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On the 29th July 2022, the European Union (Preventive Restructuring) Regulations 2022 (the ‘Regulations’) were signed into law by the Minister for Enterprise, Trade and Employment.
The amendments to the Companies Act 2014 and therefore to the examinership process apply with immediate effect to all examinerships in respect of which a petition had not been presented to the Court before 29 July 2022.
The Regulations provide for the transposition of the mandatory articles of Directive (EU) 2019/1023 (the ‘Directive’) on preventive restructuring frameworks. The principal objective of the Directive is to harmonise restructuring procedures across EU Member States. The length and cost of insolvency and restructuring proceedings will be reduced as a result.
Changes to the Companies Act 2014
In the Irish context, the Regulations modify the examinership process as set out in the Companies Act 2014. The key changes to the law on examinership in Ireland, as introduced by the Regulations, include:
The introduction of an early warning system with a view to avoid insolvency.
Carve out workers’ claims from the stay which prevents creditors from enforcing their security against the company during the period of protection of the Court;
The codification of certain obligations previously recognised by the courts, such as the duty of directors to have regard for the interests of creditors in the period prior to insolvency.
Creditors are prevented from withholding performance or terminating contracts to the detriment of the company.
The introduction of a 12-month cap on the maximum stay on proceedings.
Changes to the examinership process
The Regulations import significant changes to the examinership process. The most noteworthy change is the amendment to voting rights. While a single class approval is still required for a court to confirm a scheme proposed by an examiner, the Regulations introduce a requirement that any such class must be in line to receive some payment in the event of liquidation. As a result, impaired creditors are not counted for proposal voting. This marks a definitive departure from how examinership previously operated in Ireland.
The Government is adopting a two-phased approach to reviewing Ireland’s examinership process. The passing of the Regulations constitutes Phase 1 of its review, however the changes introduced to date have the potential to have a material impact on certain examinerships in Ireland.
About the Author: Dermot McClean is a Solicitor specialising in insolvency and commercial litigation.