SCARP (Small Company Administrative Rescue Process) is a rescue option for SMEs (small and medium sized enterprises) facing temporary insolvency. Moreover, it has been an effective solution for SMEs since the process commenced in 2022.

Company Requirements for SCARP?

Approximately 98% of businesses in Ireland fall under the company requirements to require a SCARP. There are three criteria that define a company’s eligibility for SCARP, the company must meet two of the three;

  • Turnover does not succeed €12m
  • The balance sheet does not exceed €6m
  • The company’s average number of employees is less than 50.

Importantly, SCARP has been designed to keep the debt restructuring process out-of-court. To file for the process you must hire a ‘process advisor’ who will work alongside creditors and build a rescue plan. In fact, the process boasts a more attractive and less costly alternative to Examinership.

Overview of the process

Pre-appointment

To begin SCARP the company engage with a Process Advisor (PA) to compile an initial report to determine the likely chance of survival. The Directors must provide the PA with a listing of assets and liabilities. Afterwards, directors and PA have a conversation reviewing matters surrounding funding/investment, business plans, payment ability and the future prospects of the company.

Appointment

Once the PA has determined that SCARP is appropriate, the company convene a board meeting within 7 days. After that, at the meeting, Directors will pass a resolution to formally begin the process. Marking day 1 of SCARP.

Post-appointment

PA writes to all creditors enclosing copies of the Statement of Affairs and the PA’s report.

Creditors receive a Proof of Debt form and have 14 days to return. At this time, Creditors can notify the PA of any facts they would consider material to the process. Following consultation with Directors, creditors and shareholders, the PA prepares the rescue plan.

The PA having reviewed the company’s financial circumstances and consulted with stakeholders including; directors, creditors, employees will make a draft rescue plan. The plan must satisfy ‘best interest of creditors’ test, IE. provide creditors with a better outcome than liquidation. 

Within 42 days of the PA’s appointment, a meeting will be called between members and creditors to vote on the plan. The notice period is 7 days. By day 49 the plan must be voted on the rescue plan needs a 60% approval vote.

If there are no objections within the 21 days that follows, the SCARP becomes binding.

Court Applications

SCARP aims to avoid court involvement, but there are certain circumstances where court applications are necessary:

  • The company may apply for a stay on receivership or provisional liquidation appointments, but it must demonstrate to the court that it has a reasonable chance of survival.
  • It may seek a stay on live proceedings that were initiated before the SCARP process began.
  • If the landlord contests the repudiation of a lease, the company may need to make an application to the court to repudiate the lease.
  • If a creditor objects to the rescue plan, they must state the grounds for their objection, such as unfair prejudice, inequity, or an improper purpose behind the plan.
  • If the objection is upheld, the rescue plan must be modified; otherwise, it will fail. If the objection is dismissed, the rescue plan will come into effect immediately.

For more information Contact Us