Small Administrative Rescue Process (SCARP)
Is It the Cheaper, Quicker and More Efficient Restructuring Process for SME’s?
The Government introduced the Small Company Administrative Rescue Process (SCARP) to provide a restructuring option to SMEs similar to the examinership process; however, SCARP is quicker, more cost-effective and does not require the close oversight of the Court. It is an accessible restructuring option for SMEs, proving successful thus far with more than 70% of cases in 2022 having been approved by creditors.
How does SCARP work?
- Subject to certain provisos, such as no creditor objecting to the proposal, a company can restructure through SCARP, including compromising its debts, without any need for Court approval.
- The process can conclude within seven weeks, with an additional three-week objection period required. Therefore, the process should conclude within 10 weeks (vs the 100-day examinership period). However, if a creditor objects, the process will extend beyond this timeframe.
- If there is a concern that SCARP is being used for tax avoidance, certain debts can be excluded (Revenue, State and Department of Social Protection).
- SCARP includes a mechanism that allows for the repudiation of onerous leases.
Who can avail of SCARP?
- Small and micro companies in Ireland
- SCARP is designed for small and micro companies, which account for 98% of companies in Ireland.
- Companies that are unable or likely to be unable to pay their debts
- SCARP is aimed at small and micro companies that are insolvent or likely to become insolvent but have a viable prospect of survival
- Any company not in liquidation
- Any company not in liquidation can avail of SCARP. Where a receiver or provisional liquidator is appointed, the Process Advisor (PA) may apply to Court to stand down the receiver / liquidator if they believe the Company has a reasonable prospect of survival. Unlike examinership, there is no time period restricting when a receiver can be stood down.
The Impact of SCARP on State Creditors and Leaseholders
Excludable Creditors - Preferential Creditors
SCARP provides that State creditors may be excludable from the process only on limited and specified grounds, primarily aimed at prohibiting tax avoidance.
Lease Holders: Onerous Leases
Onerous leases can only be repudiated where the Lease Holder consents. Without such consent and where repudiation is necessary for the survival of the company, an application to Court is required.
The Process
-
![The Process]()
Statement of Affairs (SoA)
Company directors prepare SoA for the Company.
-
![The Process]()
Process Advisor (PA) provides report on survival prospects
PA must review the SoA and issues a report confirming that the Company has a reasonable prospect of survival from SCARP.
-
![The Process]()
Initiate SCARP (Day 1)
Company directors meet to formally appoint the PA and commence the process.
-
![The Process]()
Preparation of Rescue Plan (Day 2 - 42)
PA undertakes a review of the company, investigates its affairs and consults with creditors to prepare and draft the Rescue Plan.
-
![The Process]()
Assessment of Excludable Creditors
Excludable creditors must be identified by the PA and notice served to them without delay that the process is intending to compromise their debt, along with other creditors.
-
![The Process]()
Meeting of Members and Creditors (Day 42)
Meetings of Members and Creditors are required to be held to consider and approve or object to the Rescue Plan. The Rescue Plan is deemed to have been accepted if 60% in number, representing the majority in value, of an impaired class of creditor vote in favour of the plan and no creditor files a formal objection to the plan within 21 days of creditor approval.
-
![The Process]()
Confirmation Hearing (SoA)
If the plan is not approved during the meetings of Members and Creditors the PA must apply to the Court to have the Rescue Plan confirmed and must satisfy the Court that the rescue plan is fair and equitable and does not unfairly prejudice the objecting creditor. If this can be evidenced, the Court will approve the Rescue Plan.
