Examinerships giving firms a leg-up

The use and alleged abuse of examinerships is a debate that has waxed and waned over the past five years. The courts made it pretty clear quite early on that they did not want to become a last-chance saloon for property developers trying to avoid the inevitable. They also signalled their displeasure at examiners running up big bills trying to put together schemes of arrangement for companies manifestly doomed.

There has been, however, a steady flow of examinerships through the courts; some big and some small. One of the more innovative uses of the legislation was to allow otherwise viable businesses break leases on properties they could no longer afford. On occasion these companies were owned by robustly solvent large conglomerates.

All of this has left the process open to the charge that it is rarely used these days for its intended purpose – the preservation of viable businesses and viable jobs. The publication yesterday by Hughes Blake of a SME Examinership Index may go some way towards reversing such perceptions.

According to Hughes Blake, 410 jobs were saved out of 476 at risk as a result of the examinership process in the first three months of the year. More than half – 219 – were the result of the survival of SIAC Construction. Other big examinerships were shoe retailer Carl Scarpa (68 jobs) and Flannery's pub (39 jobs).

The timing of the index is felicitous, with the first application under the "examinership-lite" legislation expected this week. According to Neil Hughes, managing partner at Hughes Blake, it will lead to "a profound uptake" among SMEs.

Under the legislation, smaller businesses can apply for examinership in the Circuit Court and, in theory, dramatically reduce the legal costs of the process, which can be prohibitive for small firms. It remains to be seen if these lower costs materialise. It may well be that a substantial reduction in the examiners’ fees may be required to tip the balance.

The inclusion of fees in the next instalment of the SME Examinership Index might be an idea worthy of consideration.