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Law
A Recession, a Pandemic, Company Law Amendments, and September the 21st Pub Sessions Rory Hearn SS Law It’s official - we’re back in a recession. Not long after it was announced that Australia entered into a recession on September 2nd, Ireland followed suit in and by a gross domestic product (GDP) contraction of 6.1 per cent negative growth in the economy for the second quarter of 2020, hitting headlines on September 7th. Amidst the throes of another seismic event - the Covid imbroglio - companies have particularly fallen under the spotlight, unexpectedly animating Irish company law in 2020. In this article, partners Mr. Ruairi Rynn of William Fry, who has been a part of the firms Restructuring and Insolvency team for over a decade, and Ms. Ashling Walsh of Ronan Daly Jermyn, who heads up the Insolvency and Restructuring Department, give their take on how Irish company law has and will respond to the challenges that business owners and directors will face in these tumultuous times. They discuss everything from provisions in the Companies Act 2014 to the introduction of the Companies (Covid-19) Act 2020, which has been developed in tandem with the evolving Covid environment. RTE’s Six One and Nine O’ Clock News regularly portray companies attempting to remain solvent in spite of the pandemic. So, an appropriate point of departure is enquiring whether there has been a commensurate rise in insolvencies, liquidations or examinerships that have resulted therefrom in commercial practice. Surprisingly, this rise doesn’t seem to have materialised as of yet. In an interview with The Eagle, Ms. Walsh said: “I have certainly seen an uptake on giving insolvency advice, but [Ronan Daly Jermyn] haven’t seen a significant number of insolvencies. I expect that you will see that towards the end of this year and in 2021.” Similarly, Mr. Rynn stated in this regard that “thankfully from an economic perspective, we haven’t seen a particular uptake in liquidations or examinerships. To nuance this point – the ingredients for trouble are there, and [William Fry] do expect that there will be a need to restructure many of those businesses in due course, as some of them will simply not be able to survive.” On the foregoing point of restructuring, the recently drafted Company (Covid-19) Bill 2020 sought to amend the examinership process by extending the time needed for the commencement of a winding up of a company from the usual 100 days to 150 days, and also increase the debt threshold needed by a creditor to petition the court to have a company wound up from €10,000 for individual creditor debts and €20,000 for aggregate debts to €50,000. As Mr. Rynn further explained: “I sit on the Insolvency Subcommittee of the Company Law Review Group (CLRG) and worked on the recent report. The 2020 Act does have one restructuring element in it in terms of examinership.” But what is the rationale behind this new aforementioned element? According to Mr. Rynn, “if a company went into examinership 100 days ago, how can they know what [their financial situation] will look like in 100 days’ time? You don’t know where it will be in 150 days, but the extra 50 days gives you a bit more scope.” Mr. Rynn explained that given that “there is a recognition that an examinership is too expensive and complex, the government is looking at potential rescue or restructuring processes for small and medium enterprises (SMEs). One can run an examinership through the Circuit Court rather than High Court, but practically it hasn’t reduced costs enough and the process is as burdensome in the Circuit Court as in the High Court. So there is within Government circles work underway to look at a potential alternative process for SMEs.” A topic that company law students will be well-acquainted with (or should be before exam season!) is what
