1. EXAMINERSHIP Edel Sheridan, Leanne Sheridan, Rachel Carroll and Kristina Beinar

2.  Examinership is a process by which the protection of the Court is obtained to assist the survival of a company.  First introduced in the Companies (Amendment) Act 1990 and subsequently modified by the Companies (Amendment) No 2 Act 1999.  This allows the company to restructure with the approval of the High Court.

3. An examiner can be appointed:  Where the petitioner has shown that the company is or is likely to be unable to pay its debts and were they are not winding up at the time.  S.12 of the 1999 Act states that the court must be satisfied that there is a reasonable prospect of the survival of the company.  In Re Atlantic Magnetics ltd (in receivership)[1993] 2 I.R – The SC overruled and stated that an examiner should be appointed where there was a ‘same reasonable prospect of survival.’  Also Re Tusker Resources Plc [2001] 1 I.R. 668

4.  The court has discretion to decide whether or not to appoint an examiner.  Section 2(1) of the Companies Act lays down one positive and one negative criteria which must exist before the court can use this discretion –  A) A company is, or is likely to be unable to pay its debts  B) No resolution subsists for the company’s winding up  C) No order has been made for the company’s winding up  A Company is deemed unable to pay its debts if –  A) If its unable to pay its debts when they fall due (the commercial insolvency test)  B) Where the value of its liabilities exceeds its assets (the balance sheet insolvency test)  C) Where section 214 (a) or (b) of the Principal Act applies to the company.

5.  The application for the appointment of an examiner is made by petition. This can be done by: The company The directors A creditor/perspective creditor (including an employee) A member holding more than ¼ of the voting shares.  The 1990 Act also now requires the petition is accompanied by a report by an ‘independent accountant.’ This can be an auditor of the company.  Details must be given of the extent of funding needed to enable the company to continue trading. Recommendations must also be stated as to which liabilities should be paid which were incurred before the petition for the examiner.  The court must be satisfied there is some prospect of the company’s survival before an examiner is appointed.  The examiner has a period of 3 weeks to prepare his 1st report detailing the company’s affairs.

6.  Examiners do not need to have any qualifications under law but they are normally practicing accountants.  Bankrupts cannot be examiners until they repay their debts  One can be prohibited from being an examiner if they committed fraud or other serious misconduct.  To make sure they work independently, an examiner can not be a director or an employee of the company, or a family member, partner or employee

7.  The court fixes the remuneration of the examiner and is also entitled to the costs of carrying out the examinership.  S. 10 of the 1990 Act provides that any liabilities incurred ‘by the company during the protection period where are referred to in subsection (2) will be treated as expenses properly incurred…by the examiner’  S. 29 of the 1990 Act was criticised as it subverted ‘the whole lending’ process. This meant that if examinership failed, the secured lenders were severely prejudiced.  S.28 of the 1999 Act now provides that only newly –incurred expenses will enjoy priority over ordinary and unsecured creditors.  Remuneration and costs of the examiner, are to be paid in priority to all creditors and this was held to be so in Re Spingline Ltd [1997] 1 I.R. 46

8.  The 1999 act provides that an examiner cannot repudiate a contract entered into prior to his appointment. The examiner is personally liable for contracts entered into after his/her appointment.

9.  Effect of the order appointing on an examiner:  Where an examiner is appointed to a company, the company is deemed to be under the courts protection for 70 days from the date of the presentation of the petition.  The following consequences will ensue during that period: No voluntary or compulsory winding up can be initiated. No receiver can be appointed No secured creditor can take any steps to realise his security without the examiners consent. Goods of the company subject to hire purchase, retention of title clauses etc. cannot be repossessed. No proceedings against a person liable for the company’s debts can be put in force against his property in respect of the company debts.  No other proceedings regarding the company can be initiated.

10.  1.The petition can be brought by the company, the directors, creditors, shareholders or a combination of all these.  2.At the full hearing, parties whose interests can be affected by the making of an order on the petition are entitled to be heard and to support or oppose the granting of court protection on foot of the petition and the appointment of an examiner.  3.If an interim examiner has been appointed, he will file a short report describing the state of affairs during that period.

11.  Duties under the 1999 Act are:  To formulate proposals for a compromise,  To carry out such duties such as the court may direct,  Examiner must report within 35 days of his appointment informing the court as to whether he has been able to come up with any schemes. If not the company is wound up under s.22

12.  Powers:  Require the production of documents from any persons  Call on the assistance form any officer of the company  Call board meetings and to attend board meetings  Can apply under s.7(6) of the 1990 Act seeking clarification on any issue which arises during examinership  Under s.11 of 1990 Act, examiner can sell assets which are the subject of floating charge, but that the charge holder will have the same priority in relation to the proceeds of sale.

13. The contents of the report are set out in s.19 and include:  A) The proposals, if any;  B) Any adopted modifications of proposals;  C) The outcome of each meeting;  D) The committee of creditors recommendations, if any;  E) A statement of the company’s assets and liabilities; (including contingent and prospective creditors)  F) A list of the company’s officers;  G) A list of the company’s creditors, the amount owed to each and their priority;  I) The examiners recommendations;  J) Any other matters the examiner deems appropriate or as the court directs.

14.  The court can impose liability on the officers of a company or any other person who knowingly involved in the company who was guilty of fraudulent trading or reckless trading.  There are criminal consequences for the concerned person.

15.  1.The period of court protection lasts 70 days, plus a discretionary 30, which may be granted on application to the High Court.  2.Meeting of directors and shareholders must be held within 35 days. This usually takes longer in practice (an application to the High Court required).  3.If at any stage the examiner thinks that the company has no chance of survival, he should make an application to the High Court under section 18(9) of the Companies (Amendment) Act 1990. The court will make an order that it sees fit, which might be for the discharge of the examiner and the lifting of the protection.

16. Fallon & Byrne 2012 A Dublin based restaurant and gourmet food supplies business went into examinership. The owner of the company also owned a construction firm known as P&P construction. In total, both companies owed a tax bill of €1.4 million euro. After the designated period, Mr Justice McGovern was satisfied to approve the survival proposals made by the examiner and the company now trade successfully due to the appointment of two new shareholders.