New Court Rules to Facilitate Operation of SCARP
New rules of court to facilitate the operation of the rescue process for small and micro companies (SCARP) came into operation on 9 May 2022. The new rules complement the operation of SCARP by providing for various procedural matters regarding applications and proceedings in the underlying legislation where court involvement is required. Examples of applications that might be required are applications for a stay proceedings against a company or to repudiate a contract. The rules will be of particular interest to insolvency practitioners and businesses dealing with companies using the SCARP process.

 

With effect from 9 May 2022, a new Order 74C of the Rules of the Superior Courts came into operation.   Order 74C facilitates the operation of the Companies (Rescue Process for Small and Micro Companies) Act 2021, which inserted a new Part 10A into the Companies Act 2014 (Part 10A).  Part 10A provides a rescue process for small and micro companies (SCARP) to create a more accessible and cost-efficient alternative to examinership for small and micro companies by reducing the involvement of the court.  You can read more about SCARP in our articles here and here

Where an eligible company wishes to avail of SCARP, it will resolve to appoint a process adviser.   The process adviser determines whether any proceedings under Part 10A should be brought before the Circuit Court or High Court.  The new rules govern proceedings in the High Court (Court).  They prescribe how the process adviser can give notification of their appointment by filing documents with the Central Office.  

Applications 

Order 74C deals with the administrative aspects of certain procedures under Part 10A.  It particularises   the various applications that should be initiated by notice of motion, and the service requirements,  including those:

  • for directions as to the effect of the appointment of the process adviser on the appointment of a receiver and on the appointment of a provisional liquidator;
  • to stay or restrain proceedings against the company;
  • to repudiate or affirm a contract;
  • for an order determining that the proceedings at a meeting were not valid;
  • to enforce the obligation of a third party in respect of a liability of the third person;
  • for an order relating to the delivery, return or payment for an asset of the company;
  • to remit the matter to the Circuit Court.

It also prescribes applications that can be commenced ex parte by the process adviser, including for payment of the remuneration and costs of the process adviser. 

Notice of objections

Under Part 10A, it is open to a creditor or member to file an objection to a rescue plan on certain grounds.  Order 74C, Rule 11 sets out the procedure to be followed where there is a notice of objection.  It also lists several directions the Court can make for the determination of the objections in a manner which is just, expeditious and likely to minimise the costs of the application, including directions:

  • as to the hearing together or in sequence of any applications or proceedings under Part 10A concerning the company;
  • relating to the filing and delivery of any further affidavits by any parties to the objections or other proceedings under Part 10A;
  • that the objections be determined on oral evidence where the Court believes they are likely to involve a substantial dispute or where necessary in the interests of justice.

If several notices of objection are filed, they shall, where practicable, be heard together.

Refusal to comply, notices of resignation and review of costs

Order 74C deals with the provision of a certificate to Court where there has been a refusal to comply with the requirements of the process adviser. Finally, it provides for the review of costs of the process adviser and the resignation and appointment of a new process adviser.

Takeaways

The new rules provide welcome clarity around the procedures to be followed where applications relating to SCARP are initiated before the Court.  We will keep you updated in the event that rules governing applications in the Circuit Court are introduced.  

For further information or to discuss SCARP on any aspect of this article in more detail, please contact Fergus Doorly, Craig Sowman, Ruairi Rynn or Niamh Cacciato.  

 

Contributed by Róisín Casey and Jack Douglas