Cantillon: ‘Examinership-light’ proposal tackles the lawyers, but what about the accountants?

The news yesterday that the Government has decided to fast-track legislation for cheaper, Circuit Court examinerships for small firms was warmly welcomed by retail lobby groups. Who could blame them? The entire sector is punch drunk after being caught on the wrong side of a five-year economic hiding.

Minister Richard Bruton’s big idea is to give highly indebted – but otherwise viable – small and medium companies access to the regional courts for protection from their creditors while they try to renegotiate their liabilities.

A typical High Court examinership cannot be done for less than six figures and sometimes costs up to €1 million in legal and accounting fees if the case is complex. For a small retailer labouring under an upwards only lease agreement, this is akin to shopping in Harrod's with a Lidl budget.

The Government estimates that its proposal will knock at least 30 per cent off the legal fees for small firms. High Courts require expensive barristers, while Circuit Courts can be navigated using cheaper solicitors.

Lawyers, however, typically account for less than half of the fees associated with an examinership. The rest goes on accountants, whose fees are unaffected by the status of the court that hears the examinership application.

So far, Bruton has given no indication that the rules will change beyond opening up the Circuit Courts.

Many small retailers are the tenants of massive pension funds who will oppose any enforced rent cuts. What if such a fund tools up in the Circuit Court with a senior counsel? Must the examiner still make do with a cheaper solicitor? Or follow suit? And if so, what then is the benefit of having the case heard in a regional court with little experience of examinerships?

The court is not the only issue. Bruton must simplify the whole process, whilst balancing this against the rights of the would-be-burnt creditors, many of whom are small businesses themselves.