Law creating rescue process for small firms to come into force shortly

A new law creating a rescue process for financially threatened small companies will come into force shortly.

Large numbers of smaller businesses are expected to suffer in the fallout from pandemic restrictions when the Government begins removing supports in coming months.

TDs and senators have just passed the Companies (Rescue Process for Small and Micro Companies) Bill, 2021, which has been sent to President Michael D Higgins for signature and enactment into law.

Under the new legislation, businesses can appoint insolvency professionals to oversee a small company administrative rescue process.

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The new system mirrors examinership, as it gives companies legal protection against creditors while they go through the process, but avoids the need for expensive court hearings.

In line with examinership law, it allows companies to repudiate onerous contracts and renegotiate liabilities, and encourages ongoing negotiations with creditors.

Minister of State Robert Troy explained that the system was designed to be cheaper and more streamlined than examinership used by larger companies.

“This Bill is the culmination of a year-long effort to ensure that we have in place the necessary legal framework to help viable companies stay in business as we emerge from the pandemic,” he said.

The legislation also boosts workers' rights in insolvency, in line with recommendations of the Company Law Review Group.