The Small Company Administrative Rescue Process (“SCARP”) is a streamlined insolvency procedure recently introduced in Ireland to help small and medium-sized enterprises restructure their debts and continue trading.
SCARP offers a cost-effective and efficient alternative to traditional examinership, designed to assist businesses in financial distress.
Eligibility for SCARP
SCARP is specifically designed for small and medium-sized enterprises ("SMEs") that meet certain criteria, including:
Annual turnover not exceeding €12 million
Balance sheet total not exceeding €6 million
Fewer than 50 employees
About SCARP
The SCARP process is initiated by the company’s directors who believe the company is insolvent or likely to become insolvent but has a reasonable prospect of survival.
A key element of SCARP is the appointment of a Process Adviser (“PA”), a qualified insolvency practitioner who will oversee the restructuring. The PA is appointed by the company’s directors and plays a crucial role in formulating a restructuring plan.
The PA works with the company to draft a restructuring plan, which may include measures such as debt write-offs, extensions of repayment terms, or other adjustments. This plan must be formulated within 42 days of the PA’s appointment.
The restructuring plan is presented to creditors at a meeting convened by the PA. For the plan to be approved, it must be supported by more than 50% in number and 50% in value of one class of impaired creditors.
If the required majority is not obtained, the PA can seek court approval for the plan, provided it is fair and equitable.
Benefits of SCARP
Unlike traditional examinership, SCARP minimises court involvement, making it faster and more cost-effective. However, court intervention can be sought if disputes arise or if creditors challenge the restructuring plan.
Successful implementation of the restructuring plan allows the company to emerge from the SCARP process on a more stable financial footing, with debts restructured and a viable path forward.
SCARP represents a significant development in Irish insolvency law, offering SMEs a practical and efficient means to restructure and survive financial difficulties. Lavelle Partners have experience of acting and advising Companies going through the SCARP process and we act for Process Advisors on a regular basis. If your business is facing financial challenges, our experienced team can guide you through the SCARP process, helping you achieve a successful restructuring and secure your company's future.
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