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Examinership Success Essay - Coggle Diagram
Examinership Success Essay
It delivers the core rescue function
Originated from belief that some companies in financial difficulty could be “put back on a sound footing and so avoid a winding up with all it entails for creditors and employees”
McCarthy J in
Re Atlantic Magnetics
: purpose is protection of company, shareholders, workforce and creditors; to provide “a breathing space albeit at the expense of some creditor or creditors”.
Clarke J in
Re Traffic Group
Focus is to allow “an enterprise to continue in existence for the benefit of the economy as a whole” and
“to enable as many as possible of the jobs…to be maintained”,
Not to help shareholders whose investment failed.
In many cases, examinership has done exactly this: saved viable enterprises and jobs.
Proven track record in certain sectors
Retail / upward-only rent leases
Examinership has proved “relatively popular as a means of freeing businesses from commercial leases containing upwards only rent review clauses”; many successful examinerships of retail businesses having high rents.
After
Re Linen Supply
, multi-unit retailers (Four Star Pizza, Atlantic Homecare, B&Q, Pamela Scott, Homebase, Ladbrokes, Mothercare, Debenhams) used examinership to repudiate loss-making leases and renegotiate rents.
Trading companies with historic / acquisition debt
“a number of successful examinerships of profit-making trading companies carrying historic or acquisition related debt”, examinership being used almost as an alternative to a Part 9 scheme.
McDermott: examples include Eircom and Fallon & Byrne as good candidates. McDermott Examinership
Big modern restructurings
McDermott:
CityJet – went into examinership in April 2020 and successfully exited in August, writing off c. €500m in debt. McDermott Examinership
Weatherford International – Irish parent of a group with 24,500 employees; examinership used as part of a choreographed global restructuring.
Norwegian Air – one of the most complex restructurings in Europe; Irish examinership combined with Norwegian reconstruction to restructure c. €5bn in debt, repudiate leases and contracts, and raise new capital; recognised in UK (s 426) and US (Chapter 15).
These show examinership is now a serious international restructuring tool, not just a quirky Irish remedy.
Endorsement (in modified form) by CLRG / Gallagher Group
First Report of the Company Law Review Group (Gallagher Group) recognised the difficulties in articulating a clear public-interest justification given impairments to creditor/competitor rights, but still concluded that:
“Examinership, albeit in a modified form, is a useful mechanism which should be available in Irish company law”,
Notably, this view came from bodies “whose interests have been impaired” by the regime. Keane - Examinership
Their recommendations led to the 1999 reforms (independent expert’s report, clarified survival test, removal of super-priority for certified liabilities over secured creditors), which made the system more balanced and credible. Keane - Examinership
International & EU context
Keane notes that examinership substantially met the requirements of the EU Preventive Restructuring Directive (2019/1023) – Ireland already had a sophisticated preventive restructuring framework. Keane - Examinership
McDermott: post-Brexit, Irish examinership became attractive because:
The automatic stay is recognised across the EU,
Recognition in the US available via Chapter 15,
Make Ireland more convenient than the UK for some big restructurings. McDermott Examinership
Pro-success summary
Has saved lots of viable businesses and jobs, especially in retail and trading companies with historic debt;
Is recognised as a useful mechanism (Gallagher Group) and an advanced EU-level preventive restructuring tool;
Has become a go-to process for complex cross-border restructurings.
Serious curtailment of creditor and competitor rights
Keane: the 1990 legislation “seriously abridged the rights of creditors, including…ordinary creditors and not merely secured creditors”. Keane - Examinership
Rights of both secured and ordinary creditors were curtailed;
Criteria for appointing an examiner turned out “not as strict as it might have been thought”;
Legislation remains more inclined to appoint an examiner, giving more weight to the needs of ailing companies than to creditors/competitors.
Examiner’s power originally to incur liabilities ranking ahead of all others during protection was seen as potentially “seriously detrimental” to other creditors and competitors.
Structural flaws left unchanged even by reforms
Keane: 2014 Act left unaltered two particularly criticised features:
Directors remain in control during protection;
Freeze on actions against personal guarantors for the duration.
Your tutorial notes repeat this as key ongoing criticisms:
Continued management by directors during protection;
Freeze on action against personal guarantors.
These create moral hazard:
Management whose decisions contributed to the insolvency keep power;
Guarantors (often directors) get a 70–100 day “holiday” from enforcement.
Appointment threshold and “pro-company” bias
In practice, the criteria for appointing an examiner “are not as strict” as might have been expected;
Courts, influenced by Re Atlantic Magnetics and Re Traffic Group, tend to give more regard to ailing companies than to creditors.
Gallagher Group acknowledged they had difficulty formulating a clear public interest justification, given the extent of rights-impairment for creditors and competitors. Keane - Examinership
Patchy success record in certain sectors
Keane explicitly notes that examinership “has not succeeded” in the property sector, where huge losses and a slow market mean there’s little realistic prospect of survival. Keane - Examinership
Similar point in your tutorial: property companies and businesses made redundant by technology (video/DVD rental) are bad candidates, so examinership is “probably neither appropriate nor likely to succeed”.
McDermott lists multiple failed property examinerships (Laragan, Vantive, McInerney, Tivway, Pierse Contracting), saying anything to do with property development tends to be a bad candidate.
Potential for abuse / improper motives
Courts have had to police abuse of process
Re JJ Red Holdings – Baker J refused examinership where the sole purpose was to renege on a very recent settlement; abuse of process. McDermott Examinership
Re Missford (Residence) – Kelly J criticises companies that flout revenue/company law then try to use examinership to benefit delinquent directors. (From tutorial, under “bad candidates”).
Re New Look – petition refused as premature; insolvency overstated, not enough effort to renegotiate rents.
Keane notes early cases where petitioners failed to disclose key facts; no independent examination existed at the start, and interim protection could be granted without notice to creditors – understandably troubling for creditors. Keane - Examinership
Accessibility / SME problem
Keane: although Circuit Court examinership was introduced in 2013 to improve access for small companies, Circuit Court examinerships have proved rare.