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Examinership ‘too costly for most businesses’

The chief executive of small business group ISME has called for changes in the examinership process, saying it is expensive and makes restructuring smaller businesses an uneconomic proposition.

Neil McDonnell (pictured) was speaking at a webinar about supports for businesses after COVID-19, which was hosted by the UCC School of Law and Judicial Cooperation for Economic Recovery in Europe (JCOERE).

He said that while Irish examinership was a highly structured and well-regarded process, only a “tiny proportion” of the country’s 250,000 businesses could afford the cost, estimated by Revenue to average between €80,000 and €130,000.

'Administrative examinership'

Mr McDonnell said that 10% to 15% of businesses at risk of insolvency in the UK will be successfully restructured, while the US figure was even higher.

“In Ireland, the equivalent is 3% to 5%,” he said. “This comes at a terrible toll to employees, business owners, and creditors.”

Earlier this year, ISME made a formal proposal to Government — drawn up by insolvency expert Barry Lyons — for an ‘administrative examinership’ process. This was considered by the Company Law Review Group and assigned to an insolvency committee headed by Professor Lynch Fannon.

While welcoming the subsequent progress, and support from the country’s banks, the ISME chief executive said the legislative work to come would be more difficult.

“It is also clear that while the practitioners involved in taking our proposals this far have been supportive, there remain some concerns at public service level that will have to be allayed before we are successful. I should stress that our proposals do not impact anyone’s constitutional rights,” he said.

Criticism 'justified'

Mr McDonnell also delivered a broader criticism of the Irish legal system, saying it had been the subject of “sustained and justified external criticism” for some time.

He cited EU figures showing that Ireland was fourth most expensive country in Europe for enforcing contracts, as well as the European Commission’s 2020 Semester Report, which said that high legal fees were affecting productivity.

“Our legal profession must recognise that their job is to serve Irish citizens and society, not the other way around,” he said, adding that promptly enacting legislation to rescue small Irish businesses would be a “small but significant start”.