SCARP: THE PROCESS WORKS

The SCARP process is a restructuring tool that is available for many small and micro enterprises to assist the survival and restructuring of an insolvent company. It was introduced into legislation in December 2021. During 2022, there were 22 appointments of a process adviser, the professional who oversees the SCARP, to companies looking to restructure their balance sheet. The sectors and industries varied, including software, hospitality, construction, healthcare, and retail companies.

Nearly 98% of all corporate bodies in Ireland meet the criteria for the appointment of a process adviser. The process takes the restructuring of the company out of the courts system and into the boardroom. Thus, it makes the process more accessible to directors and, more importantly, less expensive than the more wellknown examinership process.

Success Rates

Since the inception of the legislation, there have been 27 appointments in total, with 17 (63%) companies successfully exiting the process. A further four SCARP cases are ongoing at the time of writing. This is a very strong success rate. One further company restructured its debt outside the SCARP. Azets Ireland has a success rate of 92% in terms of all SCARP appointments overseen. This proves that the process can work.

Creditor Engagement

The engagement from creditors has been overwhelmingly positive to date. In many SCARP cases overseen by Azets Ireland, the creditors have voted in favour of rescue plans formulated. In addition, it is Azets

Ireland’s experience that the Revenue Commissioners have been supportive of companies availing of the SCARP and have opted in to all the SCARP appointments overseen by the company. This is a huge comfort to business owners: even though returns to creditors under the SCARP can be limited, creditors are supporting companies with a viable future to enable business owners to restructure their business.

Jobs Saved

In the 17 companies that availed of SCARP to assist the survival and restructuring of an insolvent company, 356 jobs were saved. SCARP appointments overseen by Azets Ireland to date have resulted in over 225 of those jobs being preserved.

The Year Ahead

Although in its infancy, SCARP can be an important lifeline for many small businesses. It is an important and viable restructuring option for business owners to allow people remain in employment in local indigenous companies that are contributing to the economy and local communities.

The introduction of the SCARP was a timely intervention by the State for hard-pressed small business owners grappling with solvency issues in the wake of the pandemic. Its introduction also addressed the absence of a cost-effective restructuring process for certain small or micro businesses. With growing wage costs, high inflation, and rising interest levels, it is vitally important for small Irish businesses facing a challenging and rapidly evolving environment that there are viable restructuring options available to them to turn around their business.

Dessie Morrow is a Partner in Azets Ireland Corporate Advisory Department specialising in restructuring and turnaround assignments. He has acted as process adviser and examiner to many companies facing difficult trading conditions. Specialist sectors include construction, retail, hospitality, manufacturing, distribution, agri-business, and healthcare.