Company law
Introduced in a hurry to save a beef baron’s bacon, examinership was designed to keep troubled companies with a potential future from winding up. But flaws soon emerged in the legislation, forcing reforms last year. The courts have recently begun testing the overhauled regime, as Barry O’Halloran reports
Examining the MAIN POINTS
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• Original examinership regime impinged seriously on creditors’ rights • Tougher approach taken in 1999 legislation • Courts are now applying these reforms
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oftware developer and Internet publisher Nua Ltd is one of the betterknown casualties of this year’s hightech fallout. When the door to a lastditch rescue bid was finally closed in March, its directors looked at one more option: examinership. This would involve petitioning the High Court to have the company placed in its protection for a period of up to 100 days while a court-appointed examiner puts together a rescue plan or ‘scheme of arrangement’ designed to ensure its survival. On the face of it, Nua might have been a good candidate. According to its chief executive, Gerry McGovern, it was close to winning a number of contracts for its recently-developed web management software, Nua Publish. That, and a number of other developments, might have ensured viability. Instead, at the request of its directors, Nua’s biggest creditor, Eircom, placed it in the hands of receiver David Hughes of Ernst & Young. McGovern says examinership had been ruled out
Law Society Gazette July 2001
almost as soon as the company looked at the possibility. ‘Our advice was that while it was once relatively easy, the law has been changed and we would have needed an independent accountant’s report to show that we could have remained viable. We just did not have time to do that’, he says. That is a far cry from the days when the courts first started to apply the Companies (Amendment) Act, 1990. It became clear through a number of controversial judgments that almost any company unable to pay its debts, but with a remote chance of survival, could get court protection, often to the detriment of its creditors. The act is partly the legacy of Saddam Hussein, because the Iraqi dictator’s September 1990 invasion of Kuwait threatened, among other things, the Irish beef industry. This depended heavily on export earnings from the Middle East. Its biggest player was the Goodman group, controlled by Larry Goodman. With the threat of war hanging over what was then one of our largest industries, an emergency sitting of the Oireachtas passed the legislation. One way or the