COVID-19: Corporate Insolvency and Restructuring Options, Aug 2020

A brief overview of the options open to companies who find themselves in difficult financial positions



There have been many devastating effects on the economy from Covid-19. One of the biggest impacts has been that previously viable and profitable businesses are now left fighting for survival due to no fault of their own. Many businesses in sectors such as retail and hospitality have seen their income streams almost wiped out overnight. While the government has been proactive in instituting measures to tackle the economic fallout, many businesses will now be in difficult situations with creditors. The purpose of this note is to provide a brief overview of the options open to companies who find themselves in difficult financial positions.

Workouts and Restructuring

The first course of action open to a company would be to engage with its creditors with a view to finding a workable solution so that the company can discharge its debts while also continuing as a going concern. In light of this a company could attempt a workout or restructuring of its debts. A key advantage of a workout or restructure is that it is consensual and does not require the involvement of the courts. Such an arrangement is also typically confidential. From a creditor’s perspective it has the advantage of not surrendering control of the process to the Courts. Where it is not possible to agree a restructure, a company may decide that its interests would be best served by the appointment of an examiner.


Examinership is the process whereby companies in difficulty seek the protection of the Court and petition for the appointment of an examiner. Examinership is governed by Part 10 of the Companies Act 2014. Before appointing an examiner, a Court must be satisfied that the company has a reasonable prospect of survival. A court will not proceed with the appointment of an examiner where it is of the view that the company will or is likely to fail.

The appointment of an examiner gives a company protection from its creditors for a 100 day period (now possibly capable of extension to 150 days under the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 when commenced). Creditors may not, during this period, bring enforcement or winding up proceedings against the company.

An examiner is appointed with the mandate of devising proposals for the survival of the company. These are then put to the shareholders and creditors of the company in a vote. The examiners proposals are deemed to be accepted by the approval of a majority. The accepted proposal is then presented to the court which has the discretion to accept, reject or modify the examiners proposals.

Traditionally examinerships were handled in the High Court and are expensive processes. The Companies (Miscellaneous Provisions) Act 2013 introduced a new mechanism for smaller companies to apply for the protection and benefits of the examinership process in the Circuit Court. In order to qualify a company must be able to satisfy two of the following three criteria: –

  • turnover of less than €8.8 million;
  • balance sheet not exceeding €4.4 million, and/or
  • average number of employees not exceeding 50.

Scheme of Arrangement

This is a procedure for a company where it reaches and agreement with its creditors to restructure its debts subject to the approval of the court. A key difference between a scheme of arrangement and an examinership is that under such a scheme the proposal must have the support of 75% in value of a company’s creditors as well as its members. It also differs from a consensual workout in that in order for it to be approved it must first be accepted by the court.

While having certain advantages over the examinership process (such as being less costly and less public) it also has added disadvantages such as the prohibitive 75% voting requirement and the fact that a receiver may still be appointed by a creditor. Although it has proved a less popular route than examinership, this should not be seen as a reflection on its effectiveness as it has been successfully applied in several high value restructurings.


Receivership is an option available to a secured creditor whereby a receiver is appointed on foot of a debenture with the task of enforcing the creditor’s security over secured assets. While the appointment of a receiver is not necessarily a desired outcome for a company, it should be stressed that it is by no means a corporate death sentence as the company can continue to trade with only the asset or assets the subject of the security being controlled by the receiver. Once the receiver has realised the security the receiver can be discharged. The powers of a receiver are set out in Section 437 of the Companies Act 2014 and are usually supplemented by additional powers in the security document granted to the secured creditor.

Winding Up/Liquidation

 There are three winding up mechanisms available under company legislation:

  • members voluntary winding up;
  • creditors voluntary winding up; and
  • compulsory (Court ordered) winding up.

Of these three options only the members voluntary winding up is available to solvent companies. This occurs where the members of a solvent company agree to appoint a liquidator to wind up a company and distribute its assets. In such a situation the directors of a company must make a declaration of solvency stating that they are of the opinion that the company is in a position to pay its debts. A report of an independent auditor must accompany such a declaration. Such a winding up commences with the passing of a winding up resolution.

A creditors voluntary winding up can be a misleading title as it is in fact commenced by the shareholders of an insolvent company. Section 586(2) of the 2014 Act requires that the company pass a resolution that it “cannot by reason of its liabilities continue its business, and that it be wound up as a creditors’ voluntary winding up.” It is a requirement that a company then call a meeting of all its creditors informing them of the decision to wind up the company. Once appointed, the liquidator’s function is to realise the assets of the company and distribute the proceeds. Where the proceeds are not enough to meet the liabilities of the company the proceeds are distributed in accordance with the rules of priority.

The High Court also retains the power to wind up a company. While there are several parties, such as the company itself or the Director of Corporate Enforcement, who may petition the court to wind up a company, this avenue is most frequently utilised by a company’s creditors. Upon the hearing of such a petition it is open to the court to decide if the company is insolvent and cannot pay its debts or that in the circumstances it is just and equitable to wind up the company. Where such an order is made a liquidator is appointed and the powers of the directors come to an end. As with a creditors voluntary winding up, where the proceeds are not enough to meet the liabilities of the company the proceeds are distributed in accordance with the rules of priority.

The Companies Acts 2014 places onerous responsibilities and obligations on directors of insolvent companies. All company directors should be aware of these responsibilities and the potential penalties for breaches.

Companies and their directors should be aware of the options available to them at this time and seek professional advice where needed.



Professional advice should always be taken before acting on any of the matters discussed. Please contact a member of our team should you wish to discuss this topic further.