The Small Companies Administrative Rescue Process (“SCARP”)

 The Small Companies Administrative Rescue Process (“SCARP”)

By Niamh Gibney and Seán Dwyer


On Tuesday 7 December 2021, the Minister for Trade Promotion, Digital and Company Regulation commenced the Companies (Rescue Process for Small and Micro Companies) Act 2021 (the “Act”).

The Act provides for a dedicated rescue process exclusively for small and micro companies, namely the “Small Companies Administrative Rescue Process” (“SCARP”).

What is SCARP?

SCARP is an eagerly awaited government initiative designed to help many small businesses struggling with debt and facing the prospect of insolvency.

It is akin to the traditional examinership process.  However, SCARP is a unique alternative insofar as it provides a simplified administrative process that makes rescue and restructuring more attractive, accessible and affordable to small businesses.

It is initiated by the company itself, and permits the directors of a company to appoint a qualified insolvency practitioner (“Process Advisor”) to prepare a rescue plan for the company, crucially without the need to make an application to the court.

Eligibility Criteria

SCARP is available exclusively to “small and micro companies”, defined under section 280A and 280D of the Companies Act 2014, respectively. To qualify as a small or micro company, a company must satisfy 2 or more of the following conditions:-

Micro Company Small Company
Net Turnover does not exceed €700,000 €12,000,000
Balance Sheet does not exceed €350,000 €6,000,000
Average No. of Employees does not exceed 10 50

Section 588B of the Act sets out the specific criteria for eligibility. To avail of the rescue process the company must show that:

  1. it is unable, or is likely to be unable, to pay its debts;
  2. no resolution subsists for the winding up of the company;
  3. no order has been made for the winding up of the company;
  4. the directors have not passed a resolution for the appointment of a Process Advisor or no Examiner has been appointed in the previous 5 years; and
  5. if a receiver has been appointed to the company, it is eligible only if that receiver has been appointed for a period of less than 3 working days.

Fundamentally a company must be financially viable to avail of SCARP – Is there a reasonable prospect of survival of the eligible company and the whole or any part of its undertaking as a going concern?

This is determined by the Process Advisor who will take into account the factors set out under section 558C of the Companies Act 2014 such as:-

  • The directors sworn statement of affairs;
  • Nature and prospects of the company;
  • Availability of funding/investment in the company;
  • Cost structure (including any cost reductions already achieved or that may be achieved);
  • Whether projections and business plans are based on objective and independent advice;
  • Repayment ability of the company;
  • Wider economic situation;
  • Future prospects of the market;
  • Expertise, brand and historic success of the company;
  • Place of the company within its group (if applicable); and
  • Whether a secured creditor has expressed an interest in or attempted to initiate a trading receivership.

The 70 Day Timeline

Through SCARP, small and micro companies’ can, with the expertise of a Process Advisor and the approval and cooperation of creditors, restructure their debts within 70 days (the “Rescue Period”).

The SCARP Phases 

 Phase 1: Commencement  
  • The Company engages a Process Advisor, for whom the Directors of the company prepare a sworn statement of affairs.
  • The Process Advisor prepares an expert report (the “Report”) to determine if the company is eligible and has a reasonable prospect of survival. The Process Advisor will then meet with the directors to provide his or her Report.
  • Provided there is a reasonable prospect of survival, the Directors of the company convene a meeting of the board with a view to passing a resolution formally appointing the Process Advisor.  The meeting of the board shall be held before the expiry of 7 days beginning on the date on which the director’s of the eligible company receive the Report.  This marks the beginning of the Rescue Period (Day 1).
  • The Process Advisor notifies the Companies Registration Office and relevant Court of his/her appointment and arranges for the necessary notice in Iris Oifigiúil and for notices to be given to employees, creditors and Revenue and such other person as may be prescribed by law.  Note creditors with an excludable debt have 14 days from the giving of notice to them to opt out.
  • The Process Advisor then starts to prepare a rescue plan (the “Rescue Plan”) for the company.
 Phase 2: Presentation and Consideration of Rescue Plan 
  • The Process Advisor calls a meeting of the members and creditors to consider the Rescue Plan.
  • The Process Advisor shall provide 7 days’ notice of such meetings, and shall furnish specific information to the creditors and members (Section 588U(3) of the Act), including a copy of the rescue plan, a statement of the companies assets and liabilities, and the likely financial outcome of a winding-up or receivership and statement from the process advisor explaining the Rescue Plan (amongst other items).
  • Such meetings shall take place no later than 49 days (Day 49) after the commencement of the Rescue Period.
  • Members and creditors alike vote on the Rescue Plan. A Rescue Plan is considered approved where 60 per cent in number representing a majority in value of the claims represented at the creditors meeting have voted in favour of the Rescue Plan.  If the Rescue Plan is rejected the matter is referred to the relevant Court for consideration.
  • Note that where the Rescue Plan is approved, there is a 21-day cool down period such that if a creditor or member decides that the Rescue Plan is unfairly prejudicial or unequitable he or she may file an objection.  A full list of the grounds of objection are found at Section 558ZC(3) of the Companies Act 2014. After the approval of the Rescue plan, the Process Advisors issues the relevant notices informing those employees, Revenue, creditors, members and such other persons as may be prescribed of the approval of the Rescue Plan.
 Phase 3: Implementation 
If there is no objections raised after 21 days the Rescue Plan comes into effect and is binding on all creditors (Day 70).


  • Out of court alternative
  • Aspirations of being cheaper and quicker than examinership
  • Ability to stay proceedings/restrain further proceedings (including winding up)
  • Ability to repudiate relevant contracts
  • Potential to save a business (and jobs)
  • Transparency for all concerned


It is important to note that SCARP is a new process.  The practicality and impact of which is yet to be realised.  Indeed, there are existing concerns regarding the potential effectiveness of SCARP, which include:

  • Reliant on creditor co-operation:  There is no automatic protection from creditors during the process.  The Process Advisor will have to apply to court to stay proceedings or restrain further proceedings.
  • Revenue free to opt-out:  For the purpose of the Act, Revenue is defined as an excludable creditor and can opt out of the process in circumstances where the company is not tax compliant.
  • Ancillary Costs could increase quickly:  Repudiation of contracts, such as property leases, shall be referred to the relevant court in circumstances where the landlord of a leased property does not consent to a surrender of the lease.
  • Extended Timeframe:  If the process is rejected or opposed by a creditor the matter is referred to the relevant Court, thereby extending the 70 day timeframe, and incurring additional costs.
  • No Guarantees:  If the Process Advisor at any time during the Rescue Period determines that the company no longer has a reasonable prospect of survival, the Process Advisor shall give notice of the determination to the directors and resign as Process Adviser.  A material change or inaccuracy in the information provided to the Process Adviser or such other matter as the Process Adviser considers relevant may result in this determination.


It is expected that SCARP will be particularly attractive to small businesses operating in specific sectors such as hospitality and retail, who have been disproportionately affected by Covid-19 and as a result have developed a dependency on creditors and government supports.

With government supports due to be phased out by April 2022 and non-performing loans awaiting address from the banks, it is anticipated that the many business will face liquidity issues and insolvency rates will increase dramatically over the course of the next year.

If your Company is experiencing financial or organisational difficulties as a result of Covid-19 or otherwise, and your business is considering the SCARP process, the solicitors at Reddy Charlton LLP are available to guide directors and companies through the process, and discuss other options.

For more information on the content of this insight please contact:

For further information contact Elaine McGrath

Elaine McGrath
Author: Elaine McGrath