The principal remedies for dealing with insolvent companies are:
1. The concept of examinership was introduced into Irish law by the Companies (Amendment) Act 1990. This legislation was enacted in order to provide companies which were in financial difficulties with the chance of recovering and thereby avoiding liquidation. An examinership is where the court places a company under its protection to enable a court appointed examiner to assess the affairs of a company and consider whether it is capable of survival, and if so, puts forward proposals that will facilitate that continuation of business. The motivation behind the creation of this legislation was the prevention of the collapse of the Goodman Group. The aim of this legislation was to avoid liquidation of companies with a chance of recovering from financial difficulties. Forde and Kennedy opine that the immediate objective and consequence of the protection created by this legislation is to provide the company or companies in question with extensive immunity against its creditors and against claims being made against it. McCormack in his article “Control and Corporate Rescue” believes that this role was created as a response to changing political and business dynamics in the l990s. The receivership model was seen as being too creditor centred and as not being sufficiently responsive to the concerns of other stakeholders. The feeling at the time, McCormack opined, was that “banks had pushed companies unnecessarily into insolvency by being unduly precipitate in the appointment of receivers.”
The original legislation has been criticised in numerous respects, and so has been amended significantly by the CA 1999. Finlay CJ in the Supreme Court in Re Holidair Ltd, acknowledged the shortcomings of the legislation and held that it is appropriate to approach the construction of any sections in CA 1990 on the basis that the two objectives of the legislature were to provide a period of protection for a company and that a company should be continued as a going concern. The legislation was being used as a last attempt to save companies which were incapable of salvation. As John O’Donnell put it in his article ‘Nursing the Corporate Patient - Examinership and Certification under the Companies Act, 1990’, “for many, it has been a painful experience to learn that the Act is designed to help cure the sick but cannot raise the dead.”
Keane notes that the granting of the examiner is discretionary. A court may appoint an examiner where it appears that:
(a) A company is or is likely to be unable to pay its debts; (b) No resolution subsists for the winding-up of the company; (c) No order has been made for the winding-up of the company.
Because of the effects of an examiner on a company, one should not be appointed without a real prospect of survival. Lardner J in Re Atlantic Magnetics Ltd advocated a strict test for “reasonable prospect of survival”. He was overruled by the Supreme Court, in favour of a requirement of “some prospect of survival”. Prior to the revision of CA 1990, the leading authority on the test for the appointment of an examiner was that SC decision in Re Atlantic Magnetics Ltd. The statutory revision...