SCARP Is Needed
SCARP stands for Small Company Administrative Rescue Process, and it provides a useful rescue tool for SME’s experiencing temporary insolvency. This procedure is a shorter and cheaper alternative to examinership, and is based on key examinership elements. The Small Company Administrative Recovery Plan has been introduced to help Irish SMEs. The new scheme is expected to capture approximately 98% of all Irish businesses.
scarp is a more affordable means of rescuing a small company. It also requires the transfer of voting rights to a guarantor, which can only be done with the involvement of a guarantor. The new legislation will require companies to engage with their creditor over a period of two years, with the aim of restoring financial viability. The bill will introduce a simplified and more efficient method for companies to restructure.
SCARP is implemented by an authorised insolvency practitioner. This individual must be independent from the company in question, and cannot be the same person as the company’s accountants. The practitioner works with the existing accountants to create a customised proposal based on the needs of the company. Not all companies will be eligible for SCARP, but it will benefit companies whose primary objective is saving jobs and preserving the company’s assets. The process begins by a resolution of the directors of the firm. There is also a requirement of 60% of the company’s creditors, or one of their pools. The guarantor can be a separate party to the deal.
Why SCARP Is Needed
SCARP is a formal process for rescuing SMEs, which enables the company to restructure its balance sheet and write off debts. It is a low-cost alternative to examinership, and it involves less court oversight. To be eligible, a company must be unable to pay its debts, have been inactive for five years, and have a substantial likelihood of failing to repay its obligations.
Although examinership is an internationally recognized rescue process, it is out of reach for small companies due to the costs associated with the process. SCARP is a stand-alone framework that focuses on reducing the cost and complexity of the rescue process for small businesses. A thriving SCARP may be beneficial to a company undergoing a bankruptcy. If you’re interested in using SCARP to save your business, read on!
SCARP will be available to companies with a balance sheet total of less than EUR6 million. This means that 98% of Irish companies are eligible for SCARP. SCARP is a formal restructuring process, similar to examinership, but it is much more accessible for smaller businesses. And because it is more efficient, it will save more companies from going bankrupt. And because it’s not expensive, SCARP is a great option for many small and micro businesses.