The presentation of the petition
An ex parte application is made to court on the day of presentation of the petition for directions in relation to the hearing of the petition[3] and frequently, the appointment of an interim examiner is sought.
As an interim examiner has the same powers of certification of expenses as a full examiner, the court will be equally cautious in acceding to the appointment of an interim examiner.
Although each situation will vary, one of the primary reasons for seeking the appointment of an interim examiner is to facilitate him commencing his work immediately rather than waiting until after the full hearing. In addition, it is often felt that the appointment of an interim examiner offers a certain level of reassurance to creditors and suppliers and to the company's employees who are frequently unaware of the intended application until after it has been made.
While the Rules of the Superior Courts[21] provide that the court may treat the hearing for directions as the full hearing (and therefore, in theory, dismiss the application at that stage) this would appear to be inconsistent with section 3B of the Companies (Amendment) Act 1990[22] which provides that the court shall not dismiss any petition until such time as all creditors have had an opportunity to be heard.
The petition is directed to be heard on a day usually seven to ten days after the date of presentation of the petition. Directions are given for its advertisement and the court will generally direct that the company's largest creditors are served with a copy of the petition papers.
Section 12 of the Companies (Amendment) Act, 1990[23] sets out a number of formalities that must be adhered to in relation to the appointment of an examiner. In this regard, notice of the petition must be delivered to the Registrar of Companies within 3 days from the presentation of a petition. Moreover, the appointment of the examiner, together with the date, if any, set for the hearing of his first report must be advertised. The advertisements must be placed in two daily newspapers circulating in the district where the company has its registered office within three days of the appointment and in Iris Oifigiúil within 21 days of the appointment.
The hearing of the petition
At the full hearing of the petition, parties whose interests can be affected by the making of an order on the petition are entitled to be heard and to support or oppose the granting of court protection on foot of the petition and the appointment of an examiner. Where an interim examiner has been appointed, he will file a short report outlining the work carried out by him during the period of interim protection and highlighting any relevant issues that may have arisen during that period.
The court has a wide discretion in terms of the order or orders that can be made on the hearing of the petition. However, if, for whatever reason the court forms the view that the company does not have a reasonable prospect of survival, it must refuse to grant the petition and it must withdraw the court's protection. The court may order the immediate appointment of a liquidator in such circumstances.
If the court is satisfied that there us a reasonable prospect of survival of the company and all or part of its undertaking it may exercise its discretion to appoint an examiner. The court will consider issues such as whether there has been full disclosure by the applicant, the conduct of the directors and, the impact on employees in exercising its discretion in this regard.
Effect of court protection
From the time of presentation of the petition in the court office, the company is under the protection of the court.[24]
From the commencement of the protection period, the company is effectively immune from creditor action.[24] This prohibition is subject only to a party's (usually a bank's) entitlement to exercise a right of set-off[25] and therefore, absent agreement from the bank not to exercise that right, it is advisable that the company opens a separate trading account for the protection period.
Unless recommended by the independent report or otherwise approved by the court on application by the examiner, the company cannot discharge any liabilities incurred prior to the presentation of the petition.[3] Typically, the independent accountant's report will recommend payment of any arrears of wages to employees together with any suppliers or trade creditors that are essential for the survival of the company during the protection period.
Period of court protection
The period of court protection is 70 days[3] plus a discretionary 30 days[3]) which may be granted on application to the High Court.
Meetings of creditors and shareholders to consider any scheme of arrangement must be held within 35 days (or within a longer period on application to the High Court) from the date of appointment of an examiner.[3]
In practice, the meetings of creditors and shareholders rarely take place within the first 35 days of the protection period and the examiner usually applies to the High Court for an extension of time in which to file his report. That period can be extended beyond the initial 70-day period (to a maximum of 100 days from the date of presentation of the petition) if the examiner demonstrates to the court that, although he cannot do so within the 70 days, he will be able to report to the court if additional time is afforded to him. Typically, the affidavit grounding the application for an extension will indicate that the examiner is in negotiations with one or more proposed investors and, on that basis, he believes that he will be able to formulate proposals for a scheme of arrangement.
Importantly, if, at any stage, the examiner forms the view that the company no longer has a reasonable prospect of survival, he should make an application to the High Court pursuant to section 18(9) of the Companies (Amendment) Act 1990
