A dramatic overhaul of the examinership process is essential if the huge number of small and medium businesses struggling to meet loan repayments are to survive, it has been claimed.
Failure to do so would see businesses close, New Beginning founder Ross Maguire warned, and ultimately lead to more people losing their jobs and being unable subsequently to pay their mortgages.
Last week, the Central Bank's director of credit institution supervision Fiona Muldoon said around half of the €50 billion lent to the SME sector by the domestic banks was impaired and suggested that the rate at which banks were facing up to the problem was unacceptable.
In response, New Beginning has called for the immediate introduction of a new system of examinership framed specifically for the SME sector. Mr Maguire said it was vital the level of impairment among SMEs was properly addressed.
"To date this problem has been largely ignored. The examinership process has been gravely undermined by the enormous legal and accountancy costs associated with such applications. The process is not fit for purpose."
Protection from creditors
Mr Maguire said examinership, during which a business has protection from creditors, should be redesigned specifically for SMEs and should last no longer than two months.
The New Beginning proposal would create a framework to allow an SME facing difficulty apply to an expert intermediary (similar to a Personal Insolvency Practitioner in the new Insolvency Process) who prepares a proposal to creditors.
“Creditors will have an opportunity to accept or reject the proposal. If rejected, the matter comes before the Circuit Court for determination. That court will be mandated to approve or reject based on defined criteria,” Mr Maguire said. “Legal fees will be capped and accountancy firms can have direct access to the Bar for applications. The trading entity and its directors will only be entitled to apply on one occasion for such relief.”
New Beginning said yesterday that such a system would give substantial protection to the SME sector and afford an opportunity to restructure debt, enabling them to grow and to thrive.
“The SME sector accounts for the majority of economic activity and employment in this country. Without a vibrant and growing SME sector, this country will be condemned to ongoing unemployment and emigration. These are the simple facts,” he said.
He warned that ignoring the problem would undermine employment leading to further pressure on mortgage arrears.
“Ultimately this will adversely affect the banks leading to a need for further recapitalisation thus further impoverishing the taxpayer.”
