The Gazette 1992

SEPTEMBER 1992

GAZETTE

creditors; the legislature does not appear to have intended one or more large creditors (even if secured) to be able to frustrate any such protection granted to a company. "The purpose of the Act is to provide a "breathing space" for the company . . . the legislature does not appear to have intended one or more large creditors to . . . frustrate such protection . . . " The company manufactured discs, components and other electronic products, employing a workforce of 170 people. While its export business had grown in Europe, it had sustained losses due to squeezing of margins and increased competition from non European Community manufacturers. The customer base of the company was fairly strong and interest in investing in the company charge over all the assets of the company, including a fixed charge over the book and other debts of the company and the proceeds of such book and other debts. In October, 1991 the company's indebtedness to the bank was in excess of £2 million. Pursuant to its debenture the bank appointed a receiver to the company on 18 October, 1991. A petition seeking the appointment of an Examiner was presented two days later by the company. The High Court appointed an Examiner on 15 November, 1991 and subsequently made an order enabling the Examiner to borrow a sum not exceeding £429,000 for certain specified purposes for the continuance of the company, and declared that the monies so borrowed and expended should be treated as expenses properly incurred by the Examiner, pursuant to section 29 (1) of the Act and should be repaid in full out of the assets of the company in priority to any other had been expressed by foreign manufacturers. West Deutsche Landesbank (Ireland) Limited ("the bank") held a fixed and floating Background

claim pursuant to section 29 (3) of the Act. Both Bank of Ireland and Barclay's Bank were authorised by a subsequent court order to have recourse to funds standing to the credit of the company in the company's account in those banks to make the relevant loan to the Examiner. Against this last order Bank of Ireland also appealed, as it did against an order directing it to pay out the monies standing to the credit of the company to the Examiner made on 25 November, 1991. The Examiner did not oppose the appeal against the making of the order on 25 November, 1991. In the High Court, Lardner J 5 indicated that in some cases the evidence may make it clear that the survival of the company is not a practical possibility. In such a case an order appointing such an Examiner is likely to be refused. In other cases there may be a strong possibility of the requisite adjustment, as a result of which the company may survive and prosper. In those circumstances it will clearly be possible to make an order appointing an Examiner. There could however also be circumstances in indeed there may be conflict between parties at the hearing of the petition. In such circumstances Lardner J held that the standard to be applied by the Court in deciding whether or not to appoint an Examiner was whether on the evidence in all the circumstances it appeared worthwhile to order an investigation by an Examiner into the company's affairs to see if it could survive, there being some reasonable prospect of survival. The Supreme Court approved this test. Finlay CJ indicated that he would qualify the test in a minor way by requiring only that there be "some prospect of survival" rather than there being some "reasonable prospect". 6 McCarthy J went even further and rejected the "real prospect" test completely. 7 In his which no clearcut conclusion emerges from the evidence and

Examiner had carried out his preliminary task of examining the company and furnishing his first statutory report to the court within the three weeks of his appointment. 8 Both judgments emphasised that the petition to appoint an Examiner is only the first step in a process within a very short time frame. It is of course possible that the Examiner will, when filing his first report undpr Section 15, express the view that the whole or part of the company would not be capable of survival as a going concern and indeed that continuing the whole or part of the undertaking of the company would be unlikely to be of more benefit to the members or creditors that to wind up the company. In these circumstances the court will hold a hearing to consider the matters arising out of such a report and may even subsequently order that the company be wound up. 9 In such circumstances the maximum delay in winding up the company which was not in fact capable of survival and was insolvent would only be a three week period in which the Examiner had time to compile and file his report to the court. Indeed, the whole time frame envisaged under the Companies (Amendment) Act, 1990 is short since the process of examination must conclude within three months from the date of the appointment unless it is extended by special order for a further 30 days. Perhaps the result of appointing an Examiner will be to lessen the eventual return to a secured creditor or indeed the dividend to an unsecured creditor in the event that the company does not survive.. In balancing this possibility against the possibility that the company is capable of surviving it would appear that a short protection period can at least be afforded under the Act to the Examiner in order to allow him to carry out an examination of the situation, affairs and prospects of the company before expressing a more emphatic view on its viability for the future.

view it would be difficult to come to any firm conclusion on the prospects for survival of the company until the

Unlike the English legislation, the Act confers an extremely wide

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