For many directors facing financial difficulty, the assumption is that the road ends in one place. Liquidation. The business closes, debts are dealt with as best they can be, and that’s that.
But for eligible small companies in Ireland, there is another path. It’s called SCARP, the Small Company Administrative Rescue Process, and it exists specifically to give viable businesses a structured route back to financial stability.
Introduced under the Companies (Rescue Process for Small and Micro Companies) Act 2021, SCARP is one of the most important tools available to small Irish businesses in distress. It is also, unfortunately, one of the most underutilised.
What is SCARP?
SCARP is an out-of-court rescue process that allows eligible small companies to restructure their debts and continue trading. Rather than winding the business up, it creates a framework for the company to agree a rescue plan with its creditors and implement it under professional supervision.
The process was modelled on examinership, Ireland’s existing corporate rescue mechanism, but was designed to be more accessible and less costly for smaller businesses. Where examinership involves the High Court from the outset, SCARP is largely an administrative process with court involvement only arising in specific circumstances such as creditor objections.
For a business that is fundamentally viable but weighed down by debt, SCARP can mean the difference between closure and survival.
Who qualifies for SCARP?
SCARP is available to small companies or micro companies that meet at least two of the following three criteria:
- Annual turnover of €15 million or less
- Balance sheet total of €7.5 million or less
- 50 employees or fewer
The company must also be insolvent or likely to become insolvent, and there must be a reasonable prospect of survival if the rescue plan is implemented. A company that has previously been through SCARP or examinership within the last five years is generally not eligible. If you are unsure whether your company qualifies, the first step is to seek professional advice. An Insolvency Practitioner can assess your position and help you understand whether SCARP is a realistic option.
How does the SCARP process work?
With McCambridge Duffy, the process typically unfolds in the following stages:
- Initial consultation
The process begins with a free consultation between the director and a member of our Corporate Team or one of our Insolvency Practitioners. This is an opportunity to understand the company’s financial position in full and explore all available options. SCARP may or may not be the right approach but it cannot be assessed without that initial conversation. - Appointment of a Process Adviser
If SCARP is appropriate, the Insolvency Practitioner is formally appointed as the Process Adviser. The necessary documentation is prepared and filed, and a resolution is filed with the court to initiate the process. - Financial assessment The Process Adviser carries out a thorough assessment of the company’s financial position, reviewing assets, liabilities, income and expenditure, and identifies areas where costs can be reduced or efficiencies gained. This forms the foundation of the rescue plan.
- Preparation of the rescue plan A rescue plan is prepared in consultation with the directors. This sets out how the company’s debts will be restructured and how the business will return to viability. The plan is then sent to creditors for review ahead of a formal vote.
- Creditor approval For the rescue plan to be implemented, it must be approved by creditors. A formal vote takes place before day 49 of the process. For the plan to be accepted, at least 60% of creditors by value and by majority number must vote in favour of the proposal.
This is a critical stage. The Process Adviser works with the directors to engage creditors, address concerns and negotiate where necessary to give the plan the best possible chance of approval. - Cooling off period and implementation Once approved, there is a 21 day cooling off period during which creditors can file an objection to the plan. If no objections are raised, the plan becomes legally binding and implementation begins.
The Process Adviser oversees the implementation of the rescue plan, managing payments, monitoring financial performance and providing ongoing support and guidance to the company throughout this period. - Completion On successful completion of the rescue plan, the company officially exits SCARP. A final report is prepared and all relevant authorities and creditors are notified. The business continues trading, free from the debt burden that threatened its survival.
The benefits of SCARP
For the right company in the right circumstances, SCARP offers significant advantages.
- It can prevent liquidation and allow a viable business to continue trading.
- It protects jobs and the livelihoods of employees who depend on the business.
- It provides a structured, professionally supervised framework for dealing with debt, removing much of the uncertainty that comes with unmanaged financial pressure.
- It is less costly and more accessible than examinership, making it a realistic option for smaller businesses.
- It gives directors a way to meet their legal obligations to creditors while still fighting for the survival of the business they have built.
- It can preserve relationships with suppliers and customers that would otherwise be lost in a liquidation.
What are the limitations?
Transparency matters, and SCARP is not the right solution for every situation. There are a number of factors worth being aware of.
- Creditor approval is not guaranteed. If the required 60% threshold is not met, the rescue plan cannot proceed and other options will need to be considered.
- The business must be fundamentally viable. SCARP is a rescue process, not a mechanism for prolonging the inevitable. If the underlying business model is not sustainable, a rescue plan is unlikely to succeed.
- Timing is critical. The further a company’s financial position deteriorates before advice is sought, the fewer options remain available. SCARP requires the company to have sufficient resources to fund the process and implement a plan.
- There are costs involved. While SCARP is more cost-effective than examinership, professional fees are involved and should be factored into any assessment. These limitations are not reasons to dismiss SCARP. They are reasons to seek advice early, before circumstances narrow the options available.
Why SCARP is underutilised and why that needs to change
Since its introduction in 2021, SCARP has been used far less frequently than the scale of financial distress among small Irish businesses would suggest is warranted. There are a number of reasons for this.
- Many directors simply don’t know it exists. Awareness of SCARP among business owners remains low, and by the time many directors seek professional advice, their options have already narrowed.
- There is also a tendency among directors under financial pressure to delay. The hope that things will improve, the fear of what advice might reveal, and the stigma that can still attach to insolvency all play a role. But delay is almost always counterproductive. The earlier advice is sought, the more options remain open and the better the likely outcome.
- For professional advisors including accountants, solicitors and financial advisors working with business clients, awareness of SCARP and its potential application is increasingly important. Identifying financial distress early and directing clients toward appropriate advice can make a significant difference to the outcome for those businesses and the people who depend on them.
Seeking advice early makes all the difference
If your company is experiencing financial pressure, whether that’s cashflow difficulties, creditor pressure, difficulty meeting tax obligations or concerns about the future viability of the business, the most important step you can take is to seek professional advice as early as possible.
At McCambridge Duffy Ireland, we work with directors and their professional advisors to assess the options available and find the right path forward. Our initial consultation is free and confidential, and there is no obligation to proceed with any particular course of action.
SCARP may or may not be the right solution for your situation. But understanding whether it is, and doing so before your options narrow, could make all the difference.
If you would like more information, to set up a consultation, get in touch with our team at mccambridgeduffy.ie
