The Summary Rescue Procedure is a proposed corporate rescue mechanism which has been recommended by the Company Law Review Group in an October 2020 report as a restructuring framework focused on SMEs.. The Government recognised that the Examinership process was too costly for many SMEs. The primary objective of the Summary Rescue Procedure to save the company and any jobs provided by it.
The Summary Rescue Procedure has undergone a public consultation process which concluded on 5 March 2021. it is expected that the Summary Rescue procedure will provide the following:
The Summary Rescue Procedure will be an agreement between your company and its creditors to gradually pay off your debts over a short-term or a long-term period, typically from one to five years, or, alternatively, to accept a lump sum payment. Entering into a Summary Rescue Procedure can prevent creditors from winding up your business using a winding up petition. This allows you to continue trading while paying back your creditors over time and keeping your company in business.
Can our existing accountants do a Summary Rescue procedure for us?
It is expected that only authorised Insolvency Practitioners will be able to implement a Summary Rescue Procedure. If your existing accountants do not have an authorised Insolvency Practitioner, then we can work with them to ensure that your company, if eligible, can successfully do a Summary Rescue Procedure.
Not all companies will be eligible to enter into a SRP. If your company has a business model that just isn’t viable and hasn’t ever produced a profit, it’s unlikely that your creditors will be willing to accept a SRP proposal.
In order to successfully propose and comply with a SRP, your company needs to show that the company will be financially viable. For some businesses, such as retail and hospitality, it will be challenging to assess future viability post-Covid. For example, in respect of pubs, the consensus view is that when pubs do finally re-open that sales in Year 1 will be 55% -60% of 2019 sales, Year 2 will be 75%, year 3 will be 85%. For some pubs, sales will not get back to full 2019 levels due to a change in consumer habits. In respect of fashion retail, Covid has propelled us 10 years into the future, and over 50% of such sales are now carried out online.
For most insolvent companies, the biggest benefits of a SRP will be the core elements of the agreement itself: it will let your company pay its debts over time and write off a percentage of its total debts to creditors, improving cash flow in the short term.
Unlike liquidation, which could leave creditors with little or no money once your company is wound up, a SRP guarantees creditors a certain amount of their debt over the repayment period.
If you believe you will end up needing a SRP then you should consider if you need to take preparatory steps now. The steps to be taken will depend on the specific circumstances facing your company. Such steps might include some of the following:
We can provide expert advice on all necessary steps, including how to communicate with creditors.
For information on Turnaround, Schemes of Arrangement, Receivership, Examinership or Creditors Voluntary Liquidation please click on the following links:
We have established three SRP teams, headed up by three qualified and registered insolvency practitioners. Jim Stafford, Tom Murray and Andrew Hendrick, to advise companies on SRP. Whilst the legislation is not yet published, we are fairly confident as to what it will generally contain. (It remains to be seen if key issues such as repudiation of onerous leases will be allowed, whether Revenue debt can be crammed down etc.) We are currently signing up clients and providing preparatory advice as to what steps companies should be taking now.
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