Lawyer Monthly - October 2022

For those who do not know, would you please mind explaining the difference between turnaround, restructuring, and insolvency? Turnaround is the term most commonly used to describe the recovery and reorganisation of a company that has been performing poorly without necessarily having become insolvent. Turnaround is usually achieved through the implementation of action plans involving measures like, for example: costcutting plans, renegotiating loan facilities, management change and re-focusing the business. Restructuring is the term typically used to describe a company that is insolvent or facing impending insolvency that restructures its debt, whether that is done on a consensual basis or through one of the three statutory restructuring processes available in Ireland. They are; examinership, schemes of arrangement and the restructuring process for small and micro companies (known as ‘SCARP’). Schemes of arrangement can however be used to restructure a company without the requirement for it to necessarily be insolvent. Corporate insolvency is a state of financial difficulty in which a company is not in a position to pay its debts as they fall due (the ‘cash-flow’ test). The question of whether a company’s total liabilities are greater than its total assets is also to be considered (the ‘balance sheet’ test). The Irish courts have not favoured either the cash-flow test or the balance sheet test, nor have they adopted a position as to the appropriateness of one test over another or the application of an amalgam of them. The courts have generally taken a global view of the company’s finances, using both tests in order to ascertain whether a company has reached the point of no return. The Fundamentalsof Turnaround and Restructuring in Ireland Thought Leader A hot-button topic for many companies in the modern business climate is insolvency and recovery. Here, we hear from Dillon Eustace partner, Jamie Ensor on the finer points of turnaround and restructuring in Ireland. What might a company’s options for recovery be, and how can they strive to achieve the best possible outcome? 84 LAWYERMONTHLYOCTOBER 2022

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