Costs associated with Examinerships

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dewdrop

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I was taken aback by an article in the Irish Times giving details of the costs involved. I think this whole business needs reappraisal.
 
The cost of an examinership can be as little as €20-30k. It depends hugely on the amount of work involved. To be fair, many Irish examinerships have resulted in the company staying in business when, if left to the creditors, it would be gone.

I remember years ago I was administering an estate and the deceased had some shares in Polly Peck, which went into administration. I used to get shareholder reports for about two years with an update on progress. My goodness me, the accountants and solicitors racked up huge money in costs ( all deserved I am sure.......).

I also remember John Harvey Jones commenting on the collapse of GPA to the effect that if the company had any chance of surviving before, it had none once the professionals got their trotters in the trough.

Unfortunately, legal services are expensive.(So, I am sure are accountancy services). There is no getting around this fact.

I am not aware of any functioning democracy where heavy legal costs can be avoided during a corporate collapse. Indeed, there is no such thing as a democracy without a properly functioning legal system - and that costs money.
 
Examinership IMO sems to have become the thing to do to stave off the evil day of liquidation. I have seen a number of cases of blatently insolvent companies attempting deals with creditors, getting those deals, then failing to meet the deal, then being granted examinership then ultimately going into liquidation. Regardless of costs, the whole area of examinership needs review. It was originally intended as a means to safeguard (temporarily) companies from its creditors while a workable solution, enabling the business to (hopefully) survive was hammered out. Unfortunately now, it seems that everyone is jumping on the examinership wagon as a way to stall the (often) inevitable liquidation.
 
I agree with previous posts regarding companies using examinership to stall the inevitable liquidation and that the process is sometimes abused.

The problem with examiners fees in Ireland is that the examiner is often under little/no pressure to be sensible about the time they spend working on the company or the staff that they appoint to look after certain issues and this is why the costs are so high!
 
For a company to present a petition to Court applying for an examiner to be appointed, the following costs will be incurred;

-An independent accountant who will prepares an independent accountants report of the Company. Depending on the size of the company, the min cost for this is 10k-12k.
-A petition must then be prepared detailing the reasons for the failure of the company, back ground, history etc, future prospects, reasons why an examination is in the best interests of the company.A legal firm would prepare this with the assistance of the company. This would then be reviewed by counsel. Legal costs (excluding counsel costs), would be in the range of 10k-15k.
-In Court, Counsel will address the Judge in the application for the appointment of an examiner. Counsel costs for this exercise only would be around 2.5k-5.k.

Once the examiner is appointed on an interim basis, he must report back to the Court usually within 14 days, at which point the examiner's appointment would be confirmed further legal costs would be incurred.

On the assumption the examiners appointment is confirmed, regular court visits are required.

Overall, the costs of an examination on a medium sized company with a turnover of €5m-€7m could be as follows;

Examiner costs- €100k-€150k
Examiner's legal costs- €40k-€70k
Counsel costs- €15-€18k

This is excluding the costs to the petitioner to bring forward to petition to court for an examiner to be appointed.
 
jack2009 said:
I agree with previous posts regarding companies using examinership to stall the inevitable liquidation and that the process is sometimes abused.

The problem with examiners fees in Ireland is that the examiner is often under little/no pressure to be sensible about the time they spend working on the company or the staff that they appoint to look after certain issues and this is why the costs are so high!
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Judges are very quick to highlight to Examiners or any practitioners in Court if their work is shoddy. I have attended Court where Judges have critised practitioners in respect of delays etc.

As was the case with the most recent high profile examination application, the Judge did queriy the Independent Accoutant's report which was prepared by the Company's own accountants and therefore may have lacked actual independence.
 
JQ2002 said:
Judges are very quick to highlight to Examiners or any practitioners in Court if their work is shoddy. I have attended Court where Judges have critised practitioners in respect of delays etc.

As was the case with the most recent high profile examination application, the Judge did queriy the Independent Accoutant's report which was prepared by the Company's own accountants and therefore may have lacked actual independence.
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A judge querying the indepence of an accountant is completely different to a jugde saying that there is no way that it took X hours at a charge out rate of Y to get to where we are now. At most the judge may say that the charge out rates appear high but they never query the amount of hours or the qualifications of the staff etc.
 
JQ2002 said:
For a company to present a petition to Court applying for an examiner to be appointed, the following costs will be incurred;

-An independent accountant who will prepares an independent accountants report of the Company. Depending on the size of the company, the min cost for this is 10k-12k.
-A petition must then be prepared detailing the reasons for the failure of the company, back ground, history etc, future prospects, reasons why an examination is in the best interests of the company.A legal firm would prepare this with the assistance of the company. This would then be reviewed by counsel. Legal costs (excluding counsel costs), would be in the range of 10k-15k.
-In Court, Counsel will address the Judge in the application for the appointment of an examiner. Counsel costs for this exercise only would be around 2.5k-5.k.

Once the examiner is appointed on an interim basis, he must report back to the Court usually within 14 days, at which point the examiner's appointment would be confirmed further legal costs would be incurred.

On the assumption the examiners appointment is confirmed, regular court visits are required.

Overall, the costs of an examination on a medium sized company with a turnover of €5m-€7m could be as follows;

Examiner costs- €100k-€150k
Examiner's legal costs- €40k-€70k
Counsel costs- €15-€18k

This is excluding the costs to the petitioner to bring forward to petition to court for an examiner to be appointed.
Click to expand...

I think you would find that these cousts would be considerably reduced if Examiners had to effectively tender to the High Court. eg if someone wants to appoint an examiner then the indepenent accountants report and background information should be sent to experienced examiners asking them to tender for the work outlining what they propose for the company detailing charge out rates etc.

The fact that the fees are almost pre agreed means that there is no pressure on the Examiner to come in under budget but they will still be quick to charge more than the budget!
 
I gather that Examiners fees and costs in certain circumstances can rank ahead of a banks fixed specific charge on say a property. Does not this possibility make it very difficult for a bank to value its security?
 
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