Clark Hill Sets Precedent With First-Ever Joint Examinership
Clark Hill Solicitors LLP recently acted for two Irish lender special purpose vehicle (SPV) companies, through which Chinese investors invested in certain housing developments owned and managed by an Irish property development company. These investments were made in compliance with the Irish Immigrant Investor Programme (IIP) by which non-European Economic Area (EEA) investors can, if satisfying the conditions of the IIP, be granted immigration permission by the Irish Government. The IIP requires an investment of at least €1m for a minimum of three years or be an endowment of at least €500,000 of a philanthropic donation to a project of public benefit.
The lenders had loaned €10m to the development company since 2018, of which €9m remained outstanding at the time of Clark Hill’s instruction. This debt was secured against assets including the various development sites. Over the course of Autumn 2021, it became clear that the development company was insolvent and unable to pay the next installment due. Numerous other loan agreement breaches had been noted and the entirety of the debt was called in for repayment.
Deploying its experience in complex corporate insolvency, Clark Hill applied to Court for an interim examiner to be appointed to the development company. Lender petitions of this nature are extremely rare and often face significant challenges. The Development Company itself petitioned for examinership on the very same day, creating a novel situation. Both applications were made without notice to the other party, and so for the first time in Irish corporate history, there were two competing examinership petitions.
Examinership is a process whereby an independent third party – typically an accountant – is appointed to an insolvent company to report to the Court on its reasonable prospects of survival and identify investment and restructuring opportunities so that the company can emerge from examinership with a clean balance sheet. During the examinership period (typically 70 days), the company is under the Court’s protection from any litigation or winding up petitions.
After several contentious hearings in the Circuit and High Courts over a number of days, it was ultimately agreed between the parties that a novel solution of a joint examinership (whereby two individuals were appointed by the Court as examiners) might resolve the impasse. This was approved by the Court, setting precedent in this regard. There has never previously been a joint examinership of an Irish company.
A bidding process was administered by the joint examiners. Ultimately after this competitive process, Clark Hill’s clients were successful and a Scheme of Arrangement was approved, resulting in those clients taking over the development company, replacing the pre-existing shareholders and directors. All employees have been retained and the company now looks set for a period of substantial growth and activity with new equity and loan investment and significant new working capital available to it.
“We are extremely pleased with the exceptional outcome achieved for our clients in this matter, particularly given the rare and challenging circumstances initially presented,” Clark Hill attorney Sam Saarsteiner said.
Now established as a matter of Irish law, joint examinerships will be of critical assistance when competing petitions arise or when examinership is being discussed between a company and its primary creditor(s).
Saarsteiner led the Clark Hill team in this matter. He was assisted by Edward Johnston of our Corporate & Commercial group.