Companies Act 2014

F317[Repudiation, affirmation and variation of certain contracts

558P

558P. (1) This section applies where—

(a) a process adviser is appointed in respect of an eligible company, and

(b) the eligible company is a party to a contract (a "relevant contract") under which some element of performance other than payment remains to be rendered both by the company and the other contracting party or parties (such party or parties being referred to in this section as the "relevant person").

(2) The process adviser shall consider, having regard in particular to the matters specified in subsection (3), whether it is necessary for the survival of the eligible company, and the whole or any part of its undertaking, as a going concern, that the relevant contract be repudiated.

(3) The matters referred to in subsection (2) are as follows, namely:

(a) whether repudiation of the relevant contract would be likely to be more advantageous for the relevant person than a winding up of the eligible company or receivership;

(b) whether, if not repudiated, the relevant contract would be burdensome to, and surplus to the requirements of, the eligible company;

(c) whether the process adviser would be able to prepare a rescue plan if the contract were not repudiated.

(4) Where, having complied with subsection (2), the process adviser proposes to repudiate the relevant contract, the process adviser shall—

(a) subject to the approval of the relevant court, repudiate the relevant contract, or

(b) subject to subsection (11), where the process adviser considers that it would be appropriate to do so in all the circumstances, comply with subsections (7) to (10) instead of applying to the relevant court under subsection (5) in pursuance of paragraph (a).

(5) On the application of the process adviser in pursuance of subsection (4)(a), the relevant court—

(a) may, if satisfied that the condition in subsection (6) is met—

(i) approve the repudiation of the relevant contract with effect from the day on which the rescue plan takes effect under section 558ZB or 558ZE, as the case may be, and

(ii) determine the amount of any loss or damage suffered by the relevant person as a result of the repudiation, or

(b) shall, if not so satisfied, dismiss the application.

(6) The condition referred to in subsection (5) is that it is necessary for the survival of the eligible company, and the whole or any part of its undertaking, as a going concern, that the relevant contract be repudiated.

(7) In any case where subsection (4)(b) applies, the process adviser shall give a notice to the relevant person—

(a) informing the relevant person that the process adviser proposes to repudiate the relevant contract,

(b) setting out the reasons why the process adviser considers that it is necessary for the survival of the eligible company, and the whole or any part of its undertaking, as a going concern that the relevant contract be repudiated,

(c) informing the relevant person that, in the event of repudiation of the relevant contract, the relevant person would stand as an unsecured creditor for the amount of loss or damage suffered by the relevant person as a result of the repudiation,

(d) specifying the terms on which the process adviser proposes to repudiate the contract (including the amount of any loss or damage suffered by the relevant person as a result of the repudiation, as determined by the process adviser),

(e) informing the relevant person that the relevant person has a right to participate in any meeting held under section 558T,

(f) informing the relevant person that, in the event that a rescue plan including provision for the repudiation of the relevant contract is approved at such a meeting, the relevant person would have a right under section 558ZC (subject to any application to the relevant court under subsection (5)) to object to—

(i) the repudiation, and

(ii) the amount determined in respect of any loss or damage,

(g) offering the relevant person an opportunity to propose to the process adviser—

(i) modifications of the terms on which the relevant contract would be repudiated, or

(ii) a variation of the terms of the relevant contract in order to avoid the repudiation of the relevant contract,

(h) in any case where the process adviser considers it appropriate to do so, offering the relevant person a variation of the terms of the relevant contract in order to avoid repudiation of the relevant contract,

(i) informing the relevant person that—

(i) the repudiation of the relevant contract, or

(ii) any variation of the terms of the relevant contract agreed by the process adviser and the relevant person in pursuance of paragraph (h), would take effect on the coming into effect of the rescue plan in accordance with this Part, and

(j) requesting that the relevant person respond to the notice within a reasonable period (being, except where a shorter period is agreed, at least 10 days after the date on which notice is given) after the giving of the notice.

(8) Where—

(a) the relevant person proposes any modifications under subsection (7)(g), the process adviser shall consider the modifications and may—

(i) include in the rescue plan provision repudiating the relevant contract on the terms agreed between the process adviser and the relevant person, or

(ii) reject the modifications proposed by the relevant person and give the relevant person a notice under subsection (9),

(b) the process adviser and the relevant person agree on a variation of the terms of the relevant contract, include in the rescue plan provision affirming the relevant contract subject to that variation, or

(c) the relevant person—

(i) objects to the proposed repudiation of the contract and does not offer any modifications, or

(ii) fails to respond to the notice given under subsection (7) within the period specified in it,

the process adviser shall give the relevant person a notice under subsection (9).

(9) Where the process adviser considers that the relevant contract should be repudiated, the process adviser shall give a notice to the relevant person—

(a) informing the relevant person that the process adviser shall include in the rescue plan provision repudiating the relevant contract,

(b) informing the relevant person that the repudiation will take effect on the date (if any) on which the rescue plan takes effect in accordance with the provisions of this Part,

(c) specifying the amount determined by the process adviser in respect of loss or damage arising from such repudiation,

(d) informing the relevant person that the relevant person has a right to participate in any meeting held under section 558T, and

(e) informing the relevant person that, in the event that a rescue plan including provision for the repudiation of the relevant contract is approved at such a meeting, the relevant person has a right under section 558ZC to object to—

(i) the repudiation of the relevant contract, and

(ii) the amount determined in respect of loss or damage.

(10) Where the relevant contract is a lease, the process adviser shall assess loss or damage for the purposes of any calculation under subsection (7)(d) or (9)(c) by reference to the following—

(a) income shortfall,

(b) letting void,

(c) letting rent-free,

(d) reletting costs,

(e) marketing costs, and

(f) any other losses or costs that may arise.

(11) In any case where the process adviser is complying with the requirement imposed by subsection (4)(b), the process adviser may at any time cease complying with that subsection (and subsections (7) to (10)) and comply instead with the requirement imposed by subsection (4)(a).

(12) Where by virtue of subsection (4) the relevant contract is repudiated, the relevant person shall stand as an unsecured creditor for the amount of loss or damage suffered as a result of the repudiation.

(13) Any amount payable by the eligible company to the relevant person in respect of any loss or damage suffered by the relevant person as a result of the repudiation of a relevant contract which is—

(a) determined by the relevant court under subsection (5)(a)(ii), or

(b) included in the rescue plan by virtue of this section,

shall be due by the eligible company to the relevant person as a judgment debt.

(14) The relevant person has a right to participate in any meeting held under section 558T notwithstanding any approval given by the relevant court under subsection (5)(a).

(15) Where the process adviser wishes to affirm the relevant contract (other than under subsection (8)(b))—

(a) he or she shall apply to the relevant court, and

(b) the relevant court may approve the affirmation by the process adviser of the relevant contract.

(16) Where the relevant court approves the repudiation or affirmation of a relevant contract under subsection (5) or (15) or by virtue of section 558ZD(11), it may, in giving such approval, make such orders as it thinks fit for the purposes of giving full effect to its approval, including orders as to notice to, or declaring the rights of, any party affected by such affirmation or repudiation.

(17) For the avoidance of doubt, a process adviser shall have authority on behalf of the eligible company to repudiate or affirm (with or without variation) a relevant contract in pursuance of the provisions of this section.]

Annotations:

Amendments:

F317

Inserted (7.12.2021) by Companies (Rescue Process for Small and Micro Companies) Act 2021 (30/2021), s. 3, S.I. No. 673 of 2021.