Minister of State for Trade Robert Troy has said a more cost-effective and faster administrative process will be put in place before the summer to enable "viable, vulnerable" businesses to restructure.
He said the Small Company Administrative Rescue Process and Miscellaneous Provisions Bill targets small and micro business.
They make up 90% of companies registered with the Companies Registration Office and employ a total of 780,000 people.
78% of these firms operate in sectors which have been particularly challenged by the pandemic such as retail, hospitality and the service industry, Mr Troy noted.
Robert Troy said Revenue had engaged in the initial stages of drafting the Bill and would be able to avail of an "opt-out" clause in the process so as to protect taxpayers' money.
He said this would see Revenue refuse to allow a company with a chequered history with it to write-off debts.
Any separate accumulated debts related to rents or lease arrangements would fall under the repudiation element of the process, which must happen in parallel via the courts, he added.
He said the Government wants to protect employment in these firms and offer an alternative to examinership, which can be expensive for smaller businesses, and allow a process that concludes in a shorter time frame.
The Bill has approval for priority drafting and Minister Troy said it will be enacted before the Dáil's summer recess at a time when Government pandemic supports for business are likely to be tapered off.
He said the Government is "acutely aware many companies have had a horrendous 14 to 15 months since the pandemic started and will face more challenges as government supports taper off".
Minister Troy said the process will differ from examinership, which is run through the High Court and will instead be an administrative process to which a company director can apply.
He said that once the process is entered into there is engagement with creditors and after a period of consultation a proposal is made which can be accepted or rejected by the creditors.
This proposal would ensure that at least 51% of the value of credit owed is paid back.
"We set ourselves an ambitious task in developing SCARP over a compressed period of time. Throughout the process we have had strong engagement with the Company Law Review Group, Revenue Commissioners, Department of Social Protection and Department of Justice as well as other relevant stakeholders, and through the public consultation launched earlier this year," Mr Troy said.
"While court involvement is limited, I am conscious the issue of corporate rescue extends far beyond the distressed company itself and as such, the process incorporates robust safeguards and reflects what I believe to be a fair balance of the sometimes, competing interests of stakeholders," he said.
"For example, state creditors will operate on an "opt-out basis" on prescribed grounds such as if the company has a poor history of tax compliance," he said.
"This should provide comfort to business that the State will not remove itself from the process for arbitrary reasons," he added.
The Small Firms Association welcomed the cabinet approval of the bill.
"Despite the optimism around the vaccine rollout, the domestic economy has been devastated by the coronavirus crisis," said Sven Spollen-Behrens, SFA Director.
"If we want to save small business owners and rebuild the economy, then this Bill needs to be passed through the Houses of the Oireachtas before the summer recess."