Stephen Donnelly (Wicklow, Independent) | Oireachtas source

I thank all Members on all sides of the House who contributed to the debate this evening and yesterday. I have listened carefully to them. It seems to me there is plenty of common ground where it matters most, namely that this Bill presents an opportunity to save thousands of companies and jobs at zero cost to the State. There is also common agreement on all sides that the current system of examinership does not work. There have been 4,700 insolvencies in the past three years but only 64 of them have gone down the examinership route, about one in 73. In the US, the ratio is 1:8. If we hit the US ratio, then nearly 600 companies that closed in the past three years would still be trading and thousands of jobs would still exist.

There is common agreement that the examinership system is too expensive for small companies and that the majority of this expense is legal fees. In spite of this common ground, the Government will vote this Bill down tonight. The Minister for Jobs, Enterprise and Innovation claimed the proposed changes would create significant risks and that the measures could be unconstitutional. While the challenge of constitutionality is vague, we were not able to get our hands on the legal advice. The Minister and Government Deputies were unhappy that the Bill would give power to the examiner to write down secure debts and repudiate leases. These were described as "unjustified and disproportionate interference in the property rights of those involved." Under the current legislation, the examiner can write down secured debt to the value of the security. That provision is simply maintained in the new Bill. Leaseholders’ interests could be written down between the enactment of the examinership legislation in 1990 and the 1999 amending legislation. Both issues raised either exist, or have existed, in legislation and are constitutional. It is, accordingly, not credible to hide behind the Constitution to vote down this Bill.

The Minister and several Deputies raised concerns that the Bill shifts the onus, unfairly, to creditors. In doing so, it creates an undue examinership process, it is claimed. Deputy Lawlor suggested the Bill is anti-creditor while Deputies Doyle and Heather Humphreys raised issues of creditors with small enterprises being put out of business. This Bill was developed over considerable time by Ross Maguire SC, who has much experience in insolvency, Barry Lyons, a solicitor who has handled more examinerships in the country than everyone else combined in the past 12 years, and me. Our objective was to reduce the costs of examinership by removing unnecessary court appearances. I accept we addressed other issues that examiners on the ground found were stopping the process. However, at no point did we think of penalising creditors. There is one case for secured creditors where they are tied in. That was brought in specifically because some banks, in trying to get their money out of this country, are burying viable companies in the process. The domestic banks, on the other hand, are not calling in security but allowing businesses continue to trade.

It was claimed the Bill creates high hurdles of proof for creditors who want to go to court such as information not being disclosed. These are in fact the existing hurdles in existing legislation. This Bill does not change the burden of proof. The second concern was that the Bill creates a situation where a creditor must not only vote against the scheme of arrangement but must also go to court to prove that they have been unfairly prejudiced. This is also the current position under existing legislation.

A third concern, raised by Deputy English and others, was that if a creditor does not agree to the survival plan put forward by the examiner, the Bill would force the creditor to initiate a court case. Accordingly, it was claimed this would make it more difficult for creditors, like suppliers, to defend their interests and, therefore, property rights. Again, these are concerns with the current process. In fact, this Bill provides new protection to critical suppliers by allowing them be granted higher security if they keep trading with the company. The Bill also makes life easier for the creditors, as in the new process, should a creditor wish to initiate legal proceedings, they simply inform the examiner of that who in turn arranges a court hearing. This process radically reduces the costs of examinership. Up to €50,000 in legal fees evaporates in the current process which comes out of the company. If this is reduced, then the creditors get a higher dividend.

Another claim was that the Bill leaves creditors to cover their own legal costs, when they are challenging the process or the proposed survival plan. This is also the current position under existing legislation. Deputy Barry claimed the Bill would see all the costs of legal proceedings borne by the creditor. As per the current legislation, creditors would pay for their own legal costs and no others. We added a clause to the Bill that if the court believed a creditor to be acting in a vexatious manner to intentionally load unnecessary costs onto the company, then the court can force the creditor to pay the legal costs of the company for those proceedings.

Deputy Barry believed the Bill gives too much power to the examiner. It does not but it changes the terms of reference within which the examiner works. Deputy Barry also mentioned that the Bill does not address the qualifications required of an examiner. These requirements are in fact contained in the Companies Act 1963 and the Companies (Amendment) Act 1990.

Deputy Connaughton was concerned that the examiner can assume the power of company director, if he or she believed the directors were trying to stymie the process. Under current legislation, the examiner enjoys this power and in this Bill, as in the current legislation, directors have the right to challenge an examiner assuming that power. Deputies Connaughton, Lawlor, McHugh, Doyle, Heather Humphreys and others raised a concern I take seriously, which is that allowing insolvent firms easier access to writing down debt in turn would damage many other firms in the sector. To be clear, this Bill does not make it easier for insolvent firms to write down debt. However, by reducing the legal fees of examinership, it provides a higher dividend to those other firms and, critically, keeps one of their customers trading. The result is not more damage to other viable firms but is less damage.

There are other points into which I do not have time to go but I hope all this makes clear two things. First, the main reasons given for not accepting this Bill were identified by us and indeed by the Minister during drafting and already have been dealt with. Second, as it stands, this Bill is more than good enough to go through Second Stage, warts and all, and could be turned into the finished article during the rest of the legislative process. The question then is, why vote against it now. At present, approximately four viable companies per week are shutting down unnecessarily because we do not have an examinership process that works. The time to help them is now and this Bill provides that opportunity. If the Government so wished, it could do what it needed to do to this Bill. I and the team with which I am working would work with the Government and this Bill could be in law, protecting jobs and small to medium-sized enterprises, SMEs, by June. Sadly, I believe the Government is not burying this Bill because it believes it to be unworkable. I believe it is burying this Bill for political reasons. Earlier, the Taoiseach stated the Government would not support this Bill because it was "legally unsound". That simply is not true. He then implied, astoundingly, that the Government would not support the Bill because I refused to work with it, that I wanted my name on the Bill or something. While that is what he said, obviously that is not true.

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