Dáil debates

Wednesday, 5 February 2014

Companies (Amendment) Bill 2014: Second Stage (Resumed) [Private Members]

 

Question again proposed: "That the Bill be now read a Second Time."

6:25 pm

Photo of Frank FeighanFrank Feighan (Roscommon-South Leitrim, Fine Gael)
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I call Deputy Pearse Doherty, who I understand may be sharing his time.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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I am sharing time with my colleague, Deputy Peadar Tóibín. We will have five minutes each, leith do thoil.

Ar dtús báire, ba mhaith liom fáilte a chur roimh an initiative seo atá curtha os comhair an Tí ag an Teachta Stephen Donnelly, maidir le gnóthaí beaga, go háirithe gnóthaí beaga atá i dtrioblóid, agus maidir le cuidiú a thabhairt dóibh. However, at the outset I want to refer to personal debt. I welcome the initiative announced last night, not by AIB but by RTE, in regard to the fact that the penny seems to have dropped in AIB headquarters that debt write-off must be part of the solution at the very early stage. I hope we can tease out the detail in that regard.

I welcome Deputy Donnelly's Bill. The Government has not explained why it will not allow the Bill to proceed to Committee Stage, where any deficiencies perceived can be addressed. It is disappointing the Government took such an approach. We need to accept that examinership is a part of business life. It is an important option that can save jobs and keep a business going when other options do not suffice. I welcome the progress the Government has made in making examinership a less burdensome process through revisions of the Companies Acts and other initiatives but it needs to go further. Allowing this Bill to be examined on Committee Stage would be a generous gesture given that we accept more work is required. Examinership does not always lead to a solution but it is an important step in saving businesses.

I do not think any community in this State has not been affected by job losses and the closure of businesses that could have been saved through the approach to examinership outlined by Deputy Donnelly. The Government has already provided a way of accessing examinership through the Circuit Court instead of the High Court. This process would allow smaller businesses to avail of the possibilities offered by examinership, while avoiding potentially massive legal costs. The Bill is aimed at saving jobs and protecting the SME sector, which employs more than 70% of our workers and acts as an essential engine for the Irish economy. It is the most sustainable sector of the economy, if managed correctly. Unfortunately, this Government's insistence on shrinking rather than growing the economy out of recession has hit small and medium enterprises hard. Its dismissal of the Bill is another blow to the sector.

Sinn Féin has proposed concrete measures which, if implemented, will give a shot in the arm to small and medium enterprises and job creation. Among these measures, we propose to amend section 149 of the Consumer Credit Act 1995 to put a freeze on all increases in bank charges in two years, to instruct banks to allow flexibility in overdraft facilities and sole traders and in moving overdrafts to term loans if a direct debit payment is missed. We also want to reform the national training fund to make it more available to SMEs to upskill their employees. We would examine the potential for allocating additional resources to the Competition Authority to allow full and timely investigations of abusive market positions and other anti-competitive practices that undermine businesses and consider merging the authority with the National Consumer Agency to make the savings necessary for these resources. We also believe it is important to legislate for the issue of upward only rent reviews. The Labour Party's capitulation on its commitment to legislate on this issue is appalling. Upward only rents are a major burden on SMEs, particular in Dublin and other cities. We would consider empowering the Credit Review Office so that its decisions on credit decisions can be made binding on the banks owned by the people of this State.

These are just some of the measures that would provide certainty for small and medium enterprises by helping them to compete on a level playing field. The Government has failed small and medium enterprises and it needs to change its position. Deputy Donnelly outlined the assistance he has received from experts in this area. We regard his Bill as a generous and genuine effort to support small and medium enterprises in the limited but important area of administration. We hope the Government puts the needs of SMEs first by allowing this Bill to pass Second Stage.

6:35 pm

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Cuirim fáilte roimh an mBille. Tá an Teachta Donnelly tar éis chuid mhaith obair a dhéanamh ar son gnólachtaí na hÉireann. Ag amanna mar seo, séanann an Rialtas smaointe maithe ón bhFreasúra. Iarraim ar an Aire glacadh leis an mBille seo agus na smaointe atá ann.

Strong indigenous enterprise sectors are the backbone of economies throughout the world because they provide stable employment. Indigenous businesses are not characterised by the volatility of foreign direct investment. They tend to grow in a more organic fashion and become more embedded in the economy. I say this not to devalue FDI but to seek redress in the imbalance in policy. To this Government, small indigenous businesses are the poor relations. Thousands of businesses throughout this State are hanging on with their finger tips in the worst economic storm since the 1920s and with blockages including energy costs, upward only rents and business rates.

The micro-enterprise development sector has not moved on since the days Batt O'Keeffe was Minister. I am aware that a Bill is currently before the Oireachtas but on a practical level, micro-enterprises are not being supported in the towns and villages across the State. We have a two tier economy and growth, anaemic though it is, is only seen inside of the M50. Business debt is putting a brake on the country's opportunities for growth. The last four years have shaken out thousands of businesses because of insolvency. Last year, 1,365 companies closed due to insolvency, of which 375 were in the construction sector, 190 in retail and 163 in hospitality. The motor industry recorded a 43% increase in insolvencies last year. Bankruptcies increased, as did the number of Irish people going bankrupt in England. We are potentially facing an avalanche of 7,000 bankruptcies in this State next year.

The examinership system is a curious thing. It seeks to rescue business from insolvency only where they have sufficient money to cover the enormous costs that arise. As a result, last year only 5% of businesses with unsustainable debt opted for examinership. Another example of Government dysfunction is the fact that businesses are being forced into the examinership process in order to rid themselves of the anti-business crisis of upward only rents. I welcome that the Government introduced new regulations last year but it is difficult to get clarity on how individual judges will adjudicate on upward only rent cases. Business will continue to worry that disgruntled landlords might force them to the High Court. I welcome the greater influence that the Bill affords to examiners, particularly in regard to lending conditions and leases. The balance this will help to bring is good for business, employees and society.

The environment within which businesses engage with the Government requires reform. The Government has introduced a number of positive initiatives in the last several years but they have enjoyed limited take up due to a lack of education and knowledge amongst businesses. In light of recent reforms, it is important that the Government educates business on how they can best engage with the system. I have previously suggested that the Government should establish an Enterprise Ireland emergency enterprise team with the skills to advise businesses in crisis before they go down the route of examinership. By carrying out these initiatives, we will be looking at fewer than 1,375 insolvencies next year.

6:45 pm

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I wish to share time with Deputies Heather Humphreys, Andrew Doyle, Dan Neville, Joe McHugh and Marcella Corcoran Kennedy.

I thank Deputy Donnelly for producing the Bill. It is a difficult and onerous task to get a Bill before the Chamber and I welcome the good discussion on small and medium-sized businesses that are being affected by the recession. For the information of Deputy Tóibín, who said the country was developing only inside the M50, I happen to live just outside the M50, where there is a major indigenous company established just outside Naas. He might be aware of that. I am just trying to keep him informed of what is happening outside the M50 as well, in case he gets some peripheral vision.

I always look at a Bill to see what might be the benefits of it. While I agree substantially with the thrust of the Bill, the object of which is to drive down costs, I have to look at the way it goes about driving down costs and further examine who benefits - the debtor or the creditor. When one looks at this, one can see we have to protect the creditor as much as the debtor because the creditor is also, more than likely, a small business. If the creditor was directly afflicted as a result of what this Bill might bring, there is the potential for the creditor to lose his or her company and its employment. What concerns me initially is that this Bill is anti-creditor. We have to look at it and take care in that regard.

One issue highlighted within the Bill that Deputy Tóibín mentioned is that of upward-only rent reviews. While I agree that the cost of examinership is quite high, as Deputy Tóibín will be aware, according to section 510(7)(b) of the Companies Bill 2012, small businesses will be entitled to go under examinership to the Circuit Court. I welcome this as it will reduce the cost of taking the examinership route for small companies.

With regard to upward-only rents, for anyone who is in business and who has properties, the objective is to have the properties occupied. What I have seen through companies that have gone to examinership is that they have been able to negotiate downward rent reviews. We will all be aware of the international company B&Q, where more than 600 jobs were saved as a result of the pressure the examiner put on the owners of the property to reduce the rent. That is one benefit that has come about from a company being in examinership. I am aware that there are negotiations going on with regard to rent.

We also must look at whether, under the Bill, the company going into examinership will be a viable company at the end of it. That is key. If the creditors will suffer most as a result, it does not then make the company coming out of it viable. It might make companies that are marginal decide to take this route rather than trade themselves out of their difficulties, and that would lead to difficulties for their creditors.

With regard to the decision by a company to have an examiner rather than go through the court process, the court process gives an umbrella of protection for both the debtor and the creditor. While, under the Bill, the creditor must initiate court proceedings to regain some of the funds it might have lost as a result of the company's going into examinership, it is important that we protect both the debtor and the creditor by giving them some protection with this court umbrella.

I am concerned also that the examiner may have too much power under this Bill. We in government are driving down costs. According to the Doing Business 2014 survey done by the World Bank, Ireland is ranked 8th in the world for ease of resolving companies' insolvency issues. That is an important statistic to examine.

My view is that the Bill is a little too onerous, gives too much power to the examiner and does not protect the creditor. It is vitally important that we maintain protection for both the creditor and the debtor, but also reduce costs. This Bill is a little too onerous in that it places too much emphasis on the company in examinership rather than the creditor. It is our objective to drive down costs and we as a Government are doing that as much as possible.

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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I thank the Acting Chairman, Deputy Feighan, for the opportunity to speak on this Private Members' Bill proposed by Deputy Donnelly, the Companies (Amendment) Bill 2014. While I cannot support the Bill for the reasons I will outline shortly, I commend Deputy Donnelly on what he is trying to achieve with this Bill in terms of making the liquidation process more simple and less expensive, and for putting this matter on the agenda because the real and tangible problems facing small businesses on a day-to-day basis needs to be continually highlighted.

There are many problems facing small businesses but the problem that concerns them most is the lack of finance, particularly the lack of overdraft facilities, which is leaving them without cashflow. As we will all be aware, cashflow is the lifeline of any business and without it the business will fail.

Small businesses create employment and it will be small indigenous industry that brings economic recovery to counties such as Monaghan and Cavan. Only last week I went into a retail business in Monaghan town and heard at first hand the difficulties it was facing. Those who run the business have to meet the fixed overheads such as rates, ESB, water charges and rent, and while they would prefer if these were much lower, they know they have to pay them. Their biggest problem is that the bank has withdrawn their overdraft facilities and they are finding it practically impossible to continue trading.

Many business owners have used all their reserves and their personal savings, there is nowhere left to go to get finance, and they are at breaking point. Rural towns in Ireland are on their knees. Small shop owners are working six and seven days per week and are waiting anxiously for customers to appear. Unfortunately, the customers are shopping online, saving their money or have gone elsewhere. Business owners need overdraft facilities from their banks to replenish their stock to attract customers but it is not forthcoming. They are putting in long hours for little or no return. Businesses need the support of their banks. I want to use this opportunity to call on the banks, once again, to give small business a break, work with them, understand their businesses better and support them. There is no point in giving a bank's customers an umbrella when the sun is shining and taking it away when it starts to rain.

I acknowledge the schemes that have been introduced by the Minister, Deputy Bruton. Both the credit guarantee scheme and the microenterprise loan fund represent a significant change in enterprise support for locally traded sectors. The message needs to be sent out clearly to SMEs that there are many supports in place for them and they need to avail of them to the benefit of their business.

My main concern with the Bill is the negative impact and lack of protection it would give to creditors, who will most likely be other small businesses, and the fact that it removes oversight by the courts. The Construction Contracts Act 2013 gave protection to subcontractors, which are also small businesses. It puts in place a statutory arrangement with regard to payments under construction contracts, including providing for interim payments, that reduces a payee's exposure to non-payment and introduces a new mechanism for swift resolution of payment disputes through a process of adjudication. This was welcomed by subcontractors and it is important that we do not put anything in place that would undermine this legislation.

Examinership will give a company protection from its creditors and allow the examiner to put forward a plan which will force creditors to take a write-down. The Bill forces creditors to initiate a court case if they object to the plan. This is designed to make it more difficult for creditors who supplied goods or services to take on the risk and the additional cost of a court challenge in an effort to recover moneys owed to them. We cannot have a situation where it would be easier for ailing companies to write down debts at a cost to their creditors while at the same time introducing new obstacles for those creditors who have supplied goods and services in good faith.

The Company Law Review Group has advised that while simplification of examinership may be possible, which could reduce costs further, court oversight remains essential if the legislation is to be legally robust and respect the provisions of the Constitution. This Bill also raises constitutional concerns about protection of property rights.

I welcome the commitment from the Minister, Deputy Bruton, that he will set up a working group to examine the proposal of a more simplified administrative initiation of examinership for small private companies and I ask him to deal with this as a matter of urgency.

The Companies Bill 2012 which is currently due to go to Report Stage in the House in the coming weeks, is targeted at reforming company law, and in particular reducing the costs of doing business in Ireland. It is the largest substantive Bill in the history of the State and will provide significant benefits to companies by reducing red-tape and making company law obligations easier to understand.

This legislation is part of the Government's drive to make Ireland the best small country in the world in which to do business. It was encouraging to read that Forbesmagazine recommends Ireland as one of the best small countries in the world in which to do business.

The Companies Bill 2012 will consolidate the 17 existing Companies Acts, which date from 1963 to 2013, into a single Act and introduces a number of reforms. I am pleased that it is hoped to have this Bill enacted in 2014.

I want to acknowledge the spirit in which the Companies (Amendment) Bill 2014 is being brought forward but in view of the issues I have highlighted I will not be supporting it.

6:55 pm

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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I also wish to commend Deputy Donnelly for drafting the Bill and bringing it before the House. It is a long process to get it to the point where one feels confident enough to present it. It boils down essentially to the cost of doing business, as well as protecting a business and keeping it viable. In considering this Bill, however, we may have lost sight of the fact that most SMEs do business with other SMEs. In that case, the Bill may tip the balance against a creditor. A domino effect can result whereby the company seeking the protection of examinership can have a knock-on effect. If enacted, the powers of the Bill would put other businesses in jeopardy by seeking examinership and, therefore, instead of reducing costs one would actually compound them. Having read the summary of the Bill, that seems to be a consequence, notwithstanding the fact that what Deputy Donnelly is trying to do is commendable.

The High Court should be removed from the process as far as possible, without removing the courts system itself. The court is an independent arbiter and adjudicator that should be left in the process. If it wishes to take on only an administrative role, then let it do so.

Small businesses around the country depend on credit. There is a story of somebody who spent €50 in a shop. When that €50 note came back to him it had been through 15 different people, but everybody had benefited from it. It is a light-hearted story but it demonstrates how money in circulation can benefit everybody, even though the note in question ended up with the person who had spent it in the first place.

We must be cognisant of the fact that by tilting the balance and ending up with challenges from creditors and landlords, there is a danger that this matter will get bogged down in the legal system to a greater extent that at present.

The Office of the Director of Corporate Enforcement is beset by delays. When a complaint or request is sent to that office, one cannot expect to see a result for two or three years. Therefore, I do not know if it is fair to involve that office as part of the process at the level proposed by Deputy Donnelly's Bill.

When the Government's Companies (Miscellaneous Provisions) Bill 2013 is commenced, it will permit small businesses to apply for examinership in the Circuit Court which, as a rule, will result in an average of 30% fewer costs than in the High Court process.

In the main, the Government's Bill covers the same category of businesses as Deputy Donnelly's Bill seeks to assist. They are companies with a balance sheet of less than €4.4 million, a turnover not exceeding €8.8 million, and no more than 50 employees. It is the same cohort of companies that Deputy Donnelly's Bill seeks to address. To be fair, this amending legislation was already proposed at an earlier stage but was rejected on the same grounds that the Government feels it now needs to reject it. For that reason, we should contribute to the Government's Bill and allow its passage. The positive emphasis that Deputy Donnelly's Bill tries to promote is encompassed in the Government's own legislation. It should therefore be accepted in that spirit.

While I cannot support the Bill as presented, I hope the Government's Bill will seek to achieve in a more balanced way the same objectives as Deputy Donnelly's Bill espouses.

Photo of Dan NevilleDan Neville (Limerick, Fine Gael)
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I welcome the opportunity to contribute to this debate on the Companies (Amendment) Bill 2014 which deals with the current situation regarding examinership. Deputy Donnelly must be congratulated on the work he has put into the Bill as well as for bringing it before the House. He has sparked an important debate on the issue of examinership. We are talking about the survival of small, medium and large companies, as well as the maintenance of jobs within such organisations.

I have introduced Private Members' Bills in the past, so I can appreciate that such measures may be rejected for various reasons. I have also seen how they can contribute to future legislation, however. At least two or three times over the years, I have seen work I did on a Bill being rejected but being reintroduced by the Government of the day at a later stage. Therefore any contribution such as this is important in terms of progressing a debate on the issue and prompting the powers that be to respond to the needs expressed within the Bill.

Both Deputy Donnelly's Bill and the company law review group, established by the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, accept that examinership should continue to be the vehicle to deal with companies in financial difficulty. I welcome the fact that the cost of examinership has been reduced by 70% due to the Minister's decision to move the process from the High Court to the Circuit Court.

Deputy Donnelly put the cost of examinership for an SME company at approximately €70,000. Some such companies might not have three times that figure as an annual turnover, yet they are in trouble as well. They may only employ a few people and the owner might have devoted his or her life to building up that company. They then have to go through a process that costs €70,000, most of which is in legal fees. Surely a system of mediation could be introduced to sort out the situation between creditors and the company itself in the interests of preserving jobs. If that had been done ten years ago we might not have the current levels of unemployment. The objective is to preserve jobs and keep small businesses in operation.

I was appalled to hear that the cost of examinership could be as high as €350,000. We have been asked by the troika to examine legal costs in Ireland and do something about them. The cost of examinership demonstrates how people can be prevented from seeking court protection because they cannot afford it. In this respect, a company that may have been viable could be put out of business due to the high level of legal fees to go through an examinership.

I welcome the approach of a simplified procedure and the establishment of an agency for preliminary examination. I welcome the commitment of the Minister, Deputy Bruton, to this. I hope the agency will involve itself in the suggestion I made regarding a less formal way of sorting out difficulties.

Creditors of companies in difficulty must get equal hearing. I have been through difficulties with small contractors and subcontractors prior to the legislation going through last year. Jobs were certainly lost and small businesses went into liquidation because of large contractors. There is a problem with that and it was well expressed during the debate so I do not intend repeating it now. I welcome the initiative of Deputy Stephen Donnelly in creating this discussion.

7:05 pm

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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I welcome the opportunity to speak on the Bill. Deputy Stephen Donnelly has heard it before from his constituency colleague, Deputy Andrew Doyle - in fact, peace nearly broke out and it was nearly going to go the whole way. We welcome the spirit of Deputy Donnelly's intervention. Leaving aside all the documentation with regard to rebuttal and the legally binding voluntary commercial debt plan, there is a weakness there. What I picked up on was a weakness in respect of the protection of creditors. I will digress a little. We had an awful experience with subbie busters ruining small companies. My sympathy always lies with the question of how to provide small companies with legally binding protection. This did not exist during the past ten years. Fortunately, we have introduced the Construction Contracts Act to give protection to smaller companies. The weakness in the legislation is that there is no legal protection, although Deputy Donnelly will argue differently.

We have a Pandora's box in respect of anything to do with banking. Does the personal insolvency legislation cover every aspect of everybody's rights in a legally binding process of restructuring loans? No, it does not. Who holds the veto? The banks hold the veto in respect of third parties. Will the examiner or a third party hold a veto? Will there be an automatic process in this Bill or will it still be the banks? It comes back to the banks. A gentleman in my constituency paid commercially for a third party in the form of a restructuring plan. It is a sensible restructuring plan but he cannot get it advanced to the stage of the personal insolvency process. Once again, the bank holds the veto.

The aggressive job we need to do in the House is to hold the banks to account. Obviously, they were not held to account in the past. The Central Bank has a job to do in that regard. We are going to have a banking inquiry so that we can learn from mistakes. However, this very day the banks still hold the cards, and it suits the banks not to engage in restructuring plans. It suits banks to have a bad debt that will be bought by a third party at a lower amount to solve the problem of bad debts on the bank's balance sheet. That is something in respect of which we must learn from the personal insolvency legislation.

We must also broaden the debate beyond company law and into procurement. There are stringent turnover requirements for companies in that they will get Government contracts only if they hit a threshold of so many million euro in turnover. We should use the opportunity to debate how we can provide protection to smaller companies in respect of Government contracts. Moving on to another Department, many centralised decisions are putting smaller companies at a disadvantage. Large companies can cherry-pick all sorts of Government jobs, including the provision of food in hospitals. Are we not looking after local companies and local food produce? This is another area where we need to broaden the debate.

My sympathy lies with the creditors. Deputy Stephen Donnelly argues that creditors will be protected under his Bill. I am interested in hearing what he has to say. We have had a horrible experience where creditors get burned when subbie busters come in. Companies can set up under a different name and do not have to move country. They can burn the creditors. Anything to move the debate forward in protecting small companies and creditors is a good move.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I welcome the opportunity to speak on Deputy Donnelly's Bill and I acknowledge the efforts he and others put into bringing it to the Dáil for consideration. I do not doubt the sincerity behind the proposals to help small viable businesses in reducing their costs if they experience unsustainable debt and cashflow problems. The past five years have been some of the most challenging for many of our small and medium-sized businesses. They have responded to the changing business environment by reducing costs, developing new markets and exploring innovative ways of reaching their customers by embracing technology in order to achieve online sales and using social media for marketing purposes. SMEs are at the heart of our communities across the country, in every rural area, village, town and city. They are the backbone of the economy in many areas that will never attract foreign direct investment in the way that towns and cities will.

The programme for Government recognised the challenges facing the sector and focused on rebuilding the economy by encouraging the development of a job-rich economy, as can be seen in the implementation of the Action Plan for Jobs each year. Supporting businesses operating in Ireland has been a Government priority. Evidence shows that the efforts are being rewarded, with improvements in our competitiveness being recognised nationally and internationally. The ESRI forecast for growth levels in 2014 is 2.7%. While this is good news, we cannot rest on our laurels.

Helping all businesses by simplifying administration has been an important measure. The establishment of Microfinance Ireland and the credit guarantee scheme have had a positive impact. Employment figures are up and this is welcomed by everyone. I welcome the fact that the Minister, Deputy Richard Bruton, intends to commence legislation that will reduce legal fees by providing for cases to be dealt with in the Circuit Court rather than in the High Court, based on the report of the Company Law Review Group. I also look forward to hearing the findings of the working group that the Minister intends to establish to examine the feasibility of allowing small private companies to be placed into examinership through an administrative procedure, with some court oversight. I appreciate the intention of the Bill, but removing obligatory court oversight is risky. I am concerned about the potential impact on the property rights of directors if the examiner were to assume their powers. Whether the company has a prospect of survival can be independently adjudicated by the court at present.

This Bill has some merits, but it is weighted in favour of a troubled company, rather than taking creditors into account, as others have noted. I am concerned about this. Creditors need to be protected as they want to survive and remain viable. Regretfully, I cannot support the Bill, but one should recognise that the Government has already commenced far-reaching reform of company law which will bring together 50 years of companies Acts into a single piece of legislation. I hope it will be enacted this year as the sooner we have these reforms in place, the better.

7:15 pm

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Deputy Thomas Pringle is sharing time with Deputies Shane Ross, Seamus Healy, Joan Collins and Mick Wallace. They each have six minutes.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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I am glad to have the opportunity to contribute to the debate on the Companies (Amendment) Bill 2014. I commend Deputy Sephen Donnelly and his team for putting together this legislation and bringing it before the House.

The Bill seeks to make examinership a cheaper and more viable option for companies in difficulty or at risk of receivership and insolvency. It is a very clear statement for the legislation, especially if we consider that last year 360 firms went into receivership, while only 21 entered examinership. That indicates there must be something particularly wrong with the system as it stands and the Bill seeks to make it easier for companies to enter the examinership process and enable a third party to formulate ways of restructuring the business and protecting jobs. That is a tenet of the Bill and the Government should consider it on the basis that it is trying to protect jobs and keeping as many companies as possible operating in the State. It is only through companies continuing to operate, trade and work their way out of difficulties with the protection of an examinership process that they can contribute, with creditors standing a better chance of getting money back than if a company goes into receivership.

In outlining his opposition to the Bill the Minister stated it would weaken the position of creditors, but I do not understand how that can be the case. I have listened to much of the debate over the two nights, but I am still not satisfied as to how that could be the case. As I understand it, if a company goes into receivership, preferred and priority creditors are dealt with. They include the State in the form of the Revenue Commissioners which deal with PRSI, PAYE and VAT payments. Secured creditors are dealt with after this and if there is anything left over, ordinary creditors will receive a proportion of what remains.

It stands to reason that in a receivership case very little is left over for creditor small and medium enterprises as the company and all of the assets have gone, with the State and secured creditors taking priority. In an examinership case the company continues to traded and has the chance to trade its way out of difficulty. Creditors would then receive a larger portion of what they were owed, although they might be put in a position where they would have to do a deal or accept a write-down on what was owed in the process of the examinership in order that the company could continue trading. Surely that scenario still offers a better chance for a creditor to recover debt. Perhaps I am completely wrong in my reading of this, but it seems that this would be a better option than forcing companies into receivership, disposing of assets and forcing significant write-downs on all creditors.

I listened to Deputy Joe McHugh speak about "subbie" busters and how companies could go into liquidation before being set up again, with subcontractors losing out. He argued that they should be protected, but that means nothing in the context of this Bill, as the company that will follow such a practice will follow it regardless of this legislation. Even if the Bill could be passed, such a company will not look to go into examinership; it will instead go straight into receivership. As the subcontractors will be burned in any case, they should have protection under other legislation; this Bill would not have an impact on their position.

Under this legislation, the examiner would have the power to reduce upward-only leases to which companies might be tied into in order to make them viable. That is a laudable possibility which should become a reality. Before the general election Fine Gael spoke long and hard about how it would end upward-only rent reviews, but this Bill would give the opportunity to a business that could be viable to achieve a sustainable rent.

The argument against the Bill seems to be about protecting creditors, but I do not see how it can stand up. When the Minister spoke about protecting creditors, was he really speaking about protecting the State and ensuring it received the due taxes, VAT, PAYE and PRSI? Perhaps it is better for the State if a company goes into liquidation as the Revenue Commissioners can recover debts before anybody else can get a look at the failed company.

The Minister mentioned property rights, which is the biggest cop-out I have seen in this House. Property rights are often mentioned, with people saying they are sacrosanct and nothing can be done to affect them. Property rights are enshrined in the Constitution in Article 43, but Article 43.2 attaches conditionality. No Government seems to have the neck or the balls to test this provision by bringing forward legislation that could stand up against it. Article 43.2.1° indicates that property rights should be qualified in civil society in terms of social justice; surely it would be social justice to allow people to continue to work, businesses continue to trade and for all of them to operate for the betterment of society. Article 43.2.2° indicates that property rights should be qualified in terms of the common good; is it not in the common good to keep people in employment and everybody working? That must surely be tested by a Government.

Photo of Shane RossShane Ross (Dublin South, Independent)
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I congratulate Deputy Stephen Donnelly on introducing this Bill which is so constructive and unprovocative that it is very strange that it has not received a welcome and applause from the Government benches. It is far better thought out than many Bills that have been put before the House and the result, if implemented, could be nothing but good. There would be very few losers under the Bill - perhaps there might be a few lawyers or other professionals for whom nobody in this House would have a great deal of sympathy who would would lose - and the reasons for its refusal are somewhat puzzling. It is a pity the Government did not take it on board and implement it in its entirety, rather than putting up such flimsy arguments against it. A particular example is the argument that it would be unconstitutional. If the Government cannot provide the detail of how it would be unconstitutional, we should not take it on trust.

I was in the other House over 20 years ago when examinership was introduced by former Deputy Des O'Malley when he was Minister for Industry and Commerce. It was introduced in an emergency as a method of saving a very large company, the Goodman Group. Goodman International was apparently so important and powerful, providing so much employment and had so much political clout that examinership could be introduced overnight. I recall that in the middle of the summer we were brought back to put it in practice. A big business could be rescued, although it was a big business of very dubious repute at the time. Examinership was successfully introduced and it rescued the Goodman Group and Goodman International before it came back to flourish. Whether that was good or bad is a debate for another day.

Examinership was introduced because it was suitable for a very large company and it was necessary to save one such company. One of the points being made implicitly by Deputy Stephen Donnelly in his Bill is that examinership in its present form is not suitable for small companies. He has introduced two areas very well which would benefit under the Bill - debt reduction and the saving of jobs.

The Government is concentrating successfully on creating jobs and the multinational sector. I applaud it for its persistence in this area. The sector is one in which we can create jobs and improve conditions for much of the workforce. I applaud the Government for retaining the corporation tax rate of 12.5% as this has been successful. There is not very much to doubt about that. There are arguments about whether it could be more or less successful and result in more revenue if it were changed but, in effect, the policy has been successful because jobs have been created and sustained. However, Government policy on small business has been an abject failure. This is the sector where so many of the jobs are. Policy on creating jobs in the sector has been a failure. There is an opportunity to save jobs, however. Members of the House will know that so many jobs have been lost as small businesses closed overnight willy-nilly. Therefore, a strategy for saving jobs is crucial. The key is not in incentives and tinkering around the edges, as the Government did in the budget, but in tackling the debt problem. The key lies in tackling the banks and tiding over some of the viable companies to ensure they can survive the bad times, not by putting them into liquidation but by putting them into examinership. I would have believed that one of the best and most aggressive ways in which the Government could have approached this would not just have been by accepting Deputy Donnelly's Bill but by taking responsibility for and not conniving in the fact that the banks have not been lending money to small businesses. By pretending otherwise, one turns a blind eye to the crisis that faces small businesses, just as one does so by creating fig leaves such as the Credit Review Office, which was established to review loans that small businesses have tried to obtain from banks only to have been refused.

This Bill proposes putting in place an examiner with new powers and lower costs. This attacks the problem at the root. It makes it possible for small businesses to go into examinership without incurring the sorts of costs that large businesses can afford. It would allow the examiner to impose conditions on the lenders. These are absolutely essential. The Bill would reduce legal fees and impose conditions on landlords, as referred to by Deputy Pringle.

7:25 pm

Photo of Séamus HealySéamus Healy (Tipperary South, Independent)
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I welcome the Bill and compliment Deputy Donnelly on its introduction. He has worked with legal practitioners on producing what is a well-thought-out and well-structured Bill. It protects jobs and small, viable industries. I am surprised and disappointed that the Government has not taken the opportunity to take it on board. There may well be flaws in it, as Deputy Donnelly has indicated on the basis of his not having access to the drafters of legislation, but the legislative process in the Oireachtas is the proper means of teasing out and amending flaws so as to bring about an improvement. This raises the question as to whether the Government's opposition to the Bill has more to do with petty politics than anything else.

Small business is the heart of our communities and towns. It is the lifeblood of the main streets in all towns and villages. Sadly, many small businesses have closed and are closing. Many tend to struggle until Christmas and find in the new year that it is no longer possible to continue. A large number of small businesses close at this time of the year, with the attendant loss of a significant number of jobs, which are mainly based on the main streets of towns and villages.

The Bill has the aim of protecting small viable companies and thereby protecting the jobs they are providing. It offers an amended system of examinership to small firms with fewer than 50 employees and a turnover of less than €10 million. It is important to remember that small industries comprise approximately 99% of businesses in the State, and they provide up to 70% of the employment. The most fundamental issue facing small businesses is the question of debt, which is obviously jeopardising their survival. The examinership process provided for in the legislation is designed to deal with this and make examinership accessible to small businesses. What is proposed is an improved system of examinership. The very question of job creation and retention is at the centre of this legislation. Jobs will be saved if it is implemented. According to the Central Bank, half of the loans to small and medium-sized businesses are in distress. The problem of over-indebtedness is certainly killing small businesses as we speak. The opportunity should be taken to introduce this legislation and thereby protect jobs.

The current examinership process is very expensive but most of the expense is not necessitated as it relates to legal fees and fees incurred by the examiner in preparing for court. Therefore, there are significant advantages to the proposed legislation. It presents a win-win situation for small businesses, job creation and the economy generally. The only people who would appear to lose out as a result of it would be the legal eagles in the Four Courts.

The constitutionality of the legislation has been raised. Deputy Donnelly and the legal team with which he has worked are satisfied that it is constitutional. If this is not the case, I would like to see the legal advice to that effect. We certainly have not heard it yet. All in all, this is well-drafted legislation. It is welcome as it would retain and protect jobs.

Photo of Joan CollinsJoan Collins (Dublin South Central, People Before Profit Alliance)
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I commend Deputy Donnelly on introducing this legislation because it concerns jobs at the heart of the economy. When researching the Bill, I was very surprised to read in the Central Statistics Office's survey Business in Ireland 2011 that only 0.2% of businesses were in the big business sector and some 99.8% were in the small to medium category.

In fact, 90% employ fewer than ten workers. This suggests a very lop-sided economy, with a big business sector dominated by foreign capital surrounded by a plethora of micro-businesses such as hairdressers, cafes, restaurants, bars, small shops and so forth. It shows the disastrous failure by Irish capitalism to develop a modern, viable industrial base. There is no real linkage between the foreign multinationals and Irish businesses. Irish capitalism can be summed up as a wide range of small to medium sized businesses engaged in enterprise and providing jobs alongside a wealthy elite engaged in speculation and property development with a banking sector focused on lending to this elite. There is a huge hole in our economy which should be filled by larger scale, Irish-owned enterprises. This black hole is one which Irish capitalism will never fill. The private sector-led policies for industrial and economic development have failed and we need a new direction based on publicly-owned companies backed by investment from publicly-owned banks. The development of Coillte or the Irish Sugar Company would be examples of such companies, to be backed by publicly-owned banks.

At present, small and medium enterprises employ seven out of every ten workers in the private sector. SMEs were extremely hard hit by the economic collapse. The collapse in domestic demand, at more than 26%, which is second only to Greece in the history of economic slumps, hit small enterprises particularly hard. Employment in the SME sector fell by 20% in 2011 alone. The Minister said earlier that he accepts that the extremely high cost of the examinership poses a serious problem for small businesses in financial difficulty. Companies that could be rescued, with jobs that could be saved, simply cannot undertake the costly court process, particularly the high legal fees involved when an examiner goes to court. The high cost of anything to do with the legal system makes it unavailable to the average citizen or small business person. Therefore, it makes perfect sense to take the process of examinership for small businesses out of the court system as far as possible. Of course, a balance must be struck to protect the interests of creditors, many of whom may be struggling small businesses too but that is something that can be teased out on Committee and Report Stage. Bringing down the cost of the examinership process by taking it out of the court system would benefit many small companies. Some of them would probably not survive after the examinership process but it at least offers the prospect of giving back money to creditors and retaining jobs.

The Bill also deals with the issues of debt and rent write-downs and, in that context, the Minister and the Government have reverted to the hoary old chestnuts of legal advice, property rights and the Constitution. The Government's legal advice is never disclosed so there is no way to challenge or debate it or to offer alternative legal opinion. Successive governments have regarded property rights as sacrosanct, protected by the Constitution. However, there is a clause in the Constitution which subjugates private property rights to the common good. As Deputy Pringle has suggested, that clause should be tested by the Government. We should now be seeking to subjugate private property rights to the common good in order to retain jobs.

In my constituency of Dublin South Central, many small businesses have gone bust overnight. Many hairdressers, for example, are opening only three days per week because it is not worth their while opening more often. That affects their employees in the local area. Several hairdressers have come to my office seeking information on the examinership and insolvency processes because they cannot continue in business. They have tried really hard in the past two or three years to keep their businesses open, employing local women because they know those women depend on their wages to pay their mortgages and to put food on their tables. They do not take lightly the decision to close their businesses and any legislation that enables us to debate and tackle these issues can only be to the good. I support the Bill.

7:35 pm

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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I welcome the Bill proposed by Deputy Donnelly. It introduces a greater element of fairness to the equation, which can only be a good thing. The biggest problem for most SMEs in the past few years has been accessing money. For a lot of people in business, money stopped being available, in some cases overnight and they found it impossible to survive. I listened to the Taoiseach earlier today during Leader's Questions addressing this issue but I did not find his argument to be the most rational.

This debate boils down to public interest versus creditors rights. The Government takes the position that some of the measures in the Bill would require a change to the Constitution but we should test the Constitution to see if that is true. Sometimes we are afraid to test the Constitution, which is unfortunate. We all know that strong property rights are enshrined in our Constitution. Sadly, property rights are much stronger than any rights flowing in the direction of small businesses.

The director of the Small Firms Association has said that due to the cost of applying for examinership to the High Court only 1% of SMEs are currently opting for the examinership process as a way of trading out of their difficulties, with the remaining 99% going into liquidation or receivership. These are pretty stark figures. I acknowledge that the measure introduced by the Government before Christmas was positive and helpful. However, this Bill will give more help to SMEs because it reduces the cost of examinership. Not only does it reduce the cost of examinership itself by cutting down on legal bills, which represent half of the cost of the process, it also gives the examiner new powers to impose lending conditions on secured lenders. This would be a big breakthrough. In fairness, though, the Bill also allows banks to challenge this.

Another very important part of this legislation is that it allows the examiner to impose changes in leases over a period of five years. During the general election campaign there was much talk about upward-only rent reviews and lots of candidates promised to challenge these and to deal with the issue. However, it was not a big surprise that the Government found itself between a rock and hard place on this issue because most of the rent payable in Ireland since the crisis began is payable to the banks. Various financial institutions are the main landlords in Ireland now and the notion that upward-only rent reviews would be abolished was unlikely to go down well with the banking institutions. The banks opposed it and sadly, our Government decided it would stick with the big financial institutions rather than with small businesses. It cannot be mentioned too often that more than 70% of the people in Ireland work in small and medium sized businesses and it is fair to argue that they are entitled to more protection than they have enjoyed to date. Life has been very difficult for small businesses in Ireland for the last few years but the Government has not been very supportive of the sector. There was a lot of talk about making sure the banks were lending to SMEs and about doing this and that.

The reality was that they were left stranded and many of them have disappeared. That is very sad. It would have been worth the Government's energy to make a greater effort to protect SMEs. It would be money well spent and would have prevented much unemployment. The Government puts a far stronger emphasis on creating employment by means of foreign direct investment. I appreciate the significant number of people employed in foreign direct investment companies but in the long term it is unsustainable and some day the Government will have to bite the bullet and start investing in indigenous industry. We do not put a fraction of the same money into it as is given to foreign direct investment.

7:45 pm

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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I wish I could address every single point that was raised in the debate but in the five minutes I have I will try to stick to the more salient and pertinent points. I note Deputy Donnelly’s Bill. Deputy Wallace has referred to it as Stephen’s Bill. That is something that might catch on in public parlance.

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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I never like to be called “Deputy”. The name reminds me of Deputy Dawg.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Questions have been asked about the legal reasons the Government has for opposing the Bill. As the Minister, Deputy Bruton, pointed out last night, there are some features of the Bill that give rise to constitutional concerns. One of those is the role of the court. Under the current examinership process the court is sitting over the process, taking into account all the relevant interests of those that will be affected by the rescue and making an independent assessment of the appropriate outcome. In Deputy Donnelly's Bill, the court is less of a feature in the process, only entering it at the very end, when time is running out, or at an earlier stage only if an appeal is made.

Another issue of concern is the way in which creditors can pursue their interests. Under existing law, a creditor is heard by the court from the start. That is quite different from the provisions in the Bill where a creditor has to mount a case and meet a high threshold of proof that, in many cases, requires an in-depth knowledge of the company's affairs that would not easily be within his or her remit or to borrow the colloquial expression, within his or her ken.

The Bill also gives new powers to examiners to alter the debts owed to others. These appear to be quite wide ranging and may stray into what is more properly the preserve of the courts. When all of the provisions are taken together, as they are in the Bill, there is a danger of making an unjust and disproportionate attack on the property rights of those who have, in good faith, supplied goods and services. Examinership has been on the Statute Book for nearly 25 years. Any proposal for alteration of that tried and tested formula needs careful consideration.

The House is currently in the middle of consideration of the Companies Bill 2012 with all its reforms and modernisations that are designed to simplify the establishment and management of a company. As some Deputies acknowledged, only a few weeks ago we enacted the Companies (Miscellaneous Provisions) Act 2013 to make it easier for small companies to have their examinership cases heard in the Circuit Court. We all share the hopes of those Deputies who mentioned it that it will bring a noticeable improvement once it is in operation, which should be soon.

We acknowledge that perhaps we could do more. That is why the Minister, Deputy Bruton, announced last night that he is setting up a working group to further examine the remaining recommendations of the Company Law Review Group in the area of examinership to assess whether they offer a viable and less costly solution. The Minister also said that some of the concerns raised by Deputy Donnelly will be examined in the course of the working group’s deliberations.

We should thank Deputy Donnelly for the considerable time and effort he has put into the proposals. We all acknowledge his work in that regard. We regret that on this occasion we cannot support the Bill but it is the Government’s firm intention to keep doing all it can to support enterprises so that they flourish.

Some points were raised by Deputies about the nature of enterprise supports. Some of those issues can be teased out by a committee. We challenge the numbers in terms of the balance between foreign direct investment and support for indigenous industry but I do not have time to address those concerns tonight.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I commend Deputy Donnelly on his excellent work in putting the Bill together. The Government’s response is extraordinarily disappointing if not entirely unpredictable. There is a very clear pattern with the Government. It is one it shares with the previous Government, namely, that it will move hell and high water to protect big corporate and financial interests but when people come forward and attempt to suggest things that would assist, support or to use the jargon of the day, bail out, the small business – the people at the bottom of the pile - it is just not interested.

The excuses the Government puts forward for not allowing the Bill to continue to the next Stage are utterly bogus. They truly smack of political cynicism on the part of the Government because the Ministers know quite well that to say the very least there is a debate on the two main objections that have been raised, which could be had on Committee Stage and Report Stage. The Government has far from given a conclusive rebuttal to Deputy Donnelly but it will not allow the debate to happen. The Ministers just snigger away, as they always do.

When we criticise the Government we are told that all we ever do is criticise the Government and we are asked why we do not bring forward our own positive proposals. When we bring forward positive proposals the Government rubbishes them, dismisses them and ignores them. That is the cynicism of the Government. It is ironic that a socialist has to get up and attack the Government over its failure to take seriously the plight of small and medium enterprise. There is an irony. The Government bangs on about it but does absolutely nothing. The Bill is a well thought-out concrete proposal to assist small and medium enterprise and the Minister just dismisses it out of hand with entirely bogus arguments.

Deputy Donnelly explained on Leaders’ Questions this morning, as others have done tonight, why the creditors would benefit from moving to a cheaper, more streamlined and easier to access examiner process. It is because it would make it more likely that the company that owes them money would stay in business. Is it not blatantly obvious that if the company that owes one money stays in business there is a better chance one will get one’s money back? A child could work that one out yet the Minister gives a rubbish argument about how he is defending the small creditors who have been crucified, yet the Government has done virtually nothing for them. Small and medium businesses have been crushed and crucified and the Minister is not doing much to change that.

Similarly, as Deputy Joan Collins rightly said, the Minister fell back on the old chestnut of property rights, the Constitution and legal advice without even furnishing it to us. Not challenging that interpretation, as Deputy Pringle said, is laughable. It is no surprise to see the two Ministers opposite, Deputies Sherlock and Bruton, laughing now because they do not take these matters seriously. It is all a game to them.

7:55 pm

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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I have a tendency to switch off because I have heard the Deputy's speech a million times. The single transferable speech is a bit tiresome and it does not speak to the Bill.

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Please, Minister.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It does speak to the Bill.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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No, it does not.

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Please, Minister. Allow Deputy Boyd Barrett to proceed.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I just explained how the Minister’s main argument against the Bill is to defend creditors.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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This is boring.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Members opposite are cynical, petty politicians who do not give a hoot about the people they claim to represent. They dismiss positive suggestions and will not even allow them to be discussed further. They have also dismissed out of hand suggestions we might examine a regime of differential rates to give a break to small and medium-sized enterprises.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Why does the Deputy not make a submission to the working group?

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We have made umpteen submissions.

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Sorry, Deputies but I am calling Deputy Donnelly.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is a pity the Minister keeps interrupting me. The Government’s response was sad but predictable.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Boring.

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Minister, please allow Deputy Donnelly to conclude.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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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.

8:05 pm

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Thank you.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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I will finish on this point. This is a good Bill. It would save thousands upon thousands of jobs. It provides more protection to the SMEs which are the creditors. I admit two groups of people would lose, namely, lawyers and foreign banks that are trying to shut down viable companies to get their assets out of the country. Everyone else would win. I commend this Bill to the House.

Question put:

The Dáil divided: Tá, 42; Níl, 71.

Tellers: Tá, Deputies Stephen S. Donnelly and Catherine Murphy; Níl, Deputies Paul Kehoe and Emmet Stagg.

Níl

Question declared lost.

The Dáil adjourned at 9.20 p.m. until 9.30 a.m. on Thursday, 6 February 2014.