Seán Kyne (Galway West, Fine Gael) | Oireachtas source

At the recent regional consultation meeting in Galway on the Action Plan for Jobs 2013 a local businessman lamented the time he had to devote to navigating regulatory issues. He contended - correctly, in my view - that the time spent on such issues was not time spent on strengthening and growing his business. Almost all of the businesspeople who spoke at the meeting told of difficulties in grappling with rules and regulations at different levels of government, including Departments, local authorities and State agencies. This legislation will go a long way towards addressing the concerns of the people assembled at that meeting in Galway and all of other men and women running businesses across the country.

We cannot underestimate the significance of small firms. As stated in the report of the advisory group on small business, there are almost 200,000 small firms in Ireland employing more than 655,000 people. The figure of 200,000 represents approximately half of all the people engaged in business. At a cursory glance, the ramifications of this landmark legislation will be felt directly by at least 1.3 million people and indirectly by hundreds of thousands more.

The overarching theme of the legislation is consolidation. It represents the culmination of a long period of consultation and co-operation with input from experts and stakeholders from across sectors including business groups, Departments and agencies, the legal and accountancy professions and trade unions. The legislation is the most comprehensive put forward by this or any Government in the history of the State, with 25 parts, more than 1,400 sections and 17 schedules. It indicates how central businesses - from the most local, community-focused organisations to the largest corporations – are to communities across the State. As anyone who has ever had cause to examine or consult legislation will know, there is little that is more tedious and time-consuming than having to search back and forth through various Acts and their amending Acts. We often hear talk of plans to create a one-stop shop for a scheme or a sector. This Bill achieves that task in terms of setting out the law as it stands for companies - for their formation, operation and, if required, their winding up. From the duties of directors to the law concerning shares and share capital, this Bill covers it all.

However, the Bill also goes beyond consolidation by setting out innovations and reform across an array of areas, including business type, director duties and offences against the Companies Act. As the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, has noted, the Bill will make it easier for companies to be aware of and understand their legal obligations, reduce red tape and simplify obligations, reduce regulation and compliance costs, and improve competitiveness, ultimately ensuring that our Irish businesses receive the support they need from the Government to prosper and flourish and so in turn ensure that our communities do likewise.

Continuing the common-sense approach, two thirds of the Bill sensibly focuses on private limited companies, as this company type is the most popular choice of business model. It is interesting to note that this company type is a little over a century old and was first permitted within the 1907 Companies Act. Among the most radical of the reforms for the traditional private company limited by shares is the abolition of the objects clause, which means that a company will now have the same legal capacity as a natural person, with particular positive consequences in terms of accessing finance and credit. Several other reforms include the new summary approval procedure, which will allow companies to carry out certain activities without having to seek High Court approval, as well as new powers to engage in mergers and divisions, heretofore not provided for private companies under Irish law, which all contribute to faster, more efficient decision-making and ultimately place Irish companies in a much improved position to compete in the more complex and competitive global marketplace.

One of the most welcome provisions of the Companies Act 1990 was the introduction of the concept of examinership. Examinership recognised that a company experiencing difficulties of a temporary nature might, with legal protection, time and space, be able to work its way through the difficulties. Thousands of companies here have successfully availed of examinership since the law was introduced. The new Companies Act sensibly permits examinership through the Circuit Court so that it will be a realistic, more affordable option for smaller companies, which make up the Irish business landscape to the greatest extent.

The Bill, however, also provides for a much greater degree of flexibility to facilitate people in choosing different business models should that prove more suitable to their situations. For the first time, each company type is governed by a specific part of the Bill, with the creation of new, more flexible company types. It also recognises the evolution of a business and that at times a different model may be a better fit for the organisation. That is why the Bill contains a provision to enable a business to change business model, subject to satisfying clearly defined rules.

While we must cherish and support entrepreneurial endeavours, we must also ensure that a person takes responsibility for his or her actions concerning a business. While we must facilitate innovation and sensible risk-taking, we must not facilitate recklessness and irresponsibility, which often leaves the taxpayer exposed and picking up the pieces.

A particularly important and innovative component of the Bill is to be found in Part 5 - that is, the duties of directors and other officers. This sees the codification and consolidation, in their entirety, of the duties of the director and other officers of the company.

Section 226 is of specific note as it concerns larger public limited companies, the failure of which can have greater ramifications, as we have unfortunately seen in recent times. The fact that directors will be required to make an annual statement acknowledging that they are responsible for ensuring that the company has complied with its relevant obligations demonstrates the importance of the role of directors and also makes certain that a director will be unable to declare that he or she was oblivious to regulatory failures should such failures be uncovered. Section 229 sets out the main fiduciary duties, including the requirements to act honestly and responsibly, to avoid conflicts of interest, to act in accordance with the company’s constitution, to exercise care, skill and diligence, and to have regard to the interests of the employees and the members of the company.

I am heartened to see the prioritisation of ethical matters. While the vast majority of Irish companies have operated ethically and in good faith, regrettably there have been those which have not upheld such high standards. Those which have acted in an unethical manner, while perhaps not illegally, have often done so often for personal gain at the expense of others, including the taxpayer. Unambiguously stating these duties and revising and strengthening the rules concerning liability for breaches and failures will not only hold to account those acting recklessly, unethically or illegally but also protect those who act honestly, genuinely and faithfully.

Furthermore, Parts 14 and 15 comprehensively address compliance and enforcement and adopt a more stringent approach. Regrettably, in the past number of years the Office of the Director of Corporate Enforcement has had a greater workload and increasingly complex cases. I welcome the fact that the Bill before the House today sets out the functions of the office while also innovatively categorising various offences against the Companies Act. The Bill demonstrates that so-called white-collar crime will rightly be dealt with as effectively and expeditiously as any other category of crime.

It is the aspiration and wish of the Government to put in place the conditions necessary to create jobs. While we cannot, except in a small way, improve the overall European and world economic climate, we can and must change the conditions within the country to help business start-ups and existing businesses to maintain jobs. It has become a cliché to say that we must reduce red tape and bureaucracy for businesses, but this Bill will do exactly that.

I look forward to the taking of Committee Stage at the Select Committee on Jobs, Enterprise and Innovation, and I have no doubt that business groups across the country will continue to submit ideas on how to optimise the climate for job creation and retention. I am confident that this ground-breaking legislation will permit the Galway business person I mentioned initially and business people across the country the time to concentrate on expanding their businesses to compete nationally and globally and, ultimately, to create the jobs that are vital to our economic recovery.

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