Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

I thank Deputy Creighton for her amendment and comments. We are united in the desire to see companies avail of examinership, which has been successful, albeit only for large companies. Of the 80 or so examinerships each year, 75% are successful. It is an instrument that we need to make accessible to small companies and that is what this legislation sets out to do. By making it accessible to more companies, we will develop the capabilities of the accountancy profession to provide skilled and effective examinerships.

I agree that we need a framework to manage the costs but I do not accept the Deputy’s proposals as representing an improvement on what we already provide here. Section 29 of the Companies (Amendment) Act 1990 prescribes that "an examiner shall, insofar as is reasonably possible, make use of the services of the staff and facilities of the company to which he has been appointed to assist him in the performance of his functions".

What the Deputy is proposing is to replace the phrase "insofar as is reasonably possible" with the phrase "with the maximum use of". My view is there is greater legal clarity in the use of "insofar as is reasonably possible" than in the use of terms such as "maximum" or in "exceptional circumstances". We have looked at this but the view is that this is subjective rather than objective, and that the current text is more objective and is one to which the court must have particular regard. In that sense, it is a better and more robust approach.

The other issue the amendment provides for is that a "nominated examiner must provide an estimate of the remuneration, costs and expenses of the examiner to the Court when presenting the petition." As of now, it is not the examiner who presents the petition; it is the company or the creditor who presents it and nominates the examiner, while the court appoints. Clearly, it is for the company to seek to work out with the examiner the approach that will be taken. The company is in a better position to do that with a nominated examiner than presenting in advance some fee schedule.

The other point the Deputy makes is on the need to ensure costs are contained. The rules of the court set out the procedure for an application of an examiner under section 29 of the Act for "payment of the remuneration and costs of, and reasonable expenses properly incurred by, an examiner." The examiner in looking for those costs must in an affidavit "set forth a full account of the work carried out by him to the date of the application and a full account of the costs and expenses incurred by him and shall vouch same and of the basis for the proposed remuneration which he is seeking to be paid." This will be against the backdrop of the examiner having to show he or she "shall, insofar as is reasonably possible, make use of the services of the staff and facilities of the company" to the most reasonable extent he or she can. In addition, "[t]he Court may, where it thinks fit, order that notice of the application be given to all such persons as the Court may direct, and may give directions as to the service of the said notice". The court will vigilantly scrutinise the examiner's application for payment and disallow items, or allow a lower charge-out rate than the examiner has claimed. In that regard, the court will seek to ensure that the examiner and his staff are only remunerated for work properly falling within the powers of the examiner.

We have inserted a framework, to use Deputy Calleary's word, that seeks to minimise costs, and the allocation of the responsibilities and how the process works is sensible. On the wider issue that one would seek to insist that only company resources be used, the difficulty, which I believe Deputy Creighton acknowledges in her comments, is that the expertise is not generally within the companies to manage the whole of the examinership, which is why the skills in this area are being brought to bear. The proposed amendment would seek to restrict severely the ability of the examiner to employ expertise external to the company to assist him or her in the performance of his or her functions. The appointing of an examiner to a company does not usurp the functions of the board of directors, which will continue to manage the affairs of the company during the period under the protection of the court. Hence, the staff of the company are not answerable to the examiner. Further, in the case of small private companies in particular, the company may not have the staff with the necessary skills to assist in the formulation of proposals for a compromise or scheme of arrangements. There is, in addition, the potential for conflicts of interest, for example, under section 22 of the Companies Act the examiner's proposals for a scheme of arrangement may, if the examiner considers it desirable to do so to facilitate the survival of the company, specify whatever changes should be made to the management or direction of the company. There could also be potential conflicts of interest between the interests of the staff in the company and other creditors.

For all of those reasons, while I understand the motivation of Deputy Creighton's amendment, and it is a motivation I share, I believe the framework here is balanced and proportionate and is designed to achieve the outcome. With regard to using the phrase "insofar as is reasonably possible", given the understanding that the examiner is intended to bring new expertise and may have to take a view of the future of the company that is at odds with the view of those who are directing the company, we need to have the flexibility within the framework that is now provided for in the way we have set in the text of the Bill as it stands. That is why I cannot accept the amendment.

On the wider issue the Deputy raises, I am acutely conscious of the challenges for SMEs. The Red C survey was, as they say, a mixed bag. It showed a declining demand for credit but it also showed a falling refusal rate. At 20%, that refusal rate is still too high and would put us in the top third of European figures, but I must acknowledge it was a 30% refusal rate when those surveys started and has come down to 20%. We are working hard with the Credit Review Office. We have extended its remit to loans of €3 million and are trying to drive more cases to its office to try to reduce further that rate.

It is worth recording here, because people do not get the message often enough, that the Credit Review Office is a very valuable tool in the hands of people who have been turned down for credit. Its head, Mr. John Trethowan, is at present turning over nearly 60% of those cases that are appealed to him, so it is not that the bank's refusal should be regarded as the end of the road. The Credit Review Office is very successful at turning over decisions. We would like to see more decisions coming Mr. Trethowan's way, and that is why, during the course of the budget, the Minister announced the raising of the threshold from €500,000 to €3 million.

I know the Deputies encourage people to use these services, which are a way of improving access to credit. In addition, €2.5 billion has been provided from non-bank sources that are put out into the marketplace for SMEs across the whole suite of Government-backed lending measures. While those have still to prove their value and are in their various stages of development, looking back at the history of the seed and venture capital fund, which also started small, it is now a very established and strong element of the SME funding environment. We certainly hope that the development finance, microfinance loan guarantee and the various equity and lending funds from the NPRF will similarly build to become an important part of the non-bank finance infrastructure. We will have to develop a much stronger element of non-bank sources against a background of more constrained rules of credit from bank sources, even if the banks are fully healthy.

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