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

I would like to thank Deputy Donnelly and those who have worked with him on this Bill for bringing it forward. I can see that a lot of work has gone into it. I have had an opportunity to meet Deputy Donnelly and there is absolutely no doubt about the bona fides of what he is trying to do. This debate is timely because we continue to have a serious challenge in this area.

I took up this issue myself as a serious challenge and referred the matter to the Company Law Review Group. That group is composed not only of legal and technical experts but also representative bodies including ICTU and ISME. The group studied this issue and reverted to me with recommendations as to what could be done. The first thing the group proposed was that examinership should continue to be the vehicle we would use in seeking to deal with companies in these difficulties, as Deputy Donnelly accepts.

The group also recommended that we should move from the High Court which added unnecessary cost to the Circuit Court, and I have done that. I acknowledge the support of the House in doing so. It was done with a view to taking out 30% of the legal costs or reducing 70% of the legal costs, which would be 30% of the costs in the High Court. Like Deputy Donnelly, I believe that by making that change we can move from a situation whereby only 60 to 80 companies avail of examinership to one where it is more prevalent.

The other issue the group recommended was to introduce a simplified administrative initiation of examinership for small private companies. The group talked about the need to identify an appropriate agency that would receive the preliminary evaluation. It would provide an alternative that takes the court hearing out of the first route of examinership. However, the group made it clear that the simplified procedure should only extend to the appointment of an examiner and that any scheme or proposal formulated by the examiner must be approved by the Circuit Court. The group believed that oversight by the court remained an important element.

I am now setting up a working group to examine that proposal further and see if that route is viable. I will certainly look at some of the items raised by Deputy Donnelly in the course of that working group. Unfortunately, however, I am not in a position to support this Bill on Second Stage. I think there are too many difficulties that would render it unworkable and open to challenge, so I simply cannot support it.

This is a complex area and the Deputy has acknowledged that. In any situation of examinership one is seeking to balance the interests of some creditors against others. We all want to see a company that is basically viable get the opportunity to recover. Equally, one must ensure that there is balance in their treatment, and that those who are losing out in that situation will get a fair hearing for their position and will be protected in a fair and equitable process. They, too, can be small businesses who happen to be trading in good faith with that company. They may find that their debts become unsecured or subject to significant losses. There is therefore always a balance to be struck where one is looking at a company that has got into difficulties and is seeking its creditors, and other people it is trading with, to be paid less. One must ensure that it is done fairly and there is clearly a public interest in seeing that businesses are viable and jobs can be saved.

The trouble with Deputy Donnelly's Bill is that he has made so many changes in this area, and has removed the court from so much of the oversight, that it would create significant risks that the measure would be unconstitutional. The last thing we need to do is introduce a piece of legislation that would build up hope or expectation and then fall at the very first hurdle.

In a number of areas the Deputy has departed from the existing process and that creates serious concerns. For starters, the examiner is not appointed by a court - it is appointed by the company without any test of independence. The examiner then goes on to issue the protection order itself and the court oversight is only in respect of being worthy within the various thresholds. The court has a role in receiving the protection order but simply to ensure that it conforms.

A creditor would then have to appeal against the protective certificate being issued. However, Deputy Donnelly's Bill has created some pretty high hurdles concerning what that creditor would have to meet. It includes being able to show the court that matters of a material nature are not disclosed in the independent accountant's report, or that the company has been acting to defraud its creditors. The hurdle of proof for someone who is at risk of losing their position is very high, including demands of an evidential nature for a person challenging it at that early stage.

The examiner is also given the role to take over the power of directors in the Bill, again without court oversight of that process. The examiner need only form an opinion that they are obstructing him or her to have the right to take over directors' powers.

The scheme of arrangement involves the final deal. Yet again, the onus is very heavily put onto the creditor who may also be in a weak position struggling with a business. A creditor must not only vote against the scheme of arrangement but must also go to court to prove that he or she has been unfairly prejudiced. The court is already given a direction in this Bill that it must have particular regard to the opinion of the examiner over and above the opinion of an individual creditor that might be challenging. When it comes to the issue of costs, the challenging creditor must bear his or her own costs. This significantly changes the balance in this area. We have a Constitution that protects the property rights of people whatever position they are in. The argument is strongly presented that this is going to such a degree of rebalancing those rights that it is going extremely far.

While taking the court out and placing many hurdles before the creditor, the Bill also gives a lot of new powers to the examiner to repudiate leases and write down secured debts. Against a background of the creditor's position being significantly weakened, this could be seen as unjustified and disproportionate interference in the property rights of those involved.

With this Bill we are running the risk of serious constitutional problems concerning the protection of property rights. While I understand the Deputy's motivation, that is not a risk I can take. The last thing we need is to create what seems to be a sound Bill, but which is so flawed that we would have serious difficulties with it.

I intend to continue to work to produce a more effective examinership system. I intend to push on with this work to see if we can develop, as the Company Law Review Group has indicated, a process that will make it cheaper for an examinership to be undertaken. This involves seeking to remove the hearings from the first part of the examinership process. Having court oversight and fairer access for a creditor than is provided for in the Bill are inherent in the way the examinership process must work. While clearly the intentions of Deputy Stephen Donnelly are good, he has gone too far in the Bill and it is not one I can support.

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