Thursday, 17 December 2020
Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
98. To ask the Minister for Enterprise, Trade and Employment the progress that has been made in developing a cheaper and easier form of examinership which could assist viable enterprises to achieve some restructuring with creditors in order to protect jobs in the trading difficulties. [43183/20]
The Tánaiste will have read this morning that the ESRI is saying that by the end of this year we could still have 15% unemployment. One of the concerns that many people have is that when the various concessions on periods of interest, taxation or rent are lifted, there will be companies in dire need of restructuring.
The loss of those companies could add significantly to unemployment. Can the Minister of State make the process of examinership easier to access for such companies that need to restructure?
I thank the Deputy. The State's long-standing preventive restructuring framework in examinership is internationally recognised and has proven to be a successful tool for restructuring in its current form. However, I accept that the cost of examinership is prohibitive for smaller businesses. The Tánaiste wrote to the Company Law Review Group, CLRG, in July requesting it to consider the issue of rescue for small businesses, following on commitments in the programme for Government. The CLRG completed its work and reported back to the Tánaiste and me on 24 October 2020. The report set out its recommendations for a proposed new process for the rescue of small companies, distinct from the existing examinership legislation.
The issue of company rescue extends far beyond the distressed company itself. It impacts all creditors, which are often other small companies. Any new framework must reflect the delicate balance between sometimes competing stakeholders and provide sufficiently robust safeguards for the protection of creditors, particularly employees.
I am acutely aware of the difficulties faced by many small companies. I am committed to progressing legislation to support their long-term viability and preserve employment. Already, I have steered legislation through the House to assist in the survival of companies during the Covid-19 crisis. The Companies (Miscellaneous Provisions) (Covid-19) Act makes necessary temporary amendments to the Companies Act 2014 and related legislation. It provides for an additional 50 days in the examinership process, bringing the period up to a total of 150 days, and it increases the threshold at which a company is deemed unable to pay its debt to €50,000. The interim period for this legislation was due to end on 31 December 2020, but, following Government approval this week, it will be extended until 9 June 2021. This means that the extension of examinership to 150 days and the threshold change remain in place. It is important, in light of the extension of these temporary provisions, that viable companies and co-operatives have sufficient flexibility to restructure and trade through the crisis.
Regarding what the CLRG has proposed, it is the firm ambition of the Tánaiste and me to have a new process enacted in a timely manner.
I thank the Minister of State and welcome his acknowledgement that the cost of examinership, running between €80,000 and €130,000 and involving High Court action, is way beyond the scope of most companies. It is estimated that fewer than one quarter of the companies that would be rescued by examinership in the US or UK are subject to such restructuring rescue here.
This will break in the next six months. I do not believe the Government will be able to get legislation through in time for the high point. Could the Minister of State consider changes that might be made on an administrative basis? He rightly said there are complex issues associated with creditors but the worst thing of all for creditors is to see a viable business destroyed and everyone left without any payment. Therefore, I stress the urgency of bringing forward proposals.
The guiding principle of the CLRG's report was to reduce the cost and make the process as accessible as possible. However, there were points on which the CLRG members did not reach a consensus. My Department is working on developing these points and further operational details. The CLRG has recommended a stand-alone process separate from examinership but mirroring key elements of examinership in respect of rescue and small companies.
This is very much a priority for both me and the Tánaiste. We spoke about it only last week to explore how we can ensure measures are put in place to sustain viable businesses. No one wants to see viable businesses going out of business. That is why, as a temporary measure, we increased the number of days to 150 and the threshold to €50,000. It is also the reason for the extension earlier this week until July.
We need to have a new fit-for-purpose regime put in place for the SME sector, and we are determined to do so in a timely fashion.
The key is whether the Government can deliver legislation in time. From listening to what the Minister of State is saying, I believe there are many issues to be resolved. We will not have the legislation for at least 12 months. It is a question of whether the Government can set up, even on a voluntary basis, an arrangement that could be administered in a similar way to that of the personal insolvency advisers, who produced proposals. Over time, the Government might want to make them statutorily enforceable but, in the short term, could we move to a voluntary administrative scheme that would allow some companies to restructure and prevent the catastrophic loss of jobs? Where companies go down, people's collective agreements do not get respected, as we know from other cases. It is a question of whether the Minister of State can do something without having to pass time-consuming and tricky legislation that will not be delivered in time to address the wave of difficulty coming towards us.
I am very conscious that the Deputy is a former Minister in my Department. He has a wealth of experience in bringing legislation through the Oireachtas. He is aware of how long it can take to pass legislation, particularly when it is difficult. The difficulties and challenges should not dampen our attitude or resolve to introduce legislation in a timely fashion, however.
We could certainly consider the voluntary process the Deputy is advocating. I am not aware of it myself but we can certainly explore it. I will bring the Deputy's suggestion back to the officials in the Department.
This has been a priority. The CLRG prioritised it and has already produced its report. The Department has already assessed that report so progress is quite swift. In acknowledgement of the difficulties facing companies as a result of Covid, temporary measures have already been introduced. In this regard, I have already mentioned the extension of the number of days and the raising of the monetary limit.