Thursday, 17 December 2015
Bankruptcy (Amendment) Bill 2015: Second Stage
I, too, welcome this legislation which is a positive move. It is important we facilitate people whose businesses have collapsed or who have unsustainable personal debts to make a fresh start and to be able to contribute to the economy again. I also note the Bill includes increased penalties in cases of non-co-operation and fraud. It is right to have that balance to support those who are genuinely co-operating and want to rebuild their lives while having disincentives for those who might try to take advantage of the situation. The Bill is in line with the recommendations of the Oireachtas Committee on Justice, Defence and Equality which considered this issue in depth, receiving 122 submissions on it, most of which were in favour of the reduction of the term to one year.
Reducing the bankruptcy term to one year will aid not just the individuals concerned, but the recovery of the State by enabling people caught up in bankruptcy to become positive contributors to the economy again. It is hoped it will encourage financial institutions to engage more with debtors and reach meaningful solutions prior to bankruptcy to ensure people do not have to take the nuclear option. It will bring Ireland into line with other countries such as the UK and Northern Ireland where the bankruptcy term is one year. It has been unfair that some who were in a position to do so were able to go to the UK for one year to have their bankruptcy discharged, while others who were not able to do so were stuck in Ireland, not able to avail of the opportunity. It is only fair everybody should be subject to the same terms.
It is also important to recognise that businesses fail. Senator Paschal Mooney referred to the entrepreneurial culture in the United States with the notion that one is not really a business person unless one has failed once or twice before hitting the big idea. We need to encourage greater entrepreneurship in Ireland and people to take the risk of setting up businesses. We cannot be overly punitive, making people feel they will lose everything and be left in a bankruptcy limbo for years if they fail.
There is much more that needs to be done to increase support for small businesses. We are good as a country at attracting foreign direct investment, bringing in significant job numbers from large multinational companies. While it is great a multinational may bring 500 jobs into the State, if it decides to pull out, that is 500 jobs gone overnight. To build a more sustainable economy and to ensure employment opportunities throughout the State, not just in key hubs, we need to support small and medium-sized enterprises, SMEs. SMEs are already our greatest employers. This is often lost when we talk about foreign direct investment and how good Ireland is at export manufacturing and areas like that. We must remember the backbone of the economy is the SME sector.
We still have punitive tax and social welfare arrangements for small businesses. While there was some movement on this in the budget, there is a need to ensure equalisation. It is unfair that those in small businesses have to pay higher taxes. It is also unfair that they are left with no social welfare entitlements when their businesses go wrong. I have dealt with several cases over recent years of people who had worked hard to build up their businesses. When times got tough, they did everything they could to keep it going and make sure they could pay their staff wages. Often they did not take any income home themselves just to keep on loyal employees who had been with them for years. Ultimately, they could not save the business and it went to the wall. Their employees were entitled to social welfare but they were not. That is unfair and needs to be examined.
The Bill provides that those who are already in the bankruptcy process will have to wait a further six months - a transition period - before they can be discharged. A concern raised with me is that this potentially could lead to 1,000 existing bankrupts falling due for their dates to be discharged on a single date six months after the passing of the legislation. Will the Minister of State clarify if that is the case? Will all these people have to wait the full six months and then will they all fall to be considered at the same time? That would put a significant burden on the Insolvency Service of Ireland, ISI, and I do not know how it would deal with that. Is there a potential for this process to be delayed? Can the ISI use the six-month period to discharge the bankrupts in question on a staggered basis? Can it start immediately bringing some people out of bankruptcy and ensuring all 1,000 people are dealt with in the next six months? If they have to wait, there is the potential of a logjam. This would be unfair on those who have been in the process already for years and have more than passed the one-year requirement while waiting to be discharged. A transitional period of six months was provided previously when the term was reduced to three years but there were not as many people then who were hitting the threshold at one time as there will be when this legislation comes into place.