Alice-Mary Higgins (Independent) | Oireachtas source

I move amendment No. 3:

In page 60, between lines 21 and 22, to insert the following:

“92.Section 599 of the Principal Act is amended by the substitution of the following for subsection (4)(c)—“(c) whether an action of the related company or of any subsidiary of the related company resulted in liquidation;

(d) whether the directors of the company demonstrated that they fulfilled their duties to work in the best interest of the company or of a related company;

(e) whether the directors of the company distinguished at all times between the best interests of the company and those of any related company;

(f) whether the creditors of the primary company were led to believe that related companies stood behind the company;

(g) where a group structure enabled a company with assets insufficient to meet its liabilities to trade while using assets belonging to a related company, whether the structure was calculated unfairly to defeat the interests of creditors in a winding up or to impose any liabilities on the Exchequer or other public funds;

(h) the effect which such order would be likely to have on the creditors of the related company concerned.”.”.

This amendment is inspired by that brought forward by Senator gerald Nash on Committee Stage which was a strong and reasonable proposal. I have attempted to redraft and, I hope, slightly tighten his proposal. The amendment proposes a change to section 599 of the original Companies Act. The section sets out the circumstances in which a related company may be required to contribute to the payment of the debts of a company being wound up. I propose the consideration of particular elements in deciding whether a related company should contribute such as "whether an action of the related company or of any subsidiary of the related company resulted in liquidation"; "whether the directors of the company demonstrated that they fulfilled their duties to work in the best interests of the company or of a related company"; "whether the directors of the company distinguished at all times between the best interests of the company and those of any related company", and so forth. I will not read through the whole amendment as it is lengthy, but its purpose is to address situations such as the Clerys case, where Clerys was sold to a company called Natrium. Natrium had two subsidiaries who bought different parts of the business, called OCS Properties and OCS Operations. One of these was set up to fail, designed to be wound up, leaving it unable to pay its debts and allowing the other wholly owned subsidiary company to avoid contributing to those debts. The pension and social welfare entitlements for the workers and contractors were then paid by the State. This amendment is effectively saying that when a company is being wound up and there is a related company and a question as to whether one of the companies was set up to be wound up, we should not have a situation where we can have a contrived dissolution of a company, where there is a tactical avoidance of any of the debts of that company, and where the State has to step in and pay the cost. The situation that we have at the moment is unsafe. The Minister will speak about the work of the company law review group, CLRG, which is looking at the question of section of 599, but we have been waiting for a considerable time for its findings and I am very concerned about the very lengthy nature of the process. Business moves very quickly at times, and the situation at the moment means that companies are very aware that exactly what happened in Clerys can be used as a strategy again. We have had years of dispute on the Clerys issue. The message that we are sending to the business community at the moment is that we have learned nothing and that we are taking no remedial action, and that the State is still in a position where it will step in and take the costs and companies do not have to do so.

I understand that this amendment may not be perfect and that we may get better proposals in the future from the CLRG, and I am sure that we would like to facilitate further amendments in that regard. However, I would argue that the amendment I am putting forward today is a much better proposal than section 599 as it stands. I ask the Minister and all those in the House to support the amendment, which provides basic checks and balances around companies and ensures that those who take over companies are acting in their best interests and not taking them on to fail. I ask the House to accept the amendment as something which would be a far better holding position for the State while we await potentially more lengthy proposals from the CLRG.

The amendment contains six criteria. The current situation allows for the dumping or splitting of assets, the creation of intentionally unsound companies which can be wound up, the dismantling and hiving off of profitable parts where workers are paying the prices and where indeed many related companies and providers are paying the prices. Limited liability is being exploited under the current provisions of company law. This amendment would patch this procedure and improve it. It would transform corporate responsibility and corporate accountability in this culture, and it would send a much needed message to others who are looking to take over and dismantle functioning businesses in our country. I ask the Minister to seriously consider accepting the amendment.