Rónán Mullen (Independent) | Oireachtas source

I wish Robert and Aideen a long and happy married life together. I hope everything goes well on Thursday. I have no doubt that it will.

I support this Bill. The proposals contained in it stem from a 2020 Company Law Review Group report, but I recall there were calls for legislation along these lines during the 2009-10 period when so many companies were failing for so many reasons, which we remember. I am not sure why this did not happen at the time although I presume it may have been because, at that time, the creditors of those failing businesses were the major banks which were themselves failing and were even banjaxed. It probably made little sense to change the law at the time since it would have been of little practical assistance to anybody. It is prudent and welcome that it is being done now.

However, it again shows the reactive nature of policymaking in this country. Just as the examinership process was introduced in a hurry in 1990 to save the Goodman beef empire from the consequences of its over-reliance on exports to Iraq, the proposals before us are a last-minute reaction to the problems faced by small business as we come out of almost 18 months of Covid cold storage. In particular, small businesses will have to face up to Revenue liabilities, which have been warehoused and put on ice during the Covid crisis. It should not have taken this looming problem to spur the Government or the Oireachtas into action. When it comes to the concerns of small businesses we should be thinking ahead more than we do, particularly when it comes to assisting those who are in difficulty through no fault of their own and providing them with a means to get back into health in a way that does not penalise anyone unduly.

The examinership process introduced in 1990 has been of great use since then in giving companies the breathing space to engage with creditors and formulate plans to rescue their businesses which may be in difficultly. However, clearly, it is not an effective process in all cases and is much less likely to be effective for, or appeal to, small and micro companies or to family businesses in particular. While the process is straightforward in theory, in practice it can be cumbersome, costly and, indeed, intimidating for directors and shareholders. Five separate court applications are necessary, from start to finish. This involves legal costs of course, but also other costs such as seeking reports from an independent expert and so on.

The Bill dubs this new rescue process the small company administrative rescue process, SCARP. The SCARP process can be commenced by a resolution of the directors and does not need the permission of a court. In the round, this removal of the court element requirement from a large number of company rescues will reduce the costs on businesses and the overall burden on directors, shareholders and creditors alike.

The timeframe of the process will also be much quicker, thankfully.Examinerships run for up to five months, which is a very unsatisfactory length of time for any small business to be put through the wringer. Under the SCARP, a scheme of arrangement will be drawn up within two months.

It is important that any new system not unfairly prejudice creditors of a business going through the SCARP. We have to remember that, in most cases, these creditors are themselves small businesses and may face their own pressures. The Bill contains good protections in this regard. The golden rule under the existing examinership regime is that, under a rescue scheme, creditors cannot be left any worse off than they would have been had the company been wound up through a liquidation. That rule is replicated in the Bill before us.

While the process is taken out of court to a large extent, creditors can object to the SCARP and insist on court approval first. That would deter against any attempt or possibility that the process would be used to evade or stymie creditors. If a business is in genuine difficulty, it will be in the interest of creditors to see this resolved, to see the business stabilised and to have the outstanding debts paid, so it is unlikely to be seeking court approval willy-nilly. This is important. The safeguards against dishonest or irresponsible conduct by company officers or practices such as reckless trading are to be welcomed.

Sadly, it seems to me, and no doubt to others, that there will inevitably be a significant rise in business failures in 2021 and 2022. Most of these will have been unavoidable. However, some will have been as a direct result of policy choices made by the Government. The greatest example, of course, concerns the pub, restaurant and hospitality sector, whose full reopening has been delayed by the Government recently, meaning the vast majority will have lost out on a summer season, which they will desperately have needed. I am aware of the good intentions behind the policy but I worry about whether the right call was made. I fear that when we look back at the decision to delay reopening in the cold light of day, the cost of it will be seen to have far outweighed the benefits, particularly given the advances we have made regarding vaccinations.

While the businesses have been kept on life support, there is a danger that they will be brought back to earth with a bang once the supports end. For that reason, we should do everything we can to assist them to rebuild for the future.