Seanad debates

Monday, 12 July 2021

Companies (Rescue Process for Small and Micro Companies) Bill 2021: Second Stage

 

9:30 am

Photo of Emer CurrieEmer Currie (Fine Gael) | Oireachtas source

I welcome the Minister of State to the House. I hope he has a successful week. Covid might be the reason we want to get this legislation across the line for the summer but it has been a while in the making. It has been examined by the Company Law Review Group, CLRG, and that has involved analysis by practitioners, businesses, unions and academics. Prior to that, there was public consultation. The legislation fills a gap in our examinership laws. It is tailored to meet the needs of small and micro businesses, enabling those that are viable but vulnerable to restructure their debts and, hopefully, keep trading. There is no better time to do that.

Through a mix of grants, loans, tax warehousing and waivers, the Government has supported businesses as much as possible in the Covid crisis. The Government has been responsive to our calls when we have identified gaps in supports, be they for the self-employed, small businesses or those availing of the Covid restrictions support scheme. Many a support has come online over the past year. Despite those supports, some companies still find themselves struggling. Of the businesses that commenced an insolvency process last year, only 5% went through for examinership. Under the proposed new mechanism, small firms facing insolvency will be able to cut debt with support from a majority of creditors without the high costs and will be able to do so in a shorter period.

The amending legislation today represents a commitment made by the Government to look beyond practical supports and review the Companies Act and regulatory framework to simplify and improve our examinership laws, specifically for the small business sector, and to try to ensure those businesses that can survive will do so, not just during the pandemic but beyond.

There are two key areas in the delivery of this new corporate framework, that is, cost and time. The international framework for examinership is overseen in the courts. This is expensive and prohibitive for small, struggling companies. It is not realistic for a small company to engage in this way so we have to address the barriers so it can access protection and support and retain the jobs we desperately need. This Bill would oversee a process that would reduce the involvement of the courts as much as possible and speed up the rescue process.

The aim is to reduce the examinership timeframe from 150 days to 70 days, although there is flexibility to accommodate the courts. The cost could be lowered from between €80,000 and €100,000 to between €20,000 and €50,000. The SCARP is initiated, importantly, by the directors of the small and micro businesses and can commence and proceed without significant involvement of the courts. It is commenced by resolution of the directors rather than an application to the court, and is overseen by a process adviser. While taking into account the vulnerability of the business in receivership, it must also be fair to the creditors who, as my colleague Senator Mullen said, are often small businesses themselves. Creditors will be able to vote in favour of the proposal as long as no creditor raises an objection to the plan within 21 days following the vote. Small companies have to be competitive and agile in respect of how they react to the reality of business, and the proposed framework complements that. Ultimately, the process has to be more successful than the liquidation process or it will not work.

I would like clarification on virtual annual general meetings. Is it just for companies going through the process or is it in general? Small companies, in particular, need to be productive. It has been recognised that this is the area we need to work on. Virtual annual general meetings can facilitate a more efficient way of working. We should consider this if it is not included.

SMEs are often referred to as the backbone of the Irish economy. It is only right, therefore, that they would have equitable access to rescue processes. Our small business sector represents our neighbours, partners, brothers and sisters and, in my case, the parents of our children's friends. There are 800,000 employees in the sector, and 78% of the companies operate in areas that are hit especially hard by the pandemic, such as leisure, tourism and hospitality. Let us get through this pandemic and leave our company law in a better place than we found it.

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