Peadar Tóibín (Meath West, Sinn Fein)
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21. To ask the Minister for Jobs, Enterprise and Innovation his plans to introduce legislation to prevent tactical insolvencies such as the Clerys debacle. [37212/15]

Richard Bruton (Dublin North Central, Fine Gael)
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Limited liability of companies, through its 150 year history in Irish law, has always been a concession to enterprise – a means of incentivising and encouraging entrepreneurs to overcome aversion to risk and to make investments in business ventures that might be beneficial to the economy at large. This concession can be open to abuse and companies can use the corporate form to evade debts that they are perfectly able to pay, for example, through tactical insolvency of subsidiaries within otherwise solvent corporate groups. As a result, the legislature has developed a number of safeguards that are aimed at reducing the opportunities for abuse. The most important of these safeguards is the common law doctrine of piercing the corporate veil. This occurs where the veil of incorporation is used fraudulently to shield the owners of a company from liability, and where the subsidiary company is merely a “sham façade” of its parent company. In such circumstances, the owners of the company can be made liable by the courts for money owed by the company to its creditors, including employees. The courts are rightly hesitant to apply this doctrine liberally: much of the beneficial effect of the concession of limited liability would be compromised if veil-piercing occurred on a regular basis. However, it does give creditors recourse where they have been genuinely defrauded.

The Deputy will be aware that the High Court was informed at the hearing on 6 July 2015 that the liquidators appointed to wind up Clerys have identified a number of matters which they intend to investigate as part of the liquidation process. It is only when all the facts and events leading up to the winding up of a company are known – and any potential legal challenges raised – that an informed decision about amendments to existing law should be made. However in general the operation of the Companies Act 2014 is under continuous review, particularly through the work of the Company Law Review Group (CLRG). The current work programme of the CLRG specifically includes receivership, examinership and winding up.