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Companies Bill 2012: Second Stage (Continued)

Tuesday, 23 April 2013

Dáil Éireann Debate
Vol. 800 No. 3

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(Speaker Continuing)

[Deputy Peadar Tóibín: Information on Peadar Tóibín Zoom on Peadar Tóibín] We heard Ms Fiona Muldoon state recently that half of the €58 billion in impaired debt was within the SME sector. Much of it is related to the construction sector but approximately 35% of the non-construction sector SME loans are impaired. Many good, healthy businesses with good products and customers are being dragged down by their marriage to that debt. In this legislation we are looking for a system for the separation of performing viable enterprises from their impaired property assets. Has the Minister a view on this? Could it form part of the process of dealing with legacy debt in the SME sector?

  As I stated, Sinn Féin supports the objectives of this legislation and the majority of the proposals made in it. It supports fully the need to promote enterprise and ease the process of establishing and running a business. It is clear that the Irish, both here and abroad, are entrepreneurs, workers and businesspeople and, if given half a chance, will create, build and enjoy profits. We support a Government that creates an opportunity for the people concerned to establish businesses and promote employment here in Ireland.

  This legislation begins to shape a legal framework for enterprise development. We need policies on investment by the Government to promote sustainable enterprise. In itself, a robust legal framework for the economy will not create growth or employment. In the recent past we have seen the growth of start-up businesses, but we have also seen, unfortunately, an increase in business closures. I fully accept that not all businesses will succeed and that the changing operating environments will make some businesses redundant. Business failure is a component of the enterprise culture. We should not stigmatise or be afraid of business failure; it happens and we need to provide legislation to deal with it.

  With regard to this process, I have some concerns about the legislation that I hope the Minister will address. The legislation includes changes regarding charges, property and debentures. I would like the Minister to confirm that these changes will not materially affect the claims for redundancy by workers arising from business closures. Will he confirm that the position of the workers made redundant will be such that they will be regarded as priority creditors?

  As the Minister will acknowledge, some businesses may face a challenge to survive. At times, we need to protect these businesses and give them a process of rebuilding, restructuring, etc. The process of examinership offers the protection of the courts during this period of business transition. Recently, many retailers have entered examinership as a way to address the cost base. B&Q is an example. Upward only rents undermined its business. In this case, the examinership process is an area in which the stakes are very high. The closure of the business and a large-scale loss of employment is one of the possible outcomes if the landlord fails to engage meaningfully in the examinership process. However, the process is extremely costly and not an option for many SMEs. I note that the Minister is aware of this. I hope that legislation will be brought forward to reduce the cost of the process such that some SMEs will be helped to continue to trade.

  Will the Minister clarify whether he believes the legislation fully meets the need of SMEs for an examinership-lite option for smaller businesses? The other option for businesses in crisis is a process of receivership, which is the last option for many. However, the recent example of the publishers of The Sunday Business Post entering receivership and coming out at the other end over the period of a weekend is a concern. The outcome of the process appears to be that the beneficial ownership of the company remains but the printing contract was cancelled and reassigned to another provider. I am aware that this case is with the courts, but I hope the Minister will address the issue to ensure receivership does not become the norm for businesses seeking to break contracts without compensation and changes to beneficial ownership.

  Given the time constraints and the size and import of this legislation, I have only had the opportunity to raise some of the technical matters of concern. I will address the other issues during Committee and Remaining Stages. I hope the Minister will provide support for the committee, through his Department, by way of advice and information.

  The changes envisaged in the legislation can make the legal framework for business simpler and more cost-effective. The legislation also has the potential to enhance corporate governance and commercial probity. While the vast majority of businesses work well and to the highest standards, a few will pursue sharp practices for profit and other SMEs will pick up the cost. Central to the success of legislation will be the compliance and support of enterprises. I ask the Minister to resource fully activities such as those of the county enterprise boards, Enterprise Ireland and other organisations that support enterprise development. These bodies will make good the changes envisaged in the legislation. They will educate businesses in order that they will understand the legislation fully and run healthily.

  I ask the Minister to re-examine the supports and information available for businesses to deal fully with this process of transition. He should ensure directors fully understand the changes. There is a need for robust compliance mechanisms to ensure the responsibilities of directors are met fully and adhered to. This should not be a matter for businesses at a time of crisis. It must include the auditing process and an overview of governance in an operating business.

  Will the Minister confirm that additional resources will be made available to the Office of the Director of Corporate Enforcement? The annual report should list judgments, including Labour Court judgments against a company or directors, and also an assessment of corporate governance.

  As I stated, Sinn Féin supports the objectives of the Bill which it approaches from a position of seeking practical changes that would improve it. It looks forward to many hours of discussion with the Minister on it.

Deputy John Halligan: Information on John Halligan Zoom on John Halligan I am sharing time with Deputy Mattie McGrath.

I support many aspects of this Bill. A commitment the Minister made before his election was to introduce it. In the short time available to me I want to speak on the benefits to SMEs afforded by the Bill. Sadly, it does not address the issue of companies dealing with workers' rights. The Minister may well say this should not be part of the Bill, but, having spoken to many trade unionists and company representatives, I believe it should. SMEs provide more than one third of all private sector employment in Ireland. As we know only too well, the financial crisis is having a severe effect on them.

There is much to be welcomed in the Bill. Many of the changes it proposes to introduce should help small and medium-sized businesses, in particular. I especially welcome the changes that will allow for some of the 12,500 private companies limited by shares which are established every year to incorporate more easily. This will result in an average saving of €1,200 in professional fees in each case. Anything that can be done to save jobs and keep businesses trading is welcome. The Bill's introduction of an affordable examinership regime will make the process a more accessible and affordable option for SMEs.

Under current legislation, only 1% of SMEs are using the courts to enter into examinership to try to trade out of their difficulties owing to the high costs they would face. I certainly hope it is true, as some industry experts are predicting, that the Bill, once enacted, will double the number of SME jobs saved this year. Perhaps the Minister might go into some detail on why he believes this will be the case.

The sad reality is that no matter how many companies or jobs are saved by opening up the examinership process, hundreds of companies will be lost, having gone into receivership. Approximately 2,000 company insolvencies last year resulted in receivership or liquidation.

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