Wednesday, 5 February 2014

I wish to share time with Deputies Heather Humphreys, Andrew Doyle, Dan Neville, Joe McHugh and Marcella Corcoran Kennedy.

I thank Deputy Donnelly for producing the Bill. It is a difficult and onerous task to get a Bill before the Chamber and I welcome the good discussion on small and medium-sized businesses that are being affected by the recession. For the information of Deputy Tóibín, who said the country was developing only inside the M50, I happen to live just outside the M50, where there is a major indigenous company established just outside Naas. He might be aware of that. I am just trying to keep him informed of what is happening outside the M50 as well, in case he gets some peripheral vision.

I always look at a Bill to see what might be the benefits of it. While I agree substantially with the thrust of the Bill, the object of which is to drive down costs, I have to look at the way it goes about driving down costs and further examine who benefits – the debtor or the creditor. When one looks at this, one can see we have to protect the creditor as much as the debtor because the creditor is also, more than likely, a small business. If the creditor was directly afflicted as a result of what this Bill might bring, there is the potential for the creditor to lose his or her company and its employment. What concerns me initially is that this Bill is anti-creditor. We have to look at it and take care in that regard.

One issue highlighted within the Bill that Deputy Tóibín mentioned is that of upward-only rent reviews. While I agree that the cost of examinership is quite high, as Deputy Tóibín will be aware, according to section 510(7)(b) of the Companies Bill 2012, small businesses will be entitled to go under examinership to the Circuit Court. I welcome this as it will reduce the cost of taking the examinership route for small companies.

With regard to upward-only rents, for anyone who is in business and who has properties, the objective is to have the properties occupied. What I have seen through companies that have gone to examinership is that they have been able to negotiate downward rent reviews. We will all be aware of the international company B&Q, where more than 600 jobs were saved as a result of the pressure the examiner put on the owners of the property to reduce the rent. That is one benefit that has come about from a company being in examinership. I am aware that there are negotiations going on with regard to rent.

We also must look at whether, under the Bill, the company going into examinership will be a viable company at the end of it. That is key. If the creditors will suffer most as a result, it does not then make the company coming out of it viable. It might make companies that are marginal decide to take this route rather than trade themselves out of their difficulties, and that would lead to difficulties for their creditors.

With regard to the decision by a company to have an examiner rather than go through the court process, the court process gives an umbrella of protection for both the debtor and the creditor. While, under the Bill, the creditor must initiate court proceedings to regain some of the funds it might have lost as a result of the company’s going into examinership, it is important that we protect both the debtor and the creditor by giving them some protection with this court umbrella.

I am concerned also that the examiner may have too much power under this Bill. We in government are driving down costs. According to the Doing Business 2014 survey done by the World Bank, Ireland is ranked 8th in the world for ease of resolving companies’ insolvency issues. That is an important statistic to examine.

My view is that the Bill is a little too onerous, gives too much power to the examiner and does not protect the creditor. It is vitally important that we maintain protection for both the creditor and the debtor, but also reduce costs. This Bill is a little too onerous in that it places too much emphasis on the company in examinership rather than the creditor. It is our objective to drive down costs and we as a Government are doing that as much as possible.

Deputy Heather Humphreys: I thank the Acting Chairman, Deputy Feighan, for the opportunity to speak on this Private Members’ Bill proposed by Deputy Donnelly, the Companies (Amendment) Bill 2014. While I cannot support the Bill for the reasons I will outline shortly, I commend Deputy Donnelly on what he is trying to achieve with this Bill in terms of making the liquidation process more simple and less expensive, and for putting this matter on the agenda because the real and tangible problems facing small businesses on a day-to-day basis needs to be continually highlighted.

There are many problems facing small businesses but the problem that concerns them most is the lack of finance, particularly the lack of overdraft facilities, which is leaving them without cashflow. As we will all be aware, cashflow is the lifeline of any business and without it the business will fail.

Small businesses create employment and it will be small indigenous industry that brings economic recovery to counties such as Monaghan and Cavan. Only last week I went into a retail business in Monaghan town and heard at first hand the difficulties it was facing. Those who run the business have to meet the fixed overheads such as rates, ESB, water charges and rent, and while they would prefer if these were much lower, they know they have to pay them. Their biggest problem is that the bank has withdrawn their overdraft facilities and they are finding it practically impossible to continue trading.

Many business owners have used all their reserves and their personal savings, there is nowhere left to go to get finance, and they are at breaking point. Rural towns in Ireland are on their knees. Small shop owners are working six and seven days per week and are waiting anxiously for customers to appear. Unfortunately, the customers are shopping online, saving their money or have gone elsewhere. Business owners need overdraft facilities from their banks to replenish their stock to attract customers but it is not forthcoming. They are putting in long hours for little or no return. Businesses need the support of their banks. I want to use this opportunity to call on the banks, once again, to give small business a break, work with them, understand their businesses better and support them. There is no point in giving a bank’s customers an umbrella when the sun is shining and taking it away when it starts to rain.

I acknowledge the schemes that have been introduced by the Minister, Deputy Bruton. Both the credit guarantee scheme and the microenterprise loan fund represent a significant change in enterprise support for locally traded sectors. The message needs to be sent out clearly to SMEs that there are many supports in place for them and they need to avail of them to the benefit of their business.

My main concern with the Bill is the negative impact and lack of protection it would give to creditors, who will most likely be other small businesses, and the fact that it removes oversight by the courts. The Construction Contracts Act 2013 gave protection to subcontractors, which are also small businesses. It puts in place a statutory arrangement with regard to payments under construction contracts, including providing for interim payments, that reduces a payee’s exposure to non-payment and introduces a new mechanism for swift resolution of payment disputes through a process of adjudication. This was welcomed by subcontractors and it is important that we do not put anything in place that would undermine this legislation.

Examinership will give a company protection from its creditors and allow the examiner to put forward a plan which will force creditors to take a write-down. The Bill forces creditors to initiate a court case if they object to the plan. This is designed to make it more difficult for creditors who supplied goods or services to take on the risk and the additional cost of a court challenge in an effort to recover moneys owed to them. We cannot have a situation where it would be easier for ailing companies to write down debts at a cost to their creditors while at the same time introducing new obstacles for those creditors who have supplied goods and services in good faith.

The Company Law Review Group has advised that while simplification of examinership may be possible, which could reduce costs further, court oversight remains essential if the legislation is to be legally robust and respect the provisions of the Constitution. This Bill also raises constitutional concerns about protection of property rights.

I welcome the commitment from the Minister, Deputy Bruton, that he will set up a working group to examine the proposal of a more simplified administrative initiation of examinership for small private companies and I ask him to deal with this as a matter of urgency.