asked the Minister for Industry and Commerce if, in the light of the frequent liquidation of companies to overcome industrial relations or tax problems and the subsequent formation of new companies in the same line of business by the same people, he intends to reform company law to deal with this problem as a matter of urgency.
Ceisteanna—Questions. Oral Answers. - Company Law Reform.
2.
The activities of unscrupulous company operators in liquidating companies owing substantial debts to creditors, including the Revenue, and forming new companies in the same line of business, has been a matter of serious concern.
The elimination of this problem, commonly known as the "Phoenix Syndrome", is one of the more important themes in the Companies (No. 2) Bill, 1987. The Deputy will be aware that this Bill, which was presented to Seanad Éireann on 8 May of last year, is on Committee Stage in the Seanad at present.
The general purpose of the Bill is to strengthen some of the existing provisions of company law and to introduce new measures, the essential objective of which is to eliminate, deter or penalise certain abuses and malpractices which can occur in the management and direction of companies.
I am confident that this Bill, which will radically reform the existing body of Irish company law, will adequately deal with these problems.
I am sure the Minister will agree that we have been given assurances that these measures were in train. Is he satisfied that under the provisions of the Companies (No. 2) Bill that, for instance, the manager director of a firm such as T & C Carpets, who has asserted that he intends to start up again in business under a different name, would be prevented from doing so? Apparently, because £38,000 was owed to the Revenue Commissioners that company went into liquidation. The managing director assured the creditors that he would start up in business again and see them okay.
May I dissuade the Deputy from identifying persons in any particular way?
It was mentioned in the national newspapers on 24 March that this would happen.
That may be so.
The matter referred to by the Deputy is covered by one of the objectives of the Company Law Bill, 1987, which is at present under discussion on Committee Stage in the Seanad and the Deputy will have an opportunity when the Bill comes into the Dáil to deal with that matter in detail.
I am sure the Minister will agree that the House has been talking about this problem for a number of years now, at least since the time Deputy Cluskey was Minister, and that this is one of the aspects of company law which needs to be reformed? Can the Minister indicate whether he will attach urgency to this matter in the implementation of the new Bill which he has in mind?
Absolutely.
Can the Minister tell us whether this legislation will apply to State-owned companies which are being restructured such as KDW?
In what way?
In the sense of protecting creditors.
It does not arise. The Deputy drafted the Bill, therefore he should know. In any event, that is a separate question. I do not expect State companies to run away with Revenue moneys. Does the Deputy?
In regard to trade creditors.
Trade creditors are dealt with in the normal way under company law, as the Deputy is well aware.
In his reply the Minister stated that the provisions of the Companies (No. 2) Bill would also apply to those directors who wish to start up again in similar businesses. Would the Minister agree that there is a need to go after these directors, particularly as it is smaller companies who are being hit? Is the Minister taking cognisance of the fact under the new Companies Bill that there is a need to address this problem as much as the overall picture? Has the Minister any plans in that area?
The problem which has been referred to by the Deputy is very complex. This Bill runs to about 200 sections and deals with the serious problem of fly-by-night directors who open up new businesses. There are those who say we have gone overboard in this Bill in stamping out this abuse and claim that we are in some way damaging and stifling enterprise. A delicate balance needs to be struck but our objective is to stamp out that abuse. It has given business a bad name, has put small firms out of business, has deprived the Exchequer of moneys due and has led to increased tax for everybody else. This is an abuse which has to be stamped out and by doing so, from a business point of view, it will restore the good name of business.
Is the Minister aware that the Revenue Commissioners are already a priority creditor in the event of liquidation? Will he agree that other creditors are just as entitled to protection as the State in the event of liquidation and can he tell us if the provisions of the new Bill will protect other creditors?
I have introduced a new Part to the Bill, Part IX, deals with the matter the Deputy has referred to whereby a company which finds itself in financial difficulties would have the opportunity to apply to the court to have an examiner appointed and to be given a period of time to see if the particular company could be restructured. The Revenue would attend the creditors meeting just like everybody else. One could say that they hold a veto on liquidations but under the new Bill they would be one of a number of creditors and if everybody else is in favour of restructuring and the Revenue are not, the examiner would be able to go back into court and Revenue would not have the veto which they have had up to now. Nevertheless it is the court who would decide what is in the best long-term interest of the company.
A final supplementary from Deputy Mac Giolla.
Let me refer back to my previous question in relation to a company which closes down in order to overcome an industrial relations problem. Can the Minister tell us whether this area is being covered under the new Bill? One such case, Hanlon Ambulances, was referred to on the radio today.
I did not hear that case raised on the radio today but there are provisions contained in the Bill which cover that type of case. I do not know what particular one the Deputy is referring to but there have been amendments to the Bill to cover that type of case.