Dáil Éireann debate -
Tuesday, 30 Jun 1998

Vol. 493 No. 3

Written Answers. - Company Law.

Jim Higgins

Question:

46 Mr. Higgins (Mayo) asked the Tánaiste and Minister for Enterprise, Trade and Employment the proposals, if any, she has to amend company law with a view to ensuring that company directors whose companies have been put into receivership are not allowed by law to re-establish a company operating the same or similar enterprise; and if she will make a statement on the matter. [15598/98]

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

Chapter 1 of Part VII of the Companies Act, 1990, contains provisions which are designed to tackle the problem, which is generally referred to as the Phoenix Syndrome, where companies are run into liquidation by their owner directors, who having liquidated them, leaving substantial liabilities outstanding to creditors, then proceed to establish new companies, many times operating in the same or a similar line. By virtue of section 154 of that Act, the provisions also apply to circumstances where a receiver is appointed.

In brief, the Companies Act, 1990, provides that where it is proved to the court on the commencement of a winding-up, or at any time during the course of a winding-up it is certified by the liquidator or is otherwise proved to the court that the company is unable to pay its debts, the court shall, unless it is satisfied that the directors have acted honestly and responsibly, declare that any person who was a director or shadow director of the company at the date of or within 12 months prior to the commencement of the winding up shall not be involved as a director of or in the promotion or formation of any company unless the company meets specific requirements. These requirements include, in the case of a public limited company, minimum paid up capital of £100,000 and, in the case of a private company, minimum paid up capital of £20,000. Other restrictions also apply such as the prohibition on the company granting loans to the directors. Application for relief can be made to the court within one year by a director who is "restricted". As previously indicated, the provisions outlined above also apply to receivership situations.

The Company Law Review Group (CLRG) examined and made recommendations for changes in six separate areas of company law. Chapter 7 of the CLRG report made recommendations for the reform of the provisions of Part VII. It recommends,inter alia, a greater focus on disqualification rather than restriction of directors found to have failed to comply with the law.

I propose to bring forward proposals to implement those recommendations which I consider appropriate on a phased basis. In this regard, the preparation of a Bill to implement the CLRG's recommendation in relation to examinership and removal of the statutory audit requirement for certain private limited companies is in the process of being drafted by the Parliamentary Draftsman. I expect to introduce this Bill to the House later this year.

As progress is made with this Bill, attention will be given to examination and preparation of the necessary proposals to deal with the other areas. I have not, however, at this time, decided the order in which I will tackle the CLRG's other recommendations for amendment of company law.