Companies Bill 2012: Second Stage

I move: "That the Bill be now read a Second Time."

I understand my speech is being circulated along with an information pack of supplementary documentation that has been made available to Deputies. I am introducing the biggest Bill in the history of the State.

We are starting in the foothills of a very big debate. This is a landmark project. It is the result of many years of detailed and comprehensive work by officials in the Department of Jobs, Enterprise and Innovation, the Company Law Review Group and the Office of the Parliamentary Counsel. It is the largest substantive Bill in the history of the State, spread out over 25 Parts and 17 Schedules and comprising 1,429 sections. It was recognised at an early stage of the process that a mere consolidation of the existing Companies Acts would be too limiting in light of the reforms that are necessary to sustain Irish competitiveness with respect to company law. Instead, an overhaul and restructuring of the company law framework was embarked upon. The result is a Bill that consolidates, simplifies and reforms company law to provide a state-of-the-art framework for all businesses operating in Ireland, whether domestic or foreign.

The principal objective of the Bill is to restructure, consolidate, simplify and modernise company law in Ireland, and in doing so to improve Ireland's competitive position as a location for business investment. This reform seeks to strike a balance between simplifying the day-to-day running of a business, maintaining the necessary protections for those dealing with companies, such as creditors and investors and putting in place an effective corporate governance regime to ensure compliance. Any modernisation and reform of company law must be viewed against the backdrop of the fact that limited liability itself is a concession by the State to business, and must therefore be tempered by robust regulation to protect creditors' interests and to ensure this concession is not abused.

The simplification of company law proposed in this legislation is consistent with the principle of maintaining high standards of shareholder and creditor protection and robust corporate governance. It is intended that by making company law more accessible, coherent and reflective of business practice, Ireland's international competitiveness will improve and ordinary businesses and companies throughout the country will find it easier to establish and operate. It is not intended to water down compliance as we simplify the law and make it more intelligible. If the law is more accessible, it is more likely to ensure respect and compliance. Although a process of simplification has been undertaken in drafting this Bill, it is a large and complex piece of legislation nonetheless.

Company law is technical by nature. The last major review and consolidation of Irish company law was over 50 years ago, in the lead-up to the Companies Act 1963. Since then, there have been 15 amending Acts and numerous statutory instruments which are required to be read as one with the Companies Acts. In that time, Ireland has taken on EU obligations in relation to the harmonisation of laws. This has inevitably added to the volume and complexity of Irish company law. Company law involves balancing many conflicting and possibly competing interests. The legislation must balance these interests, including creditor protection, shareholder protection, corporate governance and incorporation and registration of companies. This necessary balancing of interests undoubtedly contributes to the intricate nature of company law.

Notwithstanding the complexity of the existing body of legislation, it was considered that company law could be simplified. This Bill seeks to break company law into distinct principles and areas and remove or lessen administrative burdens, where possible and appropriate, bearing in mind that the public interest will sometimes require the introduction of additional regulation. Some new provisions will reduce burdens on business and simplify the day-to-day operation of a company, thereby offering tangible benefits to the ordinary businessperson. Changes in a number of procedures have been introduced to take account of technological and organisational developments in the conduct of business and communications and emerging best practice in corporate governance. This will lighten the regulatory burden, particularly on private companies, while balancing the interests of members, creditors and the public. This streamlining of the law will bring the Irish company law regime into the 21st century and ensure Ireland maintains a competitive edge as one of the best places in Europe and the world in which to do business.

The Bill is the culmination of many years of work by my Department and the Company Law Review Group, CLRG. The group is a statutory body that was set up in February 2000. Its role is to advise the Minister on the reform and modernisation of company law. The group includes all relevant stakeholder interests, with members from Government Departments, professional bodies including solicitors, barristers and accountants, employer and business interests, regulatory bodies; trade union interests and individual legal and finance practitioners. The group has published 14 reports since its inception 13 years ago. All of these reports have been available to access free of charge on its website. By making its reports publicly available, the Company Law Review Group has ensured its decision-making process is transparent and the reasoning behind any recommendations issued by it can be dissected. The general public and interested groups have been free to make submissions to the CLRG to express views or bring matters to its attention. All such submissions are given due consideration.

I wish to take this opportunity to thank the members of the CLRG for the sterling work they have done in shaping the Bill before the House today. I understand that some of them are with us today. Their interest in this work has endured to the start of the lengthy process of having this legislation passed. In early 2007, the CLRG submitted its general scheme, which represented the outcome of more than six years of work. In July 2007, the Government approved the formal drafting of a Bill along these lines. The next significant milestone came in May 2011, when Volume 1 was published in draft form on my Department's website. This gave all interested stakeholders an opportunity to become familiar with the proposed new legislation, to interrogate it from a technical perspective and to prepare themselves for its introduction. Submissions were welcomed. They were considered by the CLRG, by the Department and by me. A number of suggestions were accepted and are included in the Bill as published.

One of the principal innovations of the Companies Bill is reflected in its general structure. For the first time in Irish company law, the most common company type - the private company limited by shares - is placed at the centre of the legislation as the default company. The architecture of the Bill is inspired by the reality that almost 90% of companies currently registered at the Companies Registration Office, CRO, are private companies limited by shares. Existing company law is peculiar in that it presupposes that the public limited company is at the centre of corporate life in Ireland, whereas in reality less than 1% of registrations are public limited companies. Historically, legislation has never clearly distinguished the law applicable to private companies from the law applicable to public limited companies. This has resulted in small businesses being faced with an apparently massive company law code, when in fact a considerable amount of it has no application to their particular business enterprise. There is a world of difference between the one-person private company formed by a tradesperson and the large publicly listed limited company.

Therefore, Volume 1, containing Parts 1 to 15 of the Bill, sets out to ring-fence the law applicable to the most common company type - the private company limited by shares, or "the new LTD company".

This reduces the burden and expense for companies that previously may have had to secure court approval for certain transactions. Additionally, it simplifies and streamlines the current methods of effecting such transactions. To ensure balance, it incorporates safeguards in respect of directors' liability if the procedure is used inappropriately. Greater detail on the summary approval procedure is provided in the Deputies' handouts.

Part 5 codifies for the first time in Irish law all the duties of directors and other officers of the company. Up to now, these duties were to be found in the common law and in various statutory provisions. They are set out now in their entirety for the sake of clarity and it is expected that this innovation in company law will promote compliance with such duties by directors and company officers. Also dealt with in this part is the directors' compliance statement, which is now being introduced into law as recommended by the CLRG and approved by the Government in November 2005. The requirement in these provisions applies to all public limited companies, except investment companies, and large limited companies. It places on obligation on directors to make an annual statement in their directors' report, acknowledging that they are responsible for securing the company's compliance with its "relevant obligations" and confirming that certain things have been done or, if they have not been done, explaining why they have not been done. Failure to prepare a director's compliance statement will constitute an offence under the Bill.

Part 6 contains provisions regarding the accounting records to be kept by companies, the financial statements to be prepared by them, the periodic returns to be made by companies to the Registrar of Companies and the auditing of financial statements of the companies. It also covers other matters related to auditors, particularly rules governing the appointment of statutory auditors and their removal from office. To a large extent, the requirements are unchanged from existing law; however, the relevant provisions have been redrafted to make them easier to understand, in order to improve compliance. One of the significant changes in this part is that the audit exemption has been extended to a group situation, so that in order to avail of the audit exemption, the company must be a small company or must be a group of companies that, taken together, fall below the threshold requirements for a small company. In a case in which the exemption applies, at least 10% of the members of the company may still request that an audit take place.

Part 7 contains provisions regarding debentures and charges and introduces a number of changes to the current law. The thrust of the changes is to simplify the registration and deregistration of charges while clarifying the rules for the priority of charges. A new two-stage procedure for the registration of charges is proposed. It provides that an initial notice can be sent to the registrar stating the intention of the company to create a charge, followed up by a more detailed notification within 21 days of the creation of the charge stating that fact. In this way, it is envisaged that lenders may be more willing to advance funds if they can achieve an enhanced security priority over a company's assets. The rules governing the priority of charges have also been significantly changed in that, where the priority of charges is not governed by other regulation, such priority will be determined by reference to the date of receipt by the Registrar of Companies of the prescribed particulars. This is in contrast to the current position whereby priority is deemed to be governed by the date of creation of the charge. The CLRG was of the view that this practice is unfair and it was recommended that priority be given to the creditor who files first in order to minimise the potential for fraudulent abuse and thereby protect providers of finance.

Part 8 deals with receivers. It substantially re-enacts the current law on receivership as contained in the Companies Act 1963, as amended. There are, however, some new provisions that set out the powers and duties of receivers. Receivers are now given certain specific powers in this part in addition to those conferred on them by court order or the instrument under which they were appointed. Conferring statutory powers on receivers is intended to alleviate many of the problems arising from poorly drafted debentures.

Part 9 contains provisions relating to the reorganisation, acquisition, merger and division of companies. The main innovation in this part is the provision for the first time in Irish law of a statutory mechanism whereby two private Irish companies can merge so that the assets, liabilities and corporate identity of one are transferred by operation of law to the other before the former is dissolved. A further innovation is that a merger can be effected without the necessity for a High Court order. Where a merger meets the requirements of the legislation, it is proposed that the summary approval procedure can be utilised to effect the merger, which can be expected to result in a significant saving of time and money. The provisions dealing with divisions are also entirely new and have been drafted to mirror the corresponding provisions in this part on mergers.

Part 10 contains the provision relating to examinerships. It largely reproduces the provision on examinerships as contained in the 1990 Act. A recent recommendation from the CLRG to me as Minister advised that changes be made to the law in order to facilitate access by small private companies to the examinership process. The proposed amendment would allow such companies to apply directly to the Circuit Court to have an examiner appointed, so that they would not be required to apply to the High Court first, as is currently the case. Small private companies will still have the option to apply to the High Court directly for examinership if they so wish under the Bill. It is hoped that the immediate impact of this change will be lower costs and greater accessibility for small private companies to the examinership process due to the fact that it eliminates the requirement for any High Court involvement and all the associated costs.

Part 11 consolidates and modernises the law relating to the winding up of companies. In the first instance, the law relating to winding up has been reordered in a more logically coherent way and greater consistency has been introduced between the three different methods of winding up - members' voluntary, creditors' voluntary and court-ordered. This is most evident in the changes to the court-initiated mode of winding up, which will reduce the court's supervisory role in favour of greater involvement for creditors. Further changes are the introduction of new professional indemnity insurance requirements for liquidators and the requirement for a person to be qualified before acting as liquidator of a company.

Part 12 combines into one part the many diverse provisions of the current law regarding the striking off and restoration of companies. The new provisions set out in one place all of the reasons a company may be struck from the register and, in another, the procedures for restoration to the register. The Director of Corporate Enforcement will be empowered to require the directors of a company that is being struck off to produce a statement of affairs. These directors can be required to appear before a court and answer on oath any question relating to the statement.

Part 13 substantially re-enacts, without any significant amendments, the law regarding the appointment of inspectors to companies and seeks to codify all law relating to the investigation of companies. In keeping with the stricter approach to the enforcement of company law, Part 14 brings together the various compliance and enforcement provisions, a change which will provide greater transparency. A director may apply for relief from a restriction order at any stage during the restriction period but the Director of Corporate Enforcement must now also be included as a notice party in any application for relief. A new provision is inserted whereby a company is prohibited from utilising the summary approval procedure where that company has a restricted director. A new four-tier categorisation of offences is introduced. It is proposed that, subject to a small number of exceptions in the case of the most serious offences - for example, prospectus and market abuse offences - all offences under the Companies Acts should be categorised according to this four-tier scheme. The Deputies will find details of the scheme in their information packs. A further new provision has been introduced which provides that, following a person's conviction for an offence under this Bill, the court may order that the person remedy any breach of the Bill in respect of which he or she was convicted.

Part 15 contains provisions relating to the Registrar of Companies, the Irish Auditing and Accounting Supervisory Authority, IAASA, the Director of Corporate Enforcement and the CLRG. For the first time, the powers and duties of both the Minister and these bodies are brought together in one coherent group of legislative provisions.

Part 16 makes provision for a type of private company to be known as a designated company, DAC. The law in volume 1 applies to DACs as it does to the new LTD, subject to the exceptions set out in the table of disapplications and any other made in this part. There will be two types of DAC under the Bill - a private company limited by shares and a private company limited by guarantee, having a share capital. The primary and defining feature of a DAC will be the continued existence of an objects clause in the constitution of the company.

This is in contrast to the "new LTD company", dealt with in Volume 1 of the Bill, the constitution of which will no longer contain an objects clause.

The DAC limited by shares will be the closest type of company to the existing private company limited by shares under the current law. During the transition period, existing private companies may elect whether to opt into the new regime for private companies or alternatively, to retain their objects clause by converting to a DAC. Alternatively, an existing private company that does not wish to opt in to the new regime can do so easily by following the procedure laid down in the Bill. It is envisaged that entities which would welcome the DAC include special purpose companies, for example, those incorporated for joint ventures or for use in a financial transaction. However, the Bill does not restrict the availability of DACs to persons engaged in such activities.

Part 17 of the Bill is concerned with public limited companies, PLCs. The law in Volume 1 applies to PLCs as it does to the new model private company limited by shares, subject to the exceptions set out in its table of disapplications and any other adaptations made in this Part. The key difference between public limited companies and private companies is that only PLCs will be permitted to list their shares an a stock exchange and offer them to the public. It is provided that the authorised minimum issued share capital of a PLC must be at least €25,000 or such greater amount as the Minister may specify by order. A PLC is now permitted to have as few as one member and there is no maximum number on the membership of such a company. A PLC must have at least two directors. A PLC is obliged to establish an audit committee and corporate governance provisions for certain PLCs are set out.

Again reflecting the simplified structural concept, Volume 1 is arranged to reflect the life cycle of the company, beginning with how a company is set up, followed by the provisions which apply when the company is in operation and, finally, the provisions which are relevant to closing the company down.
Volume 2, comprising Parts 16 to 25 of the Bill and its Schedules, goes on to state how the law contained in Volume 1 is applied, disapplied or varied for each other company type. These other company types are the designated activity company, the public limited company, the guarantee company, the unlimited company, the unregistered company and the investment company. There are legitimate users of all the different company types laid down in the Bill and it is imperative that Irish company law should facilitate business and the wider community by making appropriate provision for different types of companies.
For the new limited company, the Bill contains a number of significant reforms. This company will have the same legal capacity as a natural person. The current ultra vires rule does not apply to this new company type - the ultra vires rule is the legal doctrine whereby a company must have an "objects clause" in its memorandum of association. This "objects clause" lists the activities which the company has power to undertake, with the consequence that any other activities are regarded as being beyond the powers of, or ultra vires, the company. In practice, this can lead to companies drawing up exhaustive objects clauses to be certain they have the relevant powers, and can in some cases lead to legal disputes as to whether a company actually had power to undertake a certain activity. Removing the need for an objects clause will both ease the administrative burden on companies and provide certainty to third parties, such as lenders, who will no longer have to examine extensive objects clauses to determine whether a company is acting within its powers.
This company type will be allowed to have only one director. Under the current law, a company must have at least two directors. Even if one wishes to establish a business as a company on his or her own, he or she needs to find an additional person to act as the second director. Removing this requirement will make it easier to start a new business.
The new limited company can have a minimum of one member and up to a maximum of 149 members. The 149 upper-limit is linked to the requirements of EU prospectus law, which governs the offer of shares to the public.
The new limited company will have a single-document constitution, in contrast to the current law whereby every company must have two documents - a memorandum of association and separate articles of association. A further benefit of the new legislation will be that the extensive and detailed provisions which every company currently needs to include in its own articles of association will now be brought into the main body of the legislation and will apply to each company by default. However, most of these provisions can be modified by an individual company, if required to suit their specific needs.
The new limited company will no longer be obliged to go through the formality of holding a "physical" AGM, whereby all of the members have to convene in one location at the same time on an annual basis. Instead, the members will be able to hold a "written" AGM, whereby all of the matters which must be dealt with at the AGM can be approved by written procedure.
The Bill contains a codified version of the fiduciary duties to which directors are currently subject by a combination of the common law and statutory provisions. This brings all of these duties together in a single identifiable place, making it easier for directors to understand their responsibilities and more difficult to deny their existence. This also addresses one of the recommendations of the Moriarty report in regard to company law.
The Bill contains a "summary approval procedure", which is applicable to a number of activities - for example, reduction of capital - which under the current law might require the company to undertake the burdensome and expensive process of securing court approval. The new "summary approval procedure" incorporates safeguards in regard to directors' liability in circumstances where the procedure is used without proper justification.
For the first time, all offences under company law have been streamlined under a new classification procedure which operates on the basis of four categories of offences, with category 1 being the most serious. This will bring a structure and consistency to the offence provisions throughout the legislation.
For the first time, it will be possible to merge two Irish private companies under the new Bill. The procedure for this is modelled on the EU cross-border merger regulations, which are regarded as relatively straightforward to operate by the business and advisory community.
Small companies will be able to apply directly to the Circuit Court for examinership instead of having to go through the High Court. This will make examinership more accessible and reduce costs.
A number of innovations which will apply to other company types include the following. As already mentioned, each company type will have its own dedicated Part within the Bill, thereby improving the accessibility and visibility of the law for all users. Part 20 enables any company to convert from its existing company type to any other company type which can be formed under the Bill, in contrast to the current law, which contains restrictions on conversions. This provides flexibility and greater options to companies which face a change in their circumstances.
For the first time, guarantee companies will be able to avail of the audit exemption. This innovation will be of significant benefit to the sectors which tend to use the guarantee company structure - for example, companies in the voluntary sector, charities and residential management companies - while at the same time recognising the particular circumstances applying to guarantee companies in allowing a single member to object.
I now turn to the actual substance of the Bill. Due to the unprecedented size of this Bill, it is not possible within the allocated time to give a detailed explanation for each of the 1,429 sections, as Members will be pleased to hear. Instead, I will give an overview of the 25 constituent Parts of the Bill, along the way highlighting any significant changes to the law and explaining the policy behind these changes. The supplementary information provided to the Deputies contains a more detailed overview at chapter-by-chapter level.
Part 1 consists of 14 sections and is largely devoted to housekeeping. It explains the structure of the Bill and it defines terms which are used throughout the Bill.
Part 2 makes provision for the incorporation and registration of the new model private company limited by shares - the new limited company - and provides that any one or more persons may form such a company. The distinction between a memorandum of association and articles of association has been abolished in this Part for the new model company type and these two documents are combined into a single document called a "constitution".
The most significant aspect of this Part is the provision for the conversion of an existing private company limited by shares to a new model private company limited by shares. Following the enactment of the Bill, existing private companies limited by shares will have to decide whether to opt in to the new regime for private limited companies or to opt out by becoming a designated activity company or other company type. Companies that do not elect to opt into the new regime will not be able to avail of the many advantages associated with the new model private company limited by shares, such as the ability to have only one director, the one-document constitution and the possibility to avoid a "physical" AGM.
There are three ways in which an existing private company limited by shares can become this new model company type. The recommended option is for the members of the company to adopt a new constitution by special resolution. Schedule 1 sets out a template for this purpose to assist the company. As an alternative to the special resolution, the directors can send the new constitution to each of the members and deliver a copy to the Companies Registration Office. If the directors fail to take any action, the company will be deemed to have a constitution at the expiry of the transition period. A company is entitled to opt out of the new regime and can do so by converting to a designated activity company or other company type.
Part 3 consolidates all existing law relating to shares, share capital and certain other instruments. At present, this law is set out across the three main Companies Acts. Many provisions from Table A of the First Schedule to the Companies Act 1963, which are commonly inserted into the articles of association of a company, are now incorporated into the text of the Bill and apply unless the company's constitution provides otherwise, thus reducing the amount of detail required in the constitution of the company.
Part 4 deals with corporate governance and provides for the duties and responsibilities of directors and other officers as regards their appointment, their proceedings in regard to the company and its members and the ways in which the activities of the company on a day-to-day basis are conducted. The procedures for corporate governance currently contained in the standard articles of association for a company limited by shares have been incorporated into the body of the Bill. Additionally, the new limited company may adopt in its constitution such additional powers or restrictions as the company may require, so long as these provisions do not conflict with the main body of law in the Bill.
This Part permits the new limited company to have a single director. It also allows such a company to dispense with holding an AGM, where agreed unanimously by the members. Provision is made for unanimous written resolutions, thus allowing a company to pass resolutions, including special resolutions, in writing. This Part also sets out the new summary approval procedure which deals with restricted activities such as the giving of financial assistance for the acquisition of shares, making reductions in company capital, varying company capital and giving loans to directors and connected persons.

I apologise for interrupting the Minister. His time has now elapsed but I can ask Members if they agree to an extension of time for the Minister in order for him to finish his contribution. Is that agreed? Agreed.

I apologise to the House. I am not reading quickly enough.

Part 18 makes provision for companies limited by guarantee, not having a share capital. Such companies are known as CLGs. The law in Volume 1 applies to CLGs as it does to the new model private company limited by shares, subject to the exceptions set out its table of disapplications and adaptations made in this Part. Since guarantee companies do not have a share capital, members of such companies do not have a distinct economic interest in their capital. It is for this reason that CLGs are a popular type of company for charities, sports and social clubs and management companies. A CLG may be exempt from the requirement to use such a suffix to its name, for example, if it has a charitable object.

In a guarantee company, the members' liability is limited to such amount as they undertake in the constitution of the company to contribute to assets of the CLG in the event of its winding-up. The audit exemption is now being extended to guarantee companies under the Bill if a company fulfils the criteria for a small company. It is expected that this will benefit many guarantee companies that are charities or sports clubs, etc. Any one member of the company is entitled to object to the exemption and thus force a company to carry out an audit.

Part 19 makes provision for unlimited companies. This Part is structured in such a way that it covers both private unlimited companies and public unlimited companies. In this regard, three different types of unlimited companies are being catered for - the private unlimited company with a share capital, ULC, the public unlimited company with a share capital, PUC, and the public unlimited company that has no share capital, PULC. All three types of unlimited company already exist.

The law in volume 1 applies to unlimited companies as it does to the "new LTD company", subject to the exceptions set out in the table of disapplications and any other adaptations made in this Part. All types of unlimited company will be permitted to have just one member but will be required to have at least two directors.

Part 20 makes provision for re-registration of companies. A company will generally be permitted to re-register as another type of company, subject to complying with the requirements applicable to the latter company type. Re-registration will involve the passing of a special resolution and the delivery of certain documents including a compliance statement to the CRO. Additional requirements may apply, depending on the type of company, following re-registration.

Part 21 makes provision for the registration and disclosure requirements of external companies, also referred to as foreign companies or overseas companies, which have been formed and registered outside the State but which have a connection with Ireland. The company law review group has proposed that the law in relation to external companies be modified from the current position which provides for both the concept of "place of business" and the concept of "branch", to a position where the new law would provide only for the "branch" concept. By not retaining the concept of "place of business", it is hoped to remove the uncertainty of the current law whereby it can be unclear whether a particular company is a branch or a place of business. The consequence of this will be that external companies can elect to register as a branch and will thus be required to file accounts.

Part 22 deals with unregistered companies and joint stock companies and the application of the Bill to companies formed or registered under previous Acts. It also provides a mechanism for an unregistered company to register as a PLC. The most important unregistered company in Ireland is the Governor and Company of the Bank of Ireland.

Part 23 contains the provisions relating to prospectus law, market abuse law, and transparency law. In particular, provisions are set out regarding the consequences of a breach of a measure forming a part of any of these, and requiring a company with traded securities to prepare a corporate governance statement. For the sake of clarity, these provisions are housed in a stand-alone Part rather than in Part 17 of the Bill on PLCs, as originally envisaged in the general scheme.

Part 24 of the Bill makes provision for the establishment of companies as investment companies, currently provided for under the 1990 Act. In order to be permitted to operate, these companies must be authorised by the Central Bank. Such companies are a key constituent of the set of legal structures under which the international collective investment funds industry operates in Ireland. An investment company is a type of PLC.

Part 25 of the Bill contains miscellaneous provisions that do not naturally fit in any preceding Parts of the Bill, such as foreign insolvency proceedings, the prohibition on partnerships with more than 20 members and certain public auditor requirements.

In conclusion, I am delighted with the significant benefits which the Bill will bring to all companies, big and small, across the country. It will make it easier to run a business as a company. An entrepreneur will be able to start a company with a single director. Time will not need to be spent on convening and holding a formal AGM. There will be no need for ordinary businesses to be tied up with objects clauses and articles of association, although the Bill will retain these concepts for those companies that need them.

This Bill will enhance Ireland's competitive position as a place in which to start or to grow a business. Indeed, it will feed directly into the Government's aim to make Ireland the best small country in the world in which to do business. I look forward to working with Deputies on progressing this Bill to enactment. I believe it will bring significant benefits to companies and to business life in Ireland.

I wish to thank all those who have worked on the drafting of this Bill. The House has only seen the tip of the iceberg of work which has been done. I commend the Bill to the House.

I thank the Minister for his speech. I thank him also for the information on the Bill provided by his office over the past number of days. I compliment all the officials involved and all those who have been involved since 2000, the members of the Company Law Review Group. I suspect they feel like parents seeing their child go off to school for the first time - they have nurtured and cared for this child and they will worry what will happen next. I assure them we will look after it. We will be supporting the Bill on Second Stage and in the interests of the child's education we might make some suggestions on Committee Stage.

I previously expressed frustration at the slow pace of the preparation of the Bill. However when preparing my contribution I read the 1962 debate. The then Minister introduced the Bill on 14 November 1962. He apologised that the preparation of the Bill had taken rather longer than he had expected. The Opposition spokesman, Deputy Liam Cosgrave, paid tribute to the work of the company law reform committee which had been set up in 1951 and reported in 1958. The legislation eventually came to the House in 1962. Everything changes but many things remain the same. I commend the phenomenal job of work. The Bill is an excellent example of tidying up legislation while maintaining very strong legislation in all areas. The legislation has been simplified but the message must be that it is not being made easier to evade one's responsibilities as a company director or company operator. The Minister made it clear on a number of occasions that the Bill is designed to provide easier access to information and to legislation.

People's responsibilities in providing for that ease of access are far clearer now. There can be no question of evading their responsibilities on the basis of a failure to understand.

Fianna Fáil will support the Bill on Second Stage. The other State agency involved is the Health and Safety Authority, with which I was threatened if I sent someone from my office to collect a physical copy of the Bill from the Minister's Department. It has probably fallen through the floor in the Minister's office so we have used the online version. It is a credit to all of the work done on the Bill that there has been very little criticism of it given the impact it will have on company life. The manner in which the Company Law Review Group communicated its work consistently during its tenure and in which the Minister has engaged with interested bodies has ensured a general welcome for the legislation. There is now encouragement and a demand that legislators get on with its implementation. The Opposition spokesman in the 1962 debate, Liam Cosgrave, proposed a special committee. The Minister had the same proposal but it is not going to happen. We will work to enact the legislation and when it has been, the Minister will have a responsibility to educate people about it. There is a danger that the extent of changes is so great that many organisations will seek to make a quick buck on it. While we are all in favour of enterprise, the LEOs and the enterprise board structure should be implemented at an early stage to educate people and companies as to the changes which are being made. The voluntary sector must be involved also as some of the most significant changes hidden in the Bill relate to making the work of voluntary organisations a great deal easier. A great deal of work must be done to provide information on the legislation and to let people know that things have changed and will be much easier.

Fianna Fáil welcomes anything that makes it easier to do business and create jobs. It is vital that any legislation be clear and accessible, which is a test the Bill passes in most respects. As the first report of the Company Law Reform Group pointed out, company law reform has generally been driven by crises, of which we have seen many in the last few years, the need to comply with EU directives and regulations, important innovations in peer jurisdictions and lacunae identified in the course of company law investigations or tribunals of inquiry. It is significant that some of the recommendations in the Moriarty report are included in the legislation. Deputy Bruton is the first Fine Gael Minister to acknowledge the report, which is a welcome development. The establishment of the Company Law Review Group in 2000 made clear the desirability of reviewing the companies code on an ongoing basis. The review process must continue when the legislation is passed. We must not leave a future Oireachtas in the position we are in now of having to introduce a massive Bill. Future Oireachtais will have to commit to ongoing review.

The review group was tasked to simplify the Companies Acts to create greater clarity and transparency in the companies' code and to increase its accessibility for business people. It has done so. In proposing simplifications, the review group recommended an increased focus on the needs of small private limited companies, in which respect it fully endorsed the think-small-first approach favoured by the Company Law Steering Review Group in the UK. The principles to be followed are that the law should be clear and accessible; that there should be no undue sacrifice of accuracy and certainty in an attempt to make the law superficially more accessible, and that legislation should be structured so as to ensure that the provisions applying to small companies are identifiable. I welcome the way the relevant law has been broken up into sections. As the group made clear, a body of law that affords protections to shareholders and creditors, while legislating for the orderly administration of solvent and insolvent entities, can never be really simply. There is no doubt that the Bill passes all of the tests while retaining a high bar for people who enter into the company law sphere. Locating all provisions in one Act will reduce complexity for all end users. In terms of competitiveness and our international standing, the legislation will be among the newest and, possibly, clearest regimes in Europe. Clarity in the years to come will depend on the range of amending legislation.

The Bill does not alter drastically basic concepts of company law including limited liability, shares and membership, the roles, duties and obligations of directors and other company officers or the liabilities of companies to creditors and employees. The major changes are geared towards streamlining mechanisms which allow companies to be easier to operate and do business with. Changes addressed to the doctrine of ultra vires for companies limited by shares grant companies the full, unlimited capacity to carry on any business or do any act, which is not contrary to the general law, and will result in greater simplicity and certainty for people doing business with them while reducing the time and expense involved in company formation. The reform will not apply to public limited companies. In recent years, there has been a great deal of public frustration that the investigation of breaches of company law has been slow. Breaches have been so technical that in many cases that investigating authorities did not have sufficient resources to investigate. We must ensure that the Bill is proofed against such breaches. There must be a review clause in the Bill to ensure that the legislation is reviewed and amended on an ongoing basis to ensure that trends in business, company law internationally and the legal business can be tracked without having to wait for a long legislative process.

Regulation is essential for the proper functioning of society. Whether through primary or delegated legislation or more informal arrangements, rules provide clear guidance and a solid basis for stability and progress. Some regulators have a primarily economic function to ensure the harmonious use of a shared resource and to guard against anti-competitive practices in particularly vulnerable sectors. While regulation is often necessary to achieve a country's social, economic and environmental objectives, it also imposes costs on businesses, consumers, Government and the wider community. It may be that the way in which some regulations have evolved has led to a situation where they have become unnecessarily complex and costly to comply with. It may also be that the originally intended benefit of regulations can be achieved more simply and cheaply. The administrative burden of regulation can be significant, especially for small businesses. As well as imposing the cost of dealing with red tape, regulation may cause businesses to adjust production processes in a way that adds to costs. Inappropriately designed regulation may also have adverse effects on innovation and entrepreneurship while reducing productivity and competition. I emphasise that reducing the burden is not about deregulation or making regulation less stringent. Examples of good practice already put in place include the online motor tax system and online revenue services, which show the benefits which can be achieved by reducing administrative burdens without altering the substance of the regulations themselves. In many ways, the operation of those regimes provides a good template for the implementation phase of the Bill.

The World Bank's 2013 report on doing business compares domestic regulation for firms worldwide and puts Ireland 15th of 183 countries for ease of doing business. It is worth pointing out that those countries that come ahead of Ireland in the survey were not necessarily those with a reputation for having deregulated economies. All of the Scandinavian countries rated ahead of Ireland, with Denmark and Norway in the top six, Finland in 11th and Sweden in 13th place. There were areas in which we scored particularly well. We came joint first in making contracts enforcement easier in terms of the number of procedures involved. We came sixth in the protection of investors and in payment of taxes. We came tenth in relation to the ease of starting a business. The provisions of the Bill will allow us to improve the ease of starting a business. Where we did not do well was in electricity access, registering property and, ironically enough, trading across borders.

I welcome the provisions in the Bill which deal with examinership and aim to reduce its cost burden to open the process to small businesses. Almost 1,000 jobs with small firms were saved through the examinership process in 2012, representing a year-on-year increase of 67% on 2011. The legal costs of examinership could be cut by up to 50% through the Bill's provisions to make it a more accessible and affordable option for SMEs. This has the potential to double the number of jobs that are saved.

Anything that can assist in saving jobs in SMEs and can assist viable SMEs get through a difficult trading process is to be welcomed.
Companies, along with many other institutions, have taken a battering in recent times. There is no sense in us putting much work, in the coming weeks and months, into the Bill unless the enforcement side of the Department is beefed up. The enforcement side and the resources available to the Companies Registration Office are insufficient given the number of cases being fought in respect of breaches of company law in recent years. I appreciate it is a time of constrained resources but if we are to rebuild confidence in the business community and implement the spirit of the Bill in making it easier to set up a business, we must examine the resources available to company law enforcement within the Minister's Department. The difficulty in introducing the legislation is that people will use the big change to justify reckless behaviour. The message must go clearly from the House that it will not be tolerated. The same message must go from the Minister's enforcement agencies in their public utterances in the coming weeks and months.
Various groups have welcomed the Bill, including some that do not often welcome the measures of this Government. The ISME chief executive, Mr. Mark Fielding, welcomes the requirement for one director to start a business. It will assist many people. The Minister referred to sole traders and we all know people who drag others into the company process, which leads to difficulties, for the sake of making up the one extra person. Mr. Fielding also points to the anomalies and expense added by the confusion that company law represents for small businesses. He is hopeful the cost and burden of running a small business will be substantially reduced if the proposals are implemented. The Small Firms Association has acknowledged significant benefits by reducing red tape and making company law obligations easier to understand. The obligations continue to exist and the bar is high but they are more accessible and understandable.
Legislation often appears in the House with the best of intentions and we see it through Committee Stage and the Seanad and then various agencies add to it when it comes to be implemented. They goldplate the legislation. We are particularly good at goldplating EU regulations. I hope we do not goldplate the Bill to the extent that its provisions, its cost saving measures and accessibility revert to the current position. Goldplating the Bill in its implementation should not create barriers for those accessing the benefits of the Bill. It is vital the Minister ensures that does not happen.
I welcome the Bill and I compliment all involved in it. I am sure many involved in the Bill have retired from the Department and we think of them and wish them well. I assure the officials and the Minister that we will look after the child as it goes through the school process. We will table a series of amendments to improve the Bill on Committee Stage but, generally, we are supportive of the Bill. The sooner we can get it implemented and the sooner companies, business people and those who want to start businesses at this time can gain the benefit of the Bill, the better.

Cuirim fáilte roimh an Bhille seo agus molaim an obair atá déanta ag an Company Law Review Group. Tá sé tar éis Bille íontach, tabhactach and cuimsitheach a chruthú.

I fully endorse the approach taken. It is unusual that the Minister and I are on the same side for three Bills in a row. I am sure normal business will resume soon enough. The work done by the Company Law Review Group, CLRG, the Department, the Minister and previous Governments has led to this Bill. It is an impressive Bill with multiple facets facing companies and ensuring the highest standards in corporate governance. The best place to address issues is among those closest to the issues. The approach of bringing together such a diverse and inclusive group of legal practitioners, representatives of various strands and sectors of business, and trade unions to address a common concern is a new benchmark in developing legislation. It should be replicated elsewhere. I am sure many representatives who served on the CLRG never thought this phase would end but the legislation is now with us.

The CLRG had over ten years to develop the ideas and work with the Department on drafting of the legislation. Given the impact and scale of the legislation, I hope the Minister will allow significant time for its discussion and debate. The implications of the legislation are deep and profound for business, the community and the wider sector. It is reputed to be the largest item of legislation tabled in the State and we should give it due consideration.

Sinn Féin comes at this legislation from a positive perspective. We share the aims of the Bill and will work to ensure its timely process through the Oireachtas. The points we raise and the amendments we will propose are for the purpose of simplification and streamlining the process and reducing cost to business, while maintaining the highest level of commercial probity and governance. I hope the Minister will take on board the points we raise, provide clarity, review our contribution and, where possible, amend the legislation.

Over 12 years ago, the CLRG was tasked with the mission to bring forward proposals to develop company legislation. Its mission statement was "to promote enterprise, facilitate commerce, simplify the operation of the Companies Acts, enhance corporate governance and encourage commercial probity". The legislation, as presented, addresses these matters in a comprehensive and detailed fashion. Central to the legislation is the need to simplify the legal framework. For seven years, I worked in business consultancy with businesses starting off and plotting their way through every stage of commerce. For many businesses, it was very difficult to navigate the legal framework governing the area. This simplification is welcome.

Recent times are littered with cases in which corporate governance and commercial probity were secondary to the reduction in regulation and oversight and the elevation of the pursuit of profit at all costs. Society is paying a dear price for that. We have seen how the banking sector and property development benefited and profited from sharp practice. We have seen how auditors passed company accounts as solid only for the company to collapse shortly after, leaving huge debts and having an impact on downstream SME creditors that makes it impossible for them to struggle and survive. Through this, we saw workers losing their jobs and livelihoods. We see daily cases of directors in front of the courts pursued for assets that appear to be lost in myriad companies and subsidiaries. The business practices and ethos of the past brought this State to its knees. It provides cases studies to compare the effectiveness of the legislation.

The key test is the difference the legislation has on our society, on reigning in sharp practice and on promoting sustainable regulated frameworks for business. Will the legislation promote reasonable, responsible and open business? I am also mindful that entrepreneurs face major costs in business start-up. Start-up is the key time for enterprise in our society Many people have ideas but not the wherewithal to put the ideas into concrete and bring them to fruition. Each week, I am contacted by SMEs across Meath and across the State with regard to meaningless bureaucracy and replication of administration. There is a balance between proper oversight and regulation and bureaucracy.

The Minister stated this legislation would save €6 million per year in professional fees for start-ups. I would say the figure would be less. If businesses had been fulfilling previous guidelines and legislation and we were going into a different sphere, there probably would be a difference of that amount of money. However, in many cases, businesses changed their practices to suit the reality in which they were existing. The legislation had become archaic and businesses had moved on. The Government could do more to reduce costs in many other areas, including utilities, property and transport, but they are cases for another day.

I will focus on the role of private limited companies which account for 90% of company types and the simplification of the business constitution. The need for the bulk of businesses to have detailed objectives and articles of memorandum had been a hoop through which many businesses continually had to jump and it had become less relevant to their day-to-day work. The simplification of this process will promote greater flexibility for existing companies while easing the process for start-ups.

Given the flexibility offered by the new form of private limited company, will the Minister outline the benefit to companies of the designated activity company, which sectors would most benefit and the expected take-up levels? I can see the sense of, and agree with, the reduction of directors down to one as a business practice. People were just finding names to put down on paper. Many people agreed to become paper directors without knowledge of what this entailed and of their responsibilities or their liabilities. The allowance of a single director should end this practice and ensure the actual director is identified and has full knowledge of the business. However, writ large on this matter are the corporate governance issues that can arise with a single uncontested director. It is important to ensure it is not abused. How will the new system ensure a full separation from vested interests and the cross-payment of contacts to companies in which the director may have an interest? Who will hold the single director to account? Will this be the role of Director of Corporate Enforcement? I will return to the issue of compliance later.

I welcome the inclusion of the full list of responsibilities of directors in the legislation and while there is considerable case law behind these responsibilities, I remain concerned as to the vagueness of some concepts. I refer to the behaviour of directors, such as the requirement to act "honestly and responsibly". These subjective terms will be further tested in case law but more could be done to enhance corporate governance and commercial probity.

One such aspect is the full disclosure of material and access to company information. Will the legislation provide that a director must list all other companies in which he or she may have a beneficial interest? Does it ensure that the contracts and payments between related companies are at market value? Will directors be personally liable to provide full information and access to all financial records to auditors in the preparation of annual accounts?

This point is central to the sharp practices which have been allowed to develop and the inaction between auditors and directors. The audit process is seen to be an independent assessment of the business when, in fact, it is only a "true and fair" reflection of the information provided. Company directors can claim a clean bill of health by non-disclosure of material information and auditors can claim they were only working on the material provided. We have audits which can be free of responsibility or liability. As we have seen, the public has paid the price for this accounting and legal grey area in the past.

Surely the highest levels of corporate governance should entail that there is full disclosure of information and that the books are fully open for auditors. Will the Minister ensure the legislation fully reflects the need for openness and that responsibility for full disclosure rests with the directors with relevant legal sanction and that auditors are liable for their findings if they have failed to ask the right questions and make a full and accurate report?

It is clear that the defence of "true and fair", with the caveat of the information provided, has failed business, failed the economy and failed workers, consumers and creditors. It would be of benefit if, in addition to the annual accounts, the audit was to include an assessment of corporate governance and list any labour court findings or other legal judgments in regard to the company directors. Such an approach to audit would be reflective of the scale of the enterprise. We are seeking a process that would be proportionate in cost and in terms of the size of the company.

In addition, while the legislation includes the criminal sanctions against directors, I hope the Minister and the Department will clarify the process by which a director will be liable for non-disclosure or abuse of position in regard to any vested interests. The business and organisation of companies has changed much in the past decade and this reflects the need for this legislation. The development of joint enterprises and the widening the investment bases is reflected in the legislation with increasing numbers of investors.

Directors of a company can be found on two or more continents. However, the legislation still holds with the practice of the company stamp signature. I understand a company must have a signature but this increasingly online world and the environment in which we live makes this physical manifestation of a signature a little bit outdated and obsolete. Will the Minister outline the reason for continued reliance on a company stamp and if the legislation will fully provide for electronic signatures?

More than 90% of all enterprises in this State are in the SME sector and account for 78% of employment. While they account for 50% of all turnover, this turnover has a greater impact on the domestic economy than the multinationals and financial sector because these SMEs are part of the ecosystem of the economy. When one business fails, it often has a far more negative impact on the rest of the SME sector, costing more jobs.

Most of this business is based on goodwill and reliance on audits and tax compliance to ensure payment is certain. Given how the current banking crisis is being played out in the SME sector, credit is tight and cash flow for many is on a knife edge. It is clear SMEs cannot carry any additional debt. Given that the Government has claimed that all policies will be SME-proofed to ensure they do not have an negative impact on the sector, I am concerned that this legislation has raised the level of winding-up petition to €10,000. Many SMEs would be out of business before they would reach this level as a creditor. Will the Minister review this level and reduce it to fully reflect the needs and recent experience of SMEs? This is not to promote a race to litigation but to ensure that businesses are paid and non-viable enterprises do not continue to trade and drag down other enterprises. This week I worked with a business which was subcontracted to another firm which had not paid tax for approximately four or five years. The subcontractor was never aware that was the case and had invested in his company while this process was occurring.

I had hoped the Bill would include a clause on prompt payments. This is another area causing significant problems in the economy. Many businesses are not getting paid on time and the larger companies are using more muscle to ensure they do not have to pay on time and are using that cash flow for their own purposes in their businesses. I urge the Minister to review this position and include a provision, as called for by the SME sector.

In regard to the credit crisis facing the SME sector, I raise the issue of mergers and divisions. We welcome the clarity the legislation will bring to the process. The process of mergers, as laid out, is sensible, straightforward and clear. I hope this will allow for companies to merge when it is in their best interests and in a fashion which is timely and cost-effective.

As the Minister will acknowledge, many viable businesses were encouraged to diversify into property and were incentivised to invest in developing their premises. These debts are now undermining enterprises and the relationship with the banking sector.

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.

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.

This was a 43% increase on the previous year. We need to find out the reason for this and to examine in more detail what can be done to help companies which want to remain in business but are finding it difficult, because of existing legislation, to do so. The Minister should as part of this Bill introduce measures to protect workers in this instance. It is appalling that we are allowing a situation to prevail whereby staff who have lost their jobs have to engage in sit-ins to obtain moneys owed to them. As the Minister will be aware, workers are often the most vulnerable when a company goes into receivership or liquidation. In such circumstances workers should be paid first. Currently, this is not the case. Invariably employees are not the cause of a small or large business going bust yet when a liquidator is appointed they are the last on the list to be paid. It is wrong to allow this treatment of people who often have given many years of service to a company.

In one case in which I was involved - a pound shop in Waterford which went into liquidation - the liquidator told the employees that the store would be cleared out and that everybody from the ESB, gas company and product manufacturers would be paid and they would not. This is fundamentally bad treatment of people who deserve better and who had no hand, act or part in a company going into liquidation in the first instance. Often the amount they are owed is very small. It may only be a week's wages, holiday pay or overtime payments, which amounts are not extraordinary in the larger scheme of a company going bust. I accept and understand that companies run out of money and go bust. However, it is wrong that we do not have in place legislation to protect workers where this happens.

A case in which I am currently involved relates to workers who are still fighting for redundancy payments three years after the company closed despite that an employment appeals tribunal ruled in their favour. I dealt with another case involving a UK based company which ceased its Irish operations and left its workers high and dry. I am currently dealing with another company, the workers of which were told it was going into liquidation, that they could do nothing about it and that the company would try to get them their statutory redundancy but which the following day re-opened under a different name having taken on new employees for less money. It is fundamentally wrong that people can be treated like this. I agree that companies are suffering and that we must do everything we can to help them remain profitable and in existence in the current circumstances. Anything we can do to help them must be done. However, we also have a responsibility to the many people who helped such companies become profitable and remain open, many of whom have taken a 24% to 30% cut in wages. These people should not be thrown on the scrap heap and left to fend for themselves. It can take up to six months to get a hearing with an appeals tribunal and up to six or seven weeks, sometimes longer, to obtain a social welfare payment. These workers have families and children but are being left to fend for themselves while we enact legislation to ensure companies, their management and directors are treated well. I am not too sure if what I am proposing can be provided for in this legislation or would need to be addressed by way of additional legislation. However, I ask that the Minister give consideration to it. The Minister needs to get his act together in terms of the introduction of tighter legislation to protect not only companies, which I accept should be protected, but their biggest asset, namely, their workers.

The Department of Finance conference last week was told that the chief barrier to growth for all small and medium sized enterprises is not as one might believe access to credit but an inability to find consumers for their products and services. I did not want to let this opportunity pass without making reference to this issue. The drop in demand for goods and services will be exacerbated as long as the Government continues to hack away at the incomes of low and middle income families. Small and medium sized businesses are our largest employers. As I have stated previously, the biggest problem with which SMEs are faced having paid rates, rent and workers' wages is a lack of customers coming into their shops and so on to purchase their products. It is important not to let this opportunity pass without saying that. Under Croke Park II, some workers were asked to take a reduction in pay that was equivalent to the 11.7% they had already lost. I strongly urge the Government, if it wants businesses to succeed, to bear this in mind before proceeding with any further public sector pay cuts or austerity measures.

I compliment the Minister on the introduction of this lengthy Bill, all of which I have not had time to read. It is important we make it easier for companies to produce, display and sell. Small companies will say that legislation, regardless of that for which it provides, means nothing if the consumer does not purchase the products produced, be it tea, a car or a meal. As I stated earlier, I do not have a problem with this Bill but would welcome a response from the Minister to some of the issues I have raised, including on the SMEs and companies which go into receivership or examinership. I ask also that he consider the introduction on Committee Stage of amendments to compel companies which go into liquidation to look after the rights of the employees who worked for them and helped to build them and who are often the last to be looked after when a company goes bust.

As a small businessman of 32 years and sole trader who transferred to a company a year ago, I too welcome the opportunity to contribute to this debate. I am also involved in a number of companies limited by guarantee, which are a different animal altogether.

I welcome the efforts being made in this area. I heard the contributions made by the Minister and main spokespersons. This legislation deals with issues such as overview, examinations and so on, all of which are necessary. I was shocked to hear that the Bill comprises 15 Parts and 1,300 pages and that a copy of it costs €109, which is an enormous amount of money for any businessman, director or member of the public. The cost is excessive and the Bill is too lengthy. Very few directors would have time to read its 1,300 pages. One could read a novel by the late Maeve Binchy or even Deputy Shane Ross's book on the bankers quicker. I do not seek to promote any book above another.

Bureaucracy is creating huge difficulties for businesses. We have been constantly told over the past 15 to 20 years, or even longer, that this level of bureaucracy is required under EU regulation.

I have found on inquiring about the position in other EU member states that while EU regulations might be introduced here, we tend to add a number of statutory instruments to them. We have a great knack for making the position cumbersome and more difficult. The banking crisis, which is a huge problem, came about because of a lack of regulation. The regulations that were in place were not enforced, and previous regulators and others were well paid but did not do their job; rather, they allowed people to run amok. I hope some effort will be made under the legislation to address this issue but I do not have huge faith in that being achieved due to the lack of due process for anyone on foot of the banking scandal and the collapse of our economy. Those senior people and some big business people who flouted the law with impunity are still laughing all the way to the bank. Ordinary people - especially, in this case, ordinary workers, as Deputy Halligan said, and those with SMEs - are carrying the can and feeling the full brunt of the law. I expect every businessman, whether he be a sole trader or the owner of a company, to obey the rules, act responsibly at all times, pay his taxes, ensure health and safety considerations are up to date and provide for the safety of his employees in the workplace.

The Minister, who meets representatives of companies every day of the week, will know that we have suffered from over-regulation and over-emphasis by entities such as NERA, and it has gone over the top. As with everything else, rules were needed; 1913 was the year of the Lock-out with the trade unions, and they were badly needed and fought to be recognised, but, ironically, there are cases now in which the pendulum has swung too much the other way. We have a culture of over-regulation; there are too many institutions and agencies dealing with small business employers and their employees.

It took from 1958, the year I was born, to 1962 to introduce the current Act, and I appreciate that it needs to be changed, but I cannot accept the sheer volume of reading material, regulations and all that is in this legislation. However, I accept that many of the reforms in it are badly needed. The company law review group has introduced countless reports and has been working on the legislation for a long time but we, the legislators, must be conscious in dealing with the legislation in this House and in the committee that it must be workable, it must be manageable and it must do what it says on the tin. What it says on the tin is that we must have tight and stiff regulation, penalties and reporting procedures to ensure there will be no white-collar and big business tax evasion and none of what has happened previously, but we cannot expect to do that while the Competition Authority and the companies organisation are understaffed. The Minister inherited that problem but we should know what is needed by now with the amount of sheer blackguarding that went on and the number of rogue companies and businesses that went off and did not pay anybody. Senator Feargal Quinn's Construction Contracts Bill is still foundering in that efforts are still being made to bring it in to protect the many subcontractors. I raised that issue here two and half or three years ago, the morning a big company in this city went bust and left more than 600 subcontractors stranded. We must remember that a subcontractor is not an item; he or she is normally a sole trade or the owner of a small company with a number of employees, who all have families. There is a huge human cost involved. Subcontractors all have workers, as Deputy Halligan said, and responsibilities. The way that legislation has been flouted is not good enough.

The new Companies Bill has some significant reforms and I will not say that it has not. The new LTD company, as it is termed, can have a minimum of one member and up to a maximum of 149 members. I welcome that, because there are people who want to set up in business. They have great ideas and enthusiasm. Our young people have the drive, passion, qualifications and energy to create businesses and they have amazing new ideas and technologies of which we would never have thought. I salute the many entrepreneurs, whether they be sole traders, farmers, shopkeepers or hairdressers, or, on the construction side, the small builder, the sole trader or the people with trades who set up their own business and have done tremendous work. However, their businesses have been hammered and decimated in the past two or three years. They need some protection, and I welcome that part of the legislation.

For the first time, guaranteed companies will be able to avail of the audit exemption. This innovation will be of significant benefit to the sectors that tend to use the guaranteed company structure, such as companies in the voluntary sector - I am involved in many of those - voluntary sector charities and residential management companies, while at the same time recognising the particular circumstances applying to guaranteed companies in allowing a single member to object. That is very important as there must be provision for one member to object.

This Bill is long overdue. Previous speakers have been complimentary about the people in the company law review group for the hard work they have done. That is great and I am delighted about that, and I know they engaged in public consultation, but we have to make it easier to do business. In terms of the figures available, we rank 15th in the world for ease of doing business. I would not have thought that was the case. If we are 15th in the world, that is wonderful, but I do not believe it is the case. Deputy Coffey, who is in the Chair, might not like to hear the figure I have seen quoted by his former employer, which is that we are 95th in terms of access to electricity and power. That was not the fault of Deputy Coffey or his colleagues. They were the people on the ground who were doing their best, but again, bureaucracy and monopolies came into play, and that is never good.

Up to 90% of businesses are in the small and medium enterprise, SME, sector and they rely hugely on the goodwill of their families, their staff and many of the agencies with which they deal. All of them have been hit with the tsunami of the banking crisis. Many of them did not get into huge debt and had limited overdrafts. They had built up those overdrafts and worked hard to get recognition from the bank manager and bank personnel who knew them to secure those facilities but, unfortunately, that all counts for naught now, as they cannot avail of any type of credit. Many of them who have overdrafts get phone calls on a daily or weekly basis asking them to come into the bank for a chat. When they go in they find out that their overdraft, which they had built up over the years because of their good record with the bank, is the problem. They paid back all the loans they got but they are now being asked to halve the money they got from the bank or the bank will have to take it from them or offer them a term loan instead. People have little choice in that regard because all the negotiation is being done in one direction. They come out of the bank with a term loan under their belt, so to speak.

To add insult to injury, I believe the banks are accumulating all arrangements in such cases and presenting them to the Minister who is present and the Minister for Finance and his officials as new lending. It is a farce. It is a con job. I know that, and the Minister and everybody else knows it. That is unfair. Deputy Coffey would know about that. Deputy Fleming knows there is a huge crisis in agriculture that is not recognised by Government or anybody. It arose because of inclement weather, with a bad summer, a long winter and a very difficult spring. I was surprised and delighted to hear the Minister's ministerial colleague, Deputy Coveney, say that the banks were ready and waiting for farmers to go in to them, but that is not true. Even if they take off the Wellingtons and wear their best suits to go in to the banks they will not get past the counter. They will be told they have no credit rating because they cannot sell their stock; the stock they currently have are unfit to be sold. I do not want to digress from the Bill, but that is a symptom of what is going on in the banks. The farmers are not getting money, and where they have got money to buy meal and forage the banks are screaming at them to give it back, but they cannot give it back. I salute some of the co-operative companies - Dairygold and others - that have recognised this and the co-operatives that have looked after farmers. We are in the midst of a huge crisis that is across the board as regards finance.

I would have thought a lack of finance was the biggest problem facing people but, having listened to previous speakers and noted what was in the report published last week, I have heard that while there is a lack of finance, the ordinary people - the punter, the man in the shop, the housewife, the husband or whoever - do not have money to spend. Austerity is not working. The IMF has recognised that. The biggest problem for companies is to try to keep their doors open and pay the rates, rents and staff while their shops are empty. They will be empty if a further €300 million is taken from the public service and not from many other areas, so that we will not have to deal with the elephant in the room, which is banking. We will have to examine the monopolies in our country. I might mention CRH, which is a huge monopoly. I meet those in companies that are being put out of business on a daily basis. The Competition Authority is toothless, or else it has gone to the dentist and got all its teeth pulled and has only bad dentures, because it is toothless and ineffective.

It does not have the staff, the wherewithal or the power to tackle big business which is crucifying small to medium-sized businesses. There is a huge cartel in that industry which needs to be blown asunder because there is too much appalling misery in small companies, by which I mean those employing up to 100 people, and sole traders. There is a monopoly in this and other areas of the economy, which I am sure the Minister sees every day of the week when he meets business people. We must get around this and have to be able to support small businesses.

The winding-up process costs €10,000, which is a lot of money. Small businesses, sole traders, farmers and subcontractors have to be protected. I do not know where they will find solace in this Bill, although it has still to be debated on Committee Stage. I do not know how they will read and understand it or how changes can be made that will suit them. The legal costs of examinerships are prohibitive for companies. In many cases. however, examinerships have worked. Some have failed, but they are a half-way house. More must be done in the Bill to curtail the newest industry in the country - receivership, which is an abomination. I do not see any change in this document to the Supreme Court ruling that a company director cannot stand in court without having a barrister or solicitor. People cannot afford solicitors and barristers who do not come cheap. They must, if they are able, be allowed to represent themselves in court. They will speak under oath and should be entitled to do so. That is a big shortcoming of this legislation. I hope to submit amendments on that issue because this is wrong. There has been an outrageous explosion of smash and grab receiverships. Some of the big companies involved in receiverships are the ones that did the accounts some years ago for the companies in receivership. It would make one dizzy. We are on a spinning top, spinning around. The Minister knows who and what I am talking about.

Is there anything in this document to deal with sheriffs? It is an outdated title, but they are stalking the land at a ferocious pace. There does not seem to be any clarity or proper legislation for them. Are they legal at all? Most of the documents they bring when they come to people's homes which they cannot enter without permission are not even stamped. I have tried to find out for myself, but will the Minister check if sheriffs operate legally? I salute the county coroner in Tipperary. Some time ago a sheriff visited a small business man in his shop at 1 p.m. to demand money with menaces and at 2 p.m. a customer found the man dead in the shop. At the inquest the county coroner for Tipperary and Laois described it as State terrorism. That is what it was. There is State terrorism up and down the country. Sheriffs and agents are making agreements with people, writing them down, signing them and tearing them up next day. There is no good will. This issue must be dealt with. We cannot deal with ordinary people and make them pay if we cannot deal with State terrorism. That State terrorism has increased and grown legs and ordinary people, including company directors, managers, sole traders, farmers and others, are living in fear and dread of the people concerned who think they are mighty and right all of the time. If companies are not allowed to challenge them in court without legal representation, they will go nowhere.

I do not see anything in the Bill to tackle that problem or empower the Competition Authority and other such bodies. There are only seven or eight people in the Competition Authority and very few investigating officers. All of the power is on one side, terrorising families and small businesses. Unfortunately, gardaí are accompanying sheriffs. Gardaí think everything is legal because there is a sheriff and that he or she is acting on behalf of the Revenue Commissioners, a bank or whatever else, but a lot of the documents they have are not worth the paper in the bathrooms here. They are only made up and not stamped.

Are the banks, AIB, Bank of Ireland and others, legal entities? I do not think they are. We have many banks selling their loan books and everything else to other companies. If I have a lease agreement with or a loan from the Minister, it is with him or his company, but he can sell it on to somebody else who writes menacing letters to me looking for the money. That is wrong, illegal and would not stand up anywhere. This is happening wholesale. There have been buy-outs and sell-outs of loan books and everything else. It is a complete and utter racket, almost equal to what is happening with receivers. At the rate the receivers charge per hour, they have a licence to print money. When they go into a company, they plunder it.

Examinership is a fairer system, which is why we must preserve and protect it. The examiner looks at a company with a view to saving it and keeping the workers employed. I would say 90% of receivers are out to rape businesses and they make a fortune out of it. That is totally wrong and disgusting, especially when some of the companies involved were advisers to Anglo Irish Bank, the IBRC. Now they are receivers. The workers who were in the former Anglo Irish Bank, the IBRC, to help the receivers obtain the loans back from people who should not have borrowed and did not repay the loans are expected to have goodwill, yet they are being treated with disdain, not receiving the redundancy package that was promised. It would be only a small sum of money in the overall scheme of things.

While I welcome this document, it is too long and unwieldy. We all know from attending meetings around the country as part of our job that any meeting that continues for three or four hours loses its impact. The same is true of any document that runs to 1,300 or 1,400 pages in its short version. Will it do what it is expected to do? Perhaps the Minister should read it again. He could bring it in stage by stage. It has to deal with the problems I have mentioned and if it does not, it is not worth the paper it is written on. I know it costs money to print, but if it costs the ordinary layman in the street or an ordinary employee or company director €109, that is prohibitive and will put them off. They could buy ten novels or thrillers for that price. The Minister knows what are the real problems in our society. I did not even mention the development companies which are being subsumed into the county councils which are not pro-business and never were; they are regulating agencies. The county enterprise boards are being subsumed into Enterprise Ireland. I have the height of respect for the boards, particularly the one in south Tipperary and its staff, as well as for the development companies.

Debate adjourned.