Fianna Fáil welcomes this Bill and intends to support it. I join with the Minister in thanking the Company Law Review Group for its work on both this Bill and the big Bill, as well as for the information and assistance it provided to the Joint Committee on Jobs, Enterprise and Innovation during the latter's review of it. This Bill is significant because it has become apparent in the past 18 months that the examinership process became the preserve of large companies and gave them an advantage in dealing with business difficulties and issues such as legacy debt that smaller companies did not have or were not in a position to use. On that basis, it is important that Members expedite the Bill's passage to level that playing pitch.
It also has the potential of reducing legal costs relative to the existing High Court process. At present, only 1% of small and medium-sized enterprises, SMEs, that are in difficulty restructure, compared with 25% of SMEs in the United States and this is despite broadly similar business structures. It demonstrates that many businesses that could have been saved potentially have been lost. They have been prohibited from restructuring by prohibitive costs and by the challenges of entering the legal system. For this legislation to be successful, it must be endorsed by the relevant professions, both accountancy and legal, and the Judiciary must be trained in the complexities of company restructuring. While the State is lucky in respect of the work undertaken by the Commercial Court at present, this Bill will require an expansion of the resources available to that court. In addition, when this type of activity is brought down to Circuit Court level, the requisite level of expertise must be brought to the Circuit Court in order for it to be maximised fully.
Solicitors, barristers, auditors and accountants should be required to post prices for their services, including hourly rates, on the relevant regulator's website so companies wishing to avail of this process can know the cost from the outset. All professionals should be required to provide clients with meaningful cost estimates to prospective customers. For an examinership to be successful the primary need is often for access to credit. There is still an issue with regard to access to credit, in particular, for companies which are being restructured. Unless this aspect is addressed the good and very solid structures provided for in the Bill will be merely structures and the intentions of the Bill may not be realised.
I welcome the provision to enable companies to avail of examinership. The Minister estimates it will allow for a reduction in costs of up to 30%. At present, applications must be made to the High Court in the first instance for examinership protection and then may be sent to the Circuit Court if the company's total liabilities are less than €317,434.52. This has never been done in practice.
Many companies find the prospect of going to the High Court to seek examinership a daunting one. They regard the High Court process as the preserve of large corporations and many are not comfortable in the surroundings of the High Court. They have some justification in believing that costs could spiral out of control. It is estimated that Circuit Court costs will be 30% lower than an examinership process through the High Court, owing to the legal and accountancy fees element being considerably lower.
The up-front costs currently associated with seeking examinership protection are made up of the costs of an independent accountant in preparing a report on the company's viability and the legal fees for the application papers. The Bill does not change the content of this report nor the content of the application papers so the same level of work is required regardless of whether the application is made to the Circuit Court or the High Court. The Minister should consider a simplified version of these reports or application papers in order to streamline the process further and to make it more accessible.
As an example, I refer to the case of an independently-operated hardware store on the main street of any town. Unlike major national chains it will not have the resources to take a High Court examinership case. However, there is a considerable social dividend from having such a business operating in a town centre and providing employment. Were it to close it would have a significant knock-on effect on surrounding premises and reduce footfall in the town.
Many national stores have used the examinership process to renegotiate leases in out-of-town centres in the past 12 months. This option is available to such stores because they have the resources but it is not available to the small local hardware store.
The examinership process is being used to address the issue of legacy debt. We must devise a system to provide options for viable businesses with legacy debt issues relating to property investments or other investments associated with the so-called boom, whose businesses are not sufficiently viable to service that debt. Banks have been permitted to set aside home-related debt and to offer split mortgage arrangements. Similar arrangements must be considered for businesses.
The hospitality sector has examples of banks taking over loans and putting a company in charge of operating the indebted hotels. Many independent, family-owned businesses do not have the support of the banks to the same extent. It is a very uneven playing field. Family-operated and independent hotels around the country are faced with competition from hotels which are being run by the banks. This is unfair competition. The family-owned hotels which have not become involved in heavy indebtedness are being put under pressure and are going out of business in some cases. This is also happening in the retail and other service sectors. The Bill will give some relief but further options are required.
Landlords have expressed concerns about the possible abuses of the examinership process by some retailers who are using this court process to reduce their rents. The difficulty is that many rents are related to costs in the period 2005 to 2008 but we are now in a very different time. Any landlord who is concerned about this legislation should first negotiate with his or her tenant rather than forcing the tenant to seek the protection of this legislation which should offer some protection for their investment.
For the proposed changes to be successful the concept of examinership being handled by the Circuit Court will have to be embraced by the professions, including the legal and accountancy professions. While it is hoped that fee levels will fall accordingly, there is already a worrying lack of transparency with regard to professional fees. Members of regulated professions should be obliged to meet strict price transparency requirements. One approach might be to require that professionals such as solicitors, barristers, auditors and accountants be required to post prices for their services on the relevant regulator's website so that those seeking to avail of this new service will know the costs at the outset. One of the challenges of dealing at a local level is that people may be tempted to use their traditional provider of accountancy and legal services. Pricing needs to be clear before professional advice is engaged.
There will also be a need for training of judges to ensure they are adequately versed in what may be complex commercial cases. The Minister for Justice and Equality has tabled amendments to the Bill in the Seanad. The Circuit Court judge cadre will need to be trained to deal with very complex cases of commercial law. The High Court and the Commercial Court are creaking under the pressure of the volume of complex examinerships, receiverships and recession-related litigation. This legislation is required to enable companies to seek the immediate protection of examinership as a last resort in many cases. If delays are to arise at Circuit Court level, the intention of the Bill will be lost.
The Bill also provides for electronic filing of returns to the Companies Registration Office. The Irish solution to an Irish problem was to have electronic filing as well as paper filing of returns. I refer to the success of the Revenue's online filing system which has proved that people are comfortable with using an electronic system which should be extended to include all commercial services.
Section 7 provides for quality assurance. I ask the Minister to clarify the status of the term, "accountant". If quality assurance in the audit process is to be provided for, care must be taken that those who undertake audits have some form of quality assurance. The Minister is considering a number of options. The fact that anyone can purport to be an accountant undermines any provision of quality assurance.
We called this Bill the "baby" Bill when discussing it on Committee Stage as compared to the bigger Bill. The provisions of this Bill must be communicated to businesses. The Department has completed a large body of work but businesses are as yet unaware of these important provisions. I suggest the Department does not leave it to the private sector - the legal and accountancy professions - to inform businesses about the provisions of the Bill as they will put their own spin on them. I suggest the local enterprise offices could provide the information to companies so that they know that these provisions are very different and will offer many companies the option of examinership which they would not have considered heretofore. There is no sense in this House passing this Bill unless it will have an impact on the high street. It will not have that impact unless there is work done by the Department to publicise its provisions and to encourage people to seek further information. I will leave that challenge to the Minister.