I broadly welcome the proposed reform of the jurisdiction of the courts in the examinership process. I note the Companies (Amendment) Act 1990 has been amended by section 2 of the Bill to allow all companies to have access to the High Court examinership process and to allow small companies the further option of applying directly to their local Circuit Court. This is in line with the recommendations of the company law review group and I note there are many other suggestions in that group's report of September 2012. The Minister might provide an update to Members as to whether he intends to implement any of them. These include the introduction of simplified administrative initiation of examinership for small private companies, that is, a non-judicial administrative procedure outside the court system relating to the appointment only of an examiner. In addition, the group suggested a possible extended role for the new Insolvency Service to include the administrative determination as to the initial appointment of an examiner to a small company. Moreover it suggested that with certain limited exceptions, for example, a shorter initial period of protection, a higher majority of creditors being required to agree to a scheme and possible right of appeal to the High Court of creditors with significant liabilities written down, the provisions of the Companies (Amendment) Act 1990, as interpreted and developed by the superior courts, should be applied to all other aspects of an examinership that is initiated by simplified administrative act.
If the Circuit Court is to be used widely, it will be important to ensure that the Circuit Court is resourced adequately to deal with the challenges this change will present. I would not dare suggest the judges are not fit to deal with those challenges but it might be beneficial to introduce some additional training for those who may not have quite as much experience in this area as, for example, individuals such as Mr. Justice Peter Kelly, who is strong in this regard in the High Court. The qualifying conditions for a company to be treated as a small company are that the company satisfies two of the following conditions, namely, it has fewer than 50 employees, a turnover of less than €8.8 million or a balance sheet value not exceeding €4.4 million or both. Given that only very large companies generally apply for the protection of the court, as was seen lately, for example, with SIAC, can the Minister confirm whether he has considered, even in exceptional circumstances, extending the facility to apply to local Circuit Courts to those companies that are categorised as being medium-sized? In other words, I refer to a company that satisfies two of the following three conditions, namely, it has fewer than 250 employees, a turnover of less than €15.24 million or a balance sheet value not exceeding €7.62 million or both.
It has been estimated that the new provision could cut the legal costs of examinership, thereby making the process a more accessible and affordable option for small and medium-sized enterprises, SMEs, in contrast with the current requirement that all companies, regardless of size, must apply to the High Court in Dublin with the attendant costs. However, I note from the discussion in the Seanad that the Minister of State, Deputy Sherlock, could not provide an estimate or a percentage as to what savings will be made and what reductions in legal costs are available to a petitioner in the Circuit Court, as opposed to the High Court process. The Minister and his departmental officials might clarify this point. In addition, legal fees currently account for approximately half the total cost of an examinership and these clearly will be reduced to some extent by the move to the Circuit Court. In addition, the fees of the examiner, who is usually an accountant, will remain unaffected by this move to the Circuit Court. Perhaps the Minister also could clarify this matter.
A three month protection of the courts from creditor's actions can sometimes be sufficient breathing space for a company to recover and survive its difficulties and ultimately, the process can result in the saving of valuable, home-grown, SME jobs. Will it be possible for the Government to exert pressure in respect of a code, even if that amounted to soft law, in which cost was based on the worth of a company? Such a code would be beneficial. I realise Members have not yet reached the day when they dare to challenge the might of the legal profession. Perhaps such a day is coming, although I do not know. While the legal profession probably would not be keen on this proposal, it would be worthwhile and positive were the Government to make some soft law in the area, whereby the percentage of costs to be applied would be based on a company's worth.
It is worth noting that the SME sector accounts for 70% of employment in Ireland and as such, is well worth protecting. It is a matter of fact, not opinion, that the domestic economy has suffered a lot more than the foreign direct investment operations during the years of austerity. This reform, although limited in its current form to small companies only, is very much welcome and I am glad that the Minister has listened to comments with regard to fast-tracking the enactment of this section of the Bill. Hopefully, it could be in place by Christmas. The Minister of State might inform Members as to when he believes the Bill will be enacted and operational. At present, thousands of Irish SMEs are struggling and in distress and such companies may not survive another year. Consequently, these companies would benefit hugely from a lifeline being thrown to them, such as the three-month protection of the local Circuit Court, to allow them to restructure their debts and to try to trade their way out of difficulty.
It is a pity it will have taken more than two years for the Government to fast-track this legislation if enacted by the beginning of 2014. It has been part of the Government's Action Plan for Jobs since the beginning of 2012. It is unfortunate it could not have been fast-tracked earlier. Many of the actions in the Government's latest progress report on the implementation of its action plan for jobs have their status listed as "delayed" rather than "completed". All the actions in the category entitled, Driving Entrepreneurship and Start-Up Companies, have been labelled as delayed. This is to be lamented. I refer to many actions relating to legislative reform of the State's workplace relations system, the employment permit system, the consumer and competition Bills and the Bill to revalue commercial rates.
Commercial rates continue to be a massive problem for small and medium enterprises. My businesses in Dublin are facing a revaluation of rates which will be increased by 45%. We thought the revaluation of rates would result in a more realistic rate and that common sense would be applied. Rates are now approximately 25% of rent, and this is unsustainable. The Government should take a hands-on approach to address the problem, and the sooner, the better. It would be of great assistance to the SME sector.
It must be emphasised that examinership does not guarantee the continued survival of a company, especially in circumstances where the necessary funding cannot be secured. Recent figures indicate that for every four companies which enter examinership, three will come out the other side and one will go into liquidation. The challenging prospects for companies emerging from examinerships have been attributed in part to the difficulty faced by companies in accessing money to re-invest in the business, particularly in the current climate where banks continue to refuse to lend to SMEs. Real and decisive action by the Minister, Deputy Bruton, and the Government in this regard would be of practical assistance to the SME sector. I know many people in the sector and many have told me about their problems in trying to access funding. The majority are looking to borrow money to deal with their debts rather than to re-invest. This is unfortunate and it will amount to a lost period in the development of the sector. Many SMEs face almost impossible challenges in accessing credit and this has been very damaging to the sector.
Along with others, I have raised on many occasions the failure of the Government to introduce a strategic investment bank. It will soon be three years since the Government came to office and the establishment of a strategic investment bank was mooted from the very outset. I thought it was a great idea and I was very impressed with the proposal. I am less impressed with its failure to follow through on the proposal. The so-called pillar banks might be the Government's pillar banks but it does not seem to be able to persuade them to lend to people unless they are gold-plated. This is most unfortunate.
The amendment by section 3 of sections 7, 17 and 18 of the
Companies (Amendment) Act 1986 and section 128 of the Companies Act 1963, relate to facilitation of electronic filing and provision of accounts and types of true copies to be put before an annual general meeting. This also relates to balance sheets and translations and true copy rules that must be provided to the Companies Registration Office. To the extent that they facilitate easier electronic compliance with filing requirements, these changes are to be welcomed.
The proposed amendment in section 5 relates to duties and powers of designated officers in circumstances where search warrants have been issued under section 20 of the Companies Act 1990. The proposed amendment appears sensible as it allows the endorsement of search warrants issued to particular designated officers to investigate by ministerial order or order of the Director of Corporate Enforcement a possible fraud, breach of the Companies Acts or the real ownership of a company. The amendment allows these search warrants to be endorsed by a District Court judge in order to substitute the name of another designated officer in the event that the original designated officer becomes ill or has retired or resigned since the search warrant was issued.
The amendment by section 6 of this Bill of the Company Law Enforcement Act 2001 by the substitution of a new section 18 is to be welcomed. This legislative change has been requested for more than two years by the Director of Corporate Enforcement and was mentioned again in the 2012 report of the Office of the Director of Corporate Enforcement. This report noted that the ODCE and the Revenue Commissioners had shared information in respect of only ten separate matters in 2012 and that the effectiveness of the information sharing arrangements in this regard had been impacted upon adversely to a significant extent by section 77 of the Finance Act 2011 which inserted section 851A of the Taxes Consolidation Act 1997. This insertion limited the ability of the ODCE to obtain, and subsequently to use, certain information from Revenue. A legislative change which results in increased cooperation and information sharing between these two bodies, and which facilitates the prosecution of white collar crime, is to be welcomed. I note that section 6 extends the list of bodies which may report to the ODCE to include the Insolvency Service of Ireland and the Irish Takeover Panel. I note also that this information sharing may relate to offences and to non-compliance with the Companies Act, along with possible disqualification of directors orders under the Companies Act. However, the section remains framed in discretionary terms, in that the word "may" is used rather than "shall" and no obligation relating to information sharing has been created. Some Government backbenchers applauded the fact that an obligation had been introduced but this is not the case.
Although the Long Title to the Bill mentions amendments to section 26(4) the Personal Insolvency Act 2012 and also amendments to sections 17(2), 105(2), 130 and 141 of the Bankruptcy Act 1988, I do not see any such amendments in the body of the proposed Bill. Will the Minister clarify whether this is a typographical error or whether these amendments are to be included in this Bill? I note the Minister of State, Deputy Sherlock's comments in the Seanad last week when he stated that these amendments would be introduced on Report Stage at the behest of the Minister for Justice and Equality. In the latest version of the Bill on the www.oireachtas.ie website, the version of the Bill as amended by committee does not include these amendments. It is unsatisfactory and unfair to the House to bypass Stages of the legislative process in this manner. Sadly, however, given the unprecedented level of guillotining of Bills in which this Government has engaged, we are not shocked. I ask the Minister to clarify.
The amendment proposed by section 7 is to enable levies to be imposed on statutory auditors and audit firms with respect to the external quality assurance of certain of their activities in the field of statutory audits.
Section 7 allows for the funding of the functions of a supervisory authority, the Irish Auditing and Accounting Supervisory Authority, by the imposition of a levy on a statutory audit firm carrying out audits of public interest entities. Public interest entities are public companies registered on the Stock Exchange and also insurance companies. To the extent that this section strengthens the oversight system in place in the auditing sector, it is to be
welcomed. The Irish Auditing and Accounting Supervisory Authority carries out these functions instead of the recognised accountancy bodies. However, it must be noted that this was based on the model set out in an EU Commission recommendation in the matter, which specified that quality assurance inspections must be executed by a public oversight body. It should be acknowledged that this is something that was forced on the Government by the European Union rather than something it came up with in the night, so to speak.
Section 7 enables the State to make provision in respect of Article 2(4) of Commission Decision 2011/30/EU of 19 January 2011, which applies the application of investigation and penalty systems to certain third country auditors and audit entities that carry out the audit of companies incorporated in specific third countries and territories whose transferable securities are admitted to trading in the State.
The Minister does not need me to tell him that there is a great deal of tightening up to be done in this area but I welcome the broad thrust of the Bill and look forward to debating the Bill in its entirety in the House.
