Companies (Accounting) Bill 2016: Committee Stage

Sections 1 and 2 agreed to.
SECTION 3
Amendment No. 1 not moved.

I move amendment No. 2:

In page 8, between lines 12 and 13, to insert the following:

“(2) The obligation in subsection (1) (j) shall not apply with respect to any company whose business in the State comprises the manufacturing, supply and/or distribution of pharmaceutical products where a director of that company certifies (in the prescribed form) that compliance with that subsection would be especially burdensome in terms of regulatory, import/export, customs requirements or otherwise.”.

We have talked to the Minister about this issue and outlined our concerns. The amendment is prudent. While the Minister can look at these situations on an ad hoc basis, having talked to a number of companies, we believe it is very important. A great number of jobs are involved. We will press the amendment.

I do not support amendment No. 2, the effect of which would be to introduce a permanent exemption from an important transparency measure. It would also be confined to a particular sector, which I believe would not be appropriate. Furthermore, it would raise concerns from a state aid point of view. It is a long-standing rule of Irish company law that virtually all types of company must include the company type in the company name. Therefore, a limited liability company must include "Limited" or "Ltd." in its name. It is important information for third parties doing business with the company as different rules and considerations apply, depending on the legal form a company takes. For example, a limited company has full legal capacity, like a natural person. However, a designated activity company is more restricted in what it can do. Similarly, the unlimited company is exempt from the obligation on other company types to file financial statements with the CRO. Therefore, company type is not an insignificant detail for third parties in extending credit to, or doing business with, a company. The Companies Act 2014 extended the general rule to unlimited companies. Up until that time unlimited companies were the only type of company that did not have to comply with the obligation to include the company type in its name. This change gave effect to a recommendation of the Company Law Review Group. The Government accepted that recommendation and made it public in 2007 as part of the general scheme of what became the Companies Act 2014.

I accept that the organisational challenge of adapting to the new requirements of the Companies Act 2014 may be significant for some companies. They may have complex businesses, perhaps with operations around the world, but these are not concerns that are confined to the pharmaceutical sector. For this reason, all companies were given an 18-month transitional period in which to make the necessary arrangements to comply with the 2014 Act. The transitional period ended on 30 November 2016. During that time the vast majority of companies managed to adapt, but some unlimited companies considered that 18 months was too short. At the time the Companies Act was being passed, the Oireachtas accepted that some unlimited companies might need more time to adapt; therefore, it gave the Minister the power to grant an exemption for longer than the 18-month period in special circumstances. During the transition period extensions were granted to just over 100 companies, some within the same group. These extensions are for an additional five years on top of the 18-month general transition period that applied to all companies. In other words, they run to 1 December 2021. I understand some companies may now find that the additional five years are not enough. I have received representations to this effect. As a result, officials in the Department are due to meet representatives of some companies to learn more about their concerns and identify appropriate solutions. As Minister, I will also be meeting some companies to discuss their concerns. If there is a concern, it may not be confined to the pharmaceutical industry, as the amendment suggests, and while some of the companies that have been granted extensions are in the pharmaceutical sector, not all of them are. In fact, the majority are in other sectors of the economy. Moreover, I am aware that there are some unlimited companies in the pharmaceutical industry that did not apply for any extension beyond the general transitional period and were able to adapt within the period of 18 months. If there is a concern, it may not be widespread within the sector.

I do not support the amendment because it would be an open-ended exemption from the rule that a company must include in its name its legal type. The rule is an important transparency measure that protects third parties doing business with that company. Moreover, we must be mindful of state aid rules. If we were to allow an exemption from compliance rules for only some companies on the basis of cost, we would risk falling foul of the rules. If an unlimited company faces such significant challenges that it requires more than six and a half years to adapt to the rule, we should examine appropriate ways to address the difficulties for that company. This should be the case, regardless of in what sector the company is operating.

On a point of order, I understand I missed an amendment I had tabled because I was outside the Chamber.

The Senator was chatting.

It was tabled on the Minister's instructions. I was greeting a member of an international delegation. The Acting Chairman said I could resubmit the amendment on Report Stage.

I said the Senator could consider resubmitting it on Report Stage.

Does that mean I have to resubmit it to the Cathaoirleach's office?

When will Report Stage be taken? Will it be taken straight after Committee Stage?

It will not be taken today. It will be a matter for the Leader to decide when it should be scheduled to be taken.

It will not be taken today.

Report Stage will not be taken today.

Is there any way we could rewind?

Unfortunately, no. I did ask the question but was told "No".

May I speak to the section?

The Senator can speak to the section, but we have moved beyond the stage when we could consider his amendment. I am sorry, but they are the rules.

I am sorry we have to disagree with the Minister today. I know she has done a lot of work on this Bill and it is quite technical legislation, but according to IDA Ireland, some 25,000 people are directly employed in the pharma industry and another 25,000 people indirectly employed. The pharma sector provides highly skilled, quality jobs. Around two thirds of the people working in the sector possess a third level qualification. The latest provision, which the Minister has added in section 3, would have such a disproportionate impact with thousands of filings required and an increased compliance on the industry, we do not feel this is prudent at this stage. It is not today nor yesterday that we flagged this issue. It had been discussed before, possibly on Committee Stage. I know the Minister is aware of it and is making inroads and I appreciate the work she is doing in regard to it but we are going to press the matter.

The Minister has given a detailed explanation on this matter but I am concerned coming at it from a Cork point of view. Nine out of ten top pharmaceutical companies in the world are based in Cork. They have come to me to express their concern on this issue and the use of the one word "unlimited". I know that they have an exemption until 2021 and I fully accept that but they have advised me that they have to apply for a new licence in something like 220 different jurisdictions and the net cost to them will be in the order of €25 million. They are the figures that they have given to me. I had a long meeting with them to see if there was any other way around this. I am concerned that we rely so heavily on this industry that one word can make such a difference. We are not talking about one company but a number of them.

The Minister outlined the number of companies that did get the exemption and I accept what she is saying about new companies not needing to get the exemption because the issue is clear in regard to individual companies making new applications for a new drug or for the appropriate licence. The problem is that in each jurisdiction where they have to apply for the licence, they have to make a new application. It is a very legal technicality. We need to be very careful in this matter and be conscious that in light of Brexit, with Britain going out of Europe, we must do everything possible not only to keep what we have but also to make sure that new companies are attracted into the country and we do not anything that will upset that in any way. This matter needs to be given very careful consideration.

The difficulty I have is with the third line of the amendment. It is on the distribution of pharmaceutical products. It only speaks about one type of company and one sector. We believe that will have implications on state aid rules. The issue is more complex than the Fianna Fáil amendment suggests. As I said, it affects other sectors and it may cut across state aid rules. I have invited relevant companies to meet me and I will meet with them. I am also keen to explore appropriate solutions and if legislation is needed I will consider that in the context of the forthcoming statutory audits Bill. That is due for publication in the autumn.

I am aware that the pharmaceutical companies may face particular organisational challenges when it comes to updating the company name. As Senator Colm Burke mentioned, they point to the fact that they have licences and patents in many countries around the world. That is why some pharmaceutical companies have been granted extensions beyond the traditional transitional period that all other company types had to meet. In effect, they have been given six and a half years to comply. I note that any company that converted to a designated activity company during the transitional period also had to change its company name. These include companies in insurance and other financial advisers. They are also complex businesses with their own organisational challenges and as there is no possibility for these companies to seek an extension they all have to apply within the 12 month transitional period. I stress that I am keen to explore solutions. If legislation is needed, I will consider that in the context of the forthcoming statutory audits Bill due in autumn.

Will the Acting Chairman tell me when we are at the section?

Acting Chairman Gerry Horkan

We will deal with the amendment and then we will have finished the section at that stage.

I fundamentally disagree with the Minister. On her admission, under her own powers she is able to grant an exemption. The place to clarify and deal with an issue such as this is when we are giving detailed consideration to a Bill, as in this instance. I disagree with talking about this in regard to state aid rules and hiding behind tax compliance. This is about tax compliance, it is certainly not about a particular rate of tax or a state grant. I fundamentally disagree with those two points. That is why we are pushing it.

I appreciate the point that the amendment refers only to the pharmaceutical industry but it is telling that the only industries that have been in contact over this legislation is that sector, so it must particularly affect it. All of the different sectors could have contacted us to express their concerns about legislation, as is their right.

Some others did.

I am not aware of any, other than those in the pharmaceutical industry. We have all received e-mails from various parts of the industry, I am not aware of any others. I accept there may well be-----

They are just from small companies. They were not necessarily pharma.

On the specific amendment, I am cognisant that there is clearly a very serious issue for the pharmaceutical sector. We have to strike a balance between overburdening business and meeting the need for regulation, accountability and transparency. I have not heard from the Minister about any loss of transparency or accountability that would arise from the Fianna Fáil amendment which addresses the very serious concerns of this agency.

Why is the Minister suggesting that we should wait until other legislation is introduced? We are only on Committee Stage in the Seanad. We have yet to deal with Report and Final Stages. We have time to deal with the issues involved. We are taking a recess for a number of weeks, so it could be a month or five weeks before we return to this.

Will the Minister assure Fianna Fáil and other Members who are concerned about this that she will seek to address those concerns with ministerial amendments on a later Stage? That would avoid dividing the House on the matter. If it is not going to impact hugely on the responsibility of the Minister and the Department to ensure the full transparency and accountability of business, I cannot see the reason for not addressing the serious concerns they have. Perhaps the Minister would advise us, first, that she is not arguing that there is a huge issue for transparency and accountability that we are not aware of. In fairness, we have heard the concerns of the pharmaceutical industry, so we must hear the views of the Department on that. Second, can the Minister consider amendments on a later Stage? It will be four or five weeks until Report Stage.

Clearly, there are concerns here. The Minister made it clear that the issue for her is primarily the fact that it is limited to one area and, as Senator Mac Lochlainn correctly said, that is the area most of us have heard about, notwithstanding Senator Norris's contribution. Perhaps Fianna Fáil would be willing to withdraw the amendment so we could agree the wording for a Report Stage amendment and let the Minister reconsider it in light of an amendment that is not so specifically related to one area, which might put us at risk in terms of state aid rules. Neither I nor Senator Davitt, with respect, is an expert or an attorney general, so caution for the sake of a couple of weeks might appear to the wisest course if the Minister is agreeable.

I accept what Senator Reilly said. The reason it affects the pharmaceutical industry so much is due to the fact that it needs a particular licence for every product it sells in each jurisdiction. That is the problem. However, if one is producing equipment and is selling it to another country, one does not need a licence in the same way. I have no difficulty with an agreed amendment, whereby my colleague would withdraw this amendment and an amendment would be made to this Bill rather than leave it for other legislation. I accept Senator Reilly's suggestion on this matter, but it is important that it is not left to drag on. We are consistently being lobbied on the matter and we can deal with it now. Perhaps an amendment agreed by all sides can be drafted that will facilitate the concern of the pharmaceutical industry. It is a serious concern and it is important that it is resolved at an early stage, rather than leaving it to be dragged into another legislative measure at a later stage. I accept that the exemptions are in place until 2021, but let us clear the desk now rather than allow it to drag on for another 12 months.

I understand the Senators' comments but I still have to deal with the issue that this is not just in the pharmaceutical sector. I must talk with the other companies. We have written to the companies and I am meeting some of them tomorrow to understand exactly what their views and issues are. To be fair, the concerns of the pharmaceutical industry only came to light in the last few weeks, so it is too soon for us to know how others are affected. I will consider it on Report Stage. If legislation is required, I must be very careful and must ensure it is properly drafted. The drafting of the audits Bill is well advanced and it should be ready in a few more months. The pharmaceutical companies have four and a half years, so it is not as if they will have an issue tomorrow or in the next number of months. I will consider the matter on Report Stage and if I cannot do it well enough then, I will definitely do it in the audits Bill.

Amendment put:
The Committee divided: Tá, 11; Níl, 24.

  • Daly, Mark.
  • Daly, Paul.
  • Davitt, Aidan.
  • Gallagher, Robbie.
  • Horkan, Gerry.
  • Lawless, Billy.
  • Leyden, Terry.
  • McDowell, Michael.
  • Norris, David.
  • Swanick, Keith.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Burke, Colm.
  • Burke, Paddy.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Conway, Martin.
  • Dolan, John.
  • Feighan, Frank.
  • Higgins, Alice-Mary.
  • Hopkins, Maura.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Mulherin, Michelle.
  • Nash, Gerald.
  • Noone, Catherine.
  • O'Donnell, Kieran.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Ó Ríordáin, Aodhán.
  • Reilly, James.
  • Ruane, Lynn.
Tellers: Tá, Senators Aidan Davitt and Diarmuid Wilson; Níl, Senators Gabrielle McFadden and John O'Mahony.
Amendment declared lost.
Section 3 agreed to.
Section 4 agreed to.
SECTION 5
Question proposed: "That section 5 stand part of the Bill."

I thought we were on section 3.

We agreed it.

Does the Cathaoirleach mean during that hubbub?

I have asked for silence.

I was at the back, preparing to come to my seat, and I heard absolutely nothing.

I understand the Senator's complaint, but it is the same thing every day. Senators congregate here and they do not understand that we have to move on. I am chairing a Committee on Procedure and Privileges meeting on an important issue and have to go back to that, unfortunately.

Can I take it up with the Cathaoirleach's successor?

Yes, the Senator can, if he finds him more indulgent.

I hope so. Could I ask the Acting Chairman's indulgence to say a few words on section 3? As he knows, I had tabled an amendment but I was instructed by the Chair to talk-----

I have been instructed that is not possible, but the Senator is allowed to resubmit his amendment on Report Stage.

That is not an awful lot of good to me-----

I understand, Senator Norris.

-----because the issues I wanted to raise were very serious. There is the fact that paper forms and paper financial statements filed on or after 1 June 2017 do not count, and so one is forced into an audit. This is about forcing small companies into an audit. It is something that is not considered by the European court-----

I am being fairly indulgent. Senator Norris might conclude.

I will conclude. Although the member state and the national court may impose penalties on an individual or company that is not compliant with the provision of EEC law, this is subject to the conditions and the penalties must not be disproportionate and must not undermine entitlement to a basic company right. Small companies are being pushed into an audit, which is very expensive. It is contradictory with European law in both the spirit and the letter of the law and I will return to this on Report Stage.

I was asked to leave the House earlier because I had met somebody from a foreign delegation and wanted to talk to them. However, nobody had the wit to send an usher to get me when my amendment came up. Like the person who complained about the noise earlier, I did not hear what was going on. I was gathering my papers to come into the House but the amendment went through in a flash. I was caught at both ends.

Senator Norris was on one side of the argument on the first attempt and the opposite side on the second attempt. I have been very indulgent with him and have let him make his point.

Yes. I said a certain amount of what I wanted to say on the record and I very much-----

Would it be fair to say Senator Norris was topped and tailed?

Yes, I was topped and tailed. I would like to say to the Minister-----

We might move on to section 5 if that is okay.

It will be interesting to see whether that ends up in The Irish Times.

In the absence of this type of detailed debate, which I would have liked to have had, I hope the Minister and her very able assistants will go back and take a look at this matter of removing section 3(6)(iii) in order to allow greater flexibility for small companies. Then we can have this discussion on Report Stage.

I thank Senator Norris. Senators can understand why it is important we have silence in the Chamber, so that Senators can hear what it is going on. That is why Senator Nash asked for Senator Norris to take his conversation outside.

I immediately obliged.

The Senator did, which I suppose was to his detriment at a later stage.

The Minister has nodded, so we will get somewhere on it on Report Stage.

I thank Senator Norris. He can deal with it on Report Stage.

I was only nodding as I listened to the Senator.

Question put and agreed to.
Sections 6 to 91, inclusive, agreed to.
NEW SECTION

I move amendment No. 3:

In page 60, between lines 21 and 22, to insert the following:

“Amendment of section 599 of Principal Act

92. Section 599 of the Principal Act is amended by the substitution of the following for subsection (4)(c)—

“(c) whether an action of the related company or of any subsidiary of the related company caused the liquidation;

(d) whether the directors of the company acted at all times in their capacity as such or as directors or employees of a related company;

(e) whether the directors of the company distinguished at all times between the best interests of the company and those of any related company;

(f) whether the related company’s prior conduct led creditors to believe that it stood behind the company;

(g) the intermingled nature of the business carried on by the companies;

(h) where a group structure enabled a company with assets insufficient to meet its liabilities to trade while using assets belonging to a related company, whether the structure was calculated unfairly to defeat the interests of creditors in a winding up or to impose any liabilities on the Exchequer or other public funds;

(i) the effect which such order would be likely to have on the creditors of the related company concerned.”.”.

The amendment is designed to stop or at least prevent a repeat of the asset stripping that we saw at the Clerys company on O'Connell Street where hundreds of people lost their jobs in a property play. I am sure the Minister will agree that the people of Ireland were scandalised at what happened, and that such a thing could be allowed to happen, in a situation where the profit motive triumphed over every other consideration. Using common enough grip company structures, the valuable aspect of the Clerys business, the building itself, was held in a subsidiary company called OCS Properties while the trading section was held in an outfit called OCS Operations, which is the trading arm that ran the department store.

As the Minister will know, Clerys was sold to a company called Natrium on 11 June 2015 and the trading section was sold for €1. Lo and behold, at the stroke of a pen, the company was wound up with minimal notice. This meant, in plain terms, that there was nothing whatsoever in the coffers of the trading company to pay redundancies and to ensure that concession holders who were left on the hook for thousands of euro received what they were owed.

As the Minister will be aware, section 599 of the Companies Act allows for a liquidator or creditor to bolster the assets of a company being wound up and for it to apply to the court for an order directing that a related company, and in this case it was the property company that held a valuable asset, to contribute to the debt. Since the introduction of the section in the Companies Act 1990 by one of the Minister's predecessors, Desmond O'Malley, the provision has not been used or tested in the courts. In the meantime, companies like Natrium and its directors have laughed all of the way to the bank and the taxpayers of Ireland, including me, the Minister, everybody in here and citizens across the country, are squeezed for the redundancy money. This fact was pointed out in a report to Cabinet almost two years ago on the sale and liquidation of Clerys. I am sure that the Minister has had an opportunity to, if not read the detailed report, be briefed on same. We do not know when the next Clerys-type episode will happen. What we can say with some clarity is that the current set of laws, in the absence of testing, are not robust enough to prevent a Clerys-type situation from happening today or tomorrow.

Amendment No. 3 proposes to amend section 599 in the context of today's Bill, which is timely and necessary. Fundamentally, if the amendment is accepted, it would remove the profit motive and make anyone considering undertaking a Clerys-style stunt to think again and to reconsider their actions because all of their assets would clearly come into play. Again, this approach was outlined in a report that I drafted and brought before Cabinet in July 2015.

Limited liability cannot be abused or exploited and company directors have obligations to all of their companies and staff. Carrying out business of an intermingled nature and within a group structure should never be used to exploit people in any way. The seven criteria that I have listed in the amendment, if adopted by the House, will send a strong message that we do not encourage, in this country, a business culture where people who are caught up in the wreckage of corporate power plays are treated like collateral damage. The message will go out that we encourage responsible corporate behaviour, that we do not view it as a luxury, that through our laws we encourage and promote responsible corporate behaviour, and that we do not preside over a wild west-type business culture where people like the Clerys workers, the small business holders and the concession holders in Clerys were left on the hook. I appeal to Senators, specifically my colleagues in Fianna Fáil, to support this provision that will have a transformational effect on the conduct of business in this country. I clearly recall that when the Clerys scandal first broke our colleagues in Fianna Fáil were, quite rightly, outraged and they called for laws to be changed and initiatives taken to ensure that something like this did not happen again. Today they have an opportunity to support a change of the law that will ensure episodes like Clerys are prevented from happening or at least the risk of something like it happening again is minimised.

If no other Senators wish to comment, I call on the Minister to reply.

I am not in favour of accepting amendment No. 3. The contribution order remedy is a unique feature of New Zealand and Irish company law. The Irish provision in section 599 echoes the judgment of Mr. Justice Costello in Power Supermarkets Limited v. Crumlin Investments Limited. It is a mechanism that deals with related companies in insolvency and the possibility of unfair behaviour in the group. Accordingly, section 599 gives discretion to a court to hold a related company liable for the debts of a company being wound up provided that the court is satisfied that circumstances giving rise to the liquidation are attributable to the actions or omissions of the related company. I note that Ireland does not yet have an authoritative judgment on the circumstances in which a contribution order will be made between related companies.

The Company Law Review Group, CLRG, was requested after the Clerys insolvency to review and recommend ways that existing company law and, indeed, other legislative provisions could be potentially amended to ensure better safeguards for employees and unsecured creditors. I understand that a subgroup of the CLRG has met a number of times to consider a wide range of provisions and remedies contained within the Companies Act. I understand that this review includes the existing section 599 and other related provisions. I look forward to receiving the CLRG's recommendations later this year and I shall give them careful consideration. It is in these circumstances that I am not in favour of the amendment.

I am disappointed that the Minister will not take on board the valid arguments that support this particular initiative to strengthen section 599. We have waited well over a year for the report of the Company Law Review Group. As I said in my earlier contribution, we do not know the minute or the hour when another Clerys-type scenario will emerge in this country. If we do not tighten up our laws, and the last Administration attempted to do so, then when something like Clerys happens again it will be on all of our heads in this Chamber. I have worked extremely closely with those who lost their jobs in desperate circumstances in Clerys in the summer of 2015. They must be given enormous credit for the way in which they have conducted their campaign. Their campaign was not about payments and support for the Clerys workers because they knew that their ship had sailed. They wanted to ensure that the law was amended and strengthened to prevent such an event from happening again. I am not certain that we are closer to reforming the law in favour of working people in this country and those who go about their business and enterprises in a responsible fashion.

I do not think the country wants to have the kind of label around its neck which certain elements of our business community got because of the way the Clerys situation was dealt with. The strengthening of section 599 and our efforts to make it more robust and meaningful would garner support from responsible business people who want to see a strong business culture in the country. I am not saying there is not a strong business culture in the country. However, where there are weaknesses in our law that permit something like this to happen, they need to be addressed.

As I stated, we have been waiting for a considerable period of time for the CLRG report. We have waited too long. If the Minister will not accept the amendment, which I am prepared to put to a vote, will she confirm when we will get the CLRG report? What will be the timeline involved in terms of taking and accepting the report and legislating for any changes the group might propose? Further, when will she legislate for the provisions of the Duffy-Cahill report? A twin-track approach was taken by the previous Administration to try to address these issues. One related to changes in employment law that were required to protect the interests of employees caught up in insolvencies such as that at Clerys. The second focused on the need to review company law and propose changes to strengthen it in these situations. I would like to see that happen.

The particular matter I will now refer to is before the courts. I welcome the fact that this week there has been some formal State action on matters relating to the Clerys redundancies on foot of an investigation that I helped to trigger. I will keep my comments on it to a minimum as the matter is before the courts. However, it is high time for concrete action from Government to at least minimise the prospect of a Clerys-type insolvency happening again. Small businesses are caught up in them and considered to be simply collateral damage in a corporate and property power play, workers are left on the hook and the taxpayers of the country are left to pay only statutory redundancy to employees who, in some cases, have decades of experience and contribution to the company.

Senator Nash airs a couple of good concerns. However, I strongly feel that the Company Law Review Group is the way forward. Senator Nash noted it himself. I urge the Minister to answer the question the Senator posed. When does she expect to hear from the group? It will be interesting to hear its findings. When we have those findings, I have no doubt that there will be ways forward to strengthen the law in this area.

I have listened with interest to Senator Nash's contribution. We all share his concern about what happened to the workers at Clerys and the unscrupulous and cynical manner in which the law was used to - let us call a spade a spade - deprive workers of their rights and a natural expectation, having given a lifetime's service to a company such as Clerys, which was iconic in Dublin, that their future in retirement would have been safe. However, I believe the Minister has made a strong case for having strong and robust legislation which should await the outcome of the review and is imminent in any event. As Senator Davitt stated, the Company Law Review Group will be very informative here as well.

All of us in the House are aware of how, despite the best of intentions, rushed legislation has untoward consequences. While I believe everyone in the House would agree with the sentiment expressed by Senator Nash, we do not want to find ourselves with unintended consequences again or with weaker legislation than we would otherwise have had, had we waited for the Company Law Review Group's report. As Senator Nash stated, that report is coming any day now. I know the Senator is anxious that we could have another situation on our hands. However, in fairness, let us have good legislation that is properly prepared and has the required effect without, in so far as we can manage it, having unforeseen consequences. We have had too many of those episodes, although they were all done with the best of intentions at the time. I, therefore, support the Minister's contention.

I support Senator Nash's amendment. We have spoken and heard about unforeseen consequences, but it behoves the House to consider foreseen consequences also. As the legislation currently stands, we are leaving ourselves exposed and open. We need to ensure that we do not speak of the situation that happened in respect of Clerys and others as an anomaly because it was a response to and a reflection of the current structuring of the laws and the lack of adequate protection in place.

We have the evidence that the situation as it stands is not a good or acceptable base position. When further information comes through and we have the report, we may wish to amend the legislation again. However, I have no doubt that Senator Nash's proposal in the amendment, if accepted at this stage, would lead to a better starting position from which we could then move. In terms of political realism, it is unlikely that there will be another Bill to amend the Companies Act within the next five to six months or year, although it is appropriate that we would have a clear indication of timing. However, while we may get an indication of when the findings and recommendations will come through, we do not want to leave open a period of time in which there is still permission to act in a way that is unconscionable.

There is a real concern because we have seen this happen systematically. It is a very real thing. What is the role of a director of a company? Are directors of companies there to ensure the companies' success or are people being put into positions in companies to facilitate their dissolution and destruction? If we are serious about our recovery and are concerned about vulture funds, for example, but do not accept the amendment at this point, we cannot wring our hands and express great surprise and concern if international companies that work to maximise their profits and returns on a quarterly basis with, in many cases, little concern for productivity, are rewarded if they take advantage. That is what will happen. In the Companies (Accounting) Bill 2016, we have an opportunity to identify and address a problem. Can we improve it in the future? Absolutely. However, this will be an immediate improvement.

If the amendment is unsuccessful, I reserve the right to table an amendment that is worded slightly differently to address the issue in a slightly different way. I reserve that right for Report Stage.

This is a sensible proposal. It shows that we are serious and that the Legislature will not lope behind business practices, commenting on the trail of destruction that they leave. It also rewards good business practice and recognises the majority of good business practices, including those of companies that have been taken over. It gives them a fair chance of recovering and moving to effective trading practices with decent conditions for their workers. I strongly support the amendment and ask the Minister to support it or suggest her own amendment on Report Stage. Either would address the issue.

While I note that the Senators propose to introduce more prescriptive criteria in terms of the circumstances the court ought to address when considering whether a related company should contribute to the debts of a company being wound up, I am not satisfied the amendment, as drafted, adds to the settled provision.

As I already stated, I am not in favour of accepting this amendment. I do not wish to disrupt existing law until I have received the totality of the recommendations from the Company Law Review Group, CLRG. I am not sure the Senator’s amendment will strengthen section 599. I strongly recommend we wait for the expert group report from the CLRG which is looking at section 599. Adding criteria before the report is received could inadvertently narrow the scope of the courts’ powers. That is a risk I do not think we should take.

I appreciate there is a need to be seen to be providing a fix for a Clerys-type situation. I was as disgusted as Members and the rest of the nation were with the whole Clerys events. However, it is not so simple. Duffy and Cahill noted in their expert report on the examination and review of the laws on the protection of employee interests when assets are separated from the operating entity that it seems section 599 is a potentially useful remedy. However, it is only when the provision is tested in the courts that any necessary amendments may become apparent. Accordingly, I am not in favour of this amendment. I understand a subgroup of the CLRG has met several times to consider the wider range of provisions contained in the Companies Act. I am looking forward to the CLRG report. While I cannot say exactly when I am going to receive it, I understand it is actively engaged and it will be soon.

We have been waiting a long time for the CLRG’s report. To the best of my recollection, it was commissioned in January 2016. While welcome, nobody envisaged it would take 18 months. The fact the Minister is not in a position to confirm when the report will be received concerns me greatly. I frankly do not believe there is a political will in this Administration to deal with this one way or the other.

That is unworthy of the Senator.

I do not believe there is a political will to deal with it. I say that because of the delay in the conclusion of this report. We have seen very little product in this area and in the whole area of employment rights over the past year or so. It is not as if it is a case that there are not any issues to address. There are myriad of issues to be addressed but I do not believe they will be addressed any time soon. I hope, however, I can stand up in the House and correct myself at some point in the not-too-distant future. However, we will wait and see.

This is not a case of rushed legislation or concerns about unintended consequences. Proposals of this nature have been distributed around system since the Clerys situation first emerged. It is not a case of rushed legislation but of no or very little legislation that will protect working people and small businesses, as well as ensuring our business culture manages to progress and we do not have situations like this in the future. This is a genuine attempt to make our company law more robust to protect everybody and improve our business culture.

We know from the Minister and our own experience that section 599 has not been tested. When it is a case that provisions in legislation go untested for 27 years, then we must ask why. Clearly, there are some who would have considered it over the years, but there might have been considerable obstacles to creditors and liquidators taking the case. I was disappointed that the Department of Social Protection as a creditor - one could argue the lead creditor - in the Clerys situation decided not to test section 599 and to go after the related assets. The State, one could argue, is owed over €2 million because of redundancy payments paid out of the statutory redundancy fund to those entitled to it in Clerys.

If the Minister is not prepared to accept the amendment, give a date for the receipt of the CLRG report and legislation emerging from that, will she have direct formal conversations with her colleague, the Minister for Social Protection, with a view to taking a case under section 599 to test the robustness, or otherwise, of the legislation? It is quite telling that after 27 years of the existence of this legislation, not a single case has been taken.

I am concerned to hear the Minister talk about testing in the courts. If we are not only waiting for reports but waiting for testing in the courts, it would seem to me that we are looking at the long-fingering of this issue. I genuinely do not understand why it cannot be seen to be clearly in the interests of good business practice that we would introduce these changes and amendments.

Will the Minister clarify whether she will be ensuring there is a test? If the Department of Social Protection decides it does not wish to test section 599 in the courts, will we wait for a test to emerge at some time? Is that a block against us moving forward in this area? There is a concern. Clearly, if legislation is not working and has not been used, then that is a sign it is not effective. We need to look to strengthen it to ensure it becomes a tool which people can use. The idea of a wait-and-see approach, not just for a CLRG report but for a court case, is unacceptable.

Will the Minister consider delaying Report and Final Stages to accommodate her own changes to address this issue? We know how difficult it is to move legislation through these Houses. There is an opportunity for the Minister to delay Report Stage to get a report from the CLRG by the end of Easter and to come up with her own proposals in respect of this issue.

We are not taking Report Stage today. It is only Committee Stage.

Yes, I know. I was just wondering if there is an opportunity to delay Report Stage.

The Government has taken several actions in response to the closure of Clerys. First, the CLRG was asked to examine legislation with a view to recommending ways the law could be amended to better safeguard companies, employees and unsecured creditors. That work is ongoing. I am awaiting recommendations from an expert group. My Department has looked at the Senator’s amendment and believes it dilutes what is there already. Accordingly, I am not going to accept this amendment. The CLRG is looking at section 599. We strongly believe that adding criteria before an event could inadvertently narrow or dilute the scope of the courts’ powers. I am committed to addressing any issues with section 599 if necessary but I am waiting for expert advice.

I cannot say when the CLRG report will be given to me but I am awaiting it. Senator Nash knows that it took us ten years to bring this company law all together. This process takes time and it is better to have good law than bad law.

Introducing something from New Zealand law will not fix it. It would not strengthen section 599. I am saying that very honestly. I would like the Senators to take it on board. I am waiting for the expert group to come through.

Does Senator Nash wish to respond?

Is Senator Nash pressing the amendment?

Amendment put:
The Committee divided: Tá, 11; Níl, 22.

  • Bacik, Ivana.
  • Devine, Máire.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Humphreys, Kevin.
  • Kelleher, Colette.
  • Mac Lochlainn, Pádraig.
  • Nash, Gerald.
  • Norris, David.
  • Ó Donnghaile, Niall.
  • Ó Ríordáin, Aodhán.

Níl

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Daly, Paul.
  • Davitt, Aidan.
  • Feighan, Frank.
  • Gallagher, Robbie.
  • Hopkins, Maura.
  • Horkan, Gerry.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Mulherin, Michelle.
  • Murnane O'Connor, Jennifer.
  • Noone, Catherine.
  • O'Donnell, Kieran.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • O'Sullivan, Ned.
  • Reilly, James.
  • Swanick, Keith.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Alice-Mary Higgins and Gerald Nash; Níl, Senators Gabrielle McFadden and John O'Mahony.
Amendment declared lost.
Sections 92 to 101, inclusive, agreed to.

I have never heard so much agreeability before in my life.

Even when we are disagreeing, we are doing it agreeably.

Schedules 1 to 6, inclusive, agreed to.
Title agreed to.
Bill reported without amendment.

When is it proposed to take Report Stage?

Report Stage ordered for Tuesday, 18 April 2017.
Sitting suspended at 2.35 p.m. and resumed at 3 p.m.