SECTION 154.

Question proposed: "That section 154 stand part of the Bill."

This section gives us an opportunity to say a few general words about the fears we might have about whether this Part of the Bill will work. Schemes such as this have been included in the British Insolvency Act. My information is that it is not working in Britain, that it is too expensive and, because there is such a heavy recourse to court hearings to settle matters, it is impractical legislation. Reference is made by advocates, of whom I am one, of legislation of this kind to the United States Chapter 11 provisions. We attempt in Chapter 9 of our Bill to copy their Chapter 11.

It is worth recalling that Chapter 11 in the United States is only used for very large companies, where very large sums of money are involved and where the court and administrative costs are small in proportion to what is at stake. The United States Chapter 11 provisions have not been used successfully for companies of the size we in Ireland would be concerned about in this discussion. The reasons, as I am advised, involve far too much recourse to the courts and, as we know, even the simplest High Court hearing costs £2,000 to £3,000. Also, my understanding is that it presumes restraint on the part of creditors in seeking to have their money returned, that they will stand back and allow the court to protect the company. My impression is that certainly companies who enjoy preferential status will not be prepared to do this. They will not co-operate in the necessary compromises because they know they have security that others do not have.

This section of the Bill has been touted by the Minister for Finance as a supposed replacement for Fóir Teoranta. We were told when the decision was announced to abolish Fóir Teoranta, the State rescue agency, that all the problems that it was taking care of will now be taken care of by Chapter IX of the Companies Bill. This is just not true. This section will not provide any substitute for the availability of easy or soft money that was made available under the Fóir Teoranta legislation, and which preserved many jobs throughout Ireland. It is no replacement for Fóir Teoranta and it should not have been claimed to be.

I should say, there has been no Second Stage discussion anywhere on this Part of the Bill. This Part of the Bill was not in the original Bill. It was introduced as amendments in the Seanad. It may have been discussed on Second Stage in the Dáil, but there has been no detailed scrutiny until now of this provision. It was not scrutinised in the Seanad. We need to examine it rather closely to see if it is going to work.

For clarification purposes, it was examined in the Seanad. There were 50 amendments adopted on Committee Stage in the Seanad.

Without debate.

My information is that there was a long debate on it. In relation to the section, there are no amendments to the section. Deputy Bruton has outlined his party's position, generally, in relation to the Part itself.

We certainly have not had an opportunity of discussing this whole principle. You either agree with the principle, or you do not. Section 154 gives us the opportunity to discuss it.

Just one point of clarification to satisfy my own mind, I want to ask the Minister why is there a specific reference to Fóir Teoranta? After all, it is a creditor in any case. The term "creditor" is there; surely in using the word "creditor" that term is comprehensive enough to make it unnecessary to refer specifically to Fóir Teoranta. That is the one point I wish to make on section 154.

Fóir Teoranta was in existence at the time the Bill was drafted. It still is but, on the proposals of the Minister for Finance, it looks like it will not be there much longer. I presume we will have an opportunity during the course of Report Stage to clarify that situation, because we will have to amend it at some stage.

I would like to see this sort of provision working in order to save companies that would otherwise go under. For that reason I hope the points we make would be made in a constructive way with a view to trying to establish the powers that this new body is going to have. Also, we must examine the conflicts that are going to arise as a result of the imposition of an examiner into the whole area of dealing with companies in danger. Those companies must be given some real authority, and particularly the necessary financial back-up, to do what has to be done in relation to the salvation of a company.

What is going to happen, for argument's sake, when conflict arises between the board members of the company and the examiner? Who is going to hold back from wanting to put in a liquidator in a situation where this examiner will have no financial independence and no proper back-up? The problem about the examiner is that you are trying to put someone into a position to do something without giving him the resources or the authority to carry through the sort of decisions that are going to have to be taken. I ask around this table if you were in a position where company X owed you a large amount of money, are you going to hold back and agree to some sort of a compromise when perhaps the same management and staff are going to remain in the company, where there is no new financial input on the part of the decisions taken by the examiner? I doubt very much if anybody is going to wait about for that and I think what you ar going to do here is postpone the evil day.

I would like to look at this from a different angle to see whether we do something, either in the area of the receiver or in the area of the administrator-type system. That was used in the PMPA and the ICI, where you had somebody with real power to do things but, above all, had finance available to him to enable the restructuring to take place. What is the point of putting somebody into a company when he cannot have the authority to raise one penny to change things or to have an injection of capital into that company? What is the point in leaving the same bad management in place? What is being attempted here is in the right spirit, but the practical difficulties in a country where we are dealing with relatively small companies all of the time are going to be absolutely enormous. Rather than doing this, we have a new opportunity of saving companies from going into liquidation. After a short period people become disillusioned because they find that this just does not work. I would like to hear from the Minister before we proceed with this Part how he thinks we can overcome the sort of difficulties that are evident to everybody.

In this Part of the Bill there are no basic qualifications required of the examiner and this also needs to be looked at. It can be anybody, as far as I can see. They do not need to have any specialist knowledge and surely in a case like this, we should have some basic requirements or qualifications in relation to the position of examiner.

I do not agree with Deputy Bruton's contention that there will be a difficulty about the creditors not waiting. It seems that if the creditors are unwilling to wait, and if they send in a receiver, an application can still be made by a member or by the company to appoint an examiner. The court will deal with the positionvis-�-vis the proposed examiner and the receiver who is there. In relation to Deputy Barrett’s point about bad management, my understanding is that the powers of the examiner include power to apply to the court to take some or all of the power, which had been vested in the board of directors by the articles or memorandum of association, from the board and transfer that power to the examiner.

For a period.

Yes, but the whole thing is dealing with a period. We are not envisaging this examiner being permanentlyin situ. We are trying to bring about a situation whereby a temporary rescue operation is mounted, rather than a company going straight into liquidation. We are trying to bring about a situation whereby somebody called an examiner is sent in to see if the company can be turned around.

I take Deputy Bruton's point, and I have a certain amount of sympathy with it, about the position in the UK, with which I am familiar. To date, the position there has not been particularly satisfactory, but I am not persuaded that the teething troubles experienced in the UK will not be overcome; I believe they will. My advice is that they are being overcome. We are attempting to create a situation here whereby legislative provisions will exist to prevent a company going straight into liquidation and somebody called an examiner being appointed to try to save a company and turn it around. The legislation is not prefect, of course; nobody is pretending it is and the Minister did not pretend it was. I believe, however, that a significant start is being made in an area that has been crying out for reform for a number of years, an area about which we have had a great many proposals, suggestions and lobbying for reform. In relation to the management and the creditors aspects, the fears expressed are groundless.

In so far as the resources available to the examiner are concerned, my understanding of the Chapter is that the position of the examiner is an extension of the management of the company. We are not talking about the State, as such, coming in to rescue ailing companies. If we went down that road, God only knows where we would finish up. What we are trying to provide is a legislative mechanism whereby interested parties can apply to the court to send in a person called an examiner to save a company from going to the wall and try to turn it around. As far as the expenses of the examiner are concerned, there are sections in the Bill dealing with that. I will have a few words to say about them, but they are there and an attempt is made to meet them.

In view of what has been said will the Minister suggest to me which finance house will provide funds to set up this rescue system? Will it be the Bank of Ireland or who will it be?

This is a very important Part of the Bill. Other Members have referred to the role of the examiner and so on but I do not necessarily see, at this stage, that an examiner ought to be or need to be funded by the State. I would see an examiner going in to participate possibly in the saving of a company receiving some recompense from the company.

(Interruptions.)

My understanding is that an examiner will be sent in if a creditor, or other interested party, feels that the company is in danger. It is as simple as that. If one happens to be doing business with a company either as a creditor or, perhaps, have some other interest in the company, one might feel the company is sick, ailing or has a problem. How does one reach into that company to find out if that is the case so that one's investment, whether as a supplier or whatever is protected. Indeed, workers or a trade union should be able to get some information to allow them to make a decision that the company is, in fact, not in trouble or not about to go out of business and can be rescued. From what I am reading before me I understand that not only can the examiner go in and get that sort of information but he can also take certain action to, perhaps, rectify the situation and help the company. That is a very important part of his role and I would see in such a situation that the examiner ought to be recompensed by the company. If the company goes to the wall that is a different kettle of fish altogether; there is no need for an examiner.

Deputies Flood and O'Dea have outlined exactly the situation and have interpreted the desire behind the part. The whole purpose of putting in an examiner is to rectify or save a company before it goes into liquidation and that provision has been widely welcomed. I certainly am not going to lay down any criteria for the qualifications of an examiner, to cover a point Deputy Barrett raised today. That was discussed before. We could appoint an examiner who will be well experienced to carry out an examination of the company and, indeed, recommend certain procedures to save that company but who would not have the necessary recognised qualifications. We are getting into a Second Stage debate on Committee Stage. I have outlined the position generally and I would like to deal with the sections. Members might be interested in the overall philosophy behind the Bill but Second Stage has been debated in the Dáil and Seanad and, contrary to what has been said by Deputy Bruton, there has been quite a discussion on this Part in both Houses on Second Stage. We are dealing with Committee Stage.

Both sides have outlined their general philosophy towards the Chapter.

The Minister is misleading the committee.

On Committee Stage we deal with the Bill section by section and we can go into the nitty gritty of what happens when there is a conflict between directors and examiners and so on, as we go through the sections. The Minister and Members of the Opposition parties have outlined their feelings on the Chapter. We will take the Bill section by section as we go through the Chapter.

Did I understand the Minister to say that section (c) of the definition of an interested party would be removed on Report Stage?

I did, Chairman, say that. At that stage I presume that the necessary legislation would be enacted by the Dáil to have Fóir Teoranta wound up. We will have to take whatever action on Report Stage that is necessary. At this stage it is premature. It is also mentioned elsewhere in the Bill. The Bill has been so long in Committee that things are happening elsewhere in relation to that issue particularly and we will have to take the necessary action on Report Stage to delete, if Fóir Teoranta are no longer in existence.

In relation to what the Minister has said, if Fóir Teoranta are removed and if an examiner is called into a company who received financial assistance from Fóir Teoranta last year or two years ago where does the State stand with regard to the debt? Are we covered under a creditor of the company or what is the position? The Government cannot just wipe out Fóir Teoranta and all their debts.

With respect, that would more than likely be dealt with by the Bill that is going to abolish Fóir Teoranta.

That is exactly what I am asking the Minister. You just cannot wipe out Fóir Teoranta and forget about it.

That is accepted, Deputy Mac Giolla, but that has nothing to do with the Companies Bill.

The Chairman has interpreted correctly. It will be dealt with in the Fóir Teoranta Bill to deal with Fóir Teoranta's affairs. We cannot anticipate the details of that Bill at this stage but when that Bill is published and passed we will then have to deal with it in the context of the Companies Bill.

Question—"That section 154 stand part of the Bill"—put and agreed to.