Dáil Éireann Debate, Tuesday - 21 July 2020
60. Deputy Paul McAuliffe asked the Tánaiste and Minister for Business, Enterprise and Innovation if legislation or measures to prevent tactical insolvency will be implemented in order to ensure that workers are better protected. [16591/20]
View answerThe Government has committed in the Programme for Government to:
- Review whether the current legal provisions surrounding collective redundancies and the liquidation of companies effectively protect the rights of workers;
- Review the Companies Act with a view to addressing the practice of trading entities splitting their operations between trading and property with the result being the trading business (including the jobs) go into insolvency and the assets are taken out of the original business;
- Examine the legal provision that pertains to any sale to a connected party following the insolvency of a company including who can object and the allowable grounds of an objection.
As part of its next Work Programme, I will be requesting the Company Law Review Group to examine these Programme for Government commitments.
Any changes to legislation must be pursued in a manner that guards against unintended consequences, particularly for affected stakeholders such as creditors, employees, other companies and the State. For example, I am mindful that other companies could include small suppliers who might go to the wall should debts owing to them remain unpaid.
Under the Companies Act 2014, if a company wants to initiate a liquidation while insolvent, it cannot do so via a voluntary liquidation. Insolvency and the inability to pay debts are both defined concepts under the Companies Act 2014 - a company cannot merely assert that it is insolvent. It must apply to and be supervised by the High Court. This helps ensure that the system is not abused to the detriment of creditors including employees. Indeed, the Companies Act provides a range of safeguards to prevent abuse of the liquidation process and protect the interests of workers and other creditors of a company.
Provisions already exist under the Act to reverse the impact of certain improper actions prior to insolvency. For example, section 608 provides for liquidators or creditors of an insolvent company in appropriate cases to obtain a court power to order the return of assets which have been improperly transferred. Section 599 concerns how a related company may be required to contribute to the payment of debts owed by the company being wound up. Such statutory provisions and the associated civil and criminal penalties also provide an important deterrent effect.
Furthermore, the liquidator of an insolvent company must report to the Office of the Director of Corporate Enforcement (ODCE) on the company’s demise and must also apply to the High Court for the restriction of each of the directors of the company, unless relieved of that obligation by the ODCE.
Turning to the protection of employees, the Protection of Employment Act 1977 imposes a number of obligations on employers who are proposing collective redundancies, including official notification to the relevant Minister and a thirty day consultation period to allow employee representatives adequate opportunity to consider the employer’s proposals and to make constructive proposals in response. While this legislation is currently the responsibility of my colleague the Minister for Employment Affairs and Social Protection, it will shortly transfer to my Department as part of a wider transfer of functions Order.
In relation to redundancy entitlements, it is the responsibility of the employer in the first instance to pay statutory redundancy and other wage related entitlements to eligible employees. However, the Social Insurance Fund, under the Department of Employment Affairs and Social Protection provides an important safety net for employees in situations where the employer cannot pay statutory redundancy due to financial difficulties or insolvency.
