Dáil Éireann Debate, Tuesday - 13 October 2020
23. Deputy Cian O'Callaghan asked the Tánaiste and Minister for Enterprise, Trade and Employment the protections that are in place to stop companies from moving assets to other holding companies thereby reducing the potential for employee redundancy payments if the trading company becomes insolvent in future; and if he will make a statement on the matter. [29890/20]
View answerThe procedures for examinership and winding up are set out in Parts 10 and 11 of the Companies Act 2014 respectively. A company, both during normal operation and during insolvency must also of course abide by all relevant legal requirements including in relation to the treatment of employees and creditors and disclosure to Revenue.
The Companies Act 2014 provides provisions which may be utilised by examiners, liquidators or creditors (which can include employees of a company) of an insolvent company in appropriate cases, including sections 557 and 608, regarding the court power to order the return of assets which have been improperly transferred; and section 599 where a related company may be required to contribute to the debts of a company being wound up. A range of factors will be involved for examiners, liquidators or creditors in deciding whether to pursue litigation based on these provisions of the Companies Act 2014.
The provisions of the Companies Act 2014 provide safeguards to prevent the abuse of the liquidation system. These include preferential payments under section 621. A preferential creditor is one whose debts are deemed to be more important than the debts of another creditor. The current law is a result of careful balancing of the various rights of creditors, including employees. In terms of wage arrears, outstanding holiday pay, and pension scheme contributions, employees are always considered preferred creditors. 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 a safety net for employees in situations where the employer cannot pay due to financial difficulties or insolvency.
In addition, the liquidator of an insolvent company must report to the Office of the Director of Corporate Enforcement (ODCE) on its demise and must also apply to the High Court for the restriction of each of the directors of the company, unless they are relieved of that obligation by the ODCE.
Such statutory provisions and associated civil and criminal penalties also provide an important deterrent effect.
The 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.
I have asked the Company Law Review Group to undertake an expedited review of these commitments as they relate to company law, to be completed before the end of the year.
