Vol. 418 No. 8
9 Mr. Hogan asked the Minister for Industry and Commerce if he will be amending the Companies Act, 1990 in view of the difficulties experienced by suppliers of goods and services to recover payment arising from the collapse of a company (details supplied) and the fact that the examiner was unable to pay for goods purchased during the time that the company was under protection of the court; and if he will make a statement on the matter.
16 Mr. Rabbitte asked the Minister for Industry and Commerce if he has satisfied himself with the operation of the examiner system as provided for in the Companies Act, 1990; if he plans any changes in view of the experience to date; and if he will make a statement on the matter.
I propose to take Questions Nos. 9 and 16 together.
I take it the Deputies are referring to the Companies (Amendment) Act, 1990, which provides a framework within which companies experiencing financial difficulties, but considered viable in the longer term, can be put under the protection of the court. The Act became operational on 29 August 1990 and has been availed of by 126 companies, according to the latest returns to the Registrar of Companies.
I would like to assure the House that the Act, which introduced a new concept in Irish company law generally, will continue to be reviewed as the need arises. In that regard, I should like to remind the House that some amendments have already been passed by the Oireachtas in the Companies Act, 1990, and commenced by my orders in December 1990 and August 1991.
In relation to the collapse of the company to which I assume the Deputy refers, I would refer the House to my statement in this House on 8 April 1992, Official Report Volume 418, columns 1231-37.
Part IX of the Companies Act, 1990, deals with the issue of placing companies under court protection while the company to which I am referring is United Meats Packers. In view of the statement issue by the receiver last week that there were assets worth £35 million in the company, that liabilities of £50 million were outstanding and that the examiner was not in a position due to the lack of finance, which could be provided by the operation of a State rescue bank, to perform his duties properly under the Act, will the Minister confirm that it is necessary to amend section 285 of the principal Act to ensure that the suppliers of goods and services to that company will get preferential treatment in the event of a winding up?
I am not familiar with the details of the statement made by the receiver but if he said that there were assets of £35 million and liabilities of £50 million I do not dispute it. However, the Deputy will realise that it is a commercial matter, not one into which I could — or should — enter. Regarding his suggestion that an amendment should be made to the 1990 Act to ensure that suppliers to a company which goes into examinership are paid, the position under the Act is quite clear. If the examiner certifies that goods he ordered and received were necessary for the orderly running of the company they get priority and are paid for. That has been the case in the company mentioned, UMP, with the exception of a small number of payments which I understand were not made even though there was an instruction to do so by the examiner because an error was made in the office of the company concerned in listing the cheques for the examiner. It was purely a clerical or administrative error and I understand the examiner — even though he is no longer acting as examiner — is seeking to make arrangements with the receiver to ensure that the small numbers of outstanding cheques, which I believe is about 150, will issue on one day. As I said, it was purely due to an administrative error in the offices of the company that they were not paid in the normal way as a substantial number of cheques were.
The examiner got permission to borrow £7 million from the bank but, subsequently, received only £4 million. Will the Minister agree it is totally unacceptable that an examiner who received goods and undertook to pay for them did not subsequently pay for them? Will the Minister also agree that that would be in breach of the Act and that whatever legislative changes are required must be introduced to ensure that people who supply goods and services to a company under examinership must be guaranteed payment, which did not happen in the case of United Meat Packers?
I believe that it did happen. I am advised that the small number of unsecured creditors who remain outstanding will be paid shortly. Only a small amount of money is involved and the reason they have not been paid up to now is that an error was made in the office of the company. The list of cheques for a whole day was not forwarded to the examiner or at least the cheques issued on a particular day were not included in the list forwarded to the examiner and, accordingly, the court. The fact that the examiner was authorised by the court to borrow £7 million and could get only £4 million does not have anything to do with the Act, the court or me; it is a matter of commercial life. If an examiner is not able to raise working capital that is a fact of life and as a result of judgement exercised by the bank. The Deputy will realise that he is arguing two incompatible principles because the reason banks might be reluctant to advance money to an examiner is that all these unsecured trade creditors will get preference over the banks. Indeed banks have made representations to me to that effect. On the other hand, those who represent unsecured trade creditors have made representations to me that they should get priority over all banks. From that point of view the two are incompatible and the law should leave it open to the court, if there is an irreconcilable conflict, to sort out where the priorities lie in that regard. If we come down on one side or the other we will cause irreparable damage.
It is now time to deal with other questions.
