Companies (Miscellaneous Provisions) Bill 2013 [Seanad]: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

Fianna Fáil welcomes this Bill and intends to support it. I join with the Minister in thanking the Company Law Review Group for its work on both this Bill and the big Bill, as well as for the information and assistance it provided to the Joint Committee on Jobs, Enterprise and Innovation during the latter's review of it. This Bill is significant because it has become apparent in the past 18 months that the examinership process became the preserve of large companies and gave them an advantage in dealing with business difficulties and issues such as legacy debt that smaller companies did not have or were not in a position to use. On that basis, it is important that Members expedite the Bill's passage to level that playing pitch.

It also has the potential of reducing legal costs relative to the existing High Court process. At present, only 1% of small and medium-sized enterprises, SMEs, that are in difficulty restructure, compared with 25% of SMEs in the United States and this is despite broadly similar business structures. It demonstrates that many businesses that could have been saved potentially have been lost. They have been prohibited from restructuring by prohibitive costs and by the challenges of entering the legal system. For this legislation to be successful, it must be endorsed by the relevant professions, both accountancy and legal, and the Judiciary must be trained in the complexities of company restructuring. While the State is lucky in respect of the work undertaken by the Commercial Court at present, this Bill will require an expansion of the resources available to that court. In addition, when this type of activity is brought down to Circuit Court level, the requisite level of expertise must be brought to the Circuit Court in order for it to be maximised fully.

Solicitors, barristers, auditors and accountants should be required to post prices for their services, including hourly rates, on the relevant regulator's website so companies wishing to avail of this process can know the cost from the outset. All professionals should be required to provide clients with meaningful cost estimates to prospective customers. For an examinership to be successful the primary need is often for access to credit. There is still an issue with regard to access to credit, in particular, for companies which are being restructured. Unless this aspect is addressed the good and very solid structures provided for in the Bill will be merely structures and the intentions of the Bill may not be realised.

I welcome the provision to enable companies to avail of examinership. The Minister estimates it will allow for a reduction in costs of up to 30%. At present, applications must be made to the High Court in the first instance for examinership protection and then may be sent to the Circuit Court if the company's total liabilities are less than €317,434.52. This has never been done in practice.

Many companies find the prospect of going to the High Court to seek examinership a daunting one. They regard the High Court process as the preserve of large corporations and many are not comfortable in the surroundings of the High Court. They have some justification in believing that costs could spiral out of control. It is estimated that Circuit Court costs will be 30% lower than an examinership process through the High Court, owing to the legal and accountancy fees element being considerably lower.

The up-front costs currently associated with seeking examinership protection are made up of the costs of an independent accountant in preparing a report on the company's viability and the legal fees for the application papers. The Bill does not change the content of this report nor the content of the application papers so the same level of work is required regardless of whether the application is made to the Circuit Court or the High Court. The Minister should consider a simplified version of these reports or application papers in order to streamline the process further and to make it more accessible.

As an example, I refer to the case of an independently-operated hardware store on the main street of any town. Unlike major national chains it will not have the resources to take a High Court examinership case. However, there is a considerable social dividend from having such a business operating in a town centre and providing employment. Were it to close it would have a significant knock-on effect on surrounding premises and reduce footfall in the town.

Many national stores have used the examinership process to renegotiate leases in out-of-town centres in the past 12 months. This option is available to such stores because they have the resources but it is not available to the small local hardware store.

The examinership process is being used to address the issue of legacy debt. We must devise a system to provide options for viable businesses with legacy debt issues relating to property investments or other investments associated with the so-called boom, whose businesses are not sufficiently viable to service that debt. Banks have been permitted to set aside home-related debt and to offer split mortgage arrangements. Similar arrangements must be considered for businesses.

The hospitality sector has examples of banks taking over loans and putting a company in charge of operating the indebted hotels. Many independent, family-owned businesses do not have the support of the banks to the same extent. It is a very uneven playing field. Family-operated and independent hotels around the country are faced with competition from hotels which are being run by the banks. This is unfair competition. The family-owned hotels which have not become involved in heavy indebtedness are being put under pressure and are going out of business in some cases. This is also happening in the retail and other service sectors. The Bill will give some relief but further options are required.

Landlords have expressed concerns about the possible abuses of the examinership process by some retailers who are using this court process to reduce their rents. The difficulty is that many rents are related to costs in the period 2005 to 2008 but we are now in a very different time. Any landlord who is concerned about this legislation should first negotiate with his or her tenant rather than forcing the tenant to seek the protection of this legislation which should offer some protection for their investment.

For the proposed changes to be successful the concept of examinership being handled by the Circuit Court will have to be embraced by the professions, including the legal and accountancy professions. While it is hoped that fee levels will fall accordingly, there is already a worrying lack of transparency with regard to professional fees. Members of regulated professions should be obliged to meet strict price transparency requirements. One approach might be to require that professionals such as solicitors, barristers, auditors and accountants be required to post prices for their services on the relevant regulator's website so that those seeking to avail of this new service will know the costs at the outset. One of the challenges of dealing at a local level is that people may be tempted to use their traditional provider of accountancy and legal services. Pricing needs to be clear before professional advice is engaged.

There will also be a need for training of judges to ensure they are adequately versed in what may be complex commercial cases. The Minister for Justice and Equality has tabled amendments to the Bill in the Seanad. The Circuit Court judge cadre will need to be trained to deal with very complex cases of commercial law. The High Court and the Commercial Court are creaking under the pressure of the volume of complex examinerships, receiverships and recession-related litigation. This legislation is required to enable companies to seek the immediate protection of examinership as a last resort in many cases. If delays are to arise at Circuit Court level, the intention of the Bill will be lost.

The Bill also provides for electronic filing of returns to the Companies Registration Office. The Irish solution to an Irish problem was to have electronic filing as well as paper filing of returns. I refer to the success of the Revenue's online filing system which has proved that people are comfortable with using an electronic system which should be extended to include all commercial services.

Section 7 provides for quality assurance. I ask the Minister to clarify the status of the term, "accountant". If quality assurance in the audit process is to be provided for, care must be taken that those who undertake audits have some form of quality assurance. The Minister is considering a number of options. The fact that anyone can purport to be an accountant undermines any provision of quality assurance.

We called this Bill the "baby" Bill when discussing it on Committee Stage as compared to the bigger Bill. The provisions of this Bill must be communicated to businesses. The Department has completed a large body of work but businesses are as yet unaware of these important provisions. I suggest the Department does not leave it to the private sector - the legal and accountancy professions - to inform businesses about the provisions of the Bill as they will put their own spin on them. I suggest the local enterprise offices could provide the information to companies so that they know that these provisions are very different and will offer many companies the option of examinership which they would not have considered heretofore. There is no sense in this House passing this Bill unless it will have an impact on the high street. It will not have that impact unless there is work done by the Department to publicise its provisions and to encourage people to seek further information. I will leave that challenge to the Minister.

As the Minister is aware, I took up this portfolio only some weeks ago. It was not the ideal time to take up a portfolio of this nature in that I was landed with Committee Stage of the Companies Bill 2012 legislation, which is probably the largest Bill this House has ever considered. I spent a great deal of time trying to get my head around that legislation and, in fairness, the Department provided me with comprehensive briefs. We have managed to deal with Committee Stage of that Bill and it will come back to this House for Report Stage, but I was amused last week to find out that we would be discussing a baby Bill, so to speak, this week and wondered why it could not have been done at the one time. In fairness, the Minister has outlined the reasons this legislation must be rushed through the House. There is merit in doing so but the news last week was a bit of a surprise.

The area of examinership is one larger retail stores or businesses have been able to abuse. I do not like using the word "abuse" but in some cases some of the larger businesses have used it as a means to address some legacy debts and issues such as upward-only rents. On the issue of upward-only rents, as the Minister is well aware it was a commitment of this Government to try to deal with that issue but, on the advice of the Attorney General, it was decided that could not be done through legislation. I do not know what the advice was to suggest that but it is an issue that goes to the heart of many of the problems with which smaller businesses are having to deal. The fact they are burdened with very high rents and leases they are unable to get out of has meant the owners of many viable businesses have a huge debt around their necks. If they did not have that debt, it is possible that some of them would be able to invest that additional funding in job creation and expanding their businesses. For that reason, it is unfortunate we have not been able to deal with the issue of upward-only rents through legislation.

While I understand the need to expedite this legislation, there are other areas under the Minister's portfolio which one could argue warrant equal urgency. On the issue of workers' rights, for instance, on which Sinn Féin has long campaigned, from what I am led to believe the Department issued a consultation document about a year and a half ago on overhauling legislation on workers' rights and safeguards for employees. It is my understanding that consultation document has not been finalised. The Minister might comment on that in his closing remarks.

When it comes to workers' rights there are other areas in need of urgent review. Some workers are subject to very little regulation. There is very little regulation in the employment and the working conditions of au pairs. That is an issue for employees but it is also a child safety issue and an area on which I would like to see the Department focus. Obviously, the upward-only rents is another area in need of such a review.

Regarding the examinership process, giving smaller companies the option of availing of examinership through the Circuit Court is to be welcomed because many small business have been left with huge legacy debts, sometimes through no fault of their own but as a result of the economic circumstances in which the State has found itself. They are viable businesses but because of that legacy debt they will find it increasingly difficult to continue in operation. Giving the option of going to the Circuit Court is an opportunity for the owners of those companies with that odious debt around their necks to put in place good business plans and free up some capital when they come out of the examinership process. That will allow them extend their businesses and perhaps create an additional one or two jobs in the local economy. The benefits of that will be far-reaching. We will support the passage of this Bill.

Sections 3 and 4 dealing with the filings of the Companies Registration Office are to be welcomed as they bring the processes up to date. Section 5 on the disclosure of information to the Director of Corporate Enforcement regarding the functions of company directors is to be welcomed also and which we will support. On that complex area of company law, which I am trying to get my head around having the brief only a few weeks, we could do more work on the disclosure of information, something I will tease out in committee. It is important that all information is disclosed on tax compliance, whether the company has been involved with a worker and so on. The more information disclosed, the better.

Section 7, dealing with the regulation and investigations of the penalty systems, is welcome also. Deputy Calleary made a valid point on the buy-in of professions to the system. Opening up the examinership process to smaller businesses at Circuit Court level is a significant change and there is a need for solicitors, barristers, auditors and even judges to buy into the new process. The Deputy made a valid point also on the role of the local enterprise offices, LEOs, and being able to get that information out. There is no point in this House passing legislation unless the very businesses that could avail of the examinership process benefit from that and can emerge successfully at the other end. The Minister stated at the outset of his contribution that in the region of 75% come out of examinership and continue to operate as a viable business. If that is the case, and we are opening up that process, we must be able to get that information out to those businesses and inform them that they have that option, that we are trying to deal with the issue of smaller companies' legacy debt, that we want to nurture that industry and that this legislation will go a long way towards doing that.

For that reason we will support the Bill and its speedy passage through this House if that is what the Minister chooses to do. I presume it is the Minister's intention to have the Bill passed by this House before we adjourn for the Christmas recess. If that is the case, we will help facilitate that.

I welcome the opportunity of speaking to the Companies (Miscellaneous Provisions) Bill 2013. I welcome also that the Minister, Deputy Richard Bruton, is in the Chamber. In addition to examining the legislation I will also put forward some sensible proposals.

I welcome the legislation and this debate as small businesses need our support at this difficult time in the country's economic history. We all accept that. A state that does not support its small and medium businesses is a state that is going nowhere in that it is neglecting its future and the future of its children. In recent days we have seen that, even against the odds, the SME sector is fighting back by retaining existing jobs and creating others in the current economic climate. I welcome that because there should not be any political point-scoring when it comes to this issue.

In dealing with the issue of our economy and the future of this country, we must all focus on job creation, and a strong SME sector is vital in that regard. It is important to state that. We must also recognise people who come up with new ideas and schemes to create jobs. That is being done in the food sector, and those in the tourism industry are filling hotel rooms and taking on new staff. Those are the areas on which we must keep an eye in terms of job creation but we have a Minister who is considering reintroducing the holy hour or closing pubs at 2.30 p.m. as part of some weird health policy.

He needs to wake up and smell the coffee because nowadays the pub is about food as well as about serving alcohol and drinks. Food is a very important part of the pub trade. I urge caution in terms of anybody trying to damage that sector because the serving of food, in particular between 12 p.m. to 4 p.m. and in the evening, has huge potential. Pubs are employing young people and are taking on extra staff, which the Minister identified in recent interviews. This is an extra dimension to the pub in the context of the tourism sector. It is important Ministers keep their eye on the ball in regard to this issue.

We need constant reform and new ideas which will create jobs. It is the duty of the Opposition to challenge and hold this Government to account. It is also the duty of the Government to listen to new and constructive proposals to assist job creation and small companies, with which I will deal later.

This Bill seeks to facilitate low cost Circuit Court examinership for small businesses. Currently, the examinership process can only be initiated through the High Court. This Bill also enables the Irish Auditing and Accounting Supervisory Authority to impose a levy to cover the cost of carrying out quality assurance of statutory auditors and firms. The examinership provisions were envisaged in the Companies Bill 2012 and these are being fast-tracked. Essentially, that is what this legislation is about and we need to be very conscious of the details of it. As I said, I welcome the legislation and will support it because if somebody comes up with an idea which will help job creation and small businesses, we should give it our full support, regardless of our politics.

It is important the Government, the Minister and Members on all sides of the House are open to new ideas. I would like to put forward a number of ideas to assist businesses and companies, some of which I would like the Minister and the Government to consider. Would the Government think about having an entrepreneur loan scheme? Many people laid off work are experts in their areas and many consider setting up small businesses or becoming their own boss. However, a major block is resources but for a small outlay of as little as €10,000, many of them could get underway and set up a basic home office, buy tools, etc. Those who do this may find the business is successful and, therefore, will not need unemployment benefit. It is also crucial to encourage those with such talents away from nixers and the black economy.

An entrepreneur loan scheme should be established. This would work very well and on a similar basis to student loan schemes for third level education in other jurisdictions. I propose that a person could apply for a loan from the Government that would be limited to a small amount and that nothing would need to be paid back for the first two years of the enterprise. If the business is successful, the loan would be repaid out of the business over the following five years. If the business fails, the loan could be repaid via social welfare or Revenue or over a long period of say eight years. I am talking about giving a start-up loan where people have constructive ideas and need to get businesses up and running.

In terms of the cost, the exposure of the taxpayer would be very limited as the money would be repaid, unless the individual left the country and even in that case, the individual would no longer be claiming unemployment benefit. It would encourage small-scale entrepreneurship which may allow some people to come off unemployment benefit. It offers a greater opportunity for the individual than having to approach a bank. As the Government could pretty much guarantee repayment, the individual would not have to jump through hoops to obtain the loan. It would be a business decision on his or her part. That is a proposal about which I would like the Minister to think.

There has been much talk and hype about third level education. Why do we not consider setting up a special group tasked with identifying foreign firms, in particular in the UK and US, which have strong growth potential but which may not have become multinational as yet? These would be medium-sized firms with potential to grow in highly skilled areas. The group should seek to establish links between the Irish third level sector and firms for research and development purposes. Firms at this level may have limited research and development facilities and problems getting access to universities. The aim should be to ask them to establish incubator units in conjunction with the universities and institutes of technology in Ireland. That may offer a platform to encourage them to move their research and development to Ireland. That is a second proposal at which I would like the Minister and the Government to look.

A number of people have asked me to raise the issue of PRSI. It is time to look at and come up with new radical ideas, although I am not saying all of these will be workable. For example, we could have an employer PRSI waiver in order to attract major foreign direct investment. Large firms proposing to locate in Ireland and employing in excess of 300 people could be entitled to an employer PRSI waiver for the first three years. This should not be limited to employees taken off the dole as this is too narrow to be attractive to a firm. Even if employees move from another job, it still creates openings in the market. There is a hit here for the Exchequer but, alternatively, it would be handing out money for unemployment benefit and such major foreign direct investment in Ireland is the quickest route to reducing unemployment. We need to look at these ideas.

An important issue on which we have not touched and about which we hear from small businesses is commercial rates. For owners of small businesses employing 15 to 20 people and small pubs and restaurants to have to pay say €37,000 in commercial rates for the year before they get out of bed in the morning is a very difficult hit. I urge the Government and the Minister to look at that issue. These commercial rates are squeezing small businesses. A number of my colleagues mentioned rent, which is another major hit for them. Local authorities need to wake up.

We had a very good debate in the House last Friday on town centres and moving the economy into them. We need to come up with new ideas. We must look at reducing costs for small businesses so they can take people off the dole. That must be drummed into this Government because it seems to be going around this week accepting that everything is fine. I accept there has been a major improvement in the number of jobs created but we need come up with new ideas.

In 2012, 32 companies went into examinership, 16 with a normal status, eight in liquidation, one in receivership and seven still in examinership. In the programme for Government, this Government promised to introduce new legally binding voluntary commercial debt plan structures to allow small businesses to restructure debts without recourse to expensive court procedures. This was included in its Action Plan for Jobs. The Government said it would examine the feasibility of introducing a new structured and non-judicial debt settlement and enforcement system to meet SME needs. That is very important, is part of the reform agenda and is why I support this legislation. If somebody comes up with a Bill which is strong, tight and will help SMEs, one has to go for it, in particular in the current economic climate where every job created is a major bonus for the State.

It is important to look at Dublin.

I know the Minister of State, Deputy Ring, is always pushing Westport.

And rightly so.

I accept that. It is a fine town. I hope Councillor Hyland is getting on well down there.

He is going well.

The Minister of State will see him on Sunday.

He is doing a great job for the local economy. I have been in Westport many times. I have seen what the SME sector there has done. When I was there in September, I was impressed to see how the restaurants in the town have looked at the pricing issue. It is positive that they have made an effort to put together packages for families and tourists, etc. We need to be very supportive of such necessary initiatives. While there are many examples of places like that, the Government has to keep an eye on Dublin. As a representative of Dublin Bay North, it is important that Dublin is seen as a major part of any economic development. I strongly believe Dublin city is still Ireland's key economic driver. The Dublin region must be prioritised if it is to develop. Particular attention must be given to encouraging people in other regions to understand the benefits that a successful Dublin can have for them. Other regions can compete with Dublin for investment on an ongoing basis, but this should not stop Dublin from being identified as a region that is entitled to attract jobs and competitively deliver the key infrastructure the State needs. There is no reason for a strategy of divide and conquer.

The Luas and DART projects must go ahead because they will be major components of Dublin's future. The Government should give special consideration to the jobs that will be put at risk in the city centre during the construction period, which will last up to ten years. The current PRSI and tax schemes that encourage companies to take on unemployed companies should be adapted to allow the businesses that will be affected by these works to avail of certain benefits, such as waivers for existing employees, during the long construction period. This might help to stem the job losses that could result from decreased footfall. Dublin city must be funded if it is to compete. Certain activities, such as traffic management and the provision of bus corridors, place a significant burden on Dublin City Council. I suggest that other local authorities should be liable for some of these costs. Perhaps a specific city innovation fund could be established for the Dublin region to encourage investment and new thinking in this area.

When we are talking about the centres of cities like Dublin, we must focus on the importance of the hospitality sector not only from the perspectives of job creation and tourism, but also with regard to how city centres are used. People do much of their big shopping in shopping centres. They are keen to get value for money with regard to issues like parking. We should be more radical in this regard. Our city centres should be places for leisure. It is great if small businesses in city centres get support, but there should not be an over-concentration on that. Thousands of people come to Dublin for sporting events like international rugby matches. They go around town looking for nice restaurants and hotels. That is why it is important for us to focus on the hospitality sector.

If we are to look after the needs of tourists, we must ensure there is a quality policing service on the ground. If a strong community policing service is not provided, people will be afraid to come into the city centre. I remind the House that 33% of people in Dublin have a mental issue about feeling safe in the city centre. We need to bring those people back. I call the approach that should be used to convince them to do so "the Havana approach". When one walks down the streets of Havana in Cuba, as I have done, one does not see any anti-social behaviour because there is a community policeman or policewoman every 200 yards. They look after the tourists and the local people. I urge the Minister to consider this example. People might slag Cuba for other reasons, but when it comes to community policing in the centres of cities like Havana, there is an example of good policing practice that prevents a great deal of crime. Tourists from countries like France, Canada and Ireland are looked after. I have been there and I have seen how it works on the ground. I felt very safe in Havana, which I am using as an example.

If we want Dublin city centre to develop commercially and economically, it is important for it to be safe. At the moment, 33% of people in Dublin and around the fringes of the city have concerns about the safety of the city centre. We need to win back our city and town centres. They belong to the people and should be controlled by the people. If Dublin is to compete internationally, social policy must be accelerated. We need to face the fact that Dublin remains at the bottom of many league tables relating to quality of life issues. Business costs remain a significant problem in the city of Dublin. It is important that we stimulate competition among those providing office space to rent. We must consider ways of utilising a significant percentage of the derelict and under-used buildings in the city. We need to up our game in this regard. It is a question of getting on with it and doing it.

Dublin is heavily reliant on bus transport. Dublin Bus currently locates every bus terminus at the side of the street. This is a particular deterrent for commuters because of the lack of shelter, the overcrowding on pavements and the disincentive to queueing. It offers the potential for fatal accidents, as has been seen in the past. Buses have to be parked somewhere until it is time for them to depart. This adds to traffic congestion. Consideration should be given to the utilisation of an area of land - possibly in the docklands - for the establishment of a city bus terminus that could be used by Dublin Bus and private operators. All buses would terminate and begin from this location. A significant number of people would be encouraged to walk to the bus terminus to avail of better shelter and less crowding. That would cause the pavements to be less congested. The availability of bus parking facilities in the area would reduce the traffic congestion caused by lines of buses waiting on the streets. Essentially, the city centre would be a set-down area only. It would become an entirely moving district. Such ideas for improving the city centre need to be considered.

The use of mobile technology and information and communications technology in Dublin could be improved. The Minister, Deputy Bruton, and the Minister of State, Deputy Ring, are aware of these issues. Mobile service providers and information and communications technology companies should be asked to suggest ways to improve this. I have already spoken about the issue of high rents. If an improved working from home scheme were introduced, this would reduce rents and alleviate consumer congestion. Most employers are unaware of how simply this can be enacted and the savings that can arise. An attempt to change the culture of working in Dublin should be considered to make use of mobile technology. This would allow workers to carry out activities from home, rather than having to be in the office five days a week. We need to consider radical ideas for dealing with these issues. We need to find sensible ways of supporting the SME sector.

I will go back to the details of the legislation. We need to concentrate on the other significant legislation that relates to this Bill, such as the Companies (Auditing and Accounting) Act 2003, which established the Irish Auditing and Accounting Supervisory Authority, and the European Communities (Statutory Audits Directive) Regulations 2010, which give EU effect to law in this area. Both of these enactments are amended slightly by this Bill. When I examined section 8 of the 2003 Act, I was reminded of a number of things that should have been done in this country over recent years. I often ask myself why they have not been done. Section 8 of the 2003 Act provides that the Irish Auditing and Accounting Supervisory Authority has four principal objectives, the first of which is "to supervise how the prescribed accountancy bodies regulate and monitor their members". I wish this had been done in the past. The second objective is "to promote adherence to high professional standards in the auditing and accountancy profession". Many questions have been asked in that regard following the crash and the banking crisis. The third objective is "to monitor whether the accounts of certain classes of companies and other undertakings comply with the Companies Acts" and with Article 4 of the international accounting standards regulation. The fourth objective is "to act as a specialist source of advice to the Minister on auditing and accounting matters".

We need accountability and efficiency. We do not need to talk about it. This legislation is doing something about it. I welcome that because it is important. We have to be strongly supportive of the SME sector. I welcome the publication of this legislation because it will give businesses a break, deal with the costs issue, help small companies and - hopefully - lead to the creation of more jobs and the development of this country and its economy.

Debate adjourned.