I thank the Chair for the introduction and for facilitating the time change to allow me to participate in the place of the Minister of State, Deputy Troy. I thank the committee for the invitation to discuss the forthcoming Bill to amend the Companies Act 2014 and to provide for a small company administrative rescue process. I am joined online by two officials from my Department, Ms Fiona O’Dea and Ms Tara Keane. They are happy to take any questions if I am unable to answer them. After today's discussion, we will be happy to engage with the committee over the coming weeks. We hope to finalise work on the Bill and bring it to Cabinet on 22 June or the following week. We will then bring the legislation through the Houses and discuss it with the select committee.
The companies (small company administrative rescue process and miscellaneous provisions) Bill is included as a legislative priority on the Government’s legislation programme for the summer session. It delivers on a programme for Government commitment to review the Companies Act to simplify and improve examinership laws in response to the Covid-19 crisis and follows on foot of proposals by the Company Law Review Group, CLRG, in response to the Tánaiste’s request that it examine the issue of corporate rescue specifically for small companies and advise as to how such a process might be put in place. I know this is an issue the committee has discussed several times and members have sought to find a simplified and less costly process to address the matter.
On 8 July 2020, the Tánaiste requested that the CLRG examine the issue of rescue for the sector. Membership of the CLRG, which is a statutory body, is wide and representative of a broad range of stakeholder experts, making it uniquely well-positioned to advise on company law. It has served us well in this space before. The CLRG submitted its report in October 2020 and recommended a rescue process for small companies, which would be stand-alone and separate from the examinership process, but which would mirror key elements of the examinership legislation. Since receipt of that report, the Department has worked closely with the Office of the Attorney General in developing the CLRG’s advice from both an operational and policy perspective. Throughout this process, we have also had strong engagement with the Revenue Commissioners, the Departments of Social Protection and Justice and other relevant stakeholders. In addition, my Department launched a public consultation earlier this year to inform development of the general scheme. The Minister of State, Deputy Troy, notified this committee of the consultation and invited it to make submissions. An overview of all submissions made, the responses to them and the reasoning underpinning those responses is available in a report on the Department’s website.
In overall terms, the Department has engaged in a process which has been transparent and accessible and has involved substantial submissions from representative bodies for employers and employees across all sectors and industry professionals in the field of company law and insolvency. As a consequence, I am pleased to note that the general scheme of the Bill has met with a generally positive response from industry and professionals in the field. I ask the joint committee, in considering our request for a waiver of pre-legislative scrutiny, to bear in mind the role of the CLRG in developing the Bill and the level of engagement with stakeholders in the public consultation.
As members will know, the primary purpose of the Bill is to provide for a small company administrative rescue process, one that can assist viable
small and micro-size companies to remain in business, as the economy recovers and supports are phased out, and to try to protect as many jobs as possible.
We know from years of experience that examinership works. It saves both companies and employment. It is internationally recognised and is a successful tool for restructuring, in its own right. However, examinership is overseen by the court from beginning to end. For this reason, it can be an expensive undertaking and, thus, potentially out of reach for the average small company, whether that be a local restaurant, hairdresser or other similar businesses. The small company administrative rescue process is designed to reduce those costs insofar as possible and provide access to an affordable and much-needed avenue of rescue and recovery for small companies in difficulty. It has limited court involvement where creditors are engaged in the process and positively disposed to a rescue plan. However, the option for court involvement remains, if there is no agreement by the creditors. This is an important part of the process.
The Bill replicates key provisions of the examinership model in an administrative context. While it provides for certain novel concepts, it does so by building on a tried and tested framework, with the benefit of years of experience and jurisprudence. The proposals are founded on an existing bedrock of well-understood and well-respected law and they deliver an accessible, fair and balanced process for the broad range of stakeholders impacted by corporate rescue.
The introduction of this legislation, or any new legislation, is not without risk. For this reason, officials in my Department have engaged extensively with the Office of the Attorney General to ensure the process is constitutionally robust and meets the required standards of procedural fairness. Therefore, the process incorporates robust safeguards, including court oversight, where appropriate. It strikes a fair balance between the needs of the company and its creditors.
The main provisions of the Bill can be broadly summarised as follows. The Bill is designed to help small and micro companies, as defined by the Companies Act 2014, which constitute approximately 98% of companies in Ireland. The rescue process is commenced by resolution of directors, rather than by application to the court. It is concluded within a shorter period than examinership. It is overseen and implemented by a qualified insolvency practitioner, to whom we refer in the context of the Bill as “process advisor”. The rescue plan can be passed by a majority of creditors. The Bill provides for the format of cross-class cram-down of debts, designed to reduce costs. The process does not require an application to court in circumstances where no creditor objects to the plan. Where creditors do object to the rescue plan, the courts will then have a role in adjudicating the matter, as is currently the case in examinership. The Bill also incorporates safeguards against, and penalties for, irresponsible or dishonest director behaviour.
On foot of recommendations made by the CLRG in its first phase of work in the area of employees' rights as creditors during a liquidation and taking into consideration the Irish Congress of Trade Unions’s, ICTU, minority report to the CLRG report, the Bill also enables the Companies Act 2014 to provide for a number of actions that can be addressed in the short term to improve the quality and circulation of information to employees as creditors. In that regard, I am also happy to engage with the committee on the overall plan of action that we discussed previously, as it is not fully dealt with in this legislation. I will also be happy to engage with the committee on its report on this area.
These amendments feature in the plan of action the Minister of State, Deputy Troy, and I published last week. It contains a range of commitments, including amendments to employment law and company law, to enhance protections and ensure transparency for employees in insolvencies.
As we emerge from a sustained period of lockdown, and as Government supports for businesses are gradually phased out, this is a Bill of the utmost importance and urgency. We are all aware of the enormous pressure business owners currently face in terms of not only their immediate liquidity, but also the sustainability of their businesses into the future. This is particularly true of small and micro companies, which employ almost 800,000 workers. Some 78% of small and micro companies operate in sectors that have been particularly challenged by the pandemic, such as retail, hospitality and the service industry. The contributions these companies make to our economy cannot be understated. They will be key to our country’s economic recovery, which we want to be jobs led. It is for this reason that the Government is so committed to providing a genuine, alternative rescue framework for these companies.
This Bill is an integral part of Government’s response to the economic impact of the pandemic. It provides for a rescue framework for small and micro companies, many of which have been significantly challenged by Covid-19. Our response to the crisis has proven successful in mitigating the immediate impact of the pandemic on these companies, so far. However, as the economy reopens, we must have an appropriate regulatory response, not simply planned but actually in place and available to small businesses. It should support fundamentally viable companies to continue to trade and get themselves back on their feet, and to preserve employment. It is our responsibility to ensure that this essential rescue process is implemented in time to make a difference to these companies. To that end, I ask the joint committee to approve a waiver of pre-legislative scrutiny, so that we may achieve enactment of this important legislation before the summer recess.
As I said, my officials and I are happy to answer members' questions and provide greater detail on the provisions of the Bill. We are also available after the meeting to go through any finer points if members want or need more time on this. We would like to have the support of the committee on the journey of this necessary legislation. As I said, we hope to bring it through Cabinet next week or the week after in order that we can begin the formal process in the Houses of the Oireachtas.