The case in question is a court-supervised liquidation, subject to oversight of the High Court and accordingly is sub judice.
The procedures for liquidations are set out in Part 11 of the Companies Act 2014. In general terms, a company is permitted to initiate a winding up where it has complied with the requirements of the Companies Act 2014. A company, both during normal operation and in a winding up process, must also of course abide by all relevant legal requirements including in relation to the treatment of employees and creditors and disclosure to Revenue.
However, the provisions of the Companies Act 2014 provide safeguards to prevent the abuse of the liquidation system. These include preferential payments under section 621 which provide for categories of employee entitlement such as wages owed, holiday remuneration, superannuation benefits, ill health payments and social welfare contributions.
An insolvent company is defined by the Companies Act 2014 in section 818 as a company that is unable to pay its debts, and this is further defined in the Act.
Therefore, insolvency cannot be merely asserted: insolvency is defined in the legislation and scrutinised in the courts.
The Companies Act 2014 also provides provisions which may be utilised by liquidators or creditors of an insolvent company in appropriate cases, including section 608, regarding the court power to order return of assets which have been improperly transferred; and section 599 where a related company may be required to contribute to debts of company being wound up. A range of factors will be involved for liquidators or creditors in deciding whether to pursue litigation based on these provisions of the Companies Act 2014. Such statutory provisions and the associated civil and criminal penalties also provide an important deterrent effect.
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.
When it comes to workers, 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 30 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 a safety net for employees in situations where the employer cannot pay due to financial difficulties or insolvency.
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.
As part of its next Work Programme, I will be requesting the Company Law Review Group to examine these Programme for Government commitments.
