13th July 2017
The Tánaiste and Minister for Enterprise and Innovation, Frances Fitzgerald TD, today published the report of the Company Law Review Group on the Protection of Employees and Unsecured Creditors.
The Company Law Review Group was requested to review company law with a view to recommending ways company law could be potentially amended to ensure better safeguards for employees and unsecured creditors. The Tánaiste today thanked the members of the Company Law Review Group for their report and also welcomes the comprehensive and substantive nature of the review which the CLRG, and its specially convened committee, had undertaken over a period of 18 months.
The report found that overall the existing protections and remedies for employees and unsecured creditors in the Companies Act 2014 were comprehensive. To further improve outcomes for employees and unsecured creditors, the report recommends measures for increasing transparency and oversight in the way in which employees and creditors are dealt with in insolvency. Its proposals include the introduction of a statutory duty for directors to a company’s creditors in insolvency, greater emphasis on the treatment of employees in the liquidator’s report to the ODCE and a new requirement that a provisional liquidator must seek specific powers from the court when they intend to terminate employee contracts or cease trading.
In addition, the report has proposed measures to alleviate the problems faced by employees and unsecured creditors as a result of informal insolvencies, also known as ‘walk-aways’, where company directors fail to formally liquidate their companies by introducing new sanctions for directors who fail to seek the appointment of a liquidator to an insolvent company.
The Tánaiste said: ‘Since the recession, the number of liquidations and insolvencies has greatly increased and the many difficulties experienced by employees and unsecured creditors in the wake of company insolvency have been evident throughout the country. I warmly welcome this comprehensive and substantive report which recommends a number of reforms which, it is hoped, will alleviate some of the issues employees and unsecured creditors have experienced in recent years. My Department is giving careful consideration to the recommendations in the Report. In addition, I would welcome the reaction of interested parties to better inform a response to the Report, which today’s publication will facilitate’.
The CLRG report complements the findings of the expert report of Ms. Nessa Cahill BL and Mr. Kevin Duffy, which examined the legal protections for workers and the interface between company and employment law. Their report also confirmed that company law provides “substantial weaponry that could be used against directors and related companies to redress the effects of, and deter, harmful transactions” but these provisions are only of weight “if they are employed and seen to be employed”.
The CLRG report notes that irrespective of how comprehensive company law is, it is likely that there will always be a dearth of actions against directors in circumstances where there are insufficient finances available to fund litigation or where the prospective defendant would have insufficient funds to meet any award that might be made against them. The report suggests that the rule against maintenance and champerty, given the international trend towards third party litigation funding, may benefit from fresh consideration by the Law Reform Commission.
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