Legislation dealing with companies and sole traders who experience serious financial difficulties needs to be radically altered, according to a local county councillor.
Councillor Martin Conway has claimed that the deal completed for a well-known business, which went into voluntary examinership last year, had caused a lot of angst throughout parts of the county.
Commenting on the deal, Councillor Conway noted that in some cases there was up a 85% reduction of liabilities for some creditors, leaving them with huge debts.
Stressing that he was in favour of securing jobs in local businesses, the Ennistymon councillor said a lot of small businesses and sole traders felt aggrieved because they couldn’t apply to the High Court to go into voluntary examinership and receive the same favourable terms.
He proposed that if a major business secured voluntary examinership and emerged with healthy profits a few years later, creditors should be in a position to recover most of the money they were owed under an agreed staged payment plan.
He also asked whether the local business, which secured the payment of 15% for commercial rates owed to local authorities and just 10% for water charges, had abided by the time limit to pay these sums.
He also requested a detailed report on all negotiations, which took place in 2009 between the council and court-appointed examiners to companies in financial difficulty, together with details of any arrangements entered into and the reasons and rationale for such arrangements.
Acting head of council finance, Noeleen Fitzgerald, revealed there was a noticeable increase on the numbers of local companies going into receivership, examinership and liquidation last year, compared with previous years, and these companies may owe rates, water and waste water charges and development contributions.
Under the examinership process, the directors of a company can present a petition to the High Court for court protection and the appointment of an examiner and if this is approved, the court will appoint an examiner.
The examiner requests details from individual creditors of amounts due to them and then formulates proposals for a scheme of arrangement and once those proposals are finalised, the examiner holds a meeting of the various classes of members and creditors.
Ms Fitzgerald explained the council considered each scheme of arrangement for individual companies on its merits, taking into account the debt due and the statement of assets and liabilities presented.
It also considered accepting a certain loss of rates or other debts due with a view to ensuring that there was an ongoing business that will be a revenue source in the coming years as against allowing the matter to proceed to liquidation and be at a loss of all the income for the current and future years.
“During 2009 there were two instances of examinership. These related to Murray Rent a Car Ltd and companies within Lynch Hotel Group.
“In both cases there was no negotiations but a review of the overall assets and liabilities of the companies involved and an assessment of the probability of recovering part or all of the debt owed.
“Account was also taken of the value of the future income accruing to this council,” he said.
“The result in both cases is still ongoing. In the case of companies within Lynch Hotel Group the scheme of arrangement as recommended by the examiner was approved by the High Court.
“This scheme allows for payment of 15% of outstanding liabilities at the date of examinership for preferential creditors, which includes commercial rates, and 10% in the case of non-preferential debt, which includes water charges,” he added.