Government looks to prevent repeat of Clerys-style closure with company law review
The Government has commissioned a review of legal protection to ensure companies meet their obligations to their employees and unsecured creditors if they go into liquidation.
Labour court chair Kevin Duffy and company law specialist Nessa Cahill have been given eight weeks to examine existing company legislation.
Speaking today Business Minister Ged Nash and Jobs Minister Richard Bruton said the review will be focused on ensuring limited liability or restructuring are not used to avoid a company’s obligations to its employees and unsecured creditors.
The examination will specifically look at situations where valuable assets in a company are separated from the operating entity, and how the position of employees can be better protected in such situations.
In the case of Clerys, the company’s former owner, Boston-based Gordon Brothers, separated the firm into an operating business and the building itself.
Gordon Brothers sold Clerys to Natrium, a joint venture between the firms D2 Private and funds controlled by London-based Cheyne Capital Management, in June for €29m.
Natrium kept the property arm of the company and sold the operating business to an insolvency practitioner, who then put the company into liquidation.
As the operating business was insolvent staff did not receive any redundancy package aside from their statutory State payments while traders were also left out of pocket.
As part of the process, Minister Bruton has separately requested that the Company Law Review Group to examine legislation with a view to recommending ways company law could be amended to better safeguard employees and creditors.
The Company Law Review Group is to explore issues such as the strengthening of directors’ duties to employees checks and circumstances in a liquidation of an insolvent company where company liabilities can be met from solvent companies in the same group or in related companies.
Both The Irish Congress of Trade Unions and SIPTU welcomed the announcement.
ICTU General Secretary Patricia King said: “This is a very positive step that can help ensure no worker is ever again treated in such a disgraceful manner. It is something that Congress worked hard to make a reality.”
SIPTU Services Division Organiser, Ethel Buckley added: “It is clear that the Government has taken on board the representations of the former Clerys workers and their SIPTU representatives regarding the inadequacy of the current legislation. The use of limited liability or restructuring by unscrupulous companies to avoid its obligations to its employees must be ended."