In this respect, there might be a real fear that banks will simply refer companies to this scheme that they may have otherwise lent to.
After all, why take a risk if you can get a Government protection on your lending? If they do, businesses will still get their loan – but will have to stump up the 2 per cent premium the Government is looking for.
So far, it’s difficult to determine how the scheme will pan out. Word on the ground is that take up of the scheme has been slow to date, with few, if any, loans sanctioned. If it is to work, it will need the banks to play fair when it comes to assessing the collateral on offer by SMEs.
School run and commercial contracts
Late last month, the High Court shot down a bid by US-backed Student Transport Scheme (STS) to get the Department of Education and Skills to put the school bus service out to tender.
State company, Bus Éireann, has operated the service since the late 1960s. STS argued that the arrangement is a public service contract and should be put out to tender, in line with EU law.
However, both Bus Éireann and the department argued that the relationship is not a contract, but an administrative scheme. Mr Justice Brian McGovern agreed. His judgment says that the evidence shows the arrangement does not contain “any terms that might normally be associated with a commercial contract”.
Amongst other things, he points out that the department can unilaterally cut funding for the scheme, whether Bus Éireann likes it or not.
Suprising then, that on page 38 of its accounts, Bus Éireann states: “The School Transport scheme is operated under contract with the Department of Education and Skills”.
The company says that this is meant as a “layman’s description” of the relationship, not a legal one.
Whether laymen and lawyers differ in their understanding of “contract” is a moot point.
What is not debatable is that reading the accounts could lead someone, particularly those with no knowledge of the STS case, to believe that the company and department have a normal commercial relationship, something they and the High Court say does not exist.
FBD Holdings interim management statement; Petroneft Resources EGM (Herbert Park Hotel, Dublin).
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