At 9pm on Wednesday night, the Government voted down a Bill that would have saved thousands of Irish companies and tens of thousands of Irish jobs. And it would have been achieved without spending a single cent of taxpayers money. Sounds too good and too bad to be true, right? Here’s what happened.

In the past three years in Ireland, nearly five thousand companies have been declared insolvent – that is, they could no longer service their debts. For these companies, there are only two possible outcomes. The first is that they’re shut down, with all jobs are lost. The second is that their debts are restructured and they continue to trade. This is done via a process called examinership. In this case, most, if not all, jobs are saved.

Examinership is obviously the better outcome for the business owners and employees. It’s a better solution for most creditors too. Regardless of whether the company is shut down or saved via examinership, secured creditors (banks) and unsecured creditors (suppliers) are likely to take a hit on what they’re owed. However, a Court will only approve examinership if the creditors are no worse off than they would be if the company was shut down. And via examinership, the creditors retain a customer. The State, too, is better off if the company survives. It continues to collect corporation tax, employers PRSI, VAT, rates, water charges, levies, USC and income tax, and avoids the costs of unemployment.

Given this, you’d expect as many insolvent companies as possible to be saved via examinership. In the US, it’s about 1 in 8. But in Ireland, it’s 1 in 73. Of the 4,700 companies declared insolvent since 2011, just 64 have gone through examinership. It’s likely that we should be able to exceed the US figure. Many companies in Ireland have shut down since 2009 due to shocks associated with the crisis. An example is small, profitable companies that made one ill-advised property purchase during the bubble. The inability to cover the mortgage buries them. Another example is the many companies that have shut down in recent years because of non-payment by a customer. Just one large customer default can see a profitable Irish company without the cash needed to make its debt payments. The creditors move in, the company is shut down, and all jobs are lost.

One practitioner I spoke with reckoned that one in four insolvent companies in Ireland could be successfully restructured through examinership. In that case, well over a thousand viable companies have been shut down unnecessarily in Ireland in the past three years.

Why are these companies not being saved via examinership? Because Ireland’s version of the process doesn’t work small to medium-sized companies – and our SMEs employ 7 out of every 10 workers in Ireland and account for 99% of all companies here.

The main problem is that Irish examinership is too expensive. It typically costs about €70k, but can be upwards of €300k. The majority of this goes on unnecessary legal fees incurred by the examiner, which are in turn driven by an overly bureaucratic and Court-centred process.

Another problem is refinancing. As part of the examinership process, existing lenders tend to take what they can and leave. So the company will only survive if it can find new lenders, to cover the restructured debts and the costs of the process. But as the ECB recently pointed out, Irish SMEs are finding it significantly harder to access finance than many other parts of the Eurozone.

There are other, smaller stumbling blocks. For example, some landlords won’t relax upward-only rent clauses, even though it forces their tenant into liquidation. Some essential suppliers won’t trade with the company for fear of non-payment. Some creditors intentionally drive up the costs of examinership, by going to Court at every opportunity, in an effort to scupper the survival plan.

The solutions to these problems were contained in Wednesday night’s Bill. The Bill was drafted by solicitor Barry Lyons, who has handled more than half of all examinerships in Ireland in the past 12 years, by Ross Maguire, Senior Counsel and co-founder of New Beginning, and by me. It reduced the costs of examinership from €70k to €20k. It reduced the refinancing requirement, based on a sample case, from over €400k to €85k. It provided additional protection to essential suppliers. It reintroduced a solution to upward-only rent clauses that was law from 1990 to 1999. It ensured banks couldn’t shut down viable businesses because they wanted to get their money out of the country, while returning higher profits to those banks over 5 years. It was supported by the Small Firms Association, who have been campaigning for years to have the process fixed.

There were probably legal technicalities in the Bill that needed work. And no doubt there were improvements to be made. But as Fianna Fáil TD Dara Calleary said during the debate, that’s exactly what the Committee on Jobs, Enterprise and Employment is meant to do during the legislative process.

Had the Bill been accepted on Wednesday night, it could have made it through the entire legislative process and been out there saving companies by June. Some banks, trying to get their money out of Ireland as quickly as possible, might have been irritated, but they would still have done well over a five year period. And there would have been so many winners. In the first year, maybe 400 viable companies could have been saved, and the thousands of jobs they provide. The suppliers to these companies would in many cases have received a higher dividend and kept a customer. And a small fortune in taxes would have been protected.

So why then was it voted down? Maybe it was a failure of communication on my part. While no Labour TDs spoke against the Bill, many of the Fine Gael TDs raised concerns that the Bill somehow penalised creditors, particularly the smaller, unsecured ones. In fact, the Bill did the opposite. Other TDs assured me it was just politics, of the worst, jaded, and predictable kind. After the vote, one political correspondent confided that, in his over 20 years observing the Dáil, it was the single worst example he’d seen of a Government putting politics ahead of the national interest.

Whatever the reason, the law needs to be changed. It’s close to impossible to find ways of protecting thousands of companies without spending public money. Getting examinership right is one such opportunity. And it needs to be changed fast. Every month the Government waits, about 30 companies will be shut down that a functioning examinership process would have saved.

This Article originally appeared in the Sunday Independent on February 9, 2014.