Dáil Éireann debate -
Wednesday, 26 Mar 1958

Vol. 166 No. 8

Committee on Finance. - Industrial Development (Encouragement of External Investment) Bill, 1957—Recommittal (Resumed).

Question proposed: "That Section 3, as amended, stand part of the Bill".

Mr. McGilligan

I have described Section 3 already as the pivotal section and would like to be quite sure of the interpretation of it. The first sub-section is merely a definition of the expression "Stock Exchange", being two bodies, the Dublin Stock Exchange and the Cork Stock Exchange. The second sub-section gives the essential conditions for a company to be an excluded company. The first is that it is a public company limited by shares and is an Irish company. I wanted to ask the Minister what is the meaning of saying it is an "Irish company" if it is merely—if we are to take the definition—registered in the State, under the Act of 1908 or some other Act. That will be a simple matter. Being a public company limited by shares, a guarantee is offered. I do not know why that should be so.

"Its Memorandum of Association and every Prospectus issued by it after the passing of this Act provide that the carrying on of a manufacturing process in relation to a commodity intended for export is a principal object". What does that mean, I wonder? When company Memoranda of Association are drawn up they will set out the objects and the ordinary company will have 20 or 30 objects, sub-paragraphs in the object clause but the early one will be in regard to whatever is the manufacturing process carried on. If the company is formed for the manufacture of boots and shoes, it will say its object is to manufacture boots and shoes. Later the sub-paragraphs will deal with money and borrowing powers and then it will go on down to deal with questions of transport and power to acquire steamers and all types of things. These are put in because the articles may later be against the company if it tries to do something ultra vires its own objects.

I look at this phrase: "is a principal object." There is never anything that can be really described as a principal object. There was once a certain school of thought that looked to the early clauses to see what was the dominant clause, as it is called, and all others were read as subsidiary or incidental to that. But the draftsman of company articles has long since forgotten that and it is entirely according to the will of the subscribers to the company how they will make their articles. Phrases used in one of the recognised books on the subject speak of company articles and says they may be "reasonable or unreasonable"; they may be "congruous or incongruous", "wise or ridiculous"; they may be "specific or general", and it is entirely inside the control of those who subscribe as to what they are going to be.

I am advised that if the company articles include in the objects clause one clause which says that the commodity to be manufactured is intended to be exported it will satisfy this condition. I do not know if that is intended but it would appear to be the manner in which it might well be dealt with.

At one time there was supposed to be a certain dominant or main clause and the others were taken as incidental or subsidiary to the earlier ones, but the application of what was called the prior object rule is taken with great caution by the courts which have rather set their face against it. However, if it was thought there would be some tendency after this to return to the primary object clause rule it could be avoided by putting in an independent clause with no relation to the other, saying "without prejudice to the generality of the foregoing..." and then go on to give a few specific clauses. What is aimed at here is export, and export, I suggest, in the ordinary run of things, could not be made the main clause, or the dominant clause, in the objects, because that would be whatever the process is, if it is the manufacture of shoes or the fabrication of steel goods or whatever business it will carry on. That will be the first object and will count as among the principal clauses.

One can put in very easily—as I said on the Second Reading, it would be an instruction to every draftsman of company articles—an export clause. That would, so to speak, make exporting one of the objects and so far as I can gather that satisfies the condition here. Personally, that is the way I would like it to be.

The other question is that 50 per cent. of the shares issued are to be made available to Irish citizens. I want to ask the Minister about this. It is an easy matter to have an issue made and to have it closed inside ten minutes if arrangements are made to have the shares taken, if, so to speak, the issue is arranged. That would not give any opportunity, but it could be claimed that it had been issued for public subscription in the State even though the list might close inside a very brief period. Apparently on the argument we already had that is to be handled by the Stock Exchange and that is the matter to which I object.

If the provisions here in regard to the excluding of companies means a liberalising, I welcome them. It would mean that nearly any company could fit in under such a provision if it simply provides an export clause among its object clauses.

I gather the Minister is inclined to accept the company if the Stock Exchange does and that it meets the two points (a) that it has issued shares in a bona fide way, and (b) that it has got a quotation. If it has got a quotation it does not matter what happens afterwards. If this is a liberalising provision in the Bill it is welcome and is, in fact, the only liberalisation in it.

Mr. S. Lemass

To understand the section one must keep in mind what we are trying to do in this Bill. First of all, we want to remove restrictions upon the establishment of manufacturing businesses here to the maximum extent possible, while having regard to the obligations we have to companies already existing here had to the assurances of the continuation of the form of protection which the existing Control of Manufactures Act represents and to specific undertakings in that regard which were given in many instances in the past.

Secondly, we want to be sure that any new industrial firms established will add to the industrial organisation of the country. Nobody wants to facilitate—there is no reason why we should—the establishment of a company intending solely to supply the home market with commodities with which the home market is already fully supplied by existing companies. Therefore, we must keep in the picture the idea of new manufacturing processes or export trade. I recognise that this section introduces a certain element of risk that we may not achieve all these objectives, that a company may be established and commence manufacturing under the provisions of this section and may not do an export trade or produce a new type of product except under Section 2; it may indeed merely intensity competition on the home market with existing firms already supplying that market. It is a risk we can take subject to reasonable efforts to minimise it.

It will be understood that any foreign-owned company now can engage in manufacturing operations here provided it gets a licence but our experience has been that certain companies are reluctant to seek a licence, to submit their plans to the examination of departmental officials which is necessarily involved in the granting of a licence. Such companies if they have a choice of establishing their factories in other countries or in other areas where that condition does not apply will probably elect to go elsewhere if other conditions are similar. We want to get it understood that there are procedures by which external companies can get into manufacturing business here without seeking approval from the Department of Industry and Commerce or without requiring any formal permission to do so.

In this case we are dealing with the type of company that finances its operations by means of a public issue of shares. We are therefore thinking of rather large concerns which operate on capital subscribed by the public. Indeed, arising out of the discussion we had before the break it is, I think, recognised that the Stock Exchange Committee would not give a quotation for any class of shares unless there is a sufficient number issued to create a market. Therefore, only fairly large sized companies can hope to qualify under this section to the extent of getting a quotation for their shares on the Stock Exchange.

It is therefore possible for us to contemplate that a company of that kind going to the public for capital will be a reputable company and will not set out in its prospectus any intention which it does not genuinely mean to fulfil. If, therefore, they say in the prospectus when they are seeking subscriptions of capital by the public that it is their intention to engage in export trade, that is at least some assurance that they will do so because these reputable companies of large size are not likely to seek subscriptions from the public on any basis of false pretences. In that way we have a safeguard in having it proclaimed that it is a principal object of theirs to seek to develop an export trade, and we can assume they will genuinely try to do so.

We recognise that some companies formed with that perfectly genuine intention of seeking export trade may, in fact, fail to get it and will seek remuneration for their capital by selling their products in the home market in competition with existing concerns, but that is a risk we can take, particularly when the other provisions of the section are borne in mind. That requirement in paragraph (c) of the section, therefore, relates more to the terms of a prospectus in connection with a share issue than the provisions of the Memorandum of Association. It is common knowledge that most companies draw their Memoranda of Association in very wide terms and cover everything they might possibly do under any conceivable circumstances. But what we are aiming to provide is that the company when seeking capital by a public issue of shares will proclaim in its prospectus that export trade is tis intention. We believe that the companies that would be large enough to get capital in that way and qualify for the Stock Exchange quotation would not lightly default on a contract of that kind entered into with the subscribers of their capital.

As I said before, we have in this Bill tried to exclude as many developments as possible from the Control of Manufactures Act altogether, to create in relation to them the situation where people can engage in manufacturing operations without any reference to the Government or any Department of the Government. We have done that by providing for the possibility of exclusion of certain commodities from the scope of the Control of Manufactures Act entirely. We have done so by excluding companies which are engaged solely or almost solely in export trade and we are doing so in this section also by this provision, by which the larger companies which offer shares to the Irish public, and offer them in a bona fide way, will also be excluded. If we could go further I would be prepared to do so without going so far as to default upon the important obligations which we have acquired under the existing Act or involving the breach of undertakings given in specific instances to individual companies.

The aim is to liberalise the legislation while at the same time safeguarding the position in regard to these obligations and in this provision, although it is clear that some risk has been taken, nevertheless I think we can afford to take that risk. I believe also that the provision in paragraph (c) to which Deputy Mcgilligan referred is a safeguard. Admittedly it is not a safeguard that can be secured by any legal sanction but it is a safeguard having regard to the type of company that is likely to avail of this section.

Mr. McGilligan

Three phrases have fallen from the Minister's lips. One is "a reputable firm;" the second is in relation to a company that would "default" on these obligations under this provision; and the third has something to do with dishonesty or "false pretences". These words are incongruous in respect of this section. All that is required is that the memorandum says: "Amongst our objects is to export a commodity."

Mr. S. Lemass

And every prospectus issued by it.

Mr. McGilligan

All it has to say is that that is a principal object. In other words, it is one of the intentions of the company. If the Minister will look at the ordinary object clauses drafted, say, by a boot manufacturing company he will see that they start off by saying that the objects of the company are: (1) the manufacture of boots; (2) the manufacture of shoes; (3) the manufacture of slippers, sandals, and so on. After that the memorandum will wander off into such things as the power to acquire railways, sidings, wharves and boats, and power to use these for the purpose of bringing in the raw materials or sending out the finished products. That is all that is required in relation to this provision. There is no question of false pretences as long as somewhere or other this stipulation is one of the object clauses, that it is intended to engage in the export trade. There should be no talk about false pretences or about what reputable firms will do. They are entitled to become an excluded company by that simple process.

Later in Section 4 you have reference as to what a company intends to do amongst its many intentions. The sales on the home market are incidental and, taking one year with another, are not more than 10 per cent. of the total output. As far as Section 3 is concerned, all the company is doing is expressing itself as manufacturing for export. There can be no question arising with a company afterwards if it fails to export and if it sells its products here in competition with other manufacturers.

Mr. S. Lemass

That is quite right, but it must issue a prospectus in which it states that its principal object is the conduct of an export trade.

Mr. McGilligan

What they say is that they are prepared to export. They say that if they can get an export market they will take it.

Mr. S. Lemass

They must say that export is a principal object.

Mr. McGilligan

No, they say that it is one of the principal objects—not the principal object—one of many objects. What you propose to do it what matters. What you do afterwards is subordinate. A firm complies with this section if it says in a memorandum or prospectus that it is going to do various things and it will export, if it can. If I am right in that interpretation I regard this as a liberalising clause and I welcome it.

Mr. S. Lemass

The Stock Exchange must say that its shares have been offered to Irish citizens.

Mr. McGilligan

The Stock Exchange has nothing to do with paragraph (c). They have nothing to say as to whether the provision about export is bona fide or a phoney. They say whether the shares have been offered to Irish citizens but they have nothing whatever to do with paragraph (c). That is a matter for the company itself and there should be no talk afterwards of a company which puts in that in its prospectus or memorandum and which does not intend to export. Such a company will take an export market if it can get it.

Mr. M.J. O'Higgins

With regard to what the Minister and Deputy McGilligan have been saying in connection with paragraph (c), is it not the position that if the export clause is contained in the memorandum as one of the principal objects, even if there are 99 other principal objects, the proposed company could set out the entire 100 objects as principal objects provided that they include the export object?

Mr. S. Lemass

Provided that it states in the prospectus that export is the principal object.

Mr. M.J. O'Higgins

then the principal objects are one to 100, including export.

Mr. S. Lemass

I am going on the assumption that we will be dealing here with large firms. This section does not deal with the usual kind of industrial concern which we have at the moment. The great majority of Irish manufacturing companies are not financed in this way at all. We are dealing, in this section, with companies and manufacturers who finance their operations by the issue of shares for public subscription and these companies must have a clause in any prospectus they issue setting out that one of their principal objects is the export market. It is a fairly safe bet that no company of that kind will be established or will receive subscriptions of capital from the public on the assertion that it intends to export without having that intention. There may be a company formed under this legislation which genuinely intends to export but which fails to do so and will then be confined to the home market. That may be a risk to some existing Irish enterprises but that is a risk we have got to take. We do not require now, as was required in the 1934 Act, that the majority of the shares should be held by Irish citizens but we do require that they must have been offered for subscription to Irish citizens. If Irish citizens do not take up these shares the company is still entitled to engage in manufacturing operations in this country.

Mr. M.J. O'Higgins

The Minister is dealing with the matter on the assumption that the company is going to play up in its prospectus the fact that one of its principal objects is to export. I think I am right in saying that, equally under paragraph (c), a company may play it down if it wants to and still come within the section.

Mr. S. Lemass

A company must state in its prospectus that the intention to export is one of its principal objects. I had given some thought to putting in an export condition but such a condition would become impracticable without having very stringent powers to enforce it and in the end I thought it better to leave the section in its present form without trying to impose any other restriction.

Mr. McGilligan

I want to repeat again that the Stock Exchange has nothing to do with paragraph (c).

Question put and agreed to.

SECTION 4.

Mr. McGilligan

I move amendment No. 14:—

In page 4, line 25, to delete "solely".

I have referred already to the use of this word "solely" which I think is an unsuitable and indefensible word. The Minister has since changed that by sub-section (2) of the section and has gone on to say that taking one year with another the output which should be sold on the home market should not be more than 10 per cent. Ten per cent. is a very small proportion to make a distinction between a home and an export trade.

One can conceive of quite a number of businesses wherein the most suitable way in which they could develop would be to sell a considerable part of the product in the home market and sell the rest abroad. If they brought in capital and were giving employment I do not see any reason why they should be precluded from doing business here on foreign capital if, as my amendment would have it, half the product was sold abroad. I am glad the word "soley" has gone. It was indefensible. I do not know how it came to be kept in here. I suggest that my amendment should be accepted and that 50 per cent. should be the division rather than 10 per cent. and 90 per cent. The 10 per cent. would be very restrictive. Admittedly, it moves a little bit away from the word "solely" because that would mean the company was taken away from the control of Section 4 if even 1 per cent. of the product were sold at home. Ten per cent. is restrictive and I suggest there should be some better division. Perhaps the 50 per cent. is too large.

Mr. S. Lemass

I think the Deputy misunderstands the section to some extent. A company coming in to do some process not done at the moment, or only to an inadequate extent, will of course be welcomed and facilitated in every way and given any permission, or licence, or certificate required to enable it to get into operation. We are dealing now with companies which will be allowed to operate without any licence or certificate, without being under any obligation to come near the Department of Industry and Commerce or any other Department.

What companies are we prepared to allow to work in that way, manufacturing commodities that are already made here by existing concerns which are supplying the whole of the home market? That is the question that arises. We are concerned here with companies that are doing something that is already done which, in relation to the requirements of the home market, can add nothing to our industrial organisation and can succeed only by putting some other company out of business. We say that these companies can nevertheless start operating here without a licence, or permission, or authority, provided they are financed in the way set out in Section 3 or provided that they the concerned mainly, or almost entirely, with the export market. It is true to say that the growth of an export trade in industrial goods comes in the normal way as an extension of the activities of a firm set up to supply the immediate market. Here, we are dealing with firms producing commodities in respect of which the home market is already fully supplied: we say to them that they are free to come in here and manufacture for export and we have modified the conditions of manufacturing solely for export to meet what will be the obvious problems of some of these firms. A firm manufacturing goods for export may have some portion of its product of secondary quality which it would not like to ship to an export market at all and which it is prepared to dispose of at cut price in the home market; or it may have a consignment prepared for some particular export market and find it is unable to deliver because of some governmental restriction, or other difficulty, or the financial default of the customer and have to dispose of the product elsewhere. Firms in the fashion trade which find at the end of the season that they have on hands good prepared to meet the fashion requirements of the season are in the some position; they will have to get rid to those goods before manufacture for the next season begins.

In the normal experience that type of product has to be disposed of as best it can. It would not usually exceed 10 per cent. of the firm's production. It would be a badly managed firm if it did exceed 10 per cent. Even there, we are not making the 10 per cent. very rigid. The sub-section requires that, taking one year with another, it should not average more than 10 per cent. If it wants to do more of its trade on the home market, then it has to come in under another provision of the Bill and, in the ordinary way, it would not get a certificate or licence to manufacture here unless it was adding something to the country's industrialisation. If it is merely coming in to cater for an already fully supplied market, it will not be permitted to enter unless it is an Irish company qualified to engage in any operation under the original Control of Manufactures Act.

Mr. McGilligan

The Minister says that if one does not qualify under this then one can come in under some other provision. I understood the object of the Bill was to induce foreign capital in here.

Mr. S. Lemass

To induce foreign capital into manufacturing operations which will extend the country's industrialisation.

Mr. McGilligan

To do all that! The Minister talks these learned things, but they do not mean very much.

Mr. S. Lemass

I will spell out the individual commodities if the Deputy likes.

Mr. McGilligan

Not so many years ago the Minister said there was a scheme for the investment of £100,000,000. That is all forgotten now. We have not sufficient capital for industrial development. That is the latest phase. This is one way out of that position. It is certainly one way in which to preclude foreign capital coming in here. The one way in which to preclude foreign capital is to have industrialists going a begging to State Departments. They just will not do that. It was decided, therefore, to introduce this measure in which there are two or three liberalising clauses to enable people, without bothering the Department of Industry and Commerce, to come in here provided they comply with certain conditions, and to manufacture here. Amongst these conditions is that governing a company which carried on business solely for export.

As I have already pointed out, that was an indefensible phrase and that has now been modified by saying that it does not mean "solely." It means not more than 10 per cent., taking one year with another. If there is a company that manufactures and finds it cannot do business and really has to sell about 15 per cent. on the home market, what then? That may be the only way in which to build up the business. The Minister says that company can come to the Department. But a manufacturer will not come to the Department. The whole object is to get people out of the habit or the necessity of going to the Department. The object was to get rid of these controls and any suspicion of favouritism. In order to get away from that, the company must comply with Section 3 or else it must manufacture and carry on its business solely for export, and that is defined as 10 per cent. of sales being home sales. If the company cannot comply with that, rather than go to the Minister for sanction, it will surely resort to Section 3. It will issue a prospectus and say it will do export if it can. There, they are no longer tied to what they do; it is only to what they say they intend to do.

They can easily comply with the first condition and the second and, if the Stock Exchange is prepared to quote, they will find it easy to comply with that condition. Yet, the Minister thinks it is a further enlargement to say that, if they do business in such a way that their home sales are only 10 per cent. of their product, they will qualify and they need not go near the Department. Then he says that, if they find that difficult, they can come back to the Department. The only valuable part of the Bill was that part attempting to get away from departmental control.

Mr. S. Lemass

If a foreign firm comes into me to-morrow and says it is anxious to engage in the manufacture of boots and shoes for the Irish market, I shall tell the firm we do not want them; we have enough firms already established under existing law for that purpose, many of them doing an export trade. If, however, that firm comes into manufacture boots and shoes for export only, or intend to finance themselves under the provisions set out in Section 3, or intend to manufacture some excepted commodity under Section 2, then, of course, they will not have to come near the Department. We are talking of a foreign firm which wants to come in to supply the home market with a commodity with which it is already fully supplied; any such proposal must be subject to consideration and sanction by the Minister in charge of the Department of Industry and Commerce.

Mr. McGilligan

Let me take an example. A company wants to come in here to manufacture boots and shoes. Under Section 3 all it has to do it to put among its object clauses "to export the products."

Mr. S. Lemass

It has to comply with all the provisions of Section 3. I regard that as a desirable development. One of the weaknesses here is that companies do not seek to finance themselves sufficiently by public share issues.

Mr. McGilligan

A company comes into an already overstocked market as far as the manufacture of boots and shoes is concerned. They establish a big firm. They put among their object clauses "to export the product." They manufacture here and do not export 1 per cent. Still they are a qualified company under Section 3. The Minister would regard that as a desirable development? I am glad to here it.

Mr. Russell

I do not see how the Minister can possibly keep to a figure of 10 per cent. The original intent was that the product was to be sold entirely for export. You must allow a company to produce mainly for export, which I would take to mean over 50 per cent. I would regard that as a desirable procedure. I agree with Deputy McGilligan, even taking the Minister's own example. Suppose you get a firm manufacturing boots and shoes and assured of an export market. It is a better propsition than a company not prepared to look for an export market.

Mr. S. Lemass

There are nine separate conditions set out in Section 4. If a company complies with any one of these, it can engage in manufacturing operations here. This is only one of them. We say that any company coming in to manufacture for export only is free of all controls. If it does not want to manufacture for export only, it comes within the other sections. It is not prevented from manufacturing.

This idea of exempting companies engaged in manufacture for export only is merely common sense. It is incidental to the Bill and not the main provision of the Bill. A company that conforms with any of these nine conditions is in a position to engage in manufacturing operations.

Mr. Russell

There is this difference. Under sub-section (a) a company does not have to go near the Department. That is very important. Otherwise, they have got to go through the procedure under Section 3 and Section 5. That is why I say I do not quite see how you are going to arrange for a figure of 10 per cent. Ten per cent. of a company's production might flood the home market.

Mr. S. Lemass

Why make the 10 per cent. larger?

Mr. Russell

To my mind, the 10 per cent. is impracticable.

Mr. S. Lemass

There are a number of companies already established in this country doing export only.

Mr. Russell

I, personally, would favour letting in efficient companies that would be prepared to export mainly.

Mr. S. Lemass

I am in favour of that, too. In these cases where they want to sell in the home market a higher proportion of their product—a commodity with which the home market is already fully supplied—I think the Department of Industry and Commerce is entitled to have a look at their intentions and decide whether they are to be approved of or not.

Mr. Russell

I agree with Deputy McGilligan. I doubt if you can get around it.

Mr. S. Lemass

We will get around that through paragraph (c), for example, where we give a company a certificate of exemption, having approved its proposals.

Mr. Russell

I think they can beat you under Section 3 and Section 5.

Mr. S. Lemass

The Deputy should not exaggerate the importance of Section 3. There are very few companies in this country established by the subscription of capital by the public on an issue of shares to the public. Even Irish companies which have a stock market quotation for their shares now did not start in that way. The issue of shares came at a later stage. There are not very many companies which, without the public having any previous experience of them, without having any balance sheet to show or any profit to record, can get money from the public on a pubic issue. I do not think there will be very many companies that will avail of the provisions of Section 3. I am not putting it forward as a broad road by which new companies can be established. No Irish company has attempted a public issue for two or three years.

Mr. Russell

This is the document to encourage foreign firms to invest in the country. May be I am wrong in my interpretation but I think the Minister is encouraging new loopholes with Section 3 and Section 5.

Mr. S. Lemass

It is perfectly true that I am creating loopholes. We are moving away from the 1934 position. We are opening new roads by which extra capital can be invested in Irish industrial development.

Mr. Russell

I would like to see that under Sections 3, 4 and 5 a company would not get a licence unless it was prepared to manufacture a majority of its products for export.

Mr. S. Lemass

I think that is the main effect of the Bill, and it is under Section 5 particularly that the powers are being given.

Mr. McGilligan

I understood from Deputy Russell that this was the bait for foreign investment. I did not think that Section 5, which drives a man to the Department if he does not satisfy a Minister, is such. That is the thing we have found people just will not do.

Mr. S. Lemass

I have not found it.

Mr. McGilligan

The Minister has shut his eyes to the amount of foreign capital turned out by the fact that the people had to become obedient to members of the Government. They only part I regarded as of any value were Section 3 and 4—Section 4, mainly, because it precludes Section 3 and, apart from saying that people wanted to export, says that if people did export a substantial amount, they could free themselves from governmental control.

Now we are told that Section 5 is the important Section. I would not like to have this piece of legislation sent to Count McCormack and tell him he is to boost Section 5, if we wish to get American capital in here. The good clauses in this are the ones that get away from this sort of departmental control. They are Section 3 in its entirety and Section 4 in its early paragraphs. I want to point out once more that what is required under Section 3 is not actual export but a statement that the object is export.

Mr. Booth

I would like the Minister to tell me if the believes that the type of industry he is trying to attract would be seriously engaged in the Irish home market? That is under (a).

Mr. S. Lemass

No.

Mr. Booth

For that reason it appears to me that the word "solely" is scarcely necessary. If we are going to attract that investment, that sort of firm will not be seriously competing in the home market and any restriction such as that would be most discouraging to a foreign investor.

Mr. S. Lemass

I am trying to make this clear, that sub-section (a) lets in a company manufacturing some commodity in this country in circumstances where it would not be let in as a foreign company because of the present position of industrial development here, but where we will let it in is to do export. I am thinking of Irish goods as boots and shoes. We have enough companies in the country to provide all the requirement of the home market in those goods. We would not let in a new foreign firm unless it is prepared to do export mainly. That is the only reason why we would want it and if it is prepared to do export solely it can come in without any permission or licence.

Mr. Booth

I see what the Minister is driving at. At the same time, an industrialist does not like his market to be limited and circumstances can easily arise where he would have to unload his products on the home market to some extent.

Mr. S. Lemass

We have covered that by another sub-section.

Mr. Booth

I should feel happier if the section said "if such company carries on business solely for export" or "if the majority of the trade went for export" but to say "solely for export" and then to say later that it means 90 per cent.—in sub-section (2) —appears to be clumsy and will give rise to misunderstanding. The average foreign industrialist will say that it is not worth while, that he is taking the risk of manufacturing in Ireland and will want to have some chance.

Mr. S. Lemass

That section, as I have repeated, relates to foreign companies manufacturing commodities which we do not want in here except they are doing it solely for export. Is that clear? We do not want them here unless they are manufacturing solely for export.

Mr. Booth

I cannot see that there in any danger of their coming to take the Irish market because it is so small. Any company that it would be worth while having, I would hope it would be far too big to supply the Irish home market, and, if it is far too big to do it, it is going to manufacture mainly for export and that has much more chance of attracting investment. But, if this is mainly for the protection of the home industry, which I think is largely unnecessary, we are back to the Control of Manufactures Act and not to the encouragement of foreign investors.

Mr. Russell

When the Minister was introducing the Bill, he said—I quote from Volume 165, No. 4, column 533:—

"As we see the national need of the present time, there is justification for encouraging and facilitating external participation in the development of Irish industrial possibilities where these possibilities offer a prospect of securing development of the export trade."

Then he goes on to say:—

"... one of the main reasons for preparing and introducing a Bill to amend the Control of Manufactures Act is to advertise as widely as possible that foreign investment in industrial development involving export trade is welcomed and will be facilitated."

There is no question of percentages, 90 or ten or "solely".

Mr. S. Lemass

If a company wants to come inhere to do export trade and to supply the home market as well, it can seek a certificate of exemption under Section 5. That is clear? That is the scheme in the Bill. A company that wants to do both export and home market sales in relation to a commodity that is not an excepted commodity has to get a certificate of exemption and must come to the Department to get it. But we say to him, if you are only doing export, you do not have to come near the Department, you can go ahead and do it without question but, if you want to do both home and export trade, then you have to come to the Department to seek the certificate. That is why I say that Section 5 is the section most likely to be availed of under this Bill.

Mr. Russell

I see the point, but I do agree with Deputy Booth that the less figures you have in the Bill, and the less reference to 90 per cent. and 20 per cent. and "solely" the better, because we may exaggerate the importance of the home market. A worth-while concern coming in here to export would certainly export that vast majority of its product.

Mr. S. Lemass

There is a number of firms already that have got licences under the Control of Manufactures Act as it stands—to do export only.

Mr. Russell

I know.

Mr. S. Lemass

Licences which require them to export only, and they were quite willing to accept those licences and engage in business on that basis.

Mr. Russell

But this si a new drive to bring in outside capital.

Mr. S. Lemass

We now say to these companies: "You will not need a licence. You can go ahead."

Mr. Russell

I should prefer to say: "If you want to manufacture mainly for export you do not require a licence." Maybe that is too broad.

Mr. S. Lemass

It is too broad.

Amendment, by leave, withdrawn.

Amendment No. 15 not moved.

Mr. McGilligan

I move amendment No. 16:

In page 4, between line 26 and 27, to insert a new paragraph as follows:—

(c) such company is providing substantial employment.

I see the emphasis now turns entirely on export. I thought what we were aiming at was to get employment.

Mr. S. Lemass

We are aiming at getting industrial expansion.

Mr. McGilligan

Would the Minister refuse employment on some phrase that it did not aid industrial development?

Mr. S. Lemass

I see no advantage in setting up a new facory in Doublin to employ 200 if it means that you are putting 200 out of employment in Cork.

Mr. McGilligan

I have not said that.

Mr. S. Lemass

that is what this amendment would do.

Mr. McGilligan

That could be modified to say "substantial new employment" or anything like that. I thought what we were aiming at was to get people employed. It is the great need of the time, particularly at this time, to get people employed. I have no idea of enticing factories to come in here which will give employment at one place at the cost of disemployment in another place. I do not see that a little competition would do any harm now add again. We have been suffering for many years under these companies with high-prices, bonuses to high cost producers. That has been done through the whole tariff movement. When I heard all the talk about inducing people to come in here, I had thought that, while we did want exports in order to get currencies of different types and to help our balance of payments, one of the things that was certainly present to the mind of everybody with anything to do with public life was employment. Supposing a company was giving substantial new employment and was not bothering about exports, did not even say in its prospectus that it was going to export but gave substantial new employment, why should not that company be favoured and not have to go to the Department to get any sort of licence?

Mr. S. Lemass

What the Deputy is proposing is that a new company could come into, say, the boot and shoe trade, which is already fully catered for as far as home market requirements are concerned, and is in fact producing a surplus for export, would have to comply with no condition except that its factory would give employment. Of course, it would give employment but only, if its sales are confined to the home market, by putting other workers out of employment. There is no net gain. Therefore, we have to assume, in so far as the effect of the measure is to extend the area of industrial activity, that employment will inevitably follow. The whole purpose of the industrial policy of the Government is to create employment. That is different from saying that the mere fact that a company will employ workers will exempt it from supervision or control of any kind even though it may be recognised that the employment which it gives will be at the expense of other workers elsewhere.

Mr. McGilligan

That is one big difference between us. I think companies that give employment ought to be free from supervision. I certainly think that a company that gives substantial new employment ought to be entirely free from any control by the Department.

Mr. M.J. O'Higgins

Would the Minister consider an amendment on these lines as suggested by Deputy McGilligan if it can be so worded as to be applicable to new employment? I see that Minister's argument that there is not a net gain if employment is given in one part of the country at the expense of people employed in another part of the country but it is possible to foresee a case where a company would come in add give substantial new employment. I do not feel capable of setting out the reasons why that might happen at the moment but I can see that it could happen without displacing those already in employment. In such a case as that, is it not worth while, having regard to the general position regarding unemployment in this country at the moment, to give specially favourable consideration to an idea of that sort? Can it be done under Section 4 at the moment unless an amendment such as is suggested is made?

Mr. S. Lemass

Certainly, indeed. That would be surely the test that would be applied to the application of any company for a certificate or licence under the Bill. the insertion of an amendment such as this means that the company decides for itself without any control or supervision that it conforms to that test and, therefore, can get into any business.

Mr. M.J. O'Higgins

Is not that the attraction of the amendment in so far as enticing companies to come in and give employment is concerned?

Mr. S. Lemass

The Deputy said that he recognises the difficulty that a new company supplying some goods to the home market could only give employment by putting other workers out of employment. The effect of the amendment is that the company decides for itself whether it is going to have that effect or not. In present circumstances if it does indeed add to the industrial organisation of the country the company will be facilitated but the check as to whether it is going to do that rests with the Department of Industry and Commerce.

Mr. McGilligan

Could it not do it by displaced imports?

Mr. S. Lemass

If it does, it will be facilitated.

Mr. Sweetman

My experience in meeting businessmen of that type is that once you say they must get a licence they reply: "No, we will not touch it."

Mr. McGilligan

Probably the Minister has never met any of those.

Mr. Russell

Is the Minister leaving in that word?

Mr. S. Lemass

I think the Deputy should read sub-section (2).

Mr. Russell

Is the word going to stand?

Mr. S. Lemass

Certainly, yes.

Amendment, by leave, withdrawn.

Mr. McGilligan

I move amendment No. 17:—

In page 4, line 33, after "business" to add "or any manufacturing process which was or is in the ordinary course of such business or forms or formed part of such business or was or is a reasonable extension of such business."

I do not know whether this is met by the construing of the two Acts together——

Mr. S. Lemass

I think so.

Mr. McGilligan

These are words that come from the earlier Acts. It may be that these are carried in by construing this together with the 1932 and 1934 Acts. I wonder would that apply? As the section runs it means that the business has to be carried on continuously between the 2nd July and the relevant time. Certainly the earlier section provided that you might have a continuing business even though it was not a company identical in operation with the business in operation on the 2nd July, 1934. It might be that these are all accepted——

Mr. S. Lemass

The position is that under the existing Control of Manufactures Act, 1934, and under the Bill as it stands companies which were engaged in manufacturing operations in 1934 and which comply with the shareholding requirements of the Act of 1932 are not restricted as to the manufacturing processes which they may undertake. They are free to extend and manufacture any range of goods. In so far as these businesses are concerned, therefore, the amendment is unnecessary and indeed appears to be slightly more restrictive than the present position.

The effect of the two amendments taken together would be that a company which has carried on continuously since 1934 would be entitled to do what it is already doing or a reasonable extension of it, irrespective of the manner in which its shares are now held. I would dislike a provision of that kind in the Bill because it would seem to me that it would leave the way open to external firms which were refused a licence or a certificate to engage in manufacturing operations here and who would not qualify under any sections enabling them to carry on without such a certificate of exemption, nevertheless to get round the Acts by acquiring a controlling interest in a firm of that kind. That would be undesirable. I think we should try to create a situation in which we would know what is happening where foreign firms are coming in to engage in manufacturing operations here. We should be in a position where we can approve of them doing so if we consider them desirable, or, where there is any indication that they would not add to the industrial organisation of the country, to say that we do not require such concerns.

Mr. Sweetman

Do I understand the Minister to say where a firm has been manufacturing soap, for instance, for the five years prior to 1934 and continuously up to the present day, that, irrespective of this Bill, that firm is entitled to manufacture chocolate tomorrow if it so wishes?

Mr. S. Lemass

There is no five years' condition. If it was a firm which was engaged in manufacturing operations in July, 1934, and which complied with the shareholding requirements of the Act of 1932 it is in that position.

Mr. Sweetman

So the five years has reference——

Mr. S. Lemass

Any firm in existence in 1932 was entitled to remain in that business or any reasonable extension of that business——

Mr. McGilligan

Or any part of it? It could drop bits?

Mr. S. Lemass

Yes, certainly. But the 1932 Act prescribed certain conditions which had to be met by a new company and these were tightened up in 1934. Nevertheless, any company formed between 1932 and 1934 and complying with the conditions of the 1932 Act was entitled to engage in any manufacturing operation in the future without restriction.

Mr. McGilligan

Surely that is a misreading. Those phrases come from the 1932 or the 1934 Act, one or the other. Am I to understand now that when this paragraph (e) comes to be interpreted there will be a strict regarding of the business and that it must be whatever business was carried on between the 2nd July, 1934, and the relevant time? Suppose some manufacturing processes have been dropped to the benefit of production and enabling the firm to do better business, would that mean it was not the same business? Would that mean the business has not been carried on continuously?

Mr. S. Lemass

No.

Mr. McGilligan

It certainly is not so from the other portions where you agree to the clause "any manufacturing process which was or is in the ordinary course of such business or formed part of such business, or was or is a reasonable extension of such business." All these things were allowed before.

Before the Minister starts talking about shares, there is nothing about shares in this. That will come in under paragraph 2 and I am not interfering with that. When you look at the business itself to see if it carried on continuously, let us say it is not identical and that it dropped certain processes that were no good or made extensions in directions it considered profitable. It would still be the same business but if a company is not to be in a position to develop or extend you may collapse it by having too rigid an interpretation put on the Bill.

Mr. S. Lemass

I think the Deputy's amendment to this Bill would do less for these companies than the existing position allows. The effect of the amendment is to restrict the freedom of any company which carried on continuously in the State since the 2nd July, 1934, and which was formed in accordance with the provisions of the 1932 Act which is entitled to continue in that business or any other business without restriction. It is as fully qualified as a company 100 per cent. Irish-owned.

Mr. McGilligan

How does that in terpretation come?

Mr. S. Lemass

That is set out in the 1934 Act.

Mr. Sweetman

How does this tie in with the 1934 Act?

Mr. S. Lemass

The position has not been changed by anything in the Bill.

Mr. McGilligan

These were terms which were given a special meaning and I understand that because the Acts are now being construed together with this Bill, these phrases will continue to carry these special meanings. At the very start of this discussion I asked was the answer to my amendments that these amendments were unnecessary because they are carried into this Act. If it can be construed in that way, as the Minister is now telling me, I will certainly withdraw the amendment.

Mr. S. Lemass

The position is that this is a redrafting of Section 9, sub-section (1), paragraph (e) of the 1934 Act and replaces that section.

Mr. Sweetman

That section is repealed.

Mr. S. Lemass

This paragraph restores it.

Mr. Sweetman

It is not the same wording, surely?

Mr. S. Lemass

There is no limitation in that paragraph. It says it shall be lawful for a company to carry on a manufacturing business, any manufacturing business, provided that company was in business since 1934 and qualified under the 1932 Act.

Mr. Sweetman

You do not arrive at the same position in law where you have an existing section of an Act and you take it out and replace it in this Act even with the same wording, because the relevant date is the date of the passage of this Act.

Mr. S. Lemass

The date is specified in this paragraph.

Mr. Sweetman

By specifying it in that way you do not throw the operation of the section back to 1934.

Mr. S. Lemass

I shall read it again. Any company can engage in any manufacturing process—this is a condensation of the preliminary part of the section—provided such business (i) "was carried on continuously in the State between the 2nd day of July, 1934, and the relevant time and (ii) is, at the relevant time, a qualified business within the meaning of part 2 of the First Schedule to this Act."

Mr. McGilligan

What is the relevant section in the 1934 Act?

Mr. S. Lemass

Section 9.

Mr. McGilligan

There are five pages in Section 9.

Mr. S. Lemass

Sub-section (1) paragraph (e).

Mr. McGilligan

That is all about shares.

Mr. Sweetman

Whether the arguments that have been made are good or bad, the Minister has certainly missed their point. Paragraph (e) sub-section (1) to which he refers, when it says "such business was carried on continuously", means such business at the date of the passage of this Act. Is that not so?

Mr. S. Lemass

Yes.

Mr. Sweetman

It means that such business was carried on continuously since 1934 but the position under the 1934 Act is that a firm that started to make soap in 1934 and changed to making chocolate in 1944 is authorised still to make chocolate but under this section it is not such business that was carried on continuously since 1934.

Mr. S. Lemass

It is not meant to be.

Mr. Sweetman

There were two businesses carried on since 1934, soap for the first ten years, chocolate for the next ten years. Under the 1934 Act, because the company was authorised to manufacture, it was authorised to switch from one to the other. Now under this section, as it is any company that has changed its business from 1934 to the present time is caught under that clause (e).

Mr. S. Lemass

The point I want to make is that it was fully entitled to change its business.

Mr. Sweetman

Certainly. It was fully entitled to change its business under the combination of the 1932 and 1934 Acts but once this section comes in it is changed.

Mr. S. Lemass

No it is not.

Mr. Sweetman

Business in this context, in the examples I have been giving, is the business of making soap or the business of making chocolate. It is not the business of making anything under the sun.

Mr. S. Lemass

No. It is a company carrying on business by way of trade or for the pupose of gain.

Mr. Sweetman

Certainly.

Mr. S. Lemass

If it carries on in the course of that business any manufacturing process, then provided the company was qualified under the 1932 Act it is entitled to engage in any manufacturing process and will be so entitled in the future and has been since 1934.

Mr. Sweetman

I cannot see how that is so on the definition at all. I accept that the Minister wants to make it so.

Mr. S. Lemass

It is not the purpose of this amendment.

Mr. Sweetman

I will accept it is so from what the Minister said in the discussion, but it does not mean that as the section was phrased.

Mr. S. Lemass

I think it does. Clearly the effect of the amendment would be restrictive.

Mr. Sweetman

The amendment was put down because the section means to us what I have just explained.

Mr. Booth

Would it meet Deputy Sweetman's point—I do not know if it meets the Minister's—if paragraph (e) read "such company (i) carried on business continuously in the State", the emphasis being taken from the word "business" and laid on the word "company". I think I can see the point the Deputy is trying to make. That would mean that the entity of the company was the entity that was being emphasised instead of the business. I can agree with Deputy Sweetman that it is a trifle vague.

Mr. Sweetman

If the word "any" was put before "business" in sub-section (1), that might cover it all the way down.

Mr. Haughey

"Carrying on business" in sub-section (1) merely means the existence of a commercial entity. It does not mean carrying on a particular business.

Mr. S. Lemass

The point is that "business" for the purpose of this provision which was in existence before July, 1934, was not qualified in any way as regards the particular type of manufacture that was carried on.

Mr. Sweetman

I agree.

Mr. S. Lemass

That was the position under the 1934 Act and it still will be the position under this Bill.

Mr. Sweetman

It is the position under the 1934 Act right up to to-day but once this section goes through it will not be the position.

Mr. S. Lemass

If that section is amended as Deputy McGilligan wants it it will not be the position.

Mr. Sweetman

I would be out of order in arguing the section on the amendment but if the section goes through the situation will not be the same as it is under the existing Act and I think it is the desire of the House that it should be the same.

Mr. S. Lemass

It is precisely the same wording as in the Act of 1934.

Mr. Sweetman

Certainly.

Mr. S. Lemass

The words are in Section 9 (1) (e): "Such business is carried on continuously."

Mr. McGilligan

I cannot see where there is anything in this Bill which will allow the business to change, that is, that a business could either drop parts or add parts to it without changing the character of the business. I suggest that in some of the Acts there is a phrase which covers that matter and I think it must be in the later Act. I think the difficulty was considered as to whether a business could be regarded as being carried on continuously if it dropped or added certain parts. I think that was rectified by something that was put in in the 1934 Act.

Mr. Sweetman

I notice that there is one word left out in this Bill which closely approximates the word which I suggested should be put in. I am talking now of the main part of sub-section (1) of Section 4 as compared with the main part of sub-section (1) of Section 9 of the 1934 Act.

Mr. Haughey

The word "any" will cover manufacturing processes but it will not cover businesses.

Mr. McGilligan

Do I understand it to be accepted that a business will be regarded as being carried on continuously even if it drops parts of its business or adds parts to it?

Mr. S. Lemass

I would be prepared to put in the word "a" before business.

Mr. McGilligan

Is it not agreed that a business will be regarded as being carried on continuously even if it has added parts or dropped parts?

Mr. S. Lemass

They are entitled to engage in any manufacturing proposition they like.

Mr. McGilligan

It will be regarded as having being carried on continuously even if parts are added to it or dropped from it. We want that in the Bill. Is it suggested that "such" business means that?

Mr. S. Lemass

Yes. There was a provision in the 1932 Act by which a company then in business, no matter what it was, was allowed to continue in that business or in any reasonable extension of it. In the 1934 Act a qualified 1932 Act company was allowed to continue in that business or in any other business.

Mr. McGilligan

How is that carried on here?

Mr. S. Lemass

In paragraph 4 (1) (f) of this Bill.

Mr. McGilligan

How does that carry on the extension?

Mr. S. Lemass

There is set out a number of different provisions under which a company can carry on a manufacturing business. If a company comes under any of these provisions it can carry on.

Mr. McGilligan

Is the Minister trying to incorporate paragraph (f) in paragraph (e)?

Mr. S. Lemass

No.

Mr. McGilligan

I am dealing only with paragraph (e) itself.

Mr. S. Lemass

If a business is carried on continuously in accordance with the 1934 Act and is a qualified business, it can engage in any manufacturing process without restriction.

Mr. Sweetman

What appears in paragraphs (f) (2) is "such manufacturing process".

Mr. S. Lemass

If a business has been carried on continuously it can now carry on any manufacturing process.

Mr. McGilligan

That is not what is said here but it is what is said in the 1934 Act.

Mr. Sweetman

That is what we want to do. Will the Minister admit that this Bill does not contain that provision?

Mr. S. Lemass

Yes. It does not say a word about the same manufacturing business.

Mr. McGilligan

I would be very glad to get a judge to say what all this means. I think there would be a lot of loopholes in it.

Mr. S. Lemass

I think that if you study it you will find that it contains what you want. It continues the position in the 1934 Act.

Mr. Sweetman

It does not. We have already discovered one difference and I shall have another crack at finding another one.

Progress reported; Committee to sit again.