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Dáil Éireann debate -
Thursday, 28 Nov 1985

Vol. 362 No. 3

Companies (Amendment) Bill, 1985: Second Stage.

I move: "That the Bill be now read a Second Time'."

The purpose of the Bill is to give effect to the fourth EC company law directive which deals with the content and publication of the annual accounts of public and private limited companies. The main impact of this Bill will be to increase the level of detailed disclosure required in the accounts of public and private limited companies and in particular to remove the current exemption under section 128 of the 1963 Companies Act whereby private limited companies are not at present required to publish their accounts.

Before addressing the details of the Bill, I wish to refer, briefly, to developments taking place in the area of company law generally both at national level and within the EC.

On the domestic front, Deputies already know of my intention to bring forward legislation aimed at removing the abuses that can occur in the direction and management of some companies and at bringing about other desirable improvements in company law. The need for such measures has been all too painfully highlighted in recent years and my Department are proceeding with the preparation of this legislation as quickly as possible.

Drafting of the text of this domestic Bill is well advanced, and when published it will be a substantial measure covering many important aspects of company law affairs. The EC also has been particularly active in the company law area in recent years and a large number of directives covering a wide range of company law matters have either already been adopted or are currently being negotiated. We have already seen the implementation into national law of the first and second company law directives and work is proceeding on implementing the remaining measures.

The servicing of meetings on EC directives, and the implementation of directives, demands considerable resources. I think this fact is not generally appreciated by those who demand quick action and reform. The complexity of the company law area makes it important that in whatever changes we make we must examine and weigh carefully the implications.

While I am on this theme, Deputies will be aware of the decision by the EC Commission to take a case against Ireland in the European Court for failure to implement the fourth directive by the required date. A principal reason for this delay stems from the complexity of the directive, the many options contained in it, which allowed different variations and requirements to be imposed on companies, and the need to consider these options carefully. These were problems faced by all members states. No member state met the directive's timetable Three member states, like us, have still to implement the directive. Indeed, in recognition of the complexities of such directives, a much longer and realistic period of implementation was allowed in the 7th EEC Directive on the accounts of groups of companies.

Notwithstanding the many options, there is still a central core of basic provisions in the directive which we have to follow in legislating here today. I must emphasise, therefore, that in many respects the Bill now before the House is merely reflective of the mandatory requirements of the fourth directive and as such contains a substantial range of provisions which we in this House are not at liberty to vary. I would ask Deputies to have regard to this fact during the debate on the later stages of the Bill.

At the same time, however, the directive contains certain optional provisions which can be availed of by individual member states to apply the directive to fit their particular circumstances. Many of the options relate to technical accounting matters and were included in the directive to permit the continuation of accepted accounting practice in the individual member states. I propose to avail of these options for that purpose.

The directive also contains options which allow for the application of modified requirements in the case of what are described as "small" and "medium-sized" companies. These latter flexibilities are, of course, of particular importance, but before commenting further on these issues I think it would be helpful to place them in perspective by referring in detail to the state of our current requirements regarding disclosure of information in accounts and the impact of this Bill.

The Companies Act, 1963, and in particular the Sixth Schedule thereto, sets down the basic accounting disclosure requirements applicable to the annual accounts of public and private companies both limited and unlimited. These requirements reflect the basic principle that such accounts should provide a "true and fair view" of a company's position and, subject to this over-riding principle, stipulate the information to be contained in the balance sheet, profit and loss account, notes to the accounts, directors' report and auditors' report.

These requirements do not, however, lay down precise formats of presentation to be adopted in the accounts, but rather identify the main headings under which disclosure must take place. In the case of private companies, the disclosure requirements relate only to the accounts prepared for shareholders, since under section 128 of the Companies Act, 1963, private companies are not required to publish their accounts. In practice, however, the requirements set out, in particular in the Sixth Schedule to the 1963 Act, have been supplemented by companies' adherence to developments in accounting practice as reflected in the accounting standards issued by the accountancy bodies in Ireland and the United Kingdom.

I now wish to turn to the content of the Bill before us and its implications for change in the current requirements which I have just outlined. The Bill specifies the format which the balance sheet and profit and loss account should take and prescribes rules in relation to the treatment of individual accounts items; the valuation procedures which can be applied to assets and liabilities and the supporting information which must be provided by way of notes to the accounts.

The Bill introduces additional disclosure requirements to be met in the directors' report and in the report of the auditors on the company's accounts. Like the Companies Act, 1963, the Bill recognises the primacy of the "true and fair view" principle which is in accountancy practice in Britain and here and this over-rides all other requirements of the Companies Acts as regards the accounts. Furthermore, if adherence to the rules set out in this Bill in regard to the format or content of the accounts would not result in a true and fair view being given, those rules must be ignored, or additional information must be given in order to give a true and fair view.

Like the Companies Act, 1963, and the Sixth Schedule thereto, those general matters relating to the scope of the Bill and the principles governing the preparation and publication of accounts are dealt with in the body of the Bill, while the detailed requirements regarding the formats of presentation and treatment of individual accounts items are dealt with in the Schedule to the Bill.

Essentially, therefore, the Bill will have the effect of substituting the more detailed and precise accounts disclosure requirements contained in its Schedule for those currently contained in the Sixth Schedule to the 1963 Companies Act, in so far as the accounts of public and private limited companies are concerned.

In so far as the formats of accounts are concerned, companies are being given a choice in the Bill of one of two balance sheet formats and one of four profit and loss account formats. The differences in either sets of formats are basically presentational. I am allowing companies to choose so as not to upset whatever current format arrangements they may be using. Once a company have chosen a particular format they must, with very limited exceptions, stick to that format in subsequent years and not chop and change. In practice, the choice of formats is not of such diversity as would cause difficulty for people to understand the accounts.

Deputies will notice that the Bill proposes in section 2 that certain companies should be excluded from its scope. The companies in question are charitable and religious companies and companies not trading for profit and the proposed exclusion would recognise their non-commercial character.

I am also proposing in section 2 a particular application of the Bill's requirements in the case of banks and other financial institutions and also in the case of insurance companies. Effectively, the Bill's proposals will result in such bodies having to publish their accounts by filing with the companies registration office and to comply with certain detailed requirements in the Bill, for example, in relation to the directors' report and publication of information on subsidiary and associated companies. However, it is not proposed to require such bodies, financial institutions, to follow the specific technical, accounting and presentational measures contained in the Bill, since these are not designed for application to such bodies. Indeed, the need for special accounting treatment for such bodies was recognised in the 1963 Companies Act and more recently in the decision of the EC Commission to bring forward special directives for application to the accounts of such bodies.

For purposes of clarification I should point out that under insurance law, insurance companies are currently required to submit to the Minister their annual report and accounts laid before their AGM and these reports and accounts in turn are lodged by the insurance section of my Department, together with other returns made by insurers, with the Companies Office. The provisions of this Bill do not alter that position.

Before going into some detail on the exemptions for small and medium-sized companies it may be of benefit to Deputies if I were to refer briefly to the remaining sections of the Bill. I have covered sections 2, scope, and 3 and 4, true and fair view, formats. Section 5 sets out the basic accounting principles to be followed in preparing accounts. These are essentially the principles of using accountancy jargon "going concern", "consistency" and "prudence". Directors may depart from these principles in drawing up accounts in special circumstances, but full details of the departure and the reasons for it and effect on the balance sheet and profit and loss account must be given in a note to the accounts.

Section 7 procures the publication of accounts by requiring them to be annexed to the annual return filed with the Registrar of Companies under the 1963 Act. The provisions in section 7 mirror those in section 128 of the 1963 Act. Sections 8 and 9 set out the criteria — turnover, gross assets, numbers employed — for qualification as a small or medium sized company. The sections apply only to private companies. The threshold levels used are those which follow the new figures for turnover and gross assets inserted in the original directive by an amendment to the directive in November last year.

The rules for qualification as a small or medium sized company may appear somewhat tortuous. They are; but they are what is required by the directive. We can go into these rules in more detail on Committee Stage. Sections 10 to 12 contain the exemptions for small and medium sized companies. I will come to those presently.

Section 13 contains an important new development. Many Deputies who read companies' accounts will be aware that they are often prefaced by a long and informative chairman's statement. This chairman's statement is not a requirement of law. However, the report of the directors is. As a recent survey of several large Irish public companies has shown, many people turn first to the chairman's report. It seems incongruous that this voluntary report should contain more meat that the statutory directors' report. Section 13 will change this by requiring that a fair amount of what now appears in the chairman's report will in future be given in the directors' report as a statutory requirement, and furthermore under section 15 of the Bill the auditors will have to certify whether what is said in the directors' report concerning the state of the company's affairs is consistent with the annual accounts.

Section 14 is a requirement of the 4th directive and the 2nd directive for the directors' report to give details of acquisitions by a company of their own shares. The circumstances in which a company may acquire their own shares are at present limited so that section does not have very wide effect. However, I have been giving a lot of thought to the issue of allowing companies to buy their own shares. I know that there are prudential reasons for circumscribing the power of a company to buy back their own shares but there are good reasons, in terms of making it easier for companies to raise investment capital, to consider moves in this area. The reason is that people will not invest in venture capital companies unless they have a reasonable prospect of being able to sell those shares at a later date. Unfortunately the stock market and similar institutions here are not as widely developed as we would like them to be. Hence, in order to make a market for shares in certain types of companies it may be desirable to allow the companies to buy the shares at a subsequent date from an individual who may wish to realise them in order to buy a house, a car or something else. Essentially that is the reason we are considering this matter and it will be the subject of another companies Bill which I shall introduce probably sometime next year. I am hopeful that the researches being carried out at my request will provide a workable and prudent way of allowing companies more latitude in this matter.

Section 16 of the Bill provides for the disclosure by companies of information on subsidiary or associated companies. The information required is the name and registered office of the subsidiary or associated company, the nature of the business carried on, details of the shares held, the capital and reserves, and profit or loss of the subsidiary or associated company.

Disclosure of this sort is not new to us here. Section 158 of the 1963 Act already contains such provisions, although these are limited to the name, registered office and the nature of the business. "Associated company" is defined in the Bill generally speaking as one in which the investing company has a more than 20 per cent interest. Certain exemptions from the disclosure rule are provided for in the section.

Section 17 provides a facility whereby the Minister may exempt subsidiaries or a parent company in the EC from the requirement to file accounts once a number of strict conditions are fulfilled. The subsidiary must be a private company, every shareholder in it must agree to the exemption, the parent must guarantee the debts of the subsidiary, the accounts of the subsidiary must be consolidated in the parent's accounts and the group accounts must be drawn up and published in accordance with the fourth Directive. The use of the exemption must be notified to the Companies Office in the annual return of the subsidiary.

Sections 18 and 19 concern the publication of accounts. They are somewhat complex and we can go into detail on these on Committee Stage. The principal feature in section 18 is the special auditors' report to attest to the fact that a small or medium-sized company can avail of the exemptions in filing accounts in the Companies Office. This procedure is necessary, since the registrar could not, nor would it be sensible for him to assume the role of and become liable for checking the annual accounts of companies to see if they were qualified for exemption. The registry acts as a public filing office, not as a supervisor or invigilator of companies.

Sections 20 and 21 are relatively minor amendments to existing law required by the directive. The remaining sections of the Bill deal with the usual provisions on offences and penalties, power to modify the Act, and the citation and commencement clauses.

Deputies will notice that the penalties for offences are substantial and the fine on summary conviction is set at a maximum of £1,000. I feel these fines are adequate. There is no need for draconian penalties. For most companies the commercial consequences of preparing and publishing inadequate accounts will be a sufficient deterrent in itself.

Deputies will also see that the commencement date for the Bill is not specified and will be laid down by order. I want to give a reasonable period to companies to comply with the new requirements but, at the same time, the measures in the Bill are long overdue. I am prepared to listen to whatever submissions are made to me on what should be a reasonable commencement date. The date I have in mind would be not later than 1 July 1986.

I would like now to refer in some detail to the important question of the options contained in the directive under which individual member states are permitted to apply modified disclosure requirements to what are described as small and medium-sized companies. These options were included in the directive in recognition of the burden which adherence to the full disclosure requirements would place upon smaller companies. I propose to avail of these options in the case of private limited companies in order to limit the burden of detailed accounting requirements upon firms which, because of their limited size may lack the resources, or may find it overly costly to comply with the full requirements of the Bill.

I am also conscious of the fact that many such companies are operating in competition with other forms of trading entities such as sole traders and others who are not required to publish their accounts. I think it would be unreasonable to over-burden small private limited companies in these circumstances. I do not propose, however, to extend this facility to public limited companies since in my view the public status of such companies requires that their affairs be fully reported to the investing public.

The precise size thresholds for qualification as small or medium-sized are set out in the body of the Bill and as stated earlier are based on the level of a company's gross assets, turnover and number of employees. A company is required to satisfy any two of these three criteria for two years running in order to qualify for the reliefs provided and, of course, the extent of these reliefs is greater for small companies than for medium-sized companies.

The reliefs in question relate to both the preparation of accounts for shareholders and the publication of accounts through lodgment with the Companies Registration Office. In the case of preparation of accounts a small company is permitted to prepare a balance sheet in which certain individual accounts items may be combined under more general headings. In the case of publication of accounts, a small company is permitted to publish this modified balance sheet and is not required to publish its profit and loss account or its directors report.

A medium-sized company is permitted a more limited range of exemptions. It may prepare a profit and loss account in which certain information relating to costs of production may be combined under one heading. This facility will also extend to small companies. In the case of publication of accounts, a medium-sized company may publish its modified profit and loss account and also a balance sheet in which certain individual accounts items may be combined under one heading. The balance sheet in this case is, however, more extensive than that required of small companies.

With regard to the proposal to avail of the options for private limited companies of limited size, I think it is important to mention that in no case will the level of disclosure involved be less than that required under the Companies Act, 1963. Indeed, even for small private limited companies the requirement to publish a balance sheet, together with notes to the accounts, will result in the provision of important information on the affairs of such companies that has not been available hitherto.

It is my view that the approach adopted in this Bill for the treatment of small private commercial concerns represents a reasonable balance between the interests of users of accounts and the need to avoid an excessive burdening of small industry at a time when the importance of such industry to our future development is becoming more and more apparent.

I am confident that Deputies will be supportive of these proposals. I think it is also important to say at this stage that we must keep a balance in what is required to be given in companies' accounts. The material to be included in the accounts by virtue of this Bill will be substantial.

The provisions of this Bill are important and will reach out to all limited companies. Recent statements in the press give an impression that only a handful of companies are affected by the Bill. This is simply not so and a reading of the Bill, in particular the Schedule and the Explanatory Memorandum, will confirm that fact. I can go into the details of this on Committee Stage if that is necessary.

I would hope that Deputies will not see this Bill, and the Schedule, as a vehicle for loading and over-loading companies' accounts with information, however interesting, which is not relevant to assessing the state of affairs of the company, or which is information that, because of its sensitivity, would be better and more effectively transmitted through private communication between interested parties and the company.

Finally, there remains the Schedule to the Bill. While the Schedule is of particular importance dealing as it does with the more detailed technical aspects of my proposal, I must confine myself here to a general overview of it. In addition to the formats of accounts, the Schedule sets out the procedures to be followed in valuing assets and liabilities under the historic cost and current cost methods of valuation, both of which are permitted by the Bill, and itemises the matters to be covered by way of notes to the accounts. It also contains requirements aimed at identifying the nature and extent of inter-company dealings and provides certain reliefs considered necessary to cater for the specialised activities of certain types of investment companies.

The main disclosure elements in the Schedule are contained in Part IV. This part sets out the information to be given by way of notes to the balance sheet or profit and loss account. Under section 12 of the Bill small and medium sized companies are exempt from having to publish the information required by certain of the notes to the accounts set out in Part IV. These exemptions parallel those already described in respect of the balance sheet and profit and loss account. Thus, if one is exempt from giving certain data on the face of the accounts a similar exemption will apply to any notes to the accounts concerning such data.

Finally, the point has been made that companies should not be allowed to be remiss in fulfilling their statutory obligations. It must be said that failure to file accounts in companies offices is a problem which other EC registries also face. For our part, I can assure the House that determined efforts are being made to remedy this problem, and will continue to be made. I realise that the disclosure requirements of this Bill are, to a large extent, only as good as what is ultimately filed in the Companies Office. It is the Government's intention to make the Bill as effective as possible.

The Government have under way a large scale programme of computerisation of the Companies Office. The effect will be to have information made available speedily and to allow the registry, using computer records, more assiduously to follow up the position of companies who fail to file their accounts. This is a very practical application of information technology in a matter of considerable commercial importance. We should not underestimate, in our desire to limit the burdens placed on companies, the problems faced by creditors of those companies and to the extent that creditors of companies do not have access to relevant information about the financial status and performance of companies, as a result of legislation such as this and its enforcement. To date, such creditors have been operating under serious disadvantages in commerce and it is important to protect the interests of creditors of small companies just as it is to protect small companies themselves, because many of those creditors will be small companies struggling to survive. It is not a justification of any measure to say that an undue burden is being imposed if failure to impose that burden would impose an even greater burden on persons who extend credit for which they do not get paid.

From this review of the Bill, I am sure Deputies will appreciate that the subject matter is fairly complex. In formulating the Bill, I had regard to the views of industry, the trade union movement and the accountancy profession and I would like to avail of this opportunity to thank all those bodies for their submissions on this subject.

In conclusion I would like to refer again to the urgency which now attaches to the enactment of this measure. I have referred to the proceedings in the European Court. These will take place in the next few months, so I am sure that the House will share my wish to proceed with this matter as quickly as possible. I look forward to the co-operation of Deputies in this regard and I recommend this Bill for the approval of the House.

This Bill is a major piece of legislation. I regard it as proposing to effect the greatest change in our company legislation since the Principal Act of 1963. There is no doubt it is of critical importance for companies and for Irish business generally. Though it might be highly technical, the Bill should be scrutinised very carefully by us so that we can establish exactly the impact it will have on private companies and business generally. We hope it will get widespread publicity because it deserves it as a most major step in company law.

The Bill is necessary as a result of the 4th Directive on Company Law. That directive has the effect of regulating free enterprise. It is fundamental as regards the operation of private companies and the greatest change in company legislation since the Principal Act of 1963. Its impact on financial reporting is far reaching. Private companies for the first time will be required to publish accounts through lodging them with the Companies Registration Office.

The intention is to harmonise the law, though not making the law identical in member states. The directive concerns the structure of private sector companies and this Bill will have a significant effect on the financial reporting procedures of limited liability companies.

The breadth and depth of the provisions have given a jolt to industry and business generally and threatens the fundamentals of secrecy and confidentiality which were the hallmark of Irish company law for private limited companies. It raises the question of how and why demands like those to be imposed by this Bill come to be placed on us and suggests a more vigilant and aggressive attitude to pre-directive negotiations.

There are many steps from the discussion document of the EC Directorate General to the Council of Ministers' resolution of contentious points, and because of our open trading economy care must be taken not to take on board willingly directives that run contrary to traditional practice. Many of these directives emanate from socialist government backgrounds, and like this Bill to implement the 4th Directive on Company Law can cause considerable dislocation of existing law which has served Irish business and undustry well since the Principal Act of 1963.

When we joined the EC in 1973 the first company law directive, already adopted in 1968, committed member states to publication of accounts of private limited companies. Ireland, accepted its obligation when it entered the Community. However, the implementation was deferred until the 4th Directive was adopted by the Council.

The most that could be expected was the inclusion of options limiting the scope of the required publication. This has been achieved, but even taking full advantage of all the options made available in the directive, it will still have a considerable effect on existing company law. It raises the whole question of EC directives in so far as they affect our normal commercial and institutional life. The full impact of EC law on commercial and institutional life is exemplified in this company law directive. We are gradually being simulated into a European framework of international law, and vigilance is to be recommended in the preparatory and formative stages of the directives to ensure that full recognition is taken of our particular circumstances. This can and should be achieved by derogation from practices that are far removed from the traditional philosophy dictating practice here. While accepting the invitability of law co-ordination in EC matters, we should always seek derogations that permit orderly transfer to new practices and principles.

We must take particular note of company law directives but we can refer also to the directive on freedom of establishment and on the draft directive on the freedom of services to insurance which is causing a considerable amount of concern within those industries. There can be serious job losses because of our involvement in taking on board the full directives in these areas. I am recommending great vigilance in the formative stages of these directives when our committee on secondary legislation and other bodies have the opportunity to make an impact on the final resolution of the directives.

For the first time private companies will have to publish accounts by way of lodgment with the Companies Registration Office. There are special provisions in the Bill for small and medium-sized companies. The Bill sets out the format, content and publication of the annual accounts of public and private limited companies with some notable exceptions such as companies not trading for profit, religious and charitable companies, banking, insurance and unlimited companies. The directive covers also the balance sheet, the profit and loss account and the notes to the account. It provides for one of two formats for the formation of the balance sheet and for one of four formats for the profit and loss account.

The difference in the formats is largely presentational while the directive prescribes the regulations to be followed for assets and liabilities and also for the information to be supplied by way of notes to the accounts. It sets out also the requirements in respect of companies' annual reports. As I perceive the main provisions of the Bill, they are: (1), that all public and private limited companies must file accounts; (2), that the format of the accounts is restricted; (3), that the accounting principles and policies are set out for the first time in Irish company law, (4), that branches of companies will not have to file accounts and publicity, (5), that certain disclosures of information that would be seriously prejudicial to companies need not be disclosed and (6), that exemptions from full disclosure are available to respect in small and medium sized companies.

For small companies, those who satisfy two of the three criteria set out in the Bill, there will be no need to produce for publication profit and loss accounts or the directors' reports while abridged balance sheets will suffice. For the medium range of companies it will be necessary to provide an abridged balance sheet and also an abridged profit and loss account. I take it that grouping will be permitted in the profit and loss accounts.

The directive recognises, as the Bill recognises also, the true and fair view principles. It is substituting detailed accounts and disclosures for the Sixth Schedule of the 1963 Act in so far as annual accounts of public and private limited companies are concerned. The main implication will be to remove the current exemption under section 128 of the 1963 Act whereby private limited companies are not required to publish their accounts through lodgment with the Companies Office. The Bill includes a generally increased level of disclosure in the annual accounts of public and private limited companies.

The Fourth Directive was adopted in July 1978 and was to have become law in the first half of 1982. Indeed the EC Commission has taken legal action in the European Court of Justice to challenge our non-implementation to date of the directive. It is to be remembered that there is wide disparity in the status of implementation and on the effects of the implementation on national legislation in so far as other EC states are concerned. Ireland, Italy, Germany and Greece have yet to comply in full with this directive, but it is interesting to note the situation that applies to other EC countries.

There was no difficulty in the Belgium situation as existing legislation was on a par with the requirements of the directive. The same could certainly not be said for Irish existing law. Denmark implemented the national legislation giving effect to the directive in February 1982. The Dutch situation is that the implementing legislation is under scrutiny by the Commission, while the United Kingdom implemented the directive in June 1982. However, it was different in the UK because the disclosure elements of the Fourth Directive were much less than the existing Statutes in that regard.

France took the option of piecemeal implementation between 1982 and 1984 and the legislation introduced in Luxembourg is very doubtful, if it is in conformity with the directive at all. The German situation is somewhat different from all others and a delay exists in any movement in so far as national legislation is concerned because of a dispute about whether limited partnerships are covered by the directive. It would now appear that the German Government are unwilling to permit that limited partnerships should be included and arrangements are being made for the Commission to make special provision for this category by means of another draft directive.

It can be seen that all countries are not rushing to implement the directive and certain states are making arrangements to accommodate themselves by seeking derogations by way of doubtful implementation legislation and also seeking changes to suit their own requirements. There are occasions when I believe we are too determined in regard to being good Europeans. Our great eagerness to comply in the European sense has not been responded to always by an anxiety on the part of our partners to reward us with special treatment. We have had plenty of examples of that in the past few years.

Limiting the scope of the required publication of information has been achieved by options to reduce our requirements in so far as the drawing up and publication of accounts are concerned for small and medium-size companies. The directive requires a considerable volume of accounting detail. It will take considerable time and resources to prepare the necessary detailed accounts. There is a cost factor in this in so far as are concerned companies having the material audited and there is no doubt but that this directive will have a significant cost effect and disclosure effect on many operating companies.

As a general principle, no company should have to disclose information where the disclosure can damage the company, their employees or their shareholders. Private companies should not be burdened with new obligations concerning the preparation and publication of accounts. The principle that has prevailed here for many years has been that secrecy should be respected in so far as the preparation of accounts is concerned. There is a legal obligation to prepare accounts for members of companies, but there is no obligation to publish them for the benefit of creditors, suppliers, the public and others. We must make sure to balance the disclosures against the possibilities of endangering economic development and safeguarding employment.

The attractiveness in the past of exemption from publication is reflected in the vast majority of commercial enterprises incorporating as companies who have taken private limited status. This was done because of the confidentiality factor. It has been regarded always as an important promotional advantage, particularly attracting overseas industrial investment. Private company accounts should be entitled to confidentiality of their financial affairs.

In the recent past the majority of United States industrial projects have come to this country as branches of companies incorporated outside the State. The locations for incorporation are chosen for tax reasons and section 354 of the 1963 Act allows the Minister to grant exemptions for these types of incorporations.

It would certainly be to our commercial disadvantage if a continuation of this practice were in any way to be curtailed by this or any other EC directive. American investment, in particular, and other overseas industrial investment, being a fundamental part of economic growth in this economy, must be given sufficient flexibility to allow it to understand Ireland as a favourable location for its activity. It can easily be appreciated that if certain information were made available to competitors in dealing with, for example, single products, it would be possible to estimate the cost of manufacture per item. This could constitute an advantage to some competitors and, in the final analysis, could lead to job losses in selected industries. This must be avoided. We want Ireland to be seen as a suitable development area and a financial centre. The success of existing industrial promotion has been based on existing incorporation rules and tax arrangements. If we reduce the incentives by our being viewed unfavourably by foreign investors, then we are bound to reduce the employment possibilities that can be created.

There are different types of trading arrangements which can maintain our attractiveness, such as unlimited company status, subsidiary companies of groups, whose parent is incorporated in the EC, companies incorporated outside the EC having a place of business in Ireland, limited partnerships under the 1907 Act, used sparsely except by members of particular professions, and branches with exemptions under the 1963 Act. Suitable opportunity and time scale must be allowed to those companies who wish to use their incorporation method and so avoid the disclosures of this Fourth Directive and the Companies (Amendment) Bill. It is understood that some major industrial projects operating as private limited companies heretofore, are taking the opportunity to change their status under section 52 of the Companies (Amendment) Act, 1982, whereby a company may register, or be re-registered, as an unlimited company.

Many Companies Acts had their origin in the 19th century and the time has come for the enactment of a consolidation Act, which would include all the existing company law, including this legislation, and also the law dealing with insolvency and abuses of limited liability status. There is also a great need for the Minister to strengthen the inspectorate under his control. There have been many major collapses over the past few years and it is obvious that there are some weaknesses in the monitoring and supervisory control within the Minister's brief. If the Minister were to strengthen and utilise the inspectorate, as it was intended originally, there would always be reports available to the Dáil on how certain operations are run. The Dáil never hears what the true position is when administrators and others are in place.

One has to ask what level of Companies Registration Office follow up will exist following the introduction of this legislation. Good companies who comply with the legislation and with this directive and are pursued by the office, can be placed at a disadvantage compared with bad companies, whether the bad company is trying to avoid disclosure or is just a plain bad company. It has to be suggested that the resources are not available at present in the Companies Registration Office and the Minister should indicate what he has in mind by way of providing the necessary computerisation and staff to deal with this matter.

The whole effect of the legislation can be negatived if the timetable for the preparation and publication of accounts is not adhered to. Unless you police this legislation by making available resources to the Companies Registration Office, then the exercise will have been a waste of the money of Irish businesses as well as Irish Government money. The impact of these new provisions will depend on how the publication rules are enforced. It should be interesting to see how the Companies Registration Office will handle the deluge of data that will be pressed upon them following the introduction of these new provisions. Over the years, there is no question but that accounts were not filed on time and there is no indication that there will be any better response following the introduction of this directive.

It is reckoned that up to 50 per cent of existing companies are not filing accounts at present. Even taking into account all the exemptions available under this legislation, it will still be cumbersome for small businesses to comply with the directive. It means another burden on small operators when every additional regulation acts as a disincentive to start up one's own business. We are led to believe there are in excess of 67,000 public and private limited companies registered in the Companies Registration Office, 85 per cent of them in the small category so far as the criterion in this Bill is concerned, and perhaps 10 per cent in the medium range.

Many of the largest companies in the State are public companies and the majority of the others fall into the medium-sized category. Of the top 50 public companies listed in 1982, eight are classified as medium-sized. If there is such a bad record in dealing with the number of companies who are at present supposed to be registered in the companies office, how will they be able to cope with the further and more detailed disclosures as set out in this legislation, unless the Minister comes to their aid? His reference to some computerisation start up will not be sufficient to deal with the new impositions placed on the office by this legislation.

There is a glaring omission in the scope of this directive in that it does not apply to co-operative working under the 1893 Act. The question has to be asked why these entities have been exempted. When one considers the size and scope of co-operatives — Mitchelstown with a turnover in excess of £200 million, Golden Vale with a turnover in excess of £150 million and many other major co-operatives — one feels that in an agricultural economy this must be seen as a glaring omission in this legislation. Agricultural marts are not covered. Together with the co-operatives these account for a major share of the business in this country. Some State companies are not covered in this legislation either. I take it that the reason for this is that some of them are incorporated under special legislation. It is difficult to understand why, if we are going to make small and medium-sized operations pay increased administrative costs to comply with the legislation, these other companies cannot be mandated to tell their full story if everybody else has to do so.

An interesting point in this directive is the change in thresholds that has taken place between 1978 and 1984. Increased thresholds to allow certain companies to escape from the directive were introduced by the Council in October 1984. It is obvious that there has been pressure from other countries to have the thresholds altered despite the fact that under the original directive arrangements are made for a review every five years. When introduced first, small companies had to have a balance sheet total of 1 million ECUs and a turnover of 2 million ECUs with 50 employees. This has been increased to IR£1.25 million balance sheet total and IR£2.5 million turnover with 50 employees. Originally, for medium-sized companies it was a balance sheet total of 4 million ECUs, 8 million ECUs turnover, and 250 employees. Now the figures are IR£5 million balance sheet total, IR£10 million turnover, with 250 employees.

To be classified one has to satisfy one of the three criteria. The exemptions were intended to offer relief to companies which cannot gear up to meet the stringent and expensive obligations of the directive. However, for those who have to submit accounts there are precise formats of presentation and this is a new departure in Irish company law.

Small and medium-sized companies deserve special treatment because of the size and scale of their activities and they may be in competition with other forms of trading entities such as unincorporated firms and partnerships who are not subject to the disclosures of accounts. So as to provide certain levels of information to members of the company and third parties such as creditors, the legislation distinguishes between exemptions available in the preparation of accounts and in the publication of accounts. Small companies will have to prepare accounts for their members. Even taking the abridged data they will have to contain financial information to allow members to monitor the affairs of the company. This is welcome. Information will be available to creditors as even small companies will be required as a minimum to publish an abridged balance sheet and specific information with regard to amounts due from debtors and owed to creditors. With medium-sized companies, because of their larger size in terms of assets, turnover and employment, a full balance sheet must be prepared and the published balance sheet even in the abridged version must give much more specific details in regard to assets, debtors and creditors than in the case of small companies. The concession to medium-sized companies is that they can omit sensitive details in their profit and loss accounts and in the notes to the account concerning turnover and gross profit margins but only if they comply with the terms of the seriously prejudicial clause on page 43 of the Schedule. The UK has made full use of all the options in the directive for both small and medium-sized private companies in relation to the publication of accounts. Had small and medium-sized Irish companies been required to make complete disclosures they could have been placed at a competitive disadvantage to their UK counterparts. This would have had serious repercussions for business generally.

Some people would desire greater detail concerning the financial state of the companies for which they work. The extent to which the publication of financial details provide information to employees and their trade unions is a secondary matter so far as this legislation is concerned. The rights of employees and their trade unions to information on the financial state of a company is recognised but it is really in the area of industrial relations and employee rights under social and labour law. Industrial relations here are on the system of free collective bargaining. Under existing law nothing prevents trade unions from negotiating with companies to disclose to their employees the financial affairs of their companies. Often it would be in the best interests of all concerned if this took place, as employees have a vested interest in seeing that their companies thrive and succeed. It is not in the best interests of the employee or the company that specific strategic information be made available to their competitors. That is a recipe for putting the employees out of work.

Under articles 1 and 2 of the 4th Directive member states will not apply the provisions of the 4th Directive in so far as banks, financial institutions or insurance companies are concerned. Other separate EC directives will apply to those accounts and will suggest changes in the format and content of accounts which will deal with characteristics of the accounts of financial institutions. In the Companies Act, 1963 certain exemptions already apply to the accounts of banks. They can conceal their true financial strength while maintaining hidden reserves which need not be disclosed in their accounts. It is necessary to maintain public confidence in the stability of banks and financial institutions and the full disclosure of reserves could undermine their stability if any of the institutions were drawing down heavily to meet a fall in the value of their investment or losses on their lending strategy.

The Central Bank Act, 1971 lays down the requirements for the publication of accounts for banks. It has been noted that since 1972 banks decided to give up any rights they had to exemptions under the Act. In the same way the Insurance Acts laid down the accounting procedures with which insurance companies must comply. These were referred to by the Minister this morning. It is reasonable to say that banks and insurance companies make very detailed disclosures of their practices at present. Considering the fact that banks, financial institutions and insurance companies will be dealt with by other EC directives it is to be expected that they will be exempt from the legislation which gives effect to the 4th Directive. It would be desirable if the Minister in his summing up gave the details and nature of the institutions that will be exempted in so far as these types of institutions are concerned.

It is now time to consider some new forms of incorporation for small firms and in particular for the type of company that could be classed as a proprietary company. When one considers that there is non-compliance by a considerable number of companies, with the requirements of the Companies Act, it is advisable to consider new types of incorporation so as to get everybody registered. What is really needed is a new simplified form of incorporation for shareholder-managed companies. Eligible private companies should re-register under the new form of incorporation and those failing to re-register should lose their limited liability status. This would be the penalty that would ensure registration by all concerned. In February 1981 this matter was dealt with in the UK Green Paper on a new form of incorporation for small firms. The Green Paper aimed at reducing the burdens of existing company law on small companies and family concerns. It was envisaged that a new form of corporate body named the incorporated limited firm or partnership should be considered. It would operate like a partnership but with limited liability and a corporate status. This would result in simple registration and just an auditor's certificate that the company was solvent for the account period involved. It was envisaged that sanctions would exist for failing to comply and this would be by way of ending the limited status made available to the company. Should a husband and wife enterprise have to be burdened with the same legislative demands as some of our major national and multinational chains? They might be able to claim exemption under the criteria laid down in this Bill but there are administrative costs in doing so and what happens is that a lot of the husband and wife operations simply do not register and do not file their annual accounts. That brings the law into disrepute.

Other options are being talked about in relation to new types of incorporation. It is in the interests of all concerned, particularly very small proprietory companies, that the Minister should have investigated the possibility of introducing this new type of company into legislation. At recent meetings in Brussels where this matter was discussed with some of the formulators of the 4th Directive and other directives under company law, a not unreasonable view was taken of the proposal. In the circumstances, the Minister could take a significant step forward in so far as the registration of private proprietory companies is concerned if he initiated discussions with all concerned with a view to a new type of corporation on the lines I have outlined this morning.

In so far as the question of pensions is concerned under the new directive, the Minister goes way beyond the United Kingdom legislation of implementation. The Minister has exceeded the directive requirement and it would appear that he is anticipating a new statement of standard of accounting practices arrangement. It can certainly be stated that the directive was accommodated by paragraph 42 (2) (c) of Part IV of the Schedule. Paragraph 36 (5) is an extra that would not seem to be required by the directive at this time.

There will be general welcome, which I share, for the protection of pension funds and pension schemes whether defined benefit or defined contribution schemes. However, it would be much more satisfactory if a separate fund for the pension scheme was made mandatory for the participating companies. If that had been incorporated in the Schedule it would have given greater protection to pension funds and pension scheme arrangements.

I am concerned about two other areas. The wide powers that are granted by this Bill to the Minister to modify the Act without having recourse to the legislator has to be viewed with some alarm. The Minister can by this Bill alter or add to the provisions affecting the balance sheet, profit and loss account or the notes to the account. This provision must introduce a major element of uncertainty to the commercial sector. The changes in this Bill are fundamental to industry and business, and legislative changes by way of order are not a suitable means of proceeding. Amending legislation has always been the safeguard for individual ministerial excesses, and certainly no good reason has been offered by the Minister as to why he requires this unnecessary power which is set out in section 23. Information required by way of notes to the accounts needs some scrutiny also. If a company have two or more businesses of different categories the company must state the turnover in respect of each category of business. If a company supply different markets the amount of turnover for each market must be stated. This information is of a commercial nature, and information is a valuable resource to a firm and to their competitors. The implications of these provisions, in particular to companies and their foreign competitors, can be of enormous consequence. A company should not have to disclose strategic marketing information which is of interest primarily to their competitors. We live in an open economy, consequently companies must compete in export markets and also with overseas traders on our own home market. The disclosure of strategic marketing information should never have been in the directive in the first place. The Minister should seek means whereby this type of information could not be sought by a competitor in the field.

The type of information that will be available to business is laid down in the Schedule. The number of employees: this non-financial item will affect most companies. Also there will have to be disclosure of wages, salaries, social welfare costs and pensions. Pensions: funding of pension funds, notes re the adequate provision for same, details of pensions to directors. I have referred to those. Some are to be welcomed. Turnover analysis which is critical to private limited companies: the turnover will be disclosed for each class of business and different geographical market and this may be omitted only if the directors think it is seriously prejudicial to the company's interest. Taxation: amounts owing to PAYE and VAT must be analysed. Large amounts outstanding may indicate cash flow difficulties and trading difficulties. This could have serious repercussions for trading competitors and may indicate a false impression. A company may have appealed their taxation position or be in dispute with the Revenue Commissioners; there is certainly a grave risk of damaging a company through bad publicity which may be undeserved.

In the notes to the accounts the number of employees by category will place certain stress on particular types of companies. While companies may seek relief using paragraph 41 (5) of the Schedule, directors will be at some pains to satisfy the requirement of what is "seriously prejudicial to the interests of the company". I recommend that the Minister at least delete the word "seriously" from the Bill. This relief is available only to the analysis of turnover and should have been applied also to other matters, financial and non-financial, as outlined in the information required by way of notes to the account in Part IV of the Schedule and article 43 of the directive.

The provision whereby the tax analysis is to be disclosed has no reference in the directive. I feel that this is included and has been included by political motivation. This analysis deals with the question of VAT and PAYE returns and there is no doubt that these disclosures will attract a great deal of ill-informed comment. It is giving preference to one creditor as opposed to others, and often what is owed at the end of an accounting period is not relevant to the overall solvency or otherwise of a concern. The real question is how much of these items are arrears at any one time? Quite often sizeable sums of VAT due to the Revenue Commissioners indicate strong company performance. It would be unfortunate if dealers, suppliers and market controllers were disturbed in their finalising transactions with companies because of the wrong slant of information from this tax analysis. The Minister did not have to include this in his Schedule, and it could lead to bad judgments being made about quite viable concerns.

The basic accounting principles and policies are defined for the first time in Irish statute, and this will provide no difficulty where already the best accounting practices are followed and the accounting principles are consistent with the fundamental accounting concept of going concern, consistency, prudence and accuracy. Any departure must be disclosed in the notes to the accounts. The accounting policies followed in respect of material items must be noted in the accounts, and the Bill requires that foreign currency translation, depreciation and diminution of fixed assets must be explained. Policies applying to fixed assets, goodwill and current assets are also defined. Fixed assets must be shown at purchase price, goodwill must show any amortisation period and current assets must be shown at the lower of cost and net realisable value. The Bill identifies a fifth general accounting principle in that it states that when determining the aggregate amount of a format item, such as an asset or liability, each individual component of that item has to be considered separately. This, in effect, means that the company will not be able to offset gains and losses in so far as they affect individual assets such as shares in subsidiaries. Each subsidiary must now be looked at individually.

Under section 23 the Minister may alter the provisions relating to publication of the accounts of all companies. This is an all-embracing power being given to the Minister to change at will any provision he likes in the Bill without recourse to the House. There is something ominous about this section and one has to ask why does the Minister require such powers? Is he going to do away with the options later or will some other Minister take advantage of the section to take that road? Does the Minister envisage any additional disclosure requirements especially in the case of small companies as defined in the Bill? Is this the method that will be used to wind up disclosure provisions later without coming back to the House? This power appears to be superfluous, is not needed by companies and is certainly too wideranging to be allowed to remain unaltered. The least that could have been expected is that the power would be the same as that outlined in section 8 (12), but in the circumstances it would be better if this section was amended entirely.

Under section 17 the Minister has the power to exempt a company filing accounts of their own where consolidated or group accounts are filed. The Minister should explain why he has to retain this power to exempt such companies. This exemption should be a right under the Bill as long as a company meet the other requirements of the section. Such a provision would also appear to be consistent with the 4th Directive which envisaged that a company which is a member of a group should publish group accounts. Multinational companies and, indeed, any non-Irish company should have the right to exemption rather than to be seen to be begging the Minister for the relief. It is not clear for how long such relief, if granted, will last. The Minister, under section 17, will have to make it clear if it is an annual exemption and what criteria he will follow in granting the exemption. The criteria should be specifically spelt out and then the exemption should automatically follow without allowing the Minister power to say that he may or may not grant it. Subsidiaries of EC based companies are exempt if the parent company guarantee the debts of the subsidiary. There are other criteria involved but the principle one is the debt guarantee. This exemption is spelt out in article 57 of the directive and it is an interim measure pending the adoption of the 7th Directive on group accounts. The section is vague and vagueness in exemption terms leads to uncertainty. The Minister should remove it.

What modus operandi will the Minister adopt in seeking these exemptions? Will the company have to make the application for the exemption or has the Minister some mechanism in mind whereby he himself can decide on the matter unilaterally? The question has to be asked, how will he operate his discretion and what group of industries has he in mind for the exemptions?

Section 17 states that as far as exemptions of subsidiaries of EC companies is concerned the body corporate shall declare in a notice sent to the shareholders of the company that it guarantees the liabilities. In that regard certain questions must be clarified. It is difficult to understand why the guarantee would not be made by way of statutory declaration in the Companies Office. Should the exemption be removed by the Minister it cannot be established that the debt is guaranteed and will continue to be guaranteed. That is an important matter because many bank debts may go on for years and there is no clear indication in the Bill what debts are guaranteed under the section. Are they the debts that exist on the date the balance sheet is prepared or future debts? What is the position if the subsidiary is sold? Will the debt guarantee terminate at the date of the sale? That is of critical importance as far as guarantees are concerned and it could lead to some disruption in the financial market.

In the course of his contribution the Minister referred to the transitional period and said he was open to suggestions on it. The Bill makes no reference to any transitional provisions in respect of disclosure of information by limited companies. The EC directive acknowledges that member states will have a period of gestation, per article 55 (2) of the original directive, of 18 months. It is vital that this transitional period be applied and a section should be inserted to make it binding, otherwise considerable cost will have to be endured by certain companies who would have to restate their accounts for the previous year. If this is not done then this legislation will have a retrospective effect and, in all circumstances, retrospective legislation can be a great burden and should be resisted.

Section 24 envisages that the Act will come into operation on such day by order of the Minister. A more realistic alternative would be to have the Act effective for an accounting period commencing on or after a certain date. Such a provision would be more acceptable to the business community. The proposed provision will be impossible to implement satisfactorily. There is need for time to be given to companies to implement a strategy of changed status if they so wish and also time to change to the alternative structures being suggested. Companies will have to consider transferring to unlimited status or to become branch operations, partnerships or sole traders. They may also be seeking to split larger companies into smaller units thereby benefiting from the exemptions of the Bill or, alternatively, to combine numbers of trading units to form one large company. That will take time and the Minister must allow that time in the interest of equity to businesses generally.

The Minister must recognise also that the training of staff both in the accountancy profession and in the administration of companies can only commence properly when the Bill has become law. There will be many items that accountancy firms will have to advise their clients on and that will take a lot of time. Companies will certainly need one full year, 1986, to get a dry run at the new structures. They will be able to comply with the new format in 1987 when they will have comparatives with 1986. Otherwise if the Bill is rushed through mistakes will be made.

Because each client will have to be handled separately and advised separately, there is no point in having huge problems involved for the business community. There are many grey areas which will only come to light in the preparation of the first set of accounts under the new formula. These should not be required as start up accounts. Legal advice will have to be sought by many companies and all this takes quite some time. It is preferable to have the job done properly from the very beginning than half done by way of rushing the legislative implementation of this Bill.

There is certainly need to have the start up of the filing of these accounts over two year ends, with a rule to file only the second year end accounts. It must be borne in mind that this law will have significant impact on financial reporting and require revision in accounting systems and control. Would the Minister consider favourably my suggestion in so far as the start up date is concerned and adjust his thinking from that indicated by him this morning as some time in mid-1986? It will make it impossible for businesses and for accountant and auditors advising companies if that timescale is implemented.

Section 4 requires that previous years information should be disclosed in the new format. This is the comparative information required under the legislation. That provision will be expensive and time consuming for the business community. It should be amended, if at all possible, in view of the great pressure that businesses are already experiencing within the economy. Such a derogation from the 4th Directive would be understandable in that for the first time ever, Ireland will require publication of information by the vast majority of private limited companies. It is not clear whether comparative figures will be required for the first set of accounts and perhaps the Minister could elaborate on that when summing up.

This Bill does not include any size exemption for groups of companies. I may be reading it wrongly but if, for instance, a group of companies do not have more than 50 employees or assets in excess of £1.25 million, there is no provision which allows that group to be treated as a small company. This is inconsistent with comparable legislation in the United Kingdom and certainly not in the spirit of the EC Directive. In fact, this Bill is silent on exemption in relation to groups of accounts. The United Kingdom legislation of 1981 implementing the 4th Directive there states that the same size criteria and exemptions are applicable to the consolidated financial statements of groups of companies. An amendment is necessary in this legislation if what I fear is the case. I would be pleased to hear the Minister elaborate on that position.

So as to allow groups to benefit from the exemption similar to that in the United Kingdom legislation, an amendment might be necessary to this legislation so that a company or a group of companies could qualify for the exemption as outlined in the criteria of sections 8 and 9. If my fears are justified it would involve a very widespread amendment because companies and groups of companies would have to be renamed and this would run throughout the whole legislation. If it is a fact that groups cannot avail of the exemption, we would be seriously disadvantaged here in so far as the United Kingdom implementing legislation is concerned. Certainly it would be very unfavourable to Irish business to have that kind of disadvantage.

Article 46 of the directive which is represented by section 13 of the Bill deals with the annual report. There is no doubt that this is a very important section. It will give considerable concern to business generally. I should like to sum it up in this fashion. Subsections (c) and (d) of section 13 are an open invitation to industrial predators. It is a significant addition to section 158 of the principal Act of 1963. Anybody reading section 13 must be not a little alarmed at the consequences it might have for company law and Irish business. These two subsections are very great indicators to competitors and if companies do not disclose this information which would be of major advantage to their competitors, both in the home and the international markets, they are liable subsequently to reasonably strong penalties. While the Minister might feel that the penalties are of a low nature but enough to satisfy his requirements, I can assure him that if paying £1,000 would relieve a major company of involvement in disclosures as necessitated by section 13, in particular paragraphs (c) and (d), it would be regarded as a very minor cash adjustment indeed into their balance sheet to pay the fine.

I recommend to the Minister that there is some need for an accounts reference date. This should have been incorporated in the legislation. It would have made it easier for everybody concerned. The Companies Registration Office, who will be under enormous pressure from the amount of new data coming to them following the implementation date of this legislation, know what to expect in various documents to satisfy the timetable for the preparation and publication of accounts. Unless they know where certain items are to be submitted, chaos will reign in that office. It is understood that the accountancy bodies recommend to the Minister and his Department something concerning an accounts reference date to be included in the legislation. Even at this late stage I hope the Minister will introduce an amendment to deal with that.

Certain actions have to be taken by companies in accordance with this legislation so far as preparation of accounts, circulation of accounts to shareholders, the laying of the accounts before shareholders at annual general meetings and the annual returns are concerned. The annual returns have to be published in the companies office. There are certain time scales attached to these matters and they are all different. Unless you have a starting up reference date there is no possibility that the legislation can be effective. If the Minister is genuine in trying to make this legislation work, he must consider the question of including an accounts reference date.

While I am making some of these recommendations, I know full well that if I put down amendments they will not be accepted by the Minister. Having had experience on that side of the House for a short time, I know that amendments put down by the Opposition will always be impossible for the draftsman to handle, not being technically correct and not fitting in. I understand that and that is why I am taking a reasonably long time this morning to go through some of the sections that I think need amending.

I am asking the Minister to consider these amendments so that he can bring them in. He will gladly have the support of this side of the House. They will certainly help to improve this legislation, which we are obliged to introduce and which many might feel would have been best left unintroduced, if possible.

The Minister made reference to the fact that medium-sized companies must produce profit and loss accounts and balance sheets which show a true and fair view. He made this point in his speech and in the explanatory memorandum. This will require small companies to publish more than the statutory minimum which might have been allowed under the directive. In effect, they have to give more information than medium-sized companies. If a small company presents a full balance sheet to its shareholders but publishes an abridged balance sheet, there will be two different sets of accounts in existence, both under obligation to give a true and fair view.

If the new requirement results in the two balance sheets being the same, then the concession is given with one hand and taken away with the other. It is certainly anomalous that small companies should have to give more information than medium-sized companies. Small and medium-sized companies deserve special treatment because of the size and scale of their activities and they may be in competition with other forms of trading entities, such as unincorporated firms who are not subject to disclosure of accounts.

The United Kingdom made full use of the exemptions available under the directive. It would be unwise to consider fewer exemptions for Irish companies because it would place medium-sized companies at a competitive disadvantage in relation to their UK counterparts. We must not put Irish business at a competitive disadvantage. Privileges enjoyed by private companies have an importance in the business of attracting foreign enterprise and investment. There must be a balance between economic development and the safeguarding of employment as against making full financial disclosures of company business to employees and consumers alike.

We should take on board every exemption available under the EC directive and seek to minimise any and every disadvantage to Irish business. In the interest of doing that, I have made a reasonable long contribution, but I feel it was necessary because this is the most important legislation affecting company law to come before this House since 1963. It has widespread implications for companies and for business generally and should be given very careful consideration. I ask the Minister to consider the suggestions I have made between now and Committee Stage and I will gladly support any amendment he introduces incorporating those suggestions.

Having listened to the lengthy speech by Deputy Flynn, which was commendable in many respects, I am tempted to suggest that most of it would have been more suited to Committee Stage. However, I take the remarks he made in the latter part of his speech and I realise the position he is in on the Opposition benches. I agree with much of what he said but I cannot agree with some parts of his speech. I do not see any political innuendo in any of the provisions of this Bill. I am very aware that most of what is before us today is something over which we have very little discretion. We can all criticise aspects but we have little control over them. We entered the European Community in 1973 and all companies were effectively warned about what was coming. The details of this legislation were known in Europe at the time, although the directive was not drawn up until some years later.

I am very aware that a limited line must be taken so as not to encroach too far into the area of limited liability. I am very conscious that for the first year since the mid-forties we will have a very good trade surplus. This is due to the very good performance of public and private limited companies in the main. We owe much to these companies, as do their employees and the Government generally, for wealth creation.

The Bill before us is in response to the 4th EC Directive outlined by the Minister and Deputy Flynn. The directive was agreed in 1978. None of the countries implemented the directive in time and I believe that Greece, Italy, Germany and ourselves are still not in line in this regard. It requires all limited companies, public and private, to publish their accounts and file them with the Registrar of Companies in the Companies Registration Office. This will herald a major change, especially for private limited companies, and no doubt there will be considerable resentment in some quarters at what may be interpreted as a major intrusion into free enterprise.

However, improvement in the level of disclosure for shareholders and creditors is long overdue, providing that a balance is attained and we do not create a disincentive to would-be investors or risk-takers who are in all-to-short supply. We can put employees at the head of this list, as many of them have been kept in the dark about the trading business of a particular company and all of us are only too aware of the social tragedy that occurs when the shutters are pulled down virtually overnight, as has happened in the case of many small companies during the past decade, without any notice having been given to the employees concerned. Creditors have similarly suffered tragic losses and most creditors are themselves small companies.

The EC directive leaves little room for manoeuvre from the point of view of national legislation but the Minister is to be congratulated on taking a favourable view towards smaller businesses, where that is possible. The Bill does not cover unlimited companies or branches of foreign companies or corporations, but it does cover dormant companies, possibly in the hope of forcing them off the register if it is too much hassle to comply with these regulations.

Private banks will be required to publish accounts for the first time and, while the Bill lays down a choice of format for profit and loss accounts and balance sheets of the limited companies, the format for the banking and insurance companies will be dealt with in a future directive. At the moment banks will have to continue to comply with the 1963 Act. Insurance and assurance companies also will continue to be required to file information with the Department. Banks and insurance companies will have to follow new requirements for directors' reports and they will have to give full information about their subsidiaries and other investments. These are most welcome developments and one wonders whether a lot of heartache recently experienced by shareholders and investors in the insurance and private banking world could have been avoided, or at least alerted to in time, if the benefit of these provisions had been available. I will not go further into that matter since the House has dealt with it in depth in recent months and years.

The effectiveness of the Bill will in general depend on its enforcement. The Companies' Registration Office are I understand, being computerised so that all information regarding limited companies will in time be available to the public at the push of a button. However, I feel this office will still need increasing resources to enforce and effectively police the new Bill and I trust these will be forthcoming. In the course of his remarks the Minister made some reference to this situation when he said:

The Registry acts as a public filing office, not as a supervisor or invigilator of companies.

While I accept that I should like some indication of on what basis the provisions of this Bill will be implemented and who will police and enforce its provisions if it is not to be the Companies Registration Office.

While non-compliance with the provision of the Bill will meet stiff fines, it still remains to be seen whether accounts will be filed on time, that is, up to 11 months after the end of the accounting period in question. There is a general weakness in enforcing and policing the provisons of all Bills passed by these Houses, caused in recent years to a large extent by the failure to provide the necessary resources to implement each new Bill. This applies throughout all Departments. I hope it will not apply to this Bill and that those responsible for the enforcement of its provisions will be given the resources to do just that.

The operative date of the provisions of the Bill must be clearly defined for all concerned. The Minister refers, possibly, to July 1986 — to all accounting periods commencing after that — as being the operative date and he asks for views on this. Very wisely he will be looking around for a suitable starting date. Perhaps this date is a little too early. Though we must be reasonable and not leave it hanging for too long — because the longer it is left the more companies will fail to comply anyway and no matter when one starts there will probably be a large proportion who will find it very difficult to get into the system until they are pushed into it, a more reasonable compliance date might be 1 January 1987.

That would mean that at least everybody and every company concerned would have a full accounting year before they entered the system, enabling them to get their accounting system and the necessary information gathered to present accounts as required by the provisions of the Bill in future years. I might suggest, with respect, that 1 January 1987 would be more reasonable than July 1986 but it is not sacrosanct and I do not hold any monopoly of wisdom on that. The important thing is to be reasonable in this area. If we are reasonable and fair we shall have more companies coming with us, and coming with us more quickly, rather than having to push them into it.

The accounting date should apply to accounting periods commencing well after implementation of the provisions of the Bill to allow all necessary information and data for the previous year to be gathered. That is particularly necessary when one considers the leeway given to the implementation of the 7th EC Directive of 1983 concerning consolidation accounts. It makes our request to shift to July 1986 all the more reasonable. The 7th Directive takes effect from January 1988 and will not apply to the companies concerned until 1990. They have that number of years to get their houses and accounts in order. We should be reasonable because it is quite a technical Bill. It will entail quite a serious change around, particularly for small companies, in their method of keeping accounts. As no country implemented this directive in time, even if we are now late, we should do so in such a fashion that we shall be more successful than others in ensuring that it is complied with.

The Bill before us is generally about disclosure, with certain exemptions from disclosure allowed if there would be a case of serious prejudicial interest against the company concerned, if disclosure would seriously prejudice the successful trading of the company and would not be in its interests vis-á-vis its competitors, employees and so on. I am not very happy about the qualification of the word “prejudicial” in the Bill. Deputy Flynn referred to this. For example, who defines “seriously prejudicial”? Anything that is genuinely prejudicial to the interests of the company is also prejudicial to the interests of the employees and the creditors who want to continue trading with that company and to the future of that company if more is forced in disclosure than is absolutely necessary to all those parties I mentioned.

I would favour the deletion of the word "seriously" or perhaps we could replace it with another word which could be more clearly defined. It is an arbitrary type of word. For example, what is "seriously predjudicial" in my view may not be in the Minister's or in the Department's viewpoint or elsewhere. It could be "seriously prejudicial" in the view of the auditors and accountants of the company but not in the Minister's view. That is understandable. But a word like "seriously" qualifying the word "prejudicial" in this case is too loose. I would favour its deletion on Committee Stage, so that issues that are genuinely prejudicial to the future trading of that company, its employees, directors, shareholders and creditors should not be forced in disclosure. I make that by way of a general comment on all the disclosure.

I might add that there are very few issues that come into that category but there are genuine cases, particularly in some companies trading with competitors, who would find it a tremendous advantage to have certain details of the business concerned and that would cause tremendous damage to the future viability of the company. I should like the Minister to give that matter some lengthy attention and perhaps to justify why the word "seriously" is included. He might tell us who will define what "seriously" will mean, what criteria will be taken into account and, best of all, whether he would consider its deletion altogether.

Private companies are defined as small, medium and large depending on the fulfilment of two out of three criteria laid down for each category over a two year period. These criteria relate to the balance sheet, turnover and employment figures. The Minister referred to them as being somewhat tortuous but he has no discretion in this area. The EC directive lays down where we may go, or what we may include in these definitions. Public companies do not qualify for size exemption but their private subsidiaries do. The medium and small companies are relieved of certain obligations, with minor reliefs for medium-sized companies and the publishing of a balance sheet only in general for small companies.

It is intended, and clearly expressed in section 3 of the Bill, that the accounting principle of true and fair view overrides all, even where not explicitly dealt with in the Bill. In the course of his remarks the Minister referred to this point when he said:

Furthermore if adherence to the rules set out in this Bill in regard to the format or content of the accounts would not result in a true and fair view being given those rules must be ignored, or additional information must be given in order to give a true and fair view.

Going on strict accountancy principles, I presume it is the auditor's interpretation of true and fair view that will obtain. But I wonder will that be acceptable, whether the Minister and his Department will be entitled to what is a true and fair view, or who will be the final arbitrator of a true and fair view in this case if it is deemed to override any provision of this Bill. Where will the buck stop in the decision there?

This slight ambiguity could be applied to section 10 where a reasonable interpretation could conclude that shareholders in small companies could end up with less information than heretofore as abridged accounts will suffice with the annual return. Perhaps the provisions of this section warrant more attention on Committee Stage even though the Minister has clarified it somewhat later on in his remarks, when he had this to say:

This facility will also extend to small companies since a small company is also, by definition, a medium-sized one.

Deputy Flynn referred to this in much greater depth. Small companies might interpret themselves strictly under the provisions of the Bill as being at a disadvantage vis-á-vis a medium sized company in relation to certain disclosure or return requirements. However, the Minister points out here that all small companies are also, by definition, medium sized companies as the definition of medium sized companies under the three criteria laid down includes up to certain figures in all cases. There is not a cut-off, you do not go from being a small company into the medium company category. Everything is a small company up to the determinations laid down for the medium company. In fact, all medium companies are also small companies by the definition. However, there is a slight ambiguous area in this regard which has been alluded to by many people and commentators since the Bill was published. Even though we are told and it is underlined in the Bill effectively that the true and fair principle over-rides all and any ambiguity, I should like to see it clarified, which would be in the best interests of all concerned.

There is a case for asking that treatment of group accounts should always be governed by the size of the component companies and treated accordingly pending the 7th Directive which will deal specifically with these companies. The subsidiaries of EC parent companies may, under the Bill, if the Minister so allows, publish the group accounts instead of their own individual accounts if all the shareholders consent to this arrangement. That word "all" may prove very interesting in the future. Certainly if one can believe all one reads in the newspapers about the goings on at AGMs of any of these companies, it would be very difficult in many cases to have the agreement of all. Whether a majority or two-thirds agreement would suffice I do not know but I think that the word "all" could cause major problems for some companies trying to avail of this option in the Bill. In other words, if all the shareholders consented to the arrangement and if the parent company guarantee to all shareholders that the debts——

It would be better to tease out these words on Committee Stage.

With respect, you have not sat through Deputy Flynn's speech and, excellent as it was, it was a Committee Stage speech. The list of speakers is not too long and I should like to put just a few points. I am concerned about the fact that all shareholders must consent to the arrangement and that the parent company must guarantee the debts of all shareholders. What debts? Over what period? That is very ambiguous and a cause of major concern. There are various other conditions that must be met for this option to be allowed.

The concession does not apply to multinationals based outside the EC but these conditions need further serious clarification. How binding will the guarantee of the parent company be in relation to the debts? We look to the Minister to clarify the position on Committee Stage as it has major implications for compliance with the Bill for subsidiaries of group companies in the EC. As we know from the Bill — and the Minister mentioned it in his speech — the only limited companies exempt from the provisions on disclosure in the Bill relate to charities or, as it is rather vaguely worded, "companies not trading for profit". This appears to be a Treaty of Rome expression and the Treaty Article precludes these types of bodies. This is an area, however, where we have discretion and I strongly urge the Minister for the sake of the charities and religious bodies themselves to ensure that they comply with the disclosure provisions. Perhaps he could turn his attention to this on Committee Stage.

There is no reason why creditors of these companies should not have access to all possible information or why their employees should not have access to all possible information. Disclosures, in effect, could help to nail down the bogus charities which are prolific at present and would save genuine charities from abuse, all too common at present. If the Minister is not prepared to go that far on Committee Stage——

The Chair is really concerned that there will be nothing left to say on Committee Stage.

I wish you had been here an hour and a half ago, I would have been finished long ago. If the Minister is not prepared to accept this on Committee Stage I request clarification of the expression "not trading for profit" or perhaps an alternative expression should be used as it is ambiguous and open to wide interpretation in the accounting world.

The Schedule with the Bill prescribes all information to be given at various stages in subsections and I wonder why this procedure, so assiduously adhered to throughout, is abandoned in section 4 (15), where in (a) through to (e) the detailed requirements for a profit and loss account of a company are given. I acknowledge that this is merely a drafting matter but it is inconsistent with the Bill's format and I wonder if anything can be read into this abberation. I have grave reservations also about section 20. The 1983 Act amended the 1963 Act in relation to the profits a company may distribute. Are we now trying to restrict unnecessarily what these profits can be defined as and how they are calculated? While the Bill allows development cost to be carried on the balance sheet, R and D and start up expenditure must continue to be written off immediately. There is a sound case for allowing start up costs to be treated as development costs and capitalised. Hi-tech companies, for example, have very high start up costs and they might find it more difficult to distribute costs and, therefore, it may be more difficult for us to attract them to the country because this provision may act as a further disincentive. I ask the Minister to investigate that.

We are now amending the 1983 Act in this area which, in itself, amended the 1963 Act and I seriously question the wisdom of that. As we are dealing with companies Acts, there are some issues not dealt with in the Bill which are in urgent need of attention. This is a disclosure Bill and I would like to see us fall into line with other companies which insist that company directors disclose all their interests. This is vitally important for employees, shareholders and creditors generally so that they can evaluate business decisions, inter-company dealings and trading patterns within the company and their subsidiaries and to ensure that personal vested interests do not prevail over the company's good. While this is not a 4th Directive matter, it complements the Bill and is long overdue.

A brief mention of the question of the involvement of the Revenue Commissioners as having preferential creditor's status for 12 months is in order. This should go under the microscope. The security of their position often allows situations in companies to compound the difficulty when it might have been kinder all around, particularly to unsecured creditors, for the Revenue to act sooner. I am fully aware of the pressure on the Revenue Commissioners not to be seen to pull the rug from under the employees if at all possible and I support that line. However, firmer action when less is at stake could have a beneficial effect on many companies in forcing them to take stock of a situation before it becomes irretrievable. A recent case shows an all too common viewpoint and attitude held by directors of companies. A director maintained in court to the end that his company was solvent. When reminded of his liabilities to the Revenue Commissioners and to the Department of Social Welfare, he was amazed that these were included as part of his personal liablities. In other words, the attitude prevailed that the Revenue Commissioners could act as bankers indefinitely, and that attitude prevails in many companies.

This situation immediately evokes the need for the provision of a US type chapter 11 administrator for companies in trouble but not yet at receivership stage. Under this a company can request such an administration to run the company for 12 months or so and protection would be received from creditors while a business plan is filed under the supervision of the courts and the creditors. Properly worked this would be a lifeline for many Irish companies who at present have no option but to drift to the end until a liquidator is appointed, particularly if they are unable to meet redundancy demands and claims under the Unfair Dismissals Act which, ironically, are becoming a major disincentive to employment. In the US, under company law, this chapter 11 protection has not been very successful, mainly due to abuse of the provision. Companies in need of liquidation prolong the agony by requesting the administrator to put off the evil day. Properly used this situation would be a lifeline for many companies here and it would be of enormous benefit to potentially viable companies who experience a run on their assets because of some short term difficulty. I urge the Minister to investigate the possible provision of this arrangement here. It may not fit neatly into this Bill but I hope he will consider it when dealing shortly with the various other measures dealing with companies.

Insolvency law generally is in urgent need of review. The United Kingdom started reviewing their laws on insolvency in December 1974 and they completed it this month. It took them 11 years to sort out company law and insolvency law, and this with the best will in the world. What does that herald for us as we start down that road? Perhaps we can learn a lot from what they had to go through in those 11 years.

The long-awaited Companies (Amendment) Bill — generally known as the cowboys Bill — is being drafted at present, as I understand the position. I trust it will deal with what is not in this Bill, particularly with imprudent and reckless trading by directors who under present law can wash their hands of a business and open up next door when a company fails. A very balanced view is needed in this area as too rigid a control on directors will ensure there will be no risk-takers or entrepreneurs who are ready to take a gamble. There is a line down the middle and every attempt must be made to encourage the honest and genuine investor and to ensure that the effects of limited liability will not be so diluted or eroded as to be unreasonable or unattractive. Let us hope that we will not take so long to sort out our company and insolvency laws as was the case across the water.

In general I welcome the Bill. It brings us into line with the EC and now we can compare like with like when it comes to companies trading in the Community. As a principle we should not make life more difficult than is necessary in the interests of justice and fair play for limited liability companies. However, their employees, shareholders and especially their creditors have for too long been in the dark. Creditors take personal risks when trading with these limited liability companies without any information to justify credit in most cases. No one can or should underwrite these risks in a free enterprise society. However, I think the Bill strikes a reasonable balance for all concerned.

On a Bill like this it is difficult to make a Second Stage speech. It is an important measure that will have far-reaching implications for the business community. It is a detailed measure more suited to a Committee Stage debate and it is difficult to refer to it in general terms as one should do on Second Stage. In 1979 a Bill dealing with VAT was referred to a special committee of the House and I think that procedure would have been more appropriate in this case.

I should like to compliment Deputy Flynn and Deputy Doyle on the Volume of research they carried out before making their contributions. Deputy Flynn put in an enormous amount of work on researching the measure. If he is ever stuck for a job in the future I am sure he will get a post in any of the larger accountancy firms as an adviser in regard to this Bill.

This Bill requires private limited companies, with certain specified exemptions, to file their accounts with the Registrar of Companies and calls for much more detailed disclosure than at present. The requirements do not extend to unlimited companies or to the branches of foreign companies. At the moment private limited companies here do not have to publish their accounts in the Companies Registration Office and this Bill will have far-reaching implications for the majority of Irish companies. There is an impression that this Bill will not affect every limited company. It is thought that perhaps a business run by a husband and wife, perhaps operating a shop in the country., will not come under the terms of this Bill. However, the reality is that every limited company will be affected in some way or other.

I realise that we have been out of step with the 4th Directive of the EC for some time and I understand that we will be called to account for this. We must comply with that directive. We got away for quite a long time with not producing the necessary legislation. In future we will have to be more careful regarding our input in the EC with respect to directives issued by the Community.

I do not think this Bill is, in the main, appropriate to Irish circumstances. I accept that the vast majority of people will go along with the terms of the Bill but personally I am not too keen on it because it is not appropriate to our circumstances. The majority of Irish companies are private limited companies. At our stage of economic development we have to encourage the risk-takers, but this Bill will demand a certain level of disclosure and small companies will be burdened with extra costs. We are responding here to the consumer lobby rather than to the lobby of business people and those who are creating jobs. There are headlines in the papers about large companies that go out of business owing the Revenue Commissioners millions of pounds and practically every day for the past three years there have been headlines in the papers about the amount of money owed in taxes in the private sector. Most of the figures cited are estimated and are far from reality.

If we want to encourage risk investment, our legislation must provide some concessions for those who are risking their capital because otherwise we will not get the employment that is so necessary. People are not prepared to risk capital any more, and I referred to this last week when speaking on the National Development Corporation Bill. This is another Bill that will discourage people who might otherwise invest risk capital.

We are at a very low level of economic development by comparison with our EC partners. We had to introduce this legislation because we are a member of the EC club and must abide by the rules. In future, though, we must give much more thought and exercise more caution during the drafting of these directives. We must make our position clear because these laws may not be appropriate at all to Irish business. We must encourage people with new ideas, the risk takers, because they are the people who will create jobs. One gets the impression when reading the Bill that the majority of employers in Ireland are multinationals and other big companies. The vast majority of Irish employers are in small businesses. They may have started off as small undertakings employing two or three people, but when such people improve and expand they will consider becoming limited companies.

This Bill is all right for people who have reached a certain stage of economic development. There are exemptions in the Bill for multinationals who have ways out of publishing returns — we can discuss this on Committee Stage. The Bill will mainly affect native Irish companies and the provisions of the Bill will militate against setting up limited companies and this, in turn, will militate against job creation.

Generally, we seem to have gone overboard in Ireland to try to protect the consumer but we must remember what the purpose of a limited company is. When I was doing economics in a university and when we discussed the industrial revolution in the UK we learned that the cause of the revolution was the growth of the joint stock or limited liability company. That form of commercial enterprise got people involved in businesses, the beginning of new ventures, with limited liability, the purpose being to protect themselves, the liability being limited to paid-up capital. A person could be involved in a number of businesses, taking the risks, but not have his personal assets taken up.

At present the whole purpose of being a limited liability company is being defeated by the banks who are now demanding personal guarantees from directors. The banks usually have enough security from companies but they still tie up the directors in every possible way. In effect, they are delimiting limited liability companies.

I suppose at the beginning I should declare an interest, because I am a chartered accountant, and this Bill will give more work to that profession and I shall be grateful for that because more work will mean more money. However, I must point out the shortcomings of this Bill. I have spoken about the purpose of the limited liability laws which is to limit liability of people involved in a company, and the role of the banks here in the last couple of years has given me cause for some concern. They usually have a first charge on property and they have now begun to demand director guarantees. This means the banks will be protected anyway and the other creditors will have to take pot luck. Even if the company winds up with nothing, the directors will have to cough up for the banks.

The banks will know the position at first hand because they have monthly accounts, or at least annual accounts, from companies and therefore they will know the volume of business being done. I suggest that the banks are stifling development. In the past couple of months we have read that certain banking institutions in this city are going after the directors of Bula Mines. I do not know any of the people involved personally, but they have given enormous contributions to the State and to the growth of employment and I suggest it is not legitimate to pursue them for all their assets. Although I do not know him personally, I know that one of those people has made an enormous contribution to Irish industrial development.

When I say that I probably do not reflect the opinion of the majority, who are glad to see this. That happens in the case of anyone who has made a few bob, unlike the position in the US. You cannot possibly win here, and I am talking about the attitude people take. If you fail they will say you were going to fail anyway. If you succeed and make it to the top, they will say: "Where did he get it from?" In another country if you fail they will say you should try again; if you tail the second time they will say you had a good idea but it did not work; and if you fail the third time they will say: "He is a great man". Here we have a knocking attitude to wealth and its creation. We would like to keep everyone at the same level. That is the attitude of our society.

We will not create employment unless we encourage free enterprise. I know we must have this Bill but I am sorry to say it is another hindrance to free enterprise or risk taking. If we keep knocking risk-taking we will end up with everyone being at nought.

The legislation is available but we do not provide for the effective policing of it. This Bill is under the aegis of the Companies Act. As one who has considerable dealings with the Companies Registration Office I am not slighting that office in any way when I say that chaos rules execeptionally well there. That has been my experience down through the years though matters have improved in the past couple of months with the advent of computerisation. Obviously the office is under-staffed. They are under-staffed in terms of the number of limited companies with which they must deal. Until recently a company would not even have to make annual returns because there was not time on the part of the staff to have a system of review. All companies are bound to submit annual returns. In the case of private companies, the accounts must be forwarded with the annual returns and include such details as the names of directors, shareholders and so on. Even those who control limited companies are confused when they have to make their returns. This Bill will mean that in future annual returns plus the accounts in some form will have to be forwarded to the Companies Office. Up to now if one wished to ascertain who controlled a company, all one had to do was to go to the Companies Office, pay a nominal fee of some pence and then look up the file concerned.

Though I have not seen this written anywhere my belief is that if a company had not furnished annual returns for a number of years they might just be unfortunate to the extent that someone had gone to the Companies Office to look up their file. Before the file would be returned to its shelf, the people in the office would decide to examine it with a view to ascertaining whether returns had been furnished in the previous couple of years. At that point the company, if they had not furnished their returns, would be notified of the omission. Though that is not official policy, it is a fair representation of what has been the case in that office for the past ten years or so anyway. This legislation will result in the Companies Office being inundated though there is not adequate staff there to deal even with the work that is required at present in respect of each company. This work includes not only dealing with annual accounts but with considering articles of memoranda, the availability of names for a new company and so on. I have never seen people work as hard as the staff in the Companies Office work so no blame can be laid at their doorstep for any delays that occur. The majority of people who work there are very helpful but now they will have to deal with all the sets of accounts that will be furnished to them every year. If this legislation is to be effective we must increase the staffing levels in that office.

Regarding the policing of the legislation, how are the Companies Office to ensure that all companies furnish their accounts on time? The Bill provides that the accounts would have to be filed with the office within 11 months of the year's end. There must be an effective system to ensure that that happens. There should be no problem for the public limited companies and the bigger companies in the matter of furnishing their accounts on time but I would be concerned about the 60,000 or so small companies, and small companies form the majority of the total of companies in Ireland. A huge policing operation will be required if the legislation is to be effective. Fines of up to £1,000 have been mentioned in the context of default but while that might be a deterrent to the smaller company, it would not be likely to be a consideration for the larger company who perhaps would be prepared to pay the £1,000 rather than bother filing accounts. The smaller company do not have the financial resources to engage expertise in the form of accountants and so on for the carrying out of this kind of work.

For the first time in legislation, companies are being categorised as large, medium or small. I congratulate the Minister on having taken advantage, in any instance possible, of the terms of the 4th Directive in order to minimise its effect on companies here. There is provision for different thresholds and criteria for defining what constitutes a small or a medium sized company.

There are some anomalies in this respect but these can be teased out on Committee Stage. In order to qualify for definition as a small or medium sized company two of three criteria must be met. In the case of a small company one of the criteria will be that the balance sheet total must be less than £1.25 million. The Bill goes into detail as to how certain matters are to be approached in terms of accounting but the balance sheet total is defined as the aggregate of fixed and current assets. That could mean that a company could have an increase in stocks which would be under the heading of current assets while there could be an equal increase in creditors, in the number who would not have paid the company. This would mean that the company would be no better off in terms of net wealth. For the purpose of this criteria if, say, the balance sheet amount exceeded £1.2 million and if the company failed in the other two respects, they would not qualify for the small companies exemption.

The Bill is extremely detailed in respect of various definitions in relation to the accounting world but an accountant might need to repeat the entire accountancy course again in order to become au fait with this type of legislation. The Bill is setting out how evaluations are to be arrived at, what turnover is and so on. This is novel in this country. Auditors will not have any discretion in such matters. There will be fixed formats for profit and loss accounts, balance sheets and notes to accounts as well as directors' reports and so on but the unfortunate auditor is the one who will be responsible ultimately if anything is found to be incorrect. Up to five or six years ago it was unheard of that an auditor would be sued in that respect but since it has become common for auditors to be sued when businesses run into difficulties. That tendency began in the United States in the seventies. Recently I read an article about the many law suits being taken against major accounting firms in Ireland. Since some of these are before the courts it would not be appropriate to comment as to what the outcome might be. At least now if an auditor is being sued, the proceedings will be taken usually by a bank or by some creditor of the firm concerned or by some other third party who might have taken over a company and found that matters were not as stated in the auditor's report. Now we will be lodging these accounts in the Companies Registration Office and employees and creditors will be able to go in and look at them. Suppose there was something wrong. I can see even more court cases being taken against the chartered accountants and auditors. I realise that there will not be any sympathy for that point of view, but this will put a major strain on the accountancy profession. There has been a plethora of legal actions taken in the past number of years and this legislation will make life increasingly difficult for my profession.

Up to now the auditor's report did not make any comment on the chairman's statement. When reviewing the accounts at the annual meeting the chairman might say that the company would do twice as well in the coming year. Most responsible chairmen assess the situation and give a true report but at least the auditor was not responsible for what was in the chairman's statement. Sections of this Bill deal with the chairman's statement and the auditor will be responsible for this statement also. The auditor's report will have to attest to the fact that it is a small or medium company and can avail of the exemptions, and give a certificate to that effect.

Is it envisaged that comparative figures will have to be given? I agree with Deputy Doyle and Deputy Flynn that the operative date should be 1 January 1987, but the Minister said he did not have a fixed view about it but suggested that 1 July 1986 might be the date. Irrespective of when the operative date will be, will comparative figures have to be given? It must be remembered that individual companies will have to reorganise their accountancy procedures and they will have to train their staff to comply with the new format laid down in this legislation. This means there will have to be a revision of the accountancy system and controls, there will have to be a change in accountancy software, and the auditors will have to be re-educated so that they can advise their clients. In my view, a full year should be given before the operative date comes into force. I suggest the accounting year should begin 1 January 1987.

I outlined earlier the disadvantages I see in this Bill but some interesting things will happen when these accounts are filed in the Companies Registration Office. Say a company has been experiencing difficulties over the past number of years and owed the Revenue Commissioners, £500,000, but had made an arrangement to pay these arrears, and suppose nobody knows that but the Revenue Commissioners and the directors, when the accounts are filed in the Companies Registration Office and the creditors see how shaky the company is, they will go to the company next day looking for their money. This could mean that the company would go into liquidation. If a company have made arrangements with the bank and the Revenue Commissioners their money is safe but ordinary creditors money is not secure. In my view detailed disclosure of this type of information may be very worthwhile but it could lead to the liquidation of a company with a loss of 50 or 100 jobs. When that happens people will not say this was a great idea.

This Bill deals with disclosures, turnover, the breakdown of the turnover and so on. In the case of a larger company if certain disclosures are made it would be possible, in certain circumstances, to deduce the company's gross margin and distribution costs. I believe that when firms have to publish their accounts and the real position is known, many more companies will go to the wall. I would like to see included in this Bill a general section providing that a company could get out under an umbrella.

Most Deputies would deduce that I am not particularly mad about this kind of legislation, but because of our membership of the EC we must have it. I recognise that the Minister has done the best possible job in minimising its effects. It will have far reaching implications of which we are not at present aware. It is most important legislation but it is inappropriate for Irish conditions. I hope the Minister will set the operative date at least for the accounting period ending after 1 January 1987, to give companies time to get their affairs in order. I hope this legislation will not have catastrophic effects. On Committee Stage we can tease out the various points made by other speakers. There are many sections about which I have queries, so I look forward to Committee Stage.

This Bill implements the EC Council 4th Directive on company law. The details of this legislation commenced in 1978 and we have been very slow to put it into effect. Along with Germany, Italy, Greece and Denmark, we have not implemented this directive. The Commission can be criticised in the implementation term they set for countries to adjust to the legal positions which will arise from this kind of legislation. The Minister had no choice but to implement this legislation. The Minister has favoured small business from the options open to us and that is welcome. At present accounts disclosures being made are made by approximately 2,500 companies but under this Bill about 70,000 companies will be affected. These companies are described in the Bill as small, medium and large. In implementing the requirements for disclosure the Minister has been careful to protect the continuation of good commercial practice. However, all the disclosure requirements of the EC are not contained in this Bill. We will need another Bill to implement the 7th Directive on major companies which will affect banks and other institutions. The Minister provided for the minimum of bureaucracy in what will have to be reported to the companies office.

The Bill will put a strain on that section of Government. I understand that the Companies Registration Office have installed a computer so that the kind of collation systems for filing reports required under this Bill will not require the enormous amount of staffing increase on which Deputy McCreevey laid considerable emphasis. The software computer industry will provide for the easy addition of new information. I am sure there will be some flagging system whereby proper notice will be given to companies about requirements for the future. New technology should be used by the companies in this area. A lot of the teething problems should be eliminated when the computer is fully established.

The Minister dealt sympathetically with small companies. As I understand it, the criteria to describe medium and small companies can be distinguished between the balance sheet total, the turnover for the year and the average number of employees in the year. The Minister has been generous in accepting for small companies abbreviated balance sheets and profit and loss accounts as suitable disclosure for small companies. For medium companies the Minister will accept a full balance sheet and a slightly abbreviated profit and loss account. That is a clear indication of the Minister's goodwill towards companies. This Bill will nonetheless add to the cost of companies. However, when we joined the EC as well as accepting benefits we had to accept responsibilities. Every day we want to postpone the difficulties that arise from membership.

This Bill will change auditing practice and it will require the management of companies to be restructured in their reporting. It will also require accountants to update themselves in the interpretation of legislation and its impact on business. The legislation is not a witch hunt on auditors as was implied by Deputy McCreevy. The legislation will just put in train what has been the practice of auditors for many years, the criteria used by them in checking and reporting accounts. Experience in other countries has shown that there has been an increase in the number of claims against auditors since this legislation was put in train by the EC. In the British context, from 1971 to 1982 the number of claims against auditors rose from 106 to 509 or, in cash terms from successful claims, from £220,000 to £4 million, which is an enormous increase for the profession to have to face. However, the business community, and, I suppose, the consumer will have to pay for this. I believe that this will be alleviated in the increase in insurance premiums which will probably be charged after the implementation of this new Bill. The cost implication for the consumer of this insurance should be tackled in some way by the Minister. I believe that insurance companies have not examined it totally. While this Bill increases the charge, some attention might be paid to protection in future.

The Bill requires private banks to make disclosures. Although the main banks and insurance companies are not covered in this Bill, the new directive will lead to proper disclosures. This forward move by the EC has been brought into train mainly to give confidence to creditors. Creditors deserve to have confidence. If we are to have a free market, as described by Deputy McCreevy, with all the risks, some limitation must be put on persons' dealings with other persons' funds such as, for instance, the Revenue Commissioners. The Bill provides that auditors will now be expected to make positive comment on accounts and they are encouraged to add notes. Accountants who have analysed the Bill have been very much disposed to include in this problems that have been highlighted in this House recently in reports on pension schemes, implicitly in large companies. The Leas-Cheann Comhairle will remember horrendous scenes here resulting from disclosures about pension schemes in companies in his town. This aspect will be welcomed generally by the community. At least now employees of large companies and their representatives will be able to consult the Companies Registration Office and see the auditors' comments on the State of the various pension schemes and employee and other remuneration.

We cannot condemn this Bill. I am disappointed that Deputy McCreevy, who is forward looking and seeks progress, did not seem to support it. The Minister acted fairly and examined fully with adequate knowledge the Irish economy and put just the necessary detail into the Bill. He has made a tremendous effort to protect the smaller companies and I commend him for it.

I welcome the opportunity to speak on this very complex Bill. The Committee Stage might be the best way to go into this in some detail. In some instances the Bill will have very far-reaching consequences and we must try to strike a balance between the company, the employees and the law under the 4th Directive which has now been implemented.

The Bill sets down many new conditions and I fear that there is some worry among companies now that things may become very awkward and that their confidentiality regarding contracts and types of quotations may be affected. Of course, they must disclose also the total amount of wages and other contributions they pay. I have some reservation here in regard to companies who might be in competition with overseas companies who might see and note their operations. I admit that employees must be protected and the creditors of and suppliers to companies must be taken into consideration. In doing so, we must realise that for nearly all major companies operating in this country seeking finance from any financial institution the day has long gone when they could put up their assets as their full guarantor. In a new trend for some years now if that money is in any way substantial the directors of the company must give personal guarantees to that financial institution. This is a very big move forward for any director of a company. He can cross the boundary in regard to other companies in which he may be involved and in regard to his private affairs also. Therefore, nobody can deny the responsibility of company directors now in a general context. They must see that the affairs of the company are being run properly; if not the directors' assets come into question here.

I hope that this amending Bill that we must bring in now will not be a deterrent — I do not like to use that word — to any new companies who are about to come into operation here. That would be a pity and a great loss to our community. Accountants — I am not in that profession, luckily or unluckily, as the case may be — will have a great deal more work to do under this Bill and that will mean further expenses and charges on companies. There is no doubt about that. Agricultural co-ops and marts who handle more than £200 million per annum should be brought in under the company law. I am not saying that there is not control over them at present, but we should see to it that their accounts are in order.

What is the position of a company that does not wish to disclose all the details of its affairs? A fine of £1,000 is not much of a fine for failure to disclose information because such an amount could be written off as miscellaneous expenditure. We should bear in mind that while company accounts may indicate that money is due to the Revenue Commissioners for income tax, PRSI and corporation profits tax, this may not be the true position because an appeal may be pending, or the amount claimed may be subject to negotiations. However, if such accounts were highlighted in the media, it could result in a flood of people looking for their money or manufacturers refusing to supply goods. That would be very serious for a company.

I note that insurance companies are not covered in the legislation and I take it the reason is that some of them are dealt with under special legislation. I presume that the other companies will be covered in another Bill. I should like to know if the Department have sufficient personnel to deal with the massive correspondence that will pour in following the introduction of this legislation. It appears that there has been some laxity by the Department in dealing with the accounts of some institutions and insurance companies. In the eyes of the public the Department have been slow to follow up on information particularly in cases where there was a lot of speculation that the companies were in severe difficulties. The monitoring in the Department has not been as good as it should have been. That may have been due to a shortage of personnel more than anything else.

In implementing legislation of this type the Department should engage professionals, people who have operated in this area for some years. I always have a doubt about those who rely on theory because theory does not always work out. I am more inclined to favour the person who has practical experience. The behaviour of some companies in the past has been open to question. The provision requiring the publishing of accounts may have far-reaching consequences. I accept that those accounts will indicate how a company is operating but I would be worried about the competitors of such a concern obtaining confidential information. I hope the obligation to publish accounts will not cause any damage in that respect. Many companies are worried about that provision and feel their businesses could be undermined. I accept that that is not the intention of the Minister but the provision has caused a scare among many companies.

The legislation will put more demands on companies. I note that the Minister has said that the operative date will be July 1986 but, in my view, the operative date should be put back to July 1987 to give those covered by the legislation plenty of time to get organised for the change. The Minister may say that, irrespective of how long the date is put off, there will be companies who will not comply and those concerns should accept the warning that they must get their affairs in order.

The main purpose of the Bill is to get all public and private companies to file their accounts. With regard to the report of a chairman of a company to an annual general meeting, it is my view that such people are responsible and will not try to create a false impression for their shareholders. I do not think that they would do that and they would be very foolish to do so.

Small companies have to prepare accounts for their shareholders. These must contain in fine detail the financial standing of the company and the people interested must know the exact position. I welcome that. Shareholders should know the exact position. Information will be available to creditors since even small companies will be required, as a minimum, to publish balance sheets and information in regard to amounts due from debtors and owed to creditors. That goes a good way towards letting interested people know the exact position.

On Committee Stage we shall be able to examine a number of the sections in more detail. It is certainly the intention of this side of the House to be as co-operative as possible, but we will be putting down a number of amendments, hoping that these will get favourable consideration. Judging by the debate here this morning which has been very elucidatory and interesting, both sides of the House have gone into this legislation in great detail and are anxious that, if anything can be done on Committee Stage to improve the Bill, it will be done. We know that when amendments are put down there may be drafting difficulties, but the public will be looking at this Bill and will expect from us in this House the best we possibly can do to protect their interests.

In regard to pension funds operated by companies, I have some views. Funds obtained from employees and companies should be kept in a separate account, completely on their own, so that employees will know the amount going into the account and the total amount involved. Recently some questions have been asked in regard to pension funds, as to why there was a shortfall, or in regard to contributions. I do not want to go into these in detail because they are very technical matters, but I hold strong views on the subject of there being a separate account for this money. That will facilitate the immediate transferral of weekly or monthly contributions to that account and there will be no reservations in the minds of the employees. Many employees to whom I have been speaking recently have some reservations with regard to how their contributions are being deducted, where they are going, and above all, if they are in good hands and properly accounted for — and quite rightly so.

Banks are excluded from this Bill, but I have no doubt that there will be legislation for them. All of us should see that it works across the board and that the public are protected in full. Some small companies will find this new ruling rather cumbersome initially. If the period before bringing this into operation is extended, as I mentioned, that will be a help.

For many years now successive Governments here have been the good boys in regard to adhering to EC regulations. Other countries have brought in regulations in regard to company and other law that are very much open to question, not having any great substance. We have honoured our commitments on entry into the EC. As far as possible, without damaging our economy, we have brought in the necessary amendments. This 4th Directive is being complied with in most of the other countries in the EC, but it might be interesting to look at some of that implementing legislation.

This Bill will have wide reaching consequences. It deals in great detail with companies and their operations and cannot be taken lightly. It is a most important Bill. I have no doubt that in coming weeks many of its sections will be teased out. I hope we shall be able to improve the Bill so that its provisions will not prove too difficult for companies operating here. Above all I would hope that companies who are about to set up operation here and who are training people in management and so on will not be deterred by the provisions of this Bill, or feel they are entering a cumbersome area. I hope its provisions will not be damaging to use in any way at this time when employment is so badly needed.

I shall have a lot more to say on Commitee Stage when my party will be putting down a number of amendments. Judging by the atmosphere in the House this morning it appears there is a lot of goodwill on the part of all Deputies, whatever about the Minister, but I hope that he will go along with many of our proposals to improve its provisions.

I welcome the introduction of this Bill. Although it stems from an EC directive it has been brought forward for the best reasons, that it is neither desirable nor possible to allow the situation to obtain that has obtained for a number of years in which companies can find themselves in the very difficult position that they were not obliged to disclose their position resulting, eventually, in their creditors and employees being placed in a most invidious position through no fault of the same creditors or employees.

The provisions of this directive are constructive and must be of benefit in safeguarding the rights of all who deal with public or private limited companies. I shall go into that aspect in greater detail in a moment. In relation to what Deputy McCreevy had to say, I should say that there are negative and positive aspects involved here. I mean by that that a domino effect could be created if, as a result of the implementation of this directive — in the publication of details — it was found necessary to disclose sensitive information of a nature to cause the company to go prematurely into liquidation or to be put into liquidation prematurely by a creditor or creditors. Its provisions are something with which business in this country will have to become familiar. I make these remarks from experience in dealing with problems of constituents when I have noticed that very often creditors are inclined to panic at the first sign of danger and, through their actions, can bring about a doomsday situation in a particular company. Possibly the reason they panic is that they do not have sufficient information at their disposal to allow them have the confidence they need, to give credit, or for employees to work for the particular company. Perhaps with the implementation of this directive it will be found that they will have that much more information at their disposal, that they will be placed in a better position to evaluate the situation, making up their minds as to whether they are in a safe and secure position as a creditor or an employee. Those are just a few comments on the situation that has obtained.

As other Deputies have said, there will be other directives emanating from the EC, some requiring much more stringent disclosures of information, some of which may meet with a fair amount of opposition here for varying reasons but that is a story for another day. The purpose of this Bill is constructive in the sense that it proposes to disclose to the general public, employers, creditors and shareholders the position of a company at a specific time on which basis it will be possible for all associated with that company — whether they be employees or creditors — to make up their minds about the health of the company.

There is another side to the story in that it will also provide certain information to competitors which may or may not be beneficial. I know there is another directive forthcoming which goes into that area in greater depth. I know there is a certain amount of discretion allowed under the terms of the directive with regard to the sensitivity for certain information. If we take the position of two multinational corporations operating in a competitive situation, one might be very much obliged to act if they could avail of precise information relating to the health of their competitor. That is an area in which the implementation of this and subsequent legislation will have to be monitored because it could open the door to a type of industrial espionage. In any event, there appears to be a fair amount of latitude even under the terms of this directive which would mean that a company would still be assured of its continued existence. Over the past ten years or so, many companies here have just about existed, many have been in difficulty. Indeed I would have to say that some have existed by virtue of not fulfilling their obligations to the State or their employees. That cannot be allowed to continue. The provisions of this Bill constitute one way of dealing with that part of the problem.

The implementation of the terms of this directive could create difficulties for certain companies who might ordinarily have difficulty meeting their obligations and who might experience even greater difficulty with the implementation of the terms of this directive. That remains to be seen.

It is good that this Bill is considered to be a forerunner to further EC directives which might be of a more inquisitorial nature. An opportunity is afforded those involved here of ascertaining how its terms will operate, which might well prove to be very helpful and constructive. That is just a reference to the negative effect it might have on private and limited companies. I suppose all legislation is introduced for positive reasons and I have already outlined the positive aspect of this legislation, that people will have basic knowledge about the financial health of the person with whom they are dealing, whether it be an employer or a debtor.

There is a growing tendency for those giving a service or selling merchandise to concentrate more on the achievement of marketing targets than on vetting the people with whom they are dealing and their ability to fulfil their liabilities. I would fault many companies, private individuals and financial corporations in particular on the manner in which they assess the ability of a person to pay. What is now happening is that judgments are being sought at a very early stage where it appears that the obligations will not be met. Judgments are obtained on a fairly regular basis. This means that the procedures one would ordinarily expect to have been undertaken had not been carried out. The obtaining of a judgment in court puts a burden on another sector and removes certain obligations which should be incumbent on anyone trading or doing business. A major priority should be to assess the prospects of an individual or group meeting their commitment, having regard to their other liabilities. This is a matter which needs careful consideration.

Lending institutions, banks and insurance companies are not catered for under this directive but will be covered subsequently. We have had too many unfortunate experiences in relation to some of those institutions. It might have been possible to avoid much difficulty if disclosure had been a requirement. Even if existing requirements had been complied with, it might have been possible to safeguard the rights of individuals. Some of the things which have happened in that area over the past couple of years leave me with very serious reservations about our legislation because of a number of individuals, some of them very poor people, and quite a lot of companies have suffered as a result of the failure of some of these corporations. They may have been well intentioned initially but by their action or lack of action they caused large-scale problems for some people. I should like to see legislation dealing with insurance companies and banks to ensure that neither the investors nor the tax-payers could be expected to carry the responsibility for their misjudgment or mismanagement.

The amount of information to be disclosed is an important factor. The Minister has indicated that companies will have two options as to how they present their accounts, but they will not be allowed to interchange between the two in order to suit themselves. Nevertheless, from past experience, especially in regard to a particular corporation, it would appear that it is possible to obtain a series of clean bills of health in relation to the operation of a company, although information may be disclosed shortly afterwards showing that the company or companies are not in a very healthy financial position.

On the other hand, by disclosing information at an earlier stage one can bring about a self-fulfilling prophecy whereby companies can be prematurely put in jeopardy or into liquidation. The moral of the story is that great care will have to be taken with regard to the operation of this legislation to ensure that it does not do any damage to what would ordinarily be self-respecting companies, always anxious and willing to fulfil their statutory obligations.

A number of EC countries have not yet introduced this legislation. I am sure there are conflicting interests within those countries and within the EC in general. Deputy Connolly referred to the fact that we are good Europeans and I suppose it is a good thing for small countries to try to uphold the regulations and commit themselves fully to the European concept. I am not referring to this directive when I make the point that we should not always be the first to plunge into the area of adopting legislation which might not be in the best interests of a small, open economy.

I have already referred to the fact that disclosures of information proposed in this legislation can be a help or a hindrance, effective or ineffective, depending on the amount of information disclosed and the manner in which it is disclosed. Under this legislation the format whereby disclosure will take place is fairly strictly laid down and, obviously, that is a step in the right direction because it removes the possibility of the presentation of the trading health of a company in such a way as to mislead those for whom it should be intended to help. The disclosure as set out and referred to in the Minister's speech is fairly well covered.

The Minister said:

The Companies Act, 1963, and in particular the Sixth Schedule thereto, sets down the basic accounting disclosure requirements applicable to the annual accounts of public and private companies both limited and unlimited. These requirements reflect the basic principle that such accounts should provide a "true and fair view" of a company's position and, subject to this over-riding principle, stipulate the information to be contained in the balance sheet, profit and loss account, notes to the accounts, directors' report and auditors' reports.

I referred to that a moment ago in relation to the true and fair view of a company's position. It could be said that, in the past, a true and fair view of the position of companies was disclosed as it were but, with the benefit of hindsight, it often appears that the so-called "true and fair view" might have been fair and probably as true as could be given having regard to the information available but did not necessarily reflect the true and fair position of the company.

I hope that the implementation of this directive will not encourage the publication of misleading information. That also refers to what I have been speaking about, that it could compound the situation if companies, having regard to this legislation, were to compile their reports on the information made available in such a way as to ensure that they complied with this directive but which could be misleading in the long term. I do not want to be specific but there have been instances in the past where this appears to have happened. Deputy McCreevy mentioned that it is quite common nowadays for auditors to be sued. I suppose this originated in America in the medical and other professions where people who felt they had a grievance took action through the courts. One must also remember that the auditor presumably is working on the basis of the information available and that can have a very far-reaching effect on his or her report.

The Minister also said:

I am also proposing in section 2 a particular application of the Bill's requirements in the case of banks and other financial institutions and also in the case of insurance companies. Effectively, the Bill's proposals will result in such bodies having to publish their accounts by filing with the Companies Registration Office and to comply with certain detailed requirements in the Bill, for example, in relation to the directors' report and publication of information on subsidiary and associated companies. However, it is not proposed to require such bodies to follow the specific technical, accounting and presentational measures contained in the Bill, since these are not designed for application to such bodies.

That is an interesting paragraph because the subsidiaries of a company can obviously have a major impact on the health of the main body in any organisation. However, I deduce from the Minister's statement that the same detailed information will not be sought in the case of a subsidiary and this might defeat the purpose of the whole exercise. Perhaps the Minister would look at that area again. Of course I realise that this legislation merely complies with an EC directive.

I wonder if this legislation had been in force four or five years ago what effect it would have had on a number of companies which were in difficulty, changed course or made decisions which, with the value of hindsight, were not in their own best interest or in that of their investors. Would it have had the corrective effect that it should have had? We must ask ourselves that now because the introduction of legislation is one thing but the effect of the teeth which such legislation is likely to have is the other and most important thing. I should like to think that the introduction of this legislation will mean that there will be more stability by virtue of the disclosure or the necessity to disclose and the knowledge that in the case of the companies concerned the necessity to disclose could have a very positive effect, particularly in regard to the trading positions of a number of fairly large companies over the past four or five years.

As with all EC directives I express reservations concerning all the red tape and bureaucracy which accompanies them. I hope that the introduction of the administrative burdens which accompany such legislation will not be so great as to undermine the benefits which might accrue from the implementation of the directive. I already mentioned that shareholders would, to a very great extent, also be protected as opposed to the situation in the past. It should give shareholders a greater degree of knowledge as to what they should do at their annual general meetings. This applies to co-operatives as well as to other businesses.

Debate adjourned.