Deputy O'Kennedy was in possession.
Companies (Amendment) Bill, 1985: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time".
When I reported progress before the extended Christmas recess I had been expressing — in line with the comments of my colleagues on this side of the House — my concern that administrative regulations of this nature being introduced here as a consequence of EC directives should be examined very carefully, at considerable length, before we felt obliged to pass them into our domestic law. This is essential for a number of reasons. First, the application of the directive we are now being asked to pass into law, as yet has not been passed into law in all of the member states of the EC. There is no reason that we, who are especially vulnerable to the application of directives such as this, should be seen to pass legislation of this nature in a hasty manner without examining all of its implications at every stage.
I might recapitulate briefly on a few points. First, more than any other member state we have branches, as they are called, of foreign companies operating in a major way in our industrial programme. These branches, as such, are not liable to disclosure under the Fourth Directive because in many cases the parent companies are based outside the EC, be they in the United States, Japan or elsewhere. They are not liable to disclosure but our indigenous industry is liable. One can see immediately the disadvantage we would impose on our domestic industry which, God knows, at this time is suffering from the sufficiently crippling burdens imposed by the actions or failures of this Government. We want to ensure that our indigenous industry, our corporations, are not placed at a disadvantage vis-à-vis the others operating in our economy who obviously have different corporate structures from ours. That is the first point that needs to be stressed.
The second point to be stressed is that we operate under a protocol since we signed the Treaty of Accession to the EC. As people are now becoming increasingly aware, it is fairly clear that the general policy and actions of the European Community, particularly in the sphere of employment in manufacturing or corporate enterprise, have been entirely inadequate. The level of unemployment in manufacturing industry or in corporate enterprise in EC countries is very much higher than that which obtains in the nonEC countries of Europe. One might say they are a mixed bag in terms of their economic structures and prosperity, ranging from Austria to Finland, to Sweden, to Norway, to Switzerland. Over the last three or four years the level of economic activity of manufacturing growth has been higher outside the Community than it has been consistently within the European Community. Therefore is it not time that the application of restrictive regulations like this one should be considered in great detail as to their further negative or damaging impact on what is already a very weak industrial sector throughout the European Community and particularly so in our case? We hear these days about reconsideration being given to these matters in Denmark. Whether Denmark reconsiders the fundamental issue of their membership of the European Community one thing is eminently clear, that is that the parliamentary committee to review the impact of EC directives, regulations and statutory provisions established in Denmark have power and authority far in excess of anything enjoyed even by this Dáil in respect of secondary legislation of the EC. I have witnessed personally major decisions of the Council being delayed because that parliamentary committee, which has a special function in Denmark — and this is not said in any critical sense of their role — have not been satisfied that the impact of the various directives and regulations would be other than damaging to the Danish economy. Hence, viewing their interests as they see them, they have, I think properly, delayed for months, even years on end, the application of directives that would have a major impact on their economy.
It is true to say that the Minister had expected that we would pass all Stages of this Bill before the Christmas recess. Our spokesman, Deputy Flynn, argued persuasively and at length that this was a matter that should involve the most detailed analysis on Committee Stage as well. It is self-evident that not merely the national interest but the proper and consistent application of regulations throughout the EC would demand that we would hasten slowly in this matter.
There are one or two other matters one is entitled to suggest on Second Stage should be the subject of considerable analysis in the course of Committee Stage debate. One is that the corporate structures throughout the European Community vary from place to place. There are concepts of partnership in the Federal Republic of Germany that do not exist here. Likewise there are corporate structures of law in France and Italy that do not exist here. Clearly, some of these corporate or partnership structures are not covered by the application of the Fourth Directive. Therefore, we may find ourselves in a disadvantaged situation because member states have tailored special corporate or partnership structures to ensure that the impact of this directive will not bite their corporate activities in a damaging way. That been said, then at least we need to draw breath, to seek advice and examine what structures we might propose as appropriate to our economy which would ensure that we too would be able to claim certain privileges or derogations, not because we asked for them but because the structures for which we are arguing are not covered by the directive.
Anybody who has had any experience of the application of European law and directives will know that countries of great sophistication in terms of diplomacy and of administrative arrangement — France is perhaps the best example of this — are very adapt indeed, very sophisticated at ensuring that the manner in which EC regulations or Council decisions apply in their case is minimised in terms of damage and maximised in terms of advantage. They never see it necessary to plead a special case for themselves — they are too sophisticated for that — but they always manage to achieve, whether at Council level or otherwise, that the structures they have and the interpretations they put on European regulations or Council decisions, while apparently — one must say prima facie— consistent with treaties and regulations, are applied in a manner that lessens the burden — if burden it is — of these decisions.
I am not satisfied that this Government have begun to research the possibilities of proposing corporate structures here that would not be influenced directly by this directive. The Minister who is responsible, and who is now being deputised for in the House, after all has been promising us for a considerable time amended company law legislation on matters of such importance as limited liability, and while we are waiting for that legislation — which, of course, will be directly affected by decisions such as this — is it not about time that we co-ordinated our actions? If we allow this to go through right now we are introducing regulations which apply to the existing corporate structure in this country, but we are told that we are about to change that. We have been told for about the last three years that we are about to change it. Deputy Cluskey, who was in the House up to a few moments ago, told us over a few years ago that he had proposals ready for Government in that area. Is it not reasonable that we could not only argue but succeed in the argument at EC level that in so far as we are engaging right now in a major overhaul of our whole company law provisions and regulations, we should not in the middle of that rearrangement and reform — it is a matter of most urgent reform — be forced to apply provisions of this nature which may impact in a different way on structures which now do not even exist?
These are fundamental issues. I am not making it a case of special pleading — we do not do so on this side of the House — in terms of a begging bowl plea to our colleagues in the EC, but not all of our colleague states in the EC have put this directive into effect, and some of them were members before we were. Secondly, the impact of it on this economy could be much more damaging than elsewhere. After all, we have, as I mentioned, a special protocol which means either what it says or otherwise should be treated as mere words. It says that the EC and the institutions of that Community in all of their decisions will do all they can in support of the national policies of development of this State. All Governments, irrespective, would place industrial and corporate development at the centre of their intentions at least if not at the centre of their actions. That is central to the national economic priorities of this State; still we are not even prepared to argue the impact of that protocol on the Council of Ministers in connection with the application of this directive.
That said, I think there is common cause here that the Minister on the face of it seemed to avail of a number of — not derogations — escape routes in the legislation which he proposes. I acknowledge that, and also that the legislation has not been brought before the House in any hasty way. I am anxious to ensure that, it having been brought in here, we have time to consider it in detail here. That is the worry I have. It might have been brought in here three or six months ago and it was not. Now that it is here it should not be just swept out of the House before all of the issues that our spokesman, Deputy Flynn, and many others raised in greater detail than I, have been not only discussed but answered in great detail. The decisions we take here can have a major effect on the economic climate, particularly for corporate enterprises which are already under major attack.
That is the extent of the contribution I wish to make at this point. I hope it will be possible to go into all these matters in much greater detail on Committee Stage and that we shall have an opportunity to ensure that what is passed by us as being in the interests of the Irish people will not have the contrary effect.
I should like to thank all the Deputies who contributed to Second Stage of this debate for the high level of their contributions which obviously reflected a great deal of research. There were many questions asked and I should like to deal with as many as possible individually. I shall start by dealing with some more general points made in the debate.
First, I must repeat that in very many of the provisions of the Bill I have no latitude to make changes, since they are requirements laid down by EC directives. For example, a number of Deputies queried the use of the words "seriously prejudicial" in the context of companies getting exemption from disclosing certain sensitive information if this information were "seriously prejudicial". I must say that I also share the concern about the precise meaning of these words, but they are the words laid down by Article 45 of the directive which covers the exemptions in question. Those are the words that we have to use and apply.
Deputy Avril Doyle asked who would decide what is seriously prejudicial to a company. This is a decision which would be left up to the directors since they are the people legally responsible under the law for the management of the company.
Deputy Flynn raised questions about the appropriateness of this Bill to Irish circumstances, as did Deputy McCreevy, and both Deputies commented on the way in which we handle our national position when confronted with new draft directives which ultimately become directives which have to be incorporated in Bills such as this. Deputy Flynn even went so far as to say that we might be better off if we did not have to implement this directive at all. We do have to implement it. That is the law of the Community of which we are a member and we have run out of time. So far as deferring implementing it is concerned, we are confronted with a case against us in the Court of Justice for non-implementation.
Deputies must bear this in mind, and we cannot take succour from the alleged deficiencies of other member states in their lateness in implementing the directive or, to use Deputy Flynn's remark, the dubious manner in which they were doing so. Indeed, I am not too certain of what is dubious about parts of other countries' legislation and what particularly the Deputy had in mind. However, that is a matter not for me but for the EC to follow up.
As for safeguarding our national position in discussions on directives, I believe this was effectively done in the preparation of this directive. We should remember that the negotiations on the directive covered five years between 1973 and 1978 under both Coalition and Fianna Fáil administrations. Indeed, members of the new party would also have been involved at some stage, so all the parties have been involved.
I believe there was a clear conception of where the national interest lay in deciding on the final form of this directive. Deputy Flynn rightly pointed out that we were already committed to a Fourth Directive type position because the First Directive on Company Law foreshadowed the publication of accounts by all limited companies. What we negotiated in the Fourth Directive was the relaxation for small and medium sized companies.
Various Deputies on the other side of the House referred to the exemption Germany had secured for a particular class of company known as GMBH & Co. K.G. I shall not attempt to give the German words represented by each of those initials but the nearest equivalent under our law is a limited partnership. We are not including these entities in our Bill. Deputies O'Kennedy and Flynn referred to the exclusion of branches of foreign companies from the Bill. Deputy Flynn wants them excluded so that foreign investment here is not jeopardised. Deputy O'Kennedy, on the other hand, complains that they are excluded while Irish firms are covered. I think that it would be wise for Members opposite, at least before Committee Stage, to agree their position on that point.
My position is the one that stands.
That is something which gives me some heart because Deputy Flynn's is the more sensible of the two positions on this issue.
I shall not go into the rights and wrongs of the matter, but I think the Minister and I would both like branches to be exempt.
Of course. Several Deputies asked how will the Bill be policed. Some also felt that the maximum fine of £1,000 for offences would not hurt companies, particularly large ones. Let me be clear on this. Section 22 of the Bill provides for further fines of up to £2,500 on conviction on indictment and a jail term of up to three years. Offences by officers of the company are also punishable.
Furthermore, if a company persist in defaulting in the form of failure to send in their annual accounts to the registrar, the registrar has enhanced powers under recent company legislation to strike the company off the register, and the company are thus wound up. As for policing, this will be done by the registrar. Certain offences in the Bill can also be prosecuted by the Minister.
The reference in my speech to the registrar not being a company invigilator — a good word, that——
A first for the Minister.
——a first for the Department of Industry, Trade, Commerce and Tourism——
Where do they get them?
——was intended to point out that the position, quite rightly, is that the registrar simply acts as a depository for public documents. He is not expected to scrutinise and stand over what companies maintain is the position in relation to their affairs. To involve the registrar in such a scheme of company supervision would not be feasible for the 70,000 companies on the register and it could have severe implications for the liability of the registrar and the State in such matters. The real reason, of course, is that we could not afford to staff the office much more generously than we are doing at present and at a much higher level which would be necessary if we were to take on that role of invigilation.
But the Minister did say there would be company supervision, or supervision of the filings?
Yes, as to compliance with the rules.
It does not go beyond that?
Not really, but people who are worried will have at least a basis for asking questions of the company themselves in the information that is published.
The computer will not ask them unless we ask the Government.
There will be liabilities attaching to these people in the event that that information proves to be incorrect. In the case of the further legislation which I have in preparation, the legislation in regard to abuse, there will be enhanced penalties, both civil and criminal, for people who put false information into accounts. Without becoming involved in a heavy police state to deal with company accounts, there will be plenty of penalties in place within the next year or so to deal with people who do not give correct information and thereby create situations in which others are at a loss. As for laxity in the filing of annual returns, the Government are determined to rectify this situation. Resources are and will be allocated to deal with this problem.
In my opening speech I referred to computerisation in the Companies Office. This is a comprehensive and thorough-going programme to bring the Companies Office documentation up to date and to rationalise and speed up the way in which that information can be made available most effectively to the public who use the office.
The main tasks facing the Companies Office in the computerisation programme are the provision of data to the public from the computer system, the removal of all defunct companies from the register and the bringing of all companies up to date in the filing of their annual returns. The registrar is at present pursuing all companies who are not up to date in filing.
Reference was made in the debate to the position in relation to co-operative societies and agricultural marts and the need to include such entities in this Bill, particularly in view of the size of the turnover, and the assets at the disposal of some of the larger co-operatives in this country. I must say I do not disagree with the general thrust of the remarks made by various Deputies. However, co-operative societies are societies formed under industrial and provident society law, not company law, and we cannot cater for them in this Bill.
Deputies Flynn, Yates and Skelly commented with some vigour about section 23 of the Bill, expressing reservations on the powers contained therein. Section 23 allows the Minister to amend the requirements of the Bill in so far as the contents of the balance sheet and the profit and loss account, and the notes to those accounts, are concerned. I can assure Deputies that there is nothing untoward or sinister in this provision. The powers in section 23 parallel, and indeed are on all-fours with, in other words are the same as, similar powers given to the Minister by section 395 of the 1963 Act. Those powers have been there for more than 20 years without any great disaster befalling the business of the country.
All that is involved in section 23 is a reformulation of this existing provision to allow the Minister to alter the matters contained essentially in the schedule to this Bill, in the same way as he can do exactly in relation to the Sixth Schedule of the 1963 Act. There is absolutely no question of what may have been in Deputy Flynn's mind, which was the motive of the clawing back through statutory orders of what the Dáil here decides.
I am perfectly satisfied that you would not do that. I mean that as a compliment.
I appreciate that. I could return the compliment.
However, I would not be satisfied with everybody else.
I shall have a look at the matter between now and Committee Stage. Presumably we shall be debating it then. The only way I can see any room for amending it would be to still leave relative freedom but possibly circumscribe in general terms what should be the sense of the changes, that they would only be within certain broad objectives. I am not so sure that that is necessary but I shall look into it if Deputy Flynn is still concerned about it. We can discuss it again on Committee Stage.
A number of Deputies mentioned the proposed commencement date. Some asked for confirmation if prior year figures have to be given from the start. Yes, they have. The directive requires this. Deputy Flynn asked that the 18 month transitional period in the directive should be used. This transitional period refers to the period between July 1980, when the Bill should have been translated into national law, and February 1982, the date on which the Bill should have been in operation. We cannot use this transitional period because it has now expired.
As for the implementation date I have in mind that it would apply to financial years beginning on or after the relevant date. The first of July 1986, was suggested to me by the accountancy bodies — on the supposition that the Bill would be passed in December 1985. I have to take it that the accountancy bodies are the people who will know in detail exactly what period is reasonable for companies to comply with the new legislation. I think 1 January 1987 might be too far ahead. While the Bill introduces many new provisions for a lot of companies, it cannot be said that companies were not on notice of this for some considerable time.
Over the past few years officials in the Department have been asked by many accountancy firms when the Bill would be implemented, and what should they do as regards accounts of companies now under consideration. The advice given generally was that they should make plans now for the Bill and start getting companies to institute systems to allow them to collect and collate the material they would ultimately be required to present when the Fourth Directive came into force. I cannot say now when the Act will come into operation. I would like to allow six months from the date on which the Bill will become law.
We will have to argue that.
We are acting within constraints because of the law and the measures being taken to enforce it.
It will cause hardship for some companies who would not be as well geared as larger ones.
I will have difficulty in responding to some of the difficulties referred to by the Deputy earlier.
Deputy Flynn expressed some concern about the provisions of section 17 of the Bill which provides that the Minister may exempt the subsidiaries of parent companies in the EC under certain stringent conditions. I am happy that this is a worthwhile power. I do not see that this particular provision is a "cop-out" facility for subsidiaries of multinationals in this country. The parent of the subsidiary must guarantee the liabilities of the subsidiary. I think some people dealing with a company, including those working for a company, would recognise the benefit of such a guarantee.
I take the point that Deputy Flynn made concerning the Minister's role in granting exemptions. I also note the points he has made concerning the nature and form of the guarantee. I intend to put down amendments on Committee Stage which I am confident will meet the Deputy's points.
Deputy Flynn also made two further interesting points concerning the operation of the Bill. The first of these concerned the use of what is known as an accounting reference date. This would mean that each company would specify what year-end they were using and notify the Companies Office to that effect. The Companies Office would then know when to expect the particular year's accounts.
This sounds very good in theory, and indeed the United Kingdom moved to such a system in 1976. However, it means that the filing of accounts becomes separated from the filing of the annual returns. If I understand it correctly, the UK are now having some reservations about having separated the two filing systems in the first place.
I see no great difficulties for maintaining the current requirement of filing all documents together in one go with the annual return, and I do not see that the problems in the Companies Office will be insuperable. Indeed it is precisely for the reason of reducing the amount of paper flying around that we have instigated the special auditor's report mentioned in section 18 of the Bill. The registrar will simply have to see that report to be satisfied that the information being filed is what it is supposed to be.
Deputy Flynn also suggested that since we are now imposing a lot of requirements on all limited companies, and since more tightening up of company law is envisaged in the future, we must stand back and question whether such arrangements are absolutely necessary, or indeed appropriate, to the small type of family owned or owner-run proprietary company. Deputy Flynn went on to suggest, much along the lines of a Green Paper published in the UK some years ago, that a new form of incorporation should be tried for small companies. This would involve the minimum of filing requirements and would allow the filing of a solvency certificate rather than any detailed accounts.
I must say this sort of thing has certain attractions. Unfortunately, as far as I know, in the United Kingdom the Green Paper seemed to have died from lack of interest. Usually, what happens with these ideas is that when they are being put into law a balance must be struck. It is all right to make things simple for certain types of companies, but you do not want to make them so simple, and you do not want to make the classifications so wide, that other interlopers and "cowboys" would abuse such provisions. We would not require some smaller companies to fulfil all of the requirements on a pragmatic basis. In effect, that is what has been suggested.
How would one convey that to the appropriate people?
It is in the Bill. There will be certain rather stringent requirements brought into company law but these will not apply to companies below a certain turnover.
Would the Minister consider publishing a small information booklet for such companies? It would be invaluable. Big companies have their own advisers.
It is an excellent idea, but it would be better if the accountants concerned, who are in the way of making money in certifying accounts on behalf of such companies, would issue a brochure at their expense. The Department would be glad to help them. It would be of use to the accountancy houses by way of promotional material for their practices while providing authoritative information. One must consider the explosive rate at which new companies are being registered. There are many guides to company law being brought out but Deputy Flynn seems to want a plain man's guide to a corporation—how does one become incorporated in the first place? I will look at it but I am sure it can be done more than adequately by the commercial interests concerned.
There would be great difficulty in defining a company by reference to the motivation or the status of the owner. What often starts off as a simple piece of legislative proposals has to be drafted carefully in order to avoid abuses, and has to have provisions nailed in to exclude this possibility. At the end of the process the provisions allowing for the liberalisation are very often so detailed and cumbersome that those it is aimed at have no interest in making use of the provisions at all.
There is a far simpler approach. We have a body of company law which has operated for more than 100 years. It is in need of amendment and tightening up and this will be done. However, as we have done in this Bill, we can always take account of the appropriateness of certain provisions in relation to companies of different size, or of different structure. I would prefer to do it this way rather than to concoct other untried arrangements.
Quite a few Deputies gave a welcome to the information which we are requiring companies to give in relation to pensions for their staff and employees. There should be no confusion here. The Companies Act cannot provide a system of regulation of pension funds and of pension matters, no matter how desirable that regulation may be. What we have tried to do in this Bill is to encourage the provision of information by companies on whether such pension schemes exist, how they are funded, whether they have been actuarially assessed and, if so, whether the actuary's report is available. I think these simple and straightforward provisions are important and should be welcomed.
Other matters which seemed to concern certain Deputies were the sensitivity of some of the information being required by the Bill, particularly in regard to analysis of turnover. I would simply draw their attention to the provisions which exist in the Bill for exemptions in case of certain matters of sensitivity. Of course, other Deputies, such as Deputy Prendergast, questioned the whole rationale behind what he would regard as the fetish of confidentiality.
Many of the concerns expressed in the contributions of the Deputies I have referred to above related to the fact that the Bill in certain cases went too far. Deputies Mac Giolla and Prendergast, however, felt that the Bill did not go far enough. Deputy Prendergast referred to the Bill as a fraud and a sham. He also referred to the Vredeling Fourth Directive and that the Bill was to give effect to that directive.
Further allegations were also made by both Deputies that the actual number of companies which would be covered was minuscule and that financial institutions and insurance companies were being exempted. I can only say that perhaps some of the concerns of the Deputies arise because they have been misinformed on the subject and what is contained in the Bill.
Firstly, financial institutions, as I pointed out during Deputy Prendergast's contribution, are not exempted. They will have to publish accounts; all they are being exempted from is the detailed format of those accounts. There are good reasons for these exemptions and in my opening speech I went into some detail as to why they were necessary.
Secondly, the reference to the Vredeling Fourth Directive is misplaced. The Vredeling Directive on the information to be supplied to workers is completely separate from the Fourth Directive. The Bill implements the Fourth Directive which is a measure in relation to company law for the protection of the various interested parties dealing with companies. It is not as was the Vredeling Directive, a piece of social or industrial relations legislation which is how one would describe the Vredeling Directive.
Indeed, it is not surprising that it was the EC Social Affairs Commissioner who brought it forward and not the Commissioner concerned with company affairs.
A number of Deputies have already indicated, and I support this view, that information on what is going on in the workplace, and this covers not just financial information, does not have to be provided to the work force by means of filing with a public office, where the information, often of a sensitive nature, would be available to all of the public, not just those working in the plant. It can hardly be in the best interests of all those dealing with a particular company that such information should be disclosed in that manner.
After all the people working in the company have a lot to lose if the company lose their markets because information is given to others. One would expect that people working in a company would prefer to get the information in a manner that was exclusive to them rather than it being given to the world at large which would be the way one would be getting it if there was a requirement that it be published in the Companies Office under the Bill. It makes more sense to deal with that in the context of industrial relations procedures and collective bargaining rather than requiring that the world and his wife have access to this legislation which is proper only to the people employed in the company. Jobs could be lost if information is given to a competitor in a manner prejudicial to the interests of the company and, ultimately, of its workforce.
I agree with the Minister.
The third myth that I must dispel is the notion that only a handful of companies will be required to do anything under the Bill. Reference has been made repeatedly to the term "full" accounts, and the impression has been given that only fewer than 100 companies will be required to publish "full" accounts.
Let us be clear about what full accounts mean. Full accounts in this context means dotting every "i" and crossing every "t" as required by the Bill. Medium sized companies will not have to do that but the amount of information they will have to give both in their profit and loss account and in their balance sheet, is in any layman's language, full accounts in the effective sense of the term. That information will be there for all to see.
The principal exemption which medium sized companies are obtaining is the facility not to have to disclose details of their turnover and cost of sales. The reasons for this are simple and obvious, and the exemptions apply equally to small companies.
Many small and medium sized companies are single product firms. To publish in a profit and loss account the sort of information being required by this directive, which shows turnover, raw material and other costs, staff costs including wages and social welfare and other costs, other operating charges, distribution expenses and so on, would have the effect of providing a simple cost sheet on the costs of production of that firm which will be very useful to competitors both here and abroad. I mention abroad because, for example, in the United Kingdom, and this includes Northern Ireland, small and medium sized companies have been given the exemptions from publication allowed by the directive. I do not think it would be right for us to require that that information be given if it is not required to be given by a person less than 100 miles from here, in Warrenpoint or Newry, who may be in competition in the same product as a person in Dundalk.
However, and this is another myth I want to nail, small companies will be providing important details on their financial affairs. Deputy Prendergast made a revealing comment in his contribution. He instanced a number of occasions on which he had found it impossible, in dealing with companies as a trade union negotiator, to get the financial low-down on a company to see whether their claims that they could not pay a wage increase were justified or not.
I quote here from what the Deputy said:
When I look for a claim for my workers from a company in a business that can well afford to pay, a world brand name, they tell me they cannot afford to pay. I tried to get them to bring in a pension scheme but they said they could not afford to do that either. We asked to see the balance sheet but they said they never disclose it.
Well, we are asking small companies to disclose their balance sheet in this Bill. This balance sheet will convey the following details: fixed assets broken down between tangible assets and financial assets; current assets broken down between stocks, debtors due, falling within one year and more than one year, cash at bank and in hand, creditors, amounts owing within one year and beyond one year, capital and reserves, made up of share capital, reserves, and the profit and loss account. That will provide a lot of helpful information to those anxious to know about the solvency of a company without necessarily wanting to know how it is trading vis-à-vis its competitors.
It will provide too much information.
I am sure Deputy Prendergast, when he gets around to using this information will find it useful. In addition, notes to the accounts are required giving details of accounting policies used. This covers such items as the accounting conventions used, the policies applied on depreciation, research and development, stocks, capital grants, taxation, foreign currency translation and notes on pension benefits.
Further notes to the accounts will detail the breakdown of tangible fixed assets in relation to land, buildings, plant and equipment and motor vehicles. Details will also be given of the amounts of creditors, bank loans and overdrafts, taxation, and the share capital of the company.
This is not just my recipe of the information that small companies will have to give. It is based on advice notes prepared by the accountancy firms for their clients indicating to them what the new arrangements arising from the Bill will be. I suggest that the Deputies concerned might like to get their hands on those documents and study them and see exactly what is and is not covered by the Bill. Those who feel that the Bill is providing too little information will be more than satisfied with what is being required. All limited companies will have to provide this financial information. We are not talking about 137, as mentioned by some commentators, or fewer than 100, or some other very small figure. We are talking about the whole 70,000 companies having to provide this information. This is the very reason why the Deputies on the other side of the House — Deputy Flynn in particular — have been suggesting forms of exemption from this requirement.
When I listened to the various points put forward on Second Stage I was struck by the range of the spectrum we had traversed from those who felt that too much was being asked for — Deputy Reynolds used the term "Socialist" but that is not accurate because the legislation is required by the EC which has within its decision making process parties of all different political views.
Mostly socialist.
No, there are socialists, and non-socialists involved in this sensible type of arrangement. There were those who felt too little was involved, such as Deputy Prendergast.
He did not know what was in the Bill.
In my view we have struck the right balance between the two in the Bill. What we want to do here is stimulate corporate enterprise, and the provision of jobs, not kill it by inappropriate and ill-advised requirements. While I do not think we should burden companies by requiring them to give too much information, we must remember that when a small company go out of business not having paid their debts it is not only the workers who suffer but very often other small companies who may have loaned them money or sold goods on account and are not being paid. If we were to go too far in protecting a small company from the onerous requirement of giving information we might be harming other small companies who are entitled to that information in order to know whether they should extend credit or not.
In the discussion on the Bill a number of issues were touched upon relating to company law in general. Deputy Avril Doyle suggested the introduction of a chapter 11 type system such as they have in the US which puts a company under "intensive care" when its gets into difficulty rather than winding it up. I am very conscious of the benefits of this and my Department have carried out a lot of detailed research on it. Proposals are being developed for my consideration.
The general Bill on abuse in company law is something I have done a great deal of work on with my officials. When I came to this Ministry there were proposals in place but they had not been cleared by the Government. I turned those proposals into heads of a Bill which were approved by the Government. The detailed legal drafting is now underway. I have brought it a considerable distance in the last two years and I hope to bring it further in the next 18 months.
Finally, in my opening speech I referred to the provisions of section 2 of the Bill now before the House and the fact that companies not trading for profit — religious companies and charitable companies — are being exempted under this section in recognition of the non-commercial nature of their activities.
It may perhaps be useful if I refer for a moment to the sort of companies we are dealing with here. Companies not trading for profit would for example be the type of company licensed by the Minister under section 24 of the Companies Act, 1963, so that they do not have to include the word "Limited" in their name. Such companies are formed for the purpose of promoting commerce, art, science, religion, charity or any other useful object, and which apply their income to the promotion of their objects.
In practice the vast majority of these companies are public companies and will, therfore, have to file accounts under the Companies Act, 1963, notwithstanding the exemption under this Act. They are not being exempted from disclosure. The only exemption they are getting is not to have to follow the detailed accounting rules and formats are in this Bill, because those rules and formats are in general not suitable or relevant for them because of their largely non-commercial nature.
The religious companies being exempted are those which are formed for charitable purposes and are under the control of a religion and which exercise their functions in accordance with the laws, canons and ordinances of that religion. Such companies are generally engaged in holding diocesan property in trust and because they are not trading companies the provisions in the Bill would not be suitable for them.
The charities being exempted are small in number and are those in respect of which an order has been made by the Commissioners of Charitable Donations under section 128 (5) of the 1963 Companies Act. It is understood that there are only 23 such companies at present in respect of which orders covering a three to five year period have been issued. However, I am informed that the commissioners recently decided that in future orders will only be granted in very exceptional circumstances so that the number of companies involved is not only small but is likely to diminish even further over the next few years.
I understand that if the orders lapse these companies, being public companies, will have to publish their accounts under the 1963 Act but will probably qualify as non-profit making and thus while required to disclose will not be required to comply with the detailed accounting requirements of this Bill. This will place them on the same footing as the non-profit making companies I referred to earlier.
I have taken a little bit more of the time of the House in replying to this debate than might have been expected. However, when we were discussing this earlier there were many useful and interesting contributions and I trespassed a little on your time to give as full a reply as possible to the points raised. I wish to thank the Deputies who made such interesting contributions, especially Deputy Flynn, who made a very detailed speech, which, unfortunately, I did not hear due to the requirement of having to attend a Government meeting. However, I studied it carefully later.
Question put and agreed to.
When is it proposed to take Committee Stage?
Would the Minister give us an opportunity to frame some amendments which he might consider on Committee Stage?
If the Deputy wishes to give me an indication of the subject he wishes to cover in his amendments it will be helpful. That is if he wishes to do so, but of course he is free not to. It might be a help in meeting his suggestions. It is proposed to take Committee Stage in about two weeks' time, subject to the agreement of the Whips.
Committee Stage ordered for Wednesday, 5 February 1986.