With your permission, a Cheann Comhairle, and I apologise for referring to the matter again, may I seek to raise on the Adjournment the subject matter of Question No. 103 on today's Order Paper, on which I was not allowed to raise supplementaries?
Companies (No. 2) Bill, 1987 [Seanad]: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
I will communicate with the Deputy, even though it is slightly after the appropriate time.
Before Question Time I had referred to the question of competition, legitimate competition and competition deriving from other possible non-legitimate sources and the knock-on effects of such competition.
The Bill does something to redress the imbalance whereby legitimate operators, directors and companies who carry out their business in an orderly fashion found more and more instances where they were put under pressure, for want of a better phrase, by the activities of those who carried out their business in a less legitimate fashion, I believe that the Bill rightly addresses this.
Another area that needs to be addressed is the whole question of public confidence, which is important and fundamental to the entire document before us. When the public have confidence in the operation of an Act of the Oireachtas it obviously does two things. It reassures those who want to carry out their business in a proper fashion and it dissuades those who have other intentions. It is most important that we give due recognition to those sections in the Bill which deal with that. The tightening up of company law will obviously have the effect of reassuring those who wish to conduct their business in a satisfactory, straightforward and upright fashion and should have the added and very desirable effect of discouraging those who wish in some way, to bend the rules, the laws or the regulations in such a way as to benefit themselves or their companies to the detriment of competitors. Business is all about competition and competition is healthy. Good, strong, vibrant, legitimate competition can only do good both to the firm involved in carrying on the enterprise and to its competitors because competition begets competition and the result should be a healthier, sharper, fitter, leaner and more active corporation rather than a docile or sleepy operation which could be the position in cases where competition is not as active or as vibrant as in Ireland.
Public confidence will be much greater after the passing of this Bill as everybody will have to comply with the regulations as set out in the Bill. If they comply with the regulations in the Bill they will find that they will not have to face the dubious competition to which I referred earlier. The point I would emphasise is that if the public have confidence in the make-up of a company it should lend further to the stability of that company, the stability of its operations, the stability of its credit rating and its general enterprise.
Another matter I should like to refer to is the question of the diverse interests of directors and that is adequately covered in the Bill. Obviously company directors can and have had a number of diverse interests in the past. While there is nothing wrong in principle with having one or more interests the danger arises if and when a particular trading enterprise comes under financial pressure and that pressure results in the diverse interests being juggled around in such a fashion as to present an unclear picture of what is happening. Particular reference is made in two sections of the Bill to this matter on the basis that therein could be a serious problem which could evolve to the extent that not only the firm involved would come into difficulty but also other companies in which the particular director, or directors, could have an interest. In other words the knock-on effect of a problem arising in one area — which in itself might be innocent or might be sufficiently small not to have a dramatic impact on other interests — could have a serious effect which, once started, might be very difficult to control and could have the added difficulty of putting jobs at risk in other areas, in other enterprises and in similar enterprises. That of course would not be desirable.
There is another matter and I wonder whether the Bill deals adequately with it. For instance, in planning laws when it was found that various vagabond developers down through the years brought the building industry into disrepute means were found to introduce insurance bonds and cash bonds to ensure against their escape from the system or from their failure to live up to their responsibilities. That legislation in planning laws is quite effective provided the various local authorities renew the bonds as they fall due because if they do not we will revert to the position that existed prior to the introduction of the 1975, 1976, 1977 and subsequent Acts.
I am aware that some insurance cover is available in certain cases. I know also that any overheads of that nature likely to be applied or superimposed on companies through the effect of company law is likely to have a carry over or a consequent cost to the consumer. Notwithstanding all that, in certain dealings between companies and between companies and their consumers there should be some overall insurance type of bond or regulation which would cover the companies being placed at a possible disadvantage should something go wrong. I know the Bill has dealt to some extent with this matter but I am not so certain that it will be dealt with adequately. As long as human beings exist there will always be the odd case where some individual decides to have a go at a venture which might not be a useful venture from the point of view of remuneration and could have the result of putting the company in question in serious difficulty. As a result those dealing with that company might have their interests best served by having some knowledge that at least a part of their liabilities could be met by way of a particular bond or insurance type of cover.
In the case of exporting companies reasonable cover exists in this area. From my discussions — and I am sure other Members in this House have had similar discussions — with people in the business world, this does not necessarily mean vast companies. Very often these are small companies who have a considerable turnover, small corporations operating legitimately on a day to day basis quite effectively and satisfactorily but who, possibly, as a result of some hiccup in the system could well find themselves short of a considerable amount of cash by virtue of decisions taken outside the company.
I do not want to talk about restrictive practices to which I alluded earlier and I am not going to go back over a debate which took place in this House last year but I still think there it is possible — notwithstanding all that is contained in the Bill — whereby careful study of this legislation by very studious scrutineers could show a system still operating whereby there could be in operation some restrictive practices with the result that hardworking and legitimate operators of companies could find themselves at a distinct disadvantage. While the Bill goes some way towards addressing that problem, the Minister may argue that it goes far enough, others will say it does not. I have not made up my mind on the matter yet and I hope that during the Committee Stage it will be dealt with adequately.
The Minister referred to the investigtions which may be carried out into a particular company. That is something that is desirable and necessary in the sense that companies entering into contracts with other companies will obviously like to be able to avail of information which goes some way towards assuring them that they are dealing with a company who are above board. Heretofore in many cases their confidence was dashed by virtue of subsequent happenings and while they were able to get certain information through the usual channels they found that by the clever operation of the system there were a number — and admittedly a minority — of companies and directors within companies who operated the legislation in such a fashion as to make life, to say the very least, very difficult for those who were prepared to operate legitimately.
Therefore, the investigations into the affairs of a company, as proposed in the legislation, will prove to be invaluable from three points of view: (1) of reassuring the public; (2) of reassuring the competitor or the person with whom a particular company proposes to enter into a contract; and (3) it will have the added effect of reassuring the institutions of State who in the past have been left to carry liabilities which were totally and absolutely undesirable and beyond the bounds of all reasonable latitude which could and should have been given in certain instances. In that respect, the old case can be argued as to whether it would be better to terminate the operations of a particular company or business earlier or later, depending on whether they are in a position to trade themselves out of their difficulty or whether their activities should be terminated before they involve others and the State in greater and everextended liabilities from which they can never extricate themselves or be extricated.
Useful legislation is now being introduced whereby it will be possible to get a statement of health at an earlier stage in relation to particular companies. This should put the Minister and his Department in a position to come to a balanced judgment with regard to the viability of a particular firm at a far earlier stage than could have been done previously. Of course, quite an amount of this depends on the degree of co-operation but in the final analysis the Minister and his Department will have at their disposal sufficient legislation and information to be able to take decisions quickly, even if the information is not forthcoming. I believe that this is a useful, constructive and progressive development.
Passing inspections into the activities of companies and their operations, etc, to the High Court as opposed to the Minister, as in the past, is probably a good thing. I know that very often we in this House have not agreed with decisions reached in the courts and likewise we have not agreed with decisions made by Ministers. I am sure that on occasion even ministerial colleagues have disagreed with ministerial decisions. I am sure this will continue to be the case and that Opposition people will disagree with ministerial decisions.
However, this is a change which could be useful or which could cause difficulties. Access to the High Court was reasonably easy for people in this country. The only point I am worried about is whether vexatious inspections, of which there can be some, could cause problems for a company through the clever operation of this Bill. For instance, information might be available to the effect that a particular company were trading very close to the financial borderline and in order to achieve an advantage it might be possible to instigate an investigation in to the affairs of that company, through the courts in this case, whereby attention might be focused in such a fashion as to make life for the company under investigation very difficult. I know that in 90 per cent of the cases which are envisaged under the Bill that that would be desirable but there may be another 10 per cent of cases where that attention, when focused, might not have the desired effect and might have the effect desired by other interests. This is something which should be noted. I know that there are other safeguards built into the Bill but nonetheless the Minister should take account of this and attempt, if possible, to ensure that when this change is made that it is made for the better and that the ill-effects, if any, should be solely and wholly directed at those for whom it was meant in the first instance, as proposed to unfortunate or innocent bystanders.
The other matter I should like to refer to — personal transactions between company directors — is dealt with in Part III of the Bill. The Minister in his speech said that directors should not use their companies as personal banks. If we check the history of various liquidations, both large and small, over the past number of years we will find adequate evidence to indicate the reason for the inclusion of this section in the Bill. I know of cases — and I am sure other Members have had similar experiences — where the degree of lending that took place between a company and its directors — and incidentally this takes place on a large scale and I am sure, as has been referred to by the Minister in his speech, will continue to take place — meant that the liabilities of the director were transferred from them to the company. The directors' personal transactions, wise or unwise, were suddenly found to be the liability of the company and they could do business from their privileged position of being within a firm, having all the advantages of being within a firm and having the back-up of the financial creditworthiness of that firm, while at the same time being able to speculate in a fashion which would be of personal gain to them and to the detriment of the company. This was also referred to by Deputy Cullen. Obviously the company would find itself in a serious situation. That has happened on numerous occasions.
I referred earlier to the two types of difficulties that seem to have arisen in relation to the operation of companies during the past number of years and, in particular, during the past ten years. That arises as a result of a slowdown in the economy where it has become that much more difficult for a business to survive. Often a genuine operation, where the company and its directors hold sincere views and have carried on their business to the best of their ability, will find themselves losing out at the end of the day. I am sure other Members of the House have dealt with cases where a husband and wife and a family have been left with no resources through no fault of their own. They find themselves virtually on the roadside and they cannot qualify for unemployment benefit or assistance or any cover whatsoever. They find themselves having to queue for long hours in health centres for a supplementary welfare allowance, something they had not heard of before. There have been countless instances where individuals in that situation have come to our clinics and told us that they did not even know what their entitlements were or what they could do.
Some people will say that because people have made a mistake and have fallen, they should have known better, and that they only got what they deserved. What about the human side? What about the families affected? What happens to them? The harsh measures that some people would apply in that situation are uncalled for. If a person makes a mistake and recognises it and if the mistake was made through no fault of his own, there must be a means whereby he can become self-sufficient again. There is no reason why he should not be allowed to trade again in the future. I know that the Bill deals with that aspect and that there will be a lot of discussion as to the legitimacy of a plea for such people. From my dealings with the public I feel that we should be careful not to condemn everybody out of hand. The Minister has referred to that when he referred to the minority of offenders. If a person gets into difficulty for reasons that can be readily explained to the institutions of the State, we should not irrevocably condemn him to a life of dependency on this State. It is not good for the morale of business and of business people that such a thing would be allowed to happen.
On the other hand are the people who have been offended by the indiscriminate abuses of company directors and entire companies who have operated outside the system to such an extent that they have put a lot of other legitimate enterprises at risk and have by their general attitude to legislation indicated a contempt which is not helpful or desirable. The restrictions in relation to the personal transactions between the company and its directors is incorporated in the Bill and that is useful and timely. Hopefully, they will operate as intended to take out the cowboys and to ensure that monitoring can allow the institutions of State to come to a value judgment as to whether an operation was satisfactory and as to whether the people involved were doing something that they should not have done. Part III of the Bill refers to this conflict of interest.
Part IV of the Bill refers to the disclosure of interest in shares. In the case of a small family operation it is not really relevant, but in the case of large corporations interests in shares outside of the company can have a very important bearing on the health and activities of that company or other companies. I will not use this debate to refer to ongoing discussions in relation to shares, acquisition of shares or sale of shares in the recent past. I am sure we have all read the newspapers and know what goes on in the business world.
It is timely that this section is incorporated in the Bill for many reasons — because it is necessary, because of the development of industry and the expansion of companies which will obviously take place between now and 1992, and because of the greater competition which will be forced on Irish companies trading in this country, in other EC countries and in third countries and vice versa. The amount of competition which was there previously was quite adequate but from now on the competition will be sharper, the stakes will be higher and they will become higher than we have anticipated at present, notwithstanding any recent events. Because the stakes will get higher the interest will be that much greater and the need to succeed will be that much greater. The need to survive will be the underlying factor in the operation of a company.
All in all, the Bill is welcome. It is extremely involved and detailed. It is something that has been requested for a number of years. The Bill required a great deal of study by the Minister and the Department and by the Minister's predecessors, before it could be introduced. I note the submissions made by the various interest groups prior to the Bill coming before the Seanad and before this House and I note the number of amendments that have already been made. I have no doubt that a large number of amendments will be made in this House.
It is important that a Bill of this nature should receive the most detailed scrutiny we can give it because the effect it is likely to have outside the House is so great. We may find after the passing of this Bill that situations will arise which we have not anticipated. When legislation as weighty as this comes before the House it should be possible to take into account the various submissions and the experience gained both here and in other countries. It should be possible to formulate company law that will be useful well into the next decade and beyond. Nevertheless, company law will have to be reviewed on a more regular basis in the future. The previous Act was useful at the time of its passage more than 20 years ago and effective to a point, but there have been deviations from the spirit and the letter to such an extent that a number of people have lost confidence in the whole structure of company law. Those trading with this country from outside the State were looking at the situation with a very jaundiced eye, for very good reason.
I welcome the Bill and hope that when passed it will have taken account of the detailed submissions from various sections who have been in contact with the Minister and the submissions made during the course of discussion in this House. If the finger is to be pointed afterwards, it must rightly be pointed at us as legislators. If we do not perform our job adequately we will be blamed. We should have enough experience at a general and personal level to formulate the most constructive legislation.
This is a very lengthy Bill containing 11 parts and a total of 207 sections. It has been broadly welcomed by most sections of the community and by Members of this House. The Minister for Industry and Commerce is to be congratulated on his efforts in bringing it before the House. The speed and efficiency with which reforming legislation is brought before the House is a hallmark of this Government. This Bill will be welcomed by the business community who will see it as a genuine effort to tighten the law in relation to administering the affairs of companies and imposing a proper amount of responsibility on directors and other officers of companies. Trade unions and their employee members will also welcome it and will see in it many provisions which will ensure the proper running of the affairs of companies which, consequently, must of necessity protect those employees and their employment.
It needs to be said that this Bill when passed by the Oireachtas will not militate against companies with genuine trading difficulties or companies trying to administer their affairs properly. It seeks to deal in a concrete and reasonable way with companies engaged in fraudulent or reckless trading or sharp practices.
Part II of the Bill deals with the power of investigation. I welcome the extension of the powers of the Minister, particularly as they relate to the possible appointment by the High Court of inspectors to investigate the affairs of companies. If there are people who are nervous of these provisions or consider them to be an invasion of some nebulous right of privacy, all they have to do is read the sections which deal with this. They will see that the powers to be conferred are intended to inhibit those who mean to defraud their creditors or engage in other unlawful activities. This section might be amended to refer specifically to company employees.
Sections 10, 14 and 17 deal with the right to compel officers and agents of a company to produce books and documents and to make statements. These sections are a welcome addition to our existing body of company law. Some people have reservations which are related, for instance, to the right to silence in our criminal law. The sections are necessary in this Bill because we must make provision for fraudulent and reckless trading on the grounds that not only does such trading affect the officer of the company concerned and a particular creditor, for instance, but may also affect fellow directors and officers of the company, the employees, all the other creditors and in certain circumstances the professional advisers to the company.
Section 17 extends the powers of investigation to companies registered outside the State who are either conducting their business in the State or have conducted their business in the State. This is a welcome addition. I welcome also section 20 which gives power to a district justice if the proper information is laid before him to enter and search a company's offices or premises and to take away books and materials which may relate to the affairs of the company. This section will prevent many abuses and in cases where abuses have taken place it will help to sort them out to the benefit of the creditors and the employees.
I believe that many of the features of this Bill, apart from giving the law greater teeth in relation to enforcement of procedures against wrongdoers, will also have a deterrent effect on officers and directors of companies in the conduct of their affairs. All these sections apply or could apply to many companies in this State, past and present. In my constituency of Waterford we recently had a case where a company called Norco, which had received grant aid from the IDA and had enjoyed happy industrial relations and seemed to be trading profitably, simply closed its doors one weekend. The workers were left without any redress and the company simply folded up and went away. If this Bill had been in force and if the employees or creditors had had redress to it, many of the practices that went on in that company towards the end of its venture in Ireland could have been reversed. It is that type of situation which this Bill will remedy and that is one of the reasons I welcome it in broad terms.
Section 16 deals with purchasers for value of shares who did not have notice of wrong-doing or any ministerial or other directive. I sympathise with those who have expressed reservations about this section. In general the law in this country and in many other countries has given protection to people who purchase an item without notice of any wrong-doing and in complete good faith. That possibly is a section to which we might look to somewhat soften the blow.
Part III of the Bill deals with transactions involving directors and I completely agree with the Minister's statement that a company should not be the banker for their directors or officers. That is a principle that almost goes without saying and I am glad to see it maintained and strengthened in this Bill. There may be cases from time to time where a small loan may be appropriate but, the Bill provides for that in stating that loans up to £2,500 may be made in certain circumstances to directors. That is quite sufficient and I do not think that anybody could have a serious crib with regard to that Part of the Bill.
Part IV deals with the disclosure of interest in shares. I am aware that the Incorporated Law Society of Ireland have certain reservations with regard to disclosure. They support completely the principle of disclosure of interest in public companies but have certain reservations in regard to disclosure of parent companies of public companies, or subsidiaries of public companies. I have no such reservations. The affairs, not just of public companies but of their parents and subsidiaries, and indeed associated companies, should be subject to public scrutiny in the interests of employees, creditors and all other interested parties.
The Minister has made a very definite statement that he is very anxious to curtail, and indeed prohibit, the powers of people to engage in insider trading. I agree with his comments on that subject. If one were to go into it in great detail, insider trading can be quite a detailed and esoteric subject. Every layman knows that, basically, insider trading is wrong and in effect is a sophisticated version of the three card trick, as practised by some unscrupulous companies and unscrupulous officers of companies. It is a welcome addition to our law to see greater teeth being given in this area. There are one or two very small specific points in relation to that subject. Section 92 (4) restricts the right of action for recovery — this is in terms of compensation — to a period of two years after the date of completion of the transaction in which the loss of profit occurred. A period of limitation of two years is quite short, given that in most other branches of our law a standard period of limitation would be three or six years and in some cases 12 years or more. That subsection might be amended to read three years rather than two.
Section 97 is the section which deals with a criminal prosecution. Paragraph (a) refers to a summary conviction making a person liable to imprisonment not exceeding 12 months, or a fine not exceeding £1,000. In the District Court at the moment in relation to what would be considered by most people to be relatively minor criminal offences the jurisdiction of the court — for a simple larceny, for instance — is up to two years' imprisonment and fines can be imposed or amounts recovered of up to £2,500.
Given that we are dealing here with companies, that large sums of money may be involved and that, in a minority of cases admittedly, major frauds can be involved, I see no reason that the punishments to be administered in appropriate circumstances in the District Court should be substantially less than the punishments or sanctions which might be imposed in relatively minor criminal matters where the offender might be, and very often is, a person with little or no income, or from a very poor or deprived background, or with very serious social problems. These are two minor comments in relation to the overall Bill, but they are worth taking note of.
Part VI of the Bill deals with windingup and related matters. Basically it gives greater teeth to the existing law and extends and amends it. The provisions in that section are generally to be welcomed. Of note and particularly to be welcomed is the introduction by the Minister of the concept of reckless trading. We are all aware that any type of fraud is and has been punishable under our law, but many companies and many officers of companies have engaged in this practice of reckless trading to the detriment of employees, creditors and the like. The attitude of some appears to be "I literally could not care about anybody except myself. I will do whatever I like in my own interests. I take no cognisance whatsoever of the general public or my responsibilities to my creditors or employees". The Minister, in bringing forward this concept of reckless trading, shows himself to be a very broadminded and far-seeing Minister. This is a concept which will be welcome in broad measure, not just by lawyers or other professional people but by the general public. It must be stressed, of course, that companies or officers acting honestly and responsibly need have not worries. As the Minister says, this is a question of balancing the interests of one group against another but, in general, this concept is a very welcome one.
Likewise, I welcome the extension of the principle of disqualification of directors from future directorships, or the restriction of their powers in regard to acting again as directors or officers should they be guilty of fraud or wrongdoing. The Bill is very specific in this regard. It prohibits directors who have been found guilty of fraud from acting again for a period of five years and in some cases, if the circumstances merit, that period can be longer. If an officer or company go into liquidation where there is no fraud but if there is insolvency and creditors remain unpaid, it is nice to see now that there will be incorporated into our law a condition that the person must satisfy the court or the Minister that such circumstances would not arise again and that provision has been made that they would not arise. This is done, for instance, by providing greater capitalisation. I notice in regard to public companies that that capitalisation would want to be at least £50,000 and in relation to private companies £10,000. These are large sums of money but, having regard to the present value of money, they are reasonable sums to make provision for.
Part VIII deals with receivers. It is to be welcomed that there is now a statutory duty on receivers to get the best price for any company property over which they have control. Rightly or wrongly, many people have felt that receivers were not so much interested in getting the best price so that the employees and creditors of a company can be protected as they are in getting rid of the property. This is a very welcome provision.
I also welcome the provision under which interested parties — and this includes receivers — can come into court if they have a problem in relation to the company or the administration of its affairs and ask the court for directions. This will be a great comfort to receivers, directors, employees, creditors and anybody who has anything to do with the company in difficulties.
Part IX is one of the most forward looking parts of the Bill and provides a very positive indication of the Government's concern to help companies who find themselves in financial difficulties. Very often our laws simply penalise those who have done wrong and impose sanctions on them. It is a welcome addition in this Bill to see that the Minister is concerned about companies who are in trouble is making provision for them to come into court to look for court protection. As he said, companies who are sick can look for a return to health. This is a new concept and one which is very welcome. So far as I can gather the method of doing this will be the appointment of examiners and placing the company under the protection of the court. If the examiner compiles a plan for dealing with the affairs of the company and the court approves that plan, it will be put in force, and remain in force, until the company cease to be under the protection of the court.
I have one reservation about that. In such circumstances I understand the debts of a company are to be frozen and no enforcement action can be taken by a creditor in relation to recovery of the debt due to him. On the face of it, that is a very protective attitude towards the company but I could envisage a situation where many creditors and employees might be placed under an impossible strain by reason of the inability of the creditor company to recover a debt properly due. We hear a lot about cash flow and the problems companies can face if they find themselves in difficulty. This section could have a very serious knockon effect with companies in that category. As I said, Part IX is to be welcomed and is very forward looking but I have that one reservation about creditor companies.
The strengthening of the position of accountants and auditors in dealing with the affairs of companies, particularly in liquidations or receivership, is to be welcomed. May I digress? I am speaking now as a solicitor, but it has always puzzled me how company law has been extended so far as it applies to auditors and accountants to strengthen their powers, yet over a period we have seen efforts being made by people who genuinely do not know any better, to delimit the areas in which solicitors and the legal profession in general may operate. I find that puzzling when, for instance, we see in this Bill the powers of auditors and accountants broadened to encompass more and more work. However, that is not strictly relevant to this Bill. It is a general observation.
Part XI deals with offences generally and section 217 is as important as any other section in this Bill because it deals with the situation where companies or their officers allow the affairs of the companies to be wound down so that eventually the companies close their doors without paying their creditors or employees. There is no fraudulent or reckless trading as such, but it is important to deal with companies and their officers who conduct their business in this way.
The Minister who was responsible for the passing of the 1963 Companies Act deserves a great deal of praise because it codifies the law in relation to companies. This Act has stood the test of time but since then we have seen many amendments as a result of directives from the European Community. This is a substantial Bill, one which will broaden and strengthen the law in relation to companies in Ireland. When we see how it is operating — and I have no doubt it will operate successfully — it might be useful to put all our company law together and codify it for the benefit of all who deal with companies.
This Bill will be welcomed by the public at large and in particular by creditors and employees. I congratulate the Minister on the tremendous effort he has made in bringing forward this Bill, and the speed with which he has done so, considering the other legislation he is putting through this House and the extent of his other responsibilities. I hope the Bill has a speedy and safe passage through the House.
I, too, compliment the Minister for bringing in this Bill which was introduced in the Seanad where it was debated at length on Second and Committee Stages. The Minister said that if suitable amendments were proposed at Committee Stage he would accept them. He has shown a lot of goodwill towards the ideas put forward by Senators and I hope he will be as generous with Members of this House.
This legislation is a continuation of the old British system. If I have a regret it is that we have not tried to remove the mantle we inherited. This is expressed in the way we tend to follow on legislation — as this Bill does — already in place in Britain. It is only to be expected, as other speakers have indicated, that because we are members of the European Community we will have to continue to add to our law various pieces of Common Market legislation in regard to companies.
In this country we tend to look with a jaundiced eye on people who are prepared to invest. If, say, one becomes bankrupt in New York, and within a three or four year period had worked one's way to Los Angeles or San Francisco, the best banks in these cities would probably be prepared to lend you money. As has been indicated, equity is available in the United States to keep companies going there. However, in this country if a person becomes bankrupt they are condemned to hell, there is little chance that they will get up again because of the consequences of their names appearing in Stubbs Gazette and of the various related difficulties. The attitudes currently prevailing in this country break the spirit of entrepreneurs. I commend the Minister for trying in this Bill to deal with rogue companies and directors and with insider dealing. What is important is that the implementation of this legislation be policed.
Something major has to happen in this country. We may have been given the lead by the British. Who in this country would have thought that Lester Piggott, the internationally famous jockey, would have received a three year sentence for abuse of the taxation code? That case had a dramatic effect not alone in the United Kingdom, but also in this country or was reflected in regard to the amnesty announced by the Minister for Finance. As the closing date approached there was a rush of "hot" money to the Revenue Commissioners. There is no doubt but that many of those people would have paid up long before the amnesty was announced if the legislation had been policed. It was our unwillingness to see the law implemented and policed that enabled these people to accumulate such large sums of money. Had this money been paid to the Exchequer many jobs could have been created and a considerable number of people would not have had to emigrate. There has been the attitude of a certain sympathy with the person who runs the risk and runs it to the very end. We do not push him too hard, we give him another chance. Under company law we have given him another chance. In 1963 we implemented a Consolidation Act. We have seen rogue companies set up, companies closing and unions and employees discovering that taxes and PRSI had not been paid. Politicians have sought in the past to relieve the pressure on these companies, asking the Revenue Commissioners if they would accept phased payment of back taxes and PRSI payments. We allowed them latitude but we are now paying the price for the lack of policing of the legislation. This has had an effect on the employment prospects of many people. If this Bill encourages the authorities to police the law as enacted a good days work will have been done by the Oireachtas.
Delayed payments cause unnecessary harm to creditors. Deputy Swift was right to illustrate this fact as I have seen companies go to the wall in my own constituency and creditors being left destitute because they extended their goodwill for too long. It is time that the position of creditors was strengthened. This issue is tackled in certain sections of this Bill and I hope by the time Committee Stage is completed those sections will have been further strengthened.
There are a few other points I wish to make. I would not quibble with the current system. I like the idea that companies can be easily established. I believe that accountants and solicitors do a good job in making their clients aware of limited liability status. At present there are many small companies run by husband and wife teams. A husband or wife wishing to establish a company may go to a solicitor or accountant and be asked if anybody else will be involved. They may indicate that shares may be taken out by the other spouse. The responsibilities which would fall on the silent partner are not always fully explained at that time so I would like to see the law providing for a solicitor or an accountant to be involved in the setting up of a company to indicate to the silent partner that while there is limited liability there are exceptions. For instance, where fraudulent intent is proven some spouses are not aware that debts can accrue to them. Therefore, we should require that an accountant or a solicitor give an independent appraisal to the silent partner. It is not good enough to say that a person can take a document home for the other spouse to sign it and to have it back the following day. We have now reached the stage where both partners in a partnership should be made aware of their responsibilities in what they are undertaking and of the liabilities which could accrue to them.
I have read most of the Second Stage debates in this and the other House and do not want to repeat anything already said. One matter that has been brought to my attention for some time past has been that of companies who advertise in newspapers a service, that of giving advice as to how to invest money. While there is at present some protection here in that regard, I predict that after 1992 the stage will be set when a Frenchman, German or Englishman can advertise in our newspapers, giving free advice with regard to investment. Of course such people will be fly-by-nighters. I wonder whether the Minister has examined that aspect of company law to ascertain whether any protection might be built into the provisions of this Bill with regard to such potential advertisers, or whether they could be prohibited in some way from preying on innocent people.
I commend the Minister on confronting the problem of insider dealing which constitutes another pushover. It is really by way of policing of the law that the regulations with regard to insider dealing will be respected. In this respect I have the impression from a reading of the provisions of this Bill that the Stock Exchange will be self-regulatory. I do not know that that will operate satisfactorily in practice. For instance, I know that people on the New York Stock Exchange, in respect of what would be considered to be a minor misdemeanour here, have spent lengthy terms in prison for their indiscretions. If Americans feel it essential to have hard and fast rules on insider dealing and they can enforce them, it should be possible for us to tackle the matter. It should be remembered that the long-term future of this country will be dependent on workers and directors having shares and trust in their companies. It is my contention that insider dealing should constitute a criminal offence. I am not certain from a reading of the provisions of the Bill that that will be the case.
I might commend the Minister also on the idea of the appointment of inspectors which constitutes a step forward. Certainly in so far as constituency politics are concerned this provision will mean that much pressure will be taken off public representatives by means of there being now a mechanism by which companies can seek the protection of the courts in obtaining an operational period within which they can trade out of their difficulties.
I compliment the Minister on the introduction of this long overdue Bill. For a number of years past I have been of the opinion that something needed to be done to tackle and eliminate the gangsters who operate here in various types of businesses. I refer to people who set up businesses, mainly in the electrical and household goods trade, who operated under a cloak of high-powered advertising, sometimes below-cost selling. They then closed shop, walked away, owing their creditors and the State millions of pounds, in the case of the latter by way of unpaid taxes. In many such instances their workers found themselves redundant, discovering it too late to tackle the problem of unpaid social insurance contributions by their former employers. Because those contributions had not been paid they did not qualify for social assistance. Something had to be done to abolish those types of cowboys. At the same time, legitimate companies who conformed to the regulations laid down by the 1963 Companies Act experienced severe financial hardship on account of the recession and lack of confidence in our economy. Such legitimate companies, especially those in Border areas, had to compete with counterparts in the North when the incidence of trading anomalies was very high.
The fact that the Minister introduced the Bill in the Seanad, the prolonged debate that took place in that House, the number of amendments tabled and the additional sections inserted convinces me once more of the great role the Seanad plays vis-á-vis legislation. Those people who advocate the abolition of that House should take a good look at Bills such as this one — and indeed the Control of Clinical Trials Act and the tremendous work done on it — and they will be equally convinced of its usefulness. Even bearing in mind the expertise of people like Deputy John Bruton and his contribution, including any amendments he may table to this Bill, Bills leaving this House very often leave much to be desired. I know what I am talking about, having been a Member of the other House for four and a half years. Therefore, I advocate that those people who recommend the abolition of that House should think again. Indeed, some might be glad to gain a seat there some time themselves.
It is my belief that the Bill before us constitutes a history of the practices of companies, good and bad. It is also my belief that it constitutes a pooling of the resources of the Department and the business sector which is a very good thing. While long overdue, its introduction is opportune in the sense that we are now experiencing a climate of industrial peace almost historic in nature. In this respect I compliment the Minister for Labour on whose initiative and hard work this climate of industrial peace has been brought about by way of his negotiations with our social partners. I also compliment the social partners, in particular the trade union movement, on their role in this area.
The Bill is a very technical and complex one. I should prefer to deal with the practicalities as I know them in relation to companies and their solvency. There is now, thankfully, a growing sense of responsibility in the commercial sector. The main reason for this is that that sector has renewed confidence, and for good reason, in our economy. For much too long that sector experienced a sense of total insecurity. There existed a lack of confidence in the economy, a sense of insecurity vis-á-vis the market and a total lack of confidence in our banking system.
I must intervene and ask the Deputy to move the Adjournment of the debate.
Debate adjourned.