Skip to main content
Normal View

Dáil Éireann debate -
Tuesday, 8 Nov 1988

Vol. 383 No. 8

Companies (No. 2) Bill, 1987 [Seanad]: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time".

When speaking on this Bill on Thursday last I mentioned that I would be dealing more with practicalities rather than technicalities in relation to the Bill.

However, having had a further look at this Bill over the weekend there are two specific areas about which I am more than a little concerned. First, the banking institutions in so far as they would come under the scope of the Bill — I will give my reasons for that at a later stage — and secondly, the charges and the Revenue Commissioners. If the gangster element to which I referred earlier — what I mentioned as the here today, gone tomorrow whizz kids who are liable to turn up the following week with some other get rich quick operation — are guilty of murder in the financial sense, then the banking institutions, if they could not be accused of murder, could certainly be accused of manslaughter for the way they have behaved over the years.

The area that concerns me is in regard to section 175, Part IX of the Bill. It relates to members' and creditors' proposals as to who has priority in regard to charges against a company which has become insolvent. I understand that there are broadly five categories. Liquidation expenses is a top priority. Secondly, secured creditors — groups of preferential creditors, local authorities and at the top of that list are the Revenue Commissioners. Category 5 refers to anybody who has a floating charge. In most cases these floating charges are held by the banks. What concerns me greatly is, at the bottom of the list, anybody to whom the company owes money and who has not got a charge. My question to the Minister is, should the Revenue Commissioners hold priority preferential status in relation to this matter? There is a case for the removal or amendment of this clause and I would ask specifically that the Minister consider this aspect.

I will give an example of a company which has gone into liquidation and owes £300,000 to creditors, £100,000 to the Revenue Commissioners and has assets of £100,000. My reading of the situation as it stands is that the Revenue take the lot, after the liquidators' expenses have been paid. The bulk of the £300,000 could be owed to suppliers who will be forced out of business and who will have to start on the vicious circle again. This has been the sad history of many of our small indigenous companies in the past. They were the last people to be considered. A supplier might be owed £50,000 and could be totally dependent on getting in that money. If a company becomes insolvent, by the time the assets are disposed of there is nothing left for the supplier, a legitimate trading company who have met their commitments to Revenue and everybody else. That company will be forced out of business.

In the history of small businesses, when such cases as I have mentioned had arisen they found little comfort in going to the banking institutions. That is why I would like to see the banks coming under the scope of this Bill. As I said last week, there is now a growing sense of responsibility and confidence in the commercial sector. They have renewed confidence in the economy and for very good reason. For far too long this sector has experienced a sense of total insecurity in the market and a total lack of confidence in the banking system. In the past two years there has been a marked improvement in this area. Exports have now reached an all-time high. I feel confident that if the trend continues — there is every good reason to believe that it will — export figures will have doubled by 1992 as compared with 1987.

Much of this is due to the hard work and flair of the Minister for Industry and Commerce, with particular reference to the Minister of State, Deputy Seamus Brennan, for his work in the marketing area in that Department. I refer specifically to the establishment of the trading houses set up by the Minister. They will be of enormous benefit to small companies who heretofore had neither the finance nor the capacity in some cases to market their products. I have known companies in the export business, specifically in the meat trade, who have gone to the wall because companies, mainly in mainland Europe, to which they exported their products had become insolvent overnight. The operation of the trading house system will, I hope, ensure that there will be less likelihood of this happening in the future.

As I have said earlier, there was a total lack of confidence in the banking system in this country. I feel I should put on record in this House the irresponsible attitude of the banks over the past 20 years. During a time of recession and depression the main banks maintained a monopoly and operated a cartel to protect their own ambitious interests. High interest rates, enormous bank charges and poor service were the only response from those institutions during that period. Companies, and businesses in general, had to refurbish and reorganise their operations to maintain their competitiveness in the market-place. To add to that, legislation compelled them to comply with health and fire regulations and most of that work was carried out with money borrowed from the banks. The high interest rates during the late seventies and early eighties and other penalties imposed by the banking institutions, together with depressed trade, the black economy and cross-Border trading, left many of those firms in dire financial straits.

The least the banks could have done at that time was to have been sympathetic to that sector. They were not. Their answer was to impose an extra 6 per cent annually on overdue accounts. That played a major part in crippling that sector. In turn, that led to a lower rate of output, unemployment, and added further to the depression. The Minister, therefore, should continue to keep a close eye on the operations of the banking institutions. They may state that they have dismantled the cartel but many people believe, as I do, that it exists in a practical sense. It is long past the time that the doors were opened and other institutions such as credit unions were allowed to operate a banking system.

Most small companies are privately owned and operated. In addition, most are limited liability companies set up under the terms of the 1963 Act. The benefits available to a businessman forming a company under the 1963 Act arise from the creation of corporate personality for his undertaking and limited liability for himself. In practice, for small companies the procedure of limited liability is circumvented by the banks and other financial institutions because they insist on personal guarantees for the owners or shareholders. In many instances company directors not only have to mortgage their businesses but their homes. Therefore, the limited liability holds only for trade and other creditors who tend to be other small companies. From the beginning a small company tends to suffer from a lack of equity and a high level of bank borrowing. All the risks are being borne by the company and its shareholders, and the rewards favour the financial institutions.

I suggest that the Minister examines the feasibility of introducing a low interest loan scheme for small indigenous enterprises. That scheme should not alone cover the manufacturing sector but be broadened to cater for the service sector. I am sure the Minister will agree that our greatest potential for employment exists in the service sector. It could expand rapidly if such a scheme was introduced.

There is an urgent need for inbuilt protection for the legitimate company. The means should be made available to eliminate the gangster-type operator whom the State has been powerless to deal with up to now. The problem of delinquent directors who abuse the concept of limited liability had to be tackled. In liquidations small companies were usually unsecured creditors and they had the problem of dealing with other companies, small and large, who set out deliberately to abuse existing company law. In other words, the multinationals could buy and sell at their own price. The ban on below-cost selling introduced by the Minister has more or less put an end to that practice. However, that ban should be extended to cover vegetables, with particular reference to potatoes, because many farmers will be forced out of business this year due to below-cost selling of potatoes by multinationals.

The problem of delinquent directors who salvage the assets of one company only to start up trading with another company, or under a different name, had to be tackled in a positive manner. I am glad the Minister has done so in section 6. At the same time there is an inbuilt security, a protection for the ordinary decent and honest businessman on whom the country depends for its continued growth and employment. Large companies can have inordinate purchasing power over smaller concerns. Prior to this if a large company became insolvent, or near insolvent, there was little a smaller company, could do under existing legislation to ensure a reorganisation. I am pleased to see that in Part IX there is a mechanism for the rescue of what has been described as sick companies who are regarded as potentially viable. The Bill provides a welcome breathing space for such companies to reorganise.

I hope the Minister gives consideration to my remarks about the banks and their responsibilities. I hope he will consider my remarks about charges and the monopoly that exists. I am more than pleased to give my support to the Bill which should be adopted unanimously by the House.

I welcome the Bill which was initiated by Deputy John Bruton and the Coalition Government. It represents the most major and comprehensive legislation in this area since the Companies Act, 1963, and contains 11 parts and 207 sections. The Bill appears to strike a fair balance between the need to firmly tackle abuse and malpractice and to discourage and prevent dishonest and reckless people becoming involved in limited liability companies. The Bill will encourage and promote honest and genuine enterprises. When the Irish economy moved into a recession which it is still in, the problem presented by the growing number of insolvencies received a lot of attention. The Coalition Government introduced this Bill to protect companies and to prevent abuses. Those abuses ranged from bad and dishonest directors to the misuse of the concept of limited liability. Therefore, I welcome the general principle which motivated the Bill and I should like to acknowledge the work and commitment involved in recent years in bringing the Bill before the House.

However, while I genuinely welcome the Bill, I would like to emphasise that it is imperative that, although abuse must be dealt with, the Bill does not restrict the normal day-to-day enterprise system that exists in the country. Companies must not be deterred from taking risks which at a later date may become illegal or may be considered as reckless or dishonest trading under the provisions of this Bill. It is vital that the Bill strikes the proper balance between curbing abuse and restricting normal business practice. Good legislation must never be oppressive. In this case, oppression would lead to the closures of small business, a loss of confidence in the economic sector of the community, a rise in unemployment and ultimately rising levels of emigration. We must protect against this happening.

I take this opportunity to look at the proposals contained in the Bill and to make some observations and suggestions, which I believe would ensure that a balance is maintained in this vital legislation. First, I will look at the proposals with regard to company directors. The purpose of Part VII, Chapter I, is to prevent directors of companies, which are insolvent and winding up, from being appointed as directors or becoming involved in the promotion or formation of companies, unless such companies meet certain minimum conditions, including greater capitalisation as protection to the creditors of the new company. Section 117 provides that where a company is insolvent and winding up, any person who is a director of the company at the commencement of the winding up or within the previous 12 months will not qualify to be appointed as a director or be concerned with the promotion or formation of any company unless that company has a share capital of £50,000 in the case of a limited public company or a share capital of £10,000 in the case of a private company and the share capital must be fully paid up in cash in each case. Obviously, the aim is to prevent fraud and to ensure that company directors who have a bad record do not continue to be involved in the destruction of another company. However, it must be noted that fraudulent, and dishonest directors are in the minority.

The underlying aim of the Bill as expressed in the explanatory memorandum is to create a climate of confidence for business activity in which genuine commercial development will take place. If this climate is to be created, the Bill must distinguish between fraudulent and genuine business risk. It is important to note that in contrast to the 1963 Act, the present Bill provides for the disqualification of company directors in a much wider range of circumstances. Under the 1963 Act, the court could disqualify a person from being a director where such a person was convicted on indictment of any offence in connection with the management of the company or of any offence involving fraud or dishonesty, whether in connection with the company or not. Under section 128 of this Bill, such a person would be automatically disqualified for a minimum of five years following such conviction. In addition, the court at its discretion may disqualify a person for such a period as it sees fit, where it is satisfied that the person is guilty of fraud, or breach of duty in relation to the company, which makes him unfit to be concerned with the management of a company. I am concerned that a director involved in a company which goes into liquidation for perfectly legitimate reasons would be victimised under these penalty clauses. Because of the additional financial guarantees required, they will be put at a severe disadvantage and may find it impossible to launch their development plans. This section makes no allowance for the honest businessman who is caught up in a liquidation but wishes to form a new enterprise. We will have to look seriously at this question.

This section deals also with people who have acted dishonestly within companies. It is important to emphasise that these positions are not designed in principle to prevent directors of insolvent companies from starting off in business again but merely provide the minimum set of safeguards in the interests of future creditors. The Bill therefore aims to eliminate the Phoenix Syndrome while at the same time attempting to punish the corporate cowboys. Indeed, I think the Minister for Finance, the Department of Finance and the Revenue Commissioners could lend considerably more support and give valuable assistance in making it much more difficult for these individuals and companies to run up debts in the first place.

How are dishonest directors to be brought to book? Under the present legislation if the receiver in a company being liquidated, identifies a fraudulent dealing, he is obliged to take action against such a director. This is difficult for a number of reasons. First, the finances necessary to do this within the company may not be available. Second, it is very difficult to identify legally exactly what is meant by fraudulent and make the case stick. Therefore how can the problem be solved? Mr. Peter Usher in his excellent work, Company Law in Ireland, has suggested that a fund be created to enable liquidators to pursue dishonest directors. I believe this idea has a lot of validity, yet it is not catered for in the proposed legislation. The cost of creating this fund could be spread over the business community as a whole, for instance, by the imposition of a levy on all companies registered at the Companies Registration Office. Mr. Usher proposes an alternative approach which involves shifting some of the burden of dealing with the consequences of company failure from the ordinary creditor to the secured creditor. The secured creditors, banks and financial institutions, have charges over the assets of the company and could be required to devote a proportion of their secured claims to the liquidator's fund to enable him to pursue directors guilty of fraud. If the balance, which I suggested at the outset, is to be maintained then it is vital that structures be set up within the Bill to allow this to happen.

The problem of company fraud would be tackled much better by providing the liquidators with adequate resources to pursue directors who have deliberately cheated their creditors rather than providing for directors to be made liable for the debts of the company in cases where there may have been no conscious dishonesty. I accept that it is difficult in certain situations to distinguish between (a) fraudulent, deliberate dishonesty; (b) necessary business risk and (c) what we would call reckless trading.

Sections 106 and 107 attempt to deal with this problem and section 107 is particularly pertinent. There have been many cases where directors have operated a company in such a way, that without fraudulent intent they have completely disregarded the interests of the creditors and shareholders. In devising the reckless trading provision, the Minister and the Department have endeavoured to ensure that it will not have adverse effects on business by providing safeguards to protect the honest director.

Under the provisions of section 104, if the court considers the person has acted honestly or responsibly it may relieve him wholly or partly from personal liability on whatever terms it thinks fit. However, it must be pointed out that phrases such as "honesty" and "responsibility" are equitable phrases and the instruction of such phrases may involve much litigation before the exact meaning of these terms is clarified. Therefore, at this stage, it is important that these ambiguities within the Bill be carefully examined and if possible taken out.

Great care must be taken in framing the legislation so that appropriate recognition is given to the reality that risk is an inherently acceptable aspect of business and, accordingly, directors of trading companies should not be unjustly penalised because of this reality.

The Bill introduces the concept of reckless trading. It would be totally unacceptable in any circumstances that directors compelled to take acceptable risks in somewhat uncertain trading conditions should be held liable for reckless trading. I recommend therefore that the concept of wrongful trading should be substituted for reckless trading in the Bill. Again, this would help to clarify some of the ambiguous terms which exist in the Bill as it now stands.

I fully support any move to impose appropriate penalties on those who seek to trade in a fraudulent manner. It is essential, however, that any steps which are legitimately taken to protect the public from the actions of those who seek to trade fraudulently should not be such as to virtually undermine limited liability status, which is the cornerstone of commercial enterprise and has been so for more than a century. In a small country with a very high level of unemployment — approximately 18 per cent — and with a national output per head of population of only 70 per cent of that of the EC average, the main focus of our efforts should be to ensure the creation of a climate which will attract more people to establish enterprises. We should ensure that an appropriate balance is always maintained between the need to encourage enterprise and the need to protect the interest of those affected by the enterprise.

As I have stressed in my general acceptance of the Bill in principle, I hope these suggestions may be useful in tying down the ambiguities which appear to be an inherent part of the Bill as now proposed. If it is important on the one hand to weed out dishonesty and fraudulence it is also important to provide some kind of structure within which companies going through hard times may find or receive the opportunity to restructure or redevelop their business. With this in mind I would like to look at Part IX of the Bill.

Part IX proposes the introduction of a new legal mechanism for the rescue and reconstruction of ailing but potentially viable companies. It has been rightly said that the primary objective of insolvency law must be to support the legitimate efforts of directors and shareholders who wish to save an ailing business while, at the same time, protecting the rights of creditors in the event of the business collapsing. Joseph Chamberlain, the former president of the British Board of Trade, once said that Parliament has to endeavour, as far as possible, to protect, to salvage and also to diminish the number of insolvencies. In this respect, therefore, we have much to learn from other countries who have tackled the problem of the rehabilitation of companies in trouble.

Under our present system it is necessary for the directors to have substantially developed their plan for reorganisation before they can approach the court, whereas in the United States, for example, the protection of the court is available during the hiatus period while the plan is being developed. In the United Kingdom the Insolvency Act, 1985, took note of these developments in the United States. The proposed legislation proposes a rehabilitation period of three months to allow companies in difficulty to get some type of reorganisation or regeneration into action. I would welcome this new legal mechanism for the rescue or reconstruction of ailing but potentially viable companies. The central feature of the proposal is the appointment by the court of an examiner and the policing of the company concerned under the protection of the court for a period of three months.

However, there are some suggestions and modifications which I would like to point out here. First, the powers of the examiner need to be strengthened and clarified. It is vital that the brief which is to be given to the examiner be clearly identified. Otherwise, we may have a situation where companies which are not really potentially viable find themselves benefiting from the rehabilitation period. This would be a time-wasting exercise and would create a terrible lack of confidence in the new structure. Secondly, the examiner should be required to report in a timely fashion and in full but not to the degree that would prejudice the company's competitive position.

There is also a very important supplementary point to be made here in relation to preferential collection of debts. This point deals with the area of creditors. In the event of a company being in difficulty, the Revenue Commissioners and local authorities have a public duty to collect unpaid taxes and other charges and they should carry out this duty without reliance on preferential status in the event of a winding-up, if that occurs. A bad debt owed to the State is likely to be insignificant in terms of total Government receipts but the loss of a similar sum to a supplier in an insolvent company could result in serious hardship and bring further insolvencies into train.

In this rehabilitation period I suggest that individual creditors be given preference where possible and that the State, if it is deemed necessary, take a secondary role in the collection of debts. This would also have the advantage of creating further confidence in the Government and in their structures. This would be advantageous to a company in difficulty as they may be able to offset debts during the period of rehabilitation and so allow the company to restructure itself and become economically viable once again.

Thus, there seems to be obvious merit in providing a system in this country whereby a company in temporary financial difficulties can be given a breathing space in which to reorganise and reconstruct and to face their difficulties at a much earlier stage and to take action to salvage the company instead of letting it slide into liquidation and, perhaps, leave a trail of unpaid creditors behind. The Bill has made provision to provide for this but the suggestions I have made will help to create the balance which I have consistently stated from the outset of this statement.

Part V of the Bill deals with the unscrupulous and reprehensible practice of insider dealing. This is a malpractice which is contrary to the principle of maintaining an efficient fair shares market involving equal access to information and so on and also because it impedes the aim of promoting a wider share ownership among the general public. Part V of the Bill proposes to make it a civil offence to deal in securities on the basis of insider information, to pass on information by way of a tip or to deal on the basis of a tip. I welcome this development.

In recent years as business transactions have become more complex, more computerised and more technical, it is very important that legislation be there to deal with this kind of fraudulence. The consequences are twofold. First, ordinary individuals and small investors may lose out as a result of this kind of activity. Secondly, this kind of dealing leads to eventual monopolisation of markets and a predominance of multinational companies.

I also welcome the provision of civil remedies for parties incurring losses as a result of insider dealing. Provision is made for exemption for directors' qualification shareholdings, for pension funds and other schemes solely or primarily for the benefit of employees, for obligations under an underwriting agreement and other limited circumstances. However, the provisions of Part V of the Bill, particularly sections 91 and 92, will give rise to many practical difficulties.

Having regard to the small size of the Irish investment community and the difficulty in determining the loss incurred and identifying each and every shareholder who may have been victims of insider trading, it is difficult to see how the Bill can protect against this problem. However, as in the case of the rehabilitation period and the examiner in the court, I think that the brief should be very clearly identified and that all ambiguities in relation to legal developments must be clearly identified and clarified. This may help to bring about more productive legislative action. The Bill overall is geared to be more beneficial to creditors while, at the same time, tackling the problem of dishonesty and fraudulence within company activities.

With the introduction of this Bill I foresee a greater climate of economic confidence for Irish business. The Bill is aimed at prevention of insolvency, liquidation and fraudulence rather than curing the problem after it has begun. This is a very valid Bill and is very good legislation. I hope my suggestions will be accepted in the spirit in which they are offered. They are aimed at creating a greater balance within the structure of the legislation so as to make the Bill more positive and functional in practice. For far too long it has been possible for people to trade without respect for liabilities due to others. Furthermore, unscrupulous people have been able to re-establish businesses which have previously failed without having to meet liabilities previously incurred and flagrantly disregarded. This has encouraged a situation where a man's word is no longer his bond as successive businesses are pulled down due to the knock-on effect of the failure of one business and has led to a general reduction of business confidence at a time when it is most needed.

People who have confidence are needed to set up business. That requires a stable and satisfactory business climate. I believe this Bill will assist in that objective. However, as I have stated it is vital that we avoid the pitfall of over-legislation within our business community. If we look at the US we can see the huge array of legislation covering all areas of business life. We are a far smaller economy and in our economy too much legislation can stifle enterprise and initiative. Therefore, while I welcome the Bill I believe the demands for further legislation should be accommodated only when it can be shown that further legislation would assist in generating economic benefit to the country. In other words, keep it simple and do not fix it unless it is broken.

The Minister should be open to suggestions and recommendations in relation to this Bill. This openness must stretch into the future and we must monitor and analyse how this legislation affects the business community. Then, and only then, can we see for sure if further legislation would be needed. There is no need to produce too much legislation so as to suffocate any future developments. Legislation must open doors, not close them.

This new legislation in the long term will create situations where information will be readily available. Survival plans can be quickly designed. Directors and creditors can make valid contributions in all areas of the development of the business and the legal structure will be there to provide and safeguard against dishonesty. This Bill opens the way for this to take place and, therefore, it is a valid exercise. I also believe this Bill could be accompanied by a greater drive to encourage investment and industrial development in this country. The Bill allows for security. It allows for openness and potential in the future. This must be counter-balanced by active initiation of industry and financial availability. The IDA and various organisations within the State are geared for this. We must give them more leeway. We must encourage greater investment and we must encourage greater confidence. This is the active side from a business point of view in relation to this Bill.

It is not enough to ensure that directors who are dishonest or reckless are dealt with. Accountability must permeate the company. Can we be sure that the agents concerned in the company — perhaps under the section dealing with auditors and the people who advise those companies — have an obligation to make responsible information available to the company and will be held responsible in addition to the directors for the protection of the common good? If these agents are knowingly involved and aware of the problems of the company and fail to act in the interests of the common good the auditors and accountants in question will have to be brought into the area of civil and legal liability. It is not good enough just to touch the tip of the iceberg. This legislation must guarantee greater confidence throughout the structure of a company and that liability must go further than simply the boardroom. In the area of liability it must be recognised that the penalties imposed upon directors or other members of a company involved in fraudulence must be in keeping and in line with the crime committed. The Bill must pursue a just line of punishment at all times. This is vital so as to encourage bona fide directors within companies to maintain their standards and to feel sure that justice will be seen to be done in relation to business activities.

As I stated clearly at the beginning, the Bill must strike a balance between reducing malpractices in business and encouraging a healthy economic climate; between the penalties imposed and justice observed and between common sense and illegal practices. As a piece of legislation it must not take on too much; otherwise it will become inefficient and create a general lack of confidence. It must strive towards finding a fine line between dealing with dishonesty and not getting bogged down in bureaucracy. I encourage the Minister to look at this carefully and to look at all the resources available within Government Departments to ensure that this Bill works and is as efficient as possible with the least amount of padding and excess. In the words of Benjamin Franklin, the price of freedom is eternal vigilance. We, as a political entity, have a responsibility to ensure that we maintain vigilance on the business community. Ireland's vigilance must not be prohibitive but it must strongly, quietly and assuredly do its work in maintaining an honest, productive and legally acceptable business community.

Like previous speakers I am delighted to contribute to this debate on what is probably one of the most important pieces of legislation to come before the Dáil during this session. This Companies Bill is the first major amendment of the Companies Act, 1963. Like other speakers I should like to put on record the indebtedness of myself and other Members to the Minister for Industry and Commerce, Deputy Reynolds, and also to the Minister of State, Deputy Séamus Brennan. Deputy Lowry asked that they be open to change but I think it is obvious from the Seanad debate on this Bill that they were willing to make changes and in many areas they completely changed various parts of the Bill. I should also like to put on record the indebtedness of this House to the Senators themselves who spent long hours on this Bill. Numerous amendments were made as a result of suggestions made by the Senators which are of great assistance to this House. Carrying out research on this Bill was made slightly easier as a result of two excellent source books by Patrick Usher and Judge Ronan Keane on company law in Ireland. Obviously they will have to amend their books as a result of the passing of this Bill in the future and bring out new editions.

This Bill reacts to a number of issues which are modern phenomena, for instance, the whole idea of reckless trading, insider dealing and in recent times the rescue of ailing companies because of our economic climate during the past 15 years. As previous speakers have said there is definite need for this Bill to strike a balance. The Bill addresses various problems which have arisen in company dealings but it should be pointed out — and indeed the Minister pointed this out in his submission — that the Bill deals only with a very small minority of companies who for one reason or another have seen fit to be dishonest, fraudulent or whatever. It should go out from here that the vast majority of companies are working properly and will not be harmed by any of the circumstances taken care of in the Bill.

Deputy Lowry referred to State intervention. I entirely agree with him that there is a need to limit State intervention and that too much State intervention is an anathema to business. I believe the Minister for Industry and Commerce, Deputy Reynolds, has forged the way in relation to this, in that he has cut red tape in many of the decisions he has taken since he came into this Ministry and he made no bones about it that he would do whatever he could in order to ensure that companies, businesses and firms would not have too much State intervention.

Another area I should like to mention is codification of the law. The legislation in this area was more or less contained in the 1963 Act but because of this amending legislation this area will be covered by two Acts and a small number of amendments to the Principal Act. There may ultimately be a need to put all the legislation into one consolidating Act. The Companies Act was a model for consolidating the law but that has now been broken. Perhaps this issue might be addressed in the future.

A Second Stage debate on a Bill as comprehensive as this is difficult and it would probably be better to go through it section by section on Committee Stage. However, I want to make a number of observations in relation to the various parts of the Bill, the first of which relates to investigations. Up to now an investigation would have largely been carried out by the Minister and his Department but the Bill is now changing this provision. I believe that this is for the better because it was obvious from research that I did that there was a lot of disquiet about the fact that the Minister and his Department were relatively slow in interfering in companies and that their powers under the Principal Act were rarely exercised. I think companies used the winding-up procedure in particular rather than go through the investigation procedure laid down in the Principal Act. Any loosening of that provision is to be welcomed. I note that Judge Keane in his book said that the history of the procedure does not inspire confidence. He was referring to the old procedure and in his book he cast doubts on the new proposals — not necessarily the new proposals in this Bill — being floated at the time he wrote his book.

The Bill proposes that a number of investigations shall be made in relation to a company's affairs, for example, the ownership of a company. This is very relevant particularly in this day and age when some disquiet has been expressed about who owns what company. The Bill also gives power to the Minister to require information and to impose restrictions on shares or debentures if certain facts are not disclosed. I should like to point out that a bona fide purchaser of shares may have difficulty between the direction made by the Minister and the actual publication in Iris Oifigiúil of the notice of the direction. I just wonder if the Minister has addresed his mind to this because if a direction is made the sale of shares is void and between the direction and the publication a purchaser for value who buys in good faith would have this purchase declared void. I also note that the Minister has power to require the production of documents and also the right of entry and search. These extra powers are to be welcomed.

One other aspect that might cause some problem is that answers given by people may be used in evidence against them. I noted that the Law Society in their submission felt that this was undesirable. We hear a lot of talk nowadays about the right to silence. Perhaps there is a problem in relation to this section in that a person is not obliged to incriminate himself by various statements made. That is an area that needs to be looked at.

There has been quite a lot of criticism of what appears to be duplication in relation to the investigation procedure whereby there is a preliminary investigation by the Minister and then a subsequent investigation by the inspectors. I agree that this might lead to uncertainty and it may not allow an investigation by the inspectors to get off the ground quickly. When a company needs to be investigated things need to be done quickly.

I notice that the inspectors' report is admissible as evidence as to the opinion of the inspector. It is not evidence of the various matters referred to in the report. In England they allow the inspector's report to be published whereas our legislation does not require it to be published for the general public and it should be. Mr. Patrick Usher in his book suggested that perhaps there should be a permanent team of investigators in relation to these companies. I would agree with that but perhaps our resources would not allow that to take place.

Section 23 is vital to solicitors and bankers. It relates to the question of privilege. Statements made by clients to the solicitors or to the banks are protected, and that is very welcome.

An aspect which is not covered relates to the area of costs. The fact that there is a more open procedure of investigation will lead to increased costs. I wonder who will be required to pay those costs. This section gives a better and bigger role to the High Court. I wonder will that lead to increased legal costs in this area?

Part III of the Bill relates to transactions involving directors and to the duty to declare an interest. In common law there has always been a duty to disclose an interest in relation to companies. We are now putting it in statutory form. One of the first documents a county councillor signs is a declaration as to interest. It is only right that a company director should declare an interest in this fashion because the omission of a declared interest leads to things like insider dealing and the use of an advantaged position. The common law duty to disclose an interest has been whittled away by various exceptions, most notably section 194 of the Principal Act. Up until now it has not been obligatory to disclose, apart from the common law duty, and the proposal in this Bill makes it obligatory. This is welcome because directors should not be allowed to use their company as a personal bank.

A number of areas in relation to disclosure of particular interest relate to the long-term employment agreements. These will now have to be disclosed and the fact that they will now be disclosed and published could mean an end to this type of employment agreement which has hamstrung various companies in relation to take-overs. Substantial property transactions must also be notified to the shareholders. This is vital if there is to be any confidence in the company.

The other area relating to disclosure relates to loans and the fact that all loans under this Bill, subject to a number of exemptions are prohibited. In my research I noted that the Cox Committee in 1958 advised against the general prohibition against loans. Have things changed over the last number of years? That seemed to be the agreed attitude at that time and I wonder what has caused this change, while I fully agree that directors should not be allowed to use companies as personal banks. Various small loans up to £2,500 are exempt as are credit transactions up to £5,000. This leaves some leeway for the smaller companies in particular.

Part IV of the Bill deals with disclosure of interest in shares. It ties up loose ends in relation to company law where directors have used their advantaged positions. Section 190 of the Principal Act had limited effect and in relation to public companies the Stock Exchange rules more or less ruled. There has been great public concern in relation to undisclosed benefits and this will be taken care of by this Part of the Bill. The Disclosure Court Order relates particularly to private limited companies and it is to be welcomed. People with an interest in a company can go to court and get this order. It does not put a great onus on the people running the company because taking all the regulations in this Act there should be more open disclosure anyway. This Part of the Bill also lists out the number of registers that company secretaries and registrars are obliged to have. There are about five or six registers they are obliged to have and this could lead to a plethora of books. It would be useful if the registers were in one book.

Taking the very topical case of Irish Distillers Limited I wonder if the proposals in this Part of the Bill are strong enough to ensure that particular shareholdings are notified. I know that there is a reporting threshold of 5 per cent but I wonder if this is low enough. It may well have been in the Irish Distillers case but who knows what may turn up in the future.

Part V deals with one of the biggest aspects dealt with in this Bill, that is insider dealing which is more or less related to public limited companies. County councillors are not allowed to use their privileged position and in just the same way insider dealing is highly undesirable. This is a modern phenomenon. Directors have a fiduciary relationship with a company. "Let the buyer beware" does not apply in this area. Directors could sell shares knowing that a company was in trouble. This is dealt with fairly comprehensively in the Bill. The Stock Exchange have rules against insider trading but obviously it goes on and has gone on, particularly in the US and England. An interesting debate took place in the Seanad relating to the original proposal to make insider trading a civil rather than a criminal offence. The Minister and Department were quite willing to change this and I compliment them on their decision to make insider dealing a criminal offence.

The issue of how this is to be policed then arises and this may have to be dealt with more comprehensively in the future. Even the manager of the Stock Exchange felt at the time that insider dealing should be a criminal rather than a civil offence. In America they have the Security and Exchange Commission who were successful in the Boesky case and a number of other cases. We probably do not have the resources ever to have that kind of commission. The proposal in this Bill is to allow the Stock Exchange to be selfregulatory. Would we be able to find Irish counterparts of Boesky and other similar cases? I am not sure. The whole question of self-regulation is an issue. The Law Society are often criticised for being selfregulatory and a number of people are not satisfied. I wonder if that would apply in relation to the Stock Exchange and their regulation of the market.

Computerised dealing, an important area, is not dealt with comprehensively enough in the Bill. I am not an expert in this area but I wonder if the Department have addressed their minds to it. There was a suspicion that we could go too far in relation to insider dealing because the whole Irish scene is very small. Making insider dealing a criminal offence is probably one of the best achievements of the Minister and the people who promoted that change in the Seanad and publicly. I note that there is a proposed EC directive on insider dealing. Perhaps the Minister when replying will say whether the proposal in the Bill takes account of the proposed directive on insider trading.

I now refer to the registration of charges under section 102. Until now a company could, in order to avoid registration of a charge, transfer its shares to a subsidiary and then charge its shareholding in that subsidiary. These new proposals attempt to change this. I have a couple of problems about this area because it is something I have dealt with in the course of my practice. The legislation proposes a stated maximum amount in relation to the charge. This would have fairly radical implications for banks and in the whole area of financing for business. Banks may now be reluctant to give extra loans. People may be reluctant to take them on because of the cost involved. There is no reference in the Bill as to whether this applies to principal or interest. It has been possible until now to stamp up a deed in order to get an additional loan. From now on it probably will be necessary to go through all the costs of doing a new charge and re-registering it in the register of deeds in the Land Registry and also in the Companies Office. This can only lead to extra costs for the companies.

One other aspect is the 21-day time limit for registration of form 47. This has caused quite a lot of difficulty from time to time but it is not addressed in the Bill. It is necessary to obtain a court order in order to dispense with that time limit. If for some reason a person has slipped up and not registered within the 21 days, he is obliged to get a High Court order. Perhaps the Bill could be amended to allow the time limit to be dispensed with in certain circumstances by, say, the secretary of the Companies Office.

Part VI deals with the winding up of companies. The liquidator or creditor may apply to the court to make related companies responsible for the debts of a liquidated company. What would happen if the liquidation was due to bad judgment rather than fraud or dishonesty? Why should a related company be penalised for the debts of the other company if the failure was due to bad judgement? I do not agree with the suggestion that reckless trading should be referred to as wrongful trading. The latter phrase could include mistaken trading and trading by bad judgment. That would not amount to reckless trading. I wonder if it should be referred to as negligent trading. This area is a minefield. In recent times there have been fairly celebrated or infamous cases of reckless trading. Perhaps this whole area will be addressed in this part of the Bill.

Some of the provisions relate to people who knowingly practice reckless trading. The word "knowingly" is much bandied about in legal circles. We had a great discussion as to whether to take it out of the Intoxicating Liquor Bill in relation to juveniles in bars. It is very difficult to prove. It is rightly included in this legislation because if anyone is to be found guilty of reckless trading there should be a definite onus on whoever is pointing the finger to prove the case beyond all doubt.

High costs are involved in the whole area of liquidation and winding up. The increased costs will ultimately be paid from the assets of the company. Several speakers have mentioned preferential creditors. The liquidator's fees have first preference, then the secured creditors and the Revenue Commissioners. Most Deputies feel that the Revenue Commissioners should not have an advantaged status over unsecured creditors. Most people who are involved in business or who deal with people in business know that they are at the bottom of the queue for the repayment of their debt and may never receive payment. They ask quite justifiably why the Revenue Commissioners should have a preferential status over them. This is particularly topical in view of the increased powers of the Revenue Commissioners in relation to sheriffs and the power of attachment. I doubt if this is an area with which the Minister for Finance and his Department would agree. They hardly ever do, anyway.

Part VII refers to the disqualification of directors. We have heard mention of fly-by-night directors and there is no doubt, particularly in the Dublin area, that there have been classic cases of such directors setting up new companies the next day. This has got quite some publicity but perhaps the occurrence is not as rife as people would believe. In country areas it is not so easy for people to act in this fashion because they must face the people in their area; but in Dublin it may be different. I welcome the restriction in this Bill of directors of old companies being able to become directors of other companies provided that certain conditions are complied with. In the case of a public company there must be £50,000 fully paid up share capital and for a private company £10,000 fully paid up share capital.

According to Part VII a receiver or liquidator must notify any person to whom he thinks the section applies. This puts quite an onus on the receiver or liquidator. What happens if he omits to notify somebody? I think that would amount to negligence. This may very well restrict a liquidator or receiver in his duties and may lead to extra costs. The liquidator or receiver may feel that there is a greater onus on him under this legislation. Some have said that it may discourage enterprise but I am not sure that it will. If people do not have anything to hide, they do not have anything to worry about. Some people may be reluctant to become directors of companies.

In the Seanad, Senator Hillery mentioned the question of part-time directors, well known people in the community who are asked to go on boards of directors part-time. Their reputation could be harmed if something happened in which they were not particularly involved in relation to the company. The Bill does allow for some relief, but such people would have to go to court to get a remedy. There is a feeling, with which I would agree to a certain extent, that going to court is not the appropriate remedy. Perhaps something could be done prior to people being disqualified, whereby they could justify their case, or at least have a right of reply with regard to any allegation made. The publicity could be very harmful to those people.

According to Part VIII, at the moment only companies and undischarged bankrupts are excluded from being receivers. This Bill proposes that the servant and also related companies of the servant are disqualified from being receivers. There was the suggestion, with which I would agree to a certain extent, that perhaps shareholders and creditors ought also to be disqualified. This matter has not been addressed in the Bill.

Section 146 refers to the fact that some specified persons may apply for a direction under this part to the courts. An attempt was made in the Seanad to include employees or trade unions in this facility. The Minister has struck a proper balance here. There is no doubt that really only the receiver should be entitled to apply for a direction because he is the person who is managing the company. If there were any interference from others involved in the company it might cause problems within that company.

The Bill also puts a statutory duty on a receiver to get the best price. It is well that this should be in the Bill. Up to now, there has been a common law duty to get the best price but now it has been put on a statutory basis, which should be welcomed.

Part IX, one of the final Parts of the Bill, refers to court protection, the rescue of companies and the appointment of an examiner. Early on, when a company begin to have problems, it is possible that there could be a dissipation of assets by employees, or employers, or directors of the company. It is important to act quickly in order to protect all interests in the company. This section is good. There has been some criticism that it does not go far enough, which may very well be true. Creditors, employees and members are entitled to go to court and apply for such court protection. This puts a stay on any creditors' rights. The debts are frozen for three months. That gives an opportunity for the whole area to be looked into. Creditors may feel aggrieved with this, but they are given an opportunity of knowing that an independent eye is being kept on the company which owes them money.

One aspect of criticism here is that the examiner may spend more time reporting to the court than actually working on the rescue of the company. I note that under the legislation he is obliged to report within 21 days and if he, or the court, feels at that stage that the company is viable, there is another 21 days limit in which an effort is made to get all the parties to agree. At that stage they come back to the court for approval. As I said earlier, it may be that too much time is taken up with reporting. Also, there is a suggestion, which is quite justified, that the costs will be a major element of having to go to court and return to court, because of all the various representations. Perhaps we could look into that question overall in the Bill. There may be too much necessity for going to court, which will lead to massive costs. Ultimately, somebody will have to pay, whether the Minister or the company. I suppose it will be the company. Under US legislation the court appointee becomes owner of the company for the duration, whereas here he has only the power of veto.

That is a broad outline of a number of points in the Bill with which I take issue. I welcome the Bill and hope to have an opportunity on Committee Stage to elaborate on a number of points that I have raised and presumably Committee Stage will take some considerable time. The Bill is a great step forward in the area of company law. It will give the general public a certainty that people who act fraudulently or dishonestly in relation to companies will be dealt with by the full rigours of the law. Most parties in this Chamber are in agreement with the broad outline of the Bill, although some may have different ideas on how things should be done.

I compliment the Minister for the excellent attitude he has adopted in relation to amendments and suggestions, not only from within the Seanad but from without. I note that quite a number of detailed submissions have been made and I have had an opportunity to see some of these. There was a feeling earlier that various interest groups were a little lethargic in putting in their submissions but ultimately, because of the way in which the matter was handled by the Government in putting the Bill before the Seanad and leaving quite a long time for it to be debated, people were given the opportunity to thrash out the various points raised.

One final criticism is that the Bill contains an absolute minefield of legal jargon and this could result in a lot of time being spent in court in deciphering what we as legislators meant when we inserted certain sections. Perhaps, more simple language could have been used but I hope I am wrong. Finally, I would like once again to compliment the Minister, the Minister of State and, indeed, the previous Government, for bringing forward this Bill which is welcome.

I am delighted that at long last this Bill has been brought before the House. It is a Bill which has been talked about for at least a decade. I think it is five years since Deputy Cluskey said that the heads of a Bill were ready. Now five years later the Bill is before the House. This Bill is of major importance and, as Deputies are aware, it is a very substantial Bill. Initially it contained 187 sections but following its passage through the Seanad it has increased to 207 sections, over 154 pages. It is a difficult Bill for Deputies to understand and, as the last speaker said, it is couched in legal jargon. It is a very technical and quite complex Bill, which will be difficult for lay people to understand. It will be difficult for them to know what it is meant to tackle. They will have to go through the explanatory memorandum to find out what it is meant to tackle and when they think they know what it is meant to tackle they will suddenly discover that there are exceptions which will make it very difficult to achieve its objectives. Therefore I would imagine the Committee Stage of this Bill will be very long.

The explanatory memorandum sets out the objectives of the Bill. It seeks to stamp out illegalities and fraud and to help those who want to stay in business. One issue which is not referred to in the explanatory memorandum and which the Bill does not seem to address is the question of the employees' interests, some of whom may spend all of their working lives with a company. Our existing body of law is unsatisfactory, and unscrupulous and crooked business people have been allowed to get away with all sorts of nefarious practices which it is hoped this Bill will help to stamp out. The ones who have suffered most are the employees. Because of these abuses, increasingly in recent years workers have been pressing for the reform of company law, and the trade unions have become very active on this issue.

Governments have shown little enthusiasm for pressing forward with the Companies Bill and I suppose there are reasons for this — different people may not want to tread on different people's toes. Instrumental in bringing forward this Bill is the pressure from workers and trade unions and now the legal obligations on the Government to meet the requirements of EC directives on company law reform. The last such EC Directive to be issued was in 1986. In other words, Governments are being forced to address the question of rogue companies. Everybody knows about these companies as this issue has been highlighted and written about in our newspapers, but nothing has been done about it. As I said, pressure has come from the trade unions and the EC but for whatever reason the Bill is now before us and it is very welcome.

It is widely known that there has been wholesale abuse of company law. Companies have been allowed to evade or avoid taxation by, for example, registering companies in such tax havens as the Cayman Islands or the Isle of Man, the establishment of offshore companies and using nominee shareholders to hide the names of the real owners. Another abuse is in the area of limited liability. It is well know that companies have closed down leaving wages and holiday pay unpaid and debts owing to the Revenue Commissioners and other creditors. In many cases these same people have been able to establish new companies in the same area of business under a different name often within a matter of days. Every Deputy in this House could give examples of this in their own areas. It is now so widespread in the Dublin area that practically everyone living in the city knows some relation or friend who has been involved with one of these rogue companies and knows precisely what happened.

I would like to give one example which was highlighted in the newspapers last March. The Irish Times carried the headline “Carpet firm leaves debts of £650,000”. The article pointed out that T & C Carpets had debts of over £650,000. Creditors at a meeting called to wind up the company, based in Walkinstown, were told quite openly and blatantly that this amount of money was owed and that up to £15,000 in deposits had been accepted from customers. This was publicly admitted by the company and according to the directors of the company the assets of the company were worth only £8,480. According to that article in The Irish Times of 24 March 1988 Mr. Graham Campbell, joint managing director, told the meeting that the company management hoped to start again in business under a different name. He said that the demands from the Revenue Commissioners for unpaid taxes totalled over £38,000, that the company had no choice but to go into liquidation and that he was hoping to start up again in business under a different name. The fact that a man was able to announce publicly that the company were being wound up and that their creditors would not receive any money because the company had no assets indicates the total inability of our existing company law to deal with that type of situation. Despite people's anger there was no redress for them from that company. To the best of my knowledge little if anything, has been paid since. The company are carrying on business under a new name. Of course the new company do not inherit or carry the debts of the old company. Indeed the employees of the old company were owed £18,000 in wages and over £5,000 in redundancy moneys that would have been due to them but in respect of which they had no redress either. That is a frequent occurence. Probably many other Members would have similar examples they could quote.

I recall a case of a company in Dorset Street in Dublin a couple of years ago, a number of whose employees came to me explaining that the crystal glass company concerned was gradually closing down. It had hived off all its assets to a new company. For example, all its transport activities had been hived off to the new company. This meant that, while the old company continued in business, it hired trucks from the new. Gradually all its assets were hived off to the new company and a number of the employees transferred to the new, the remainder being dismissed and the old company closed down. The new company were already in business, all the assets having been transferred to them and set up business under a different name — Dublin Glass or some such title, continuing as before. That company, in addition to dismissing a number of their employees, owed the Revenue Commissioners the moneys deducted from their former employees by way of PAYE and PRSI contributions. Yet the Revenue Commissioners could not hit the new company.

Apart from that type of fraudulent practice there is another example where companies are not doing anything illegal. The whole business of establishing a company is so easy it means that one could establish 500 in a week if one wanted. This practice is most widely resorted to in the construction industry. Take the example of a building company, such as Brennan and McGowan, who engage in that practice regularly. Let us suppose they have 100 acres of land on which they decide to build houses. They will establish a separate company to build those houses. That company may have another site elsewhere on which they build houses and they establish another separate company to build those houses. I am not saying that such companies are engaging in fraudulent practice; they pay all their taxes and so on. Nevertheless, when those 200 or 1,000 houses are built the company that built them can go out of business, leaving the people living in such estates with no redress vis-á-vis any problems arising. Such purchasers can only go after the separate company established for that purpose which will have gone out of business by then. Such companies tend to move to another site, build more houses, wind up the company established for that purpose and move on yet again. This is a widespread practice. It means that such construction companies are leaving residents in estates all over the country encountering problems for ten years afterwards, having to go to the courts and being unable to gain any constructive redress. It is essential that that practice be dealt with.

The provisions of this Bill deal with the question of fraudulent or rogue companies but do not address the ease with which new companies can be established and wound up. This Bill should render it much more difficult to establish and wind up such companies. Such areas of abuse cry out for some type of legislative action. Indeed the interests of the workers of such companies — some of whom might have given a lifetime of service — have not been and will not be well protected under the provisions of this Bill. Their interests should be as well protected as those of shareholders. After all their livelihoods are at stake.

There has been progress made in this area elsewhere in Europe. It is significant that, while our company law has required directors to act in the interests of shareholders, there is no obligation on them to act in the interests of employees. Many men and women are forced to join the dole queues at present simply because their interests were given such low priority by the directors of the various companies in which they worked.

I might refer briefly to the other widely publicised example, that of the H. Williams Group. That whole affair appeared to me to be fraudulent and constituted unscrupulous practice. Of the 1,500 people who worked in that group 700 lost their jobs. The remainder did not retain their existing jobs but had to accept inferior working conditions and lower wages than they had had formerly. Yet that issue has not been addressed at all by the provisions of this Bill. The H. Williams Group case demonstrated that individuals such as Mr. Finbar Holland can dump people out of work, lower other employees' standards of living while they carry on, as if nothing had happened, in their residences in paradise island, in the Bahamas or wherever, where they live in luxury on the moneys they gain from the misery of others.

There are a number of gaps in this Bill. I might refer to a number of issues. For example, there is need for full disclosure of all directors' fees. There should also be a requirement for full disclosure of all donations made by companies to political parties. There should be explicit recognition of the duty of company directors to take account of and act in the interests of their employees at all times. Bearing in mind the scale of the damage that can be perpetrated under existing company law many penalties are totally inadequate and should be increased considerably.

I note that the provisions of section 7 give the courts power to investigate the affairs of a company. This was formerly the remit of the Minister. It is all right so far as it goes, but section 7 (3) renders that provision totally inoperable because it provides that a court may look for a bond of up to £200,000 to cover the cost of any such investigation. This sum is excessively high and it means that practically nobody — with the possible exception of another company or the Minister — will be able to put up such a bond to enable an investigation to be made by the court. I do not know how the figure of £200,000 was arrived at but it will act as a major deterrent to people seeking an investigation and it should be reduced.

Section 11 outlines the persons and bodies to whom a report by an inspector can be given but, in this list, there is no mention of the employees or the union representative. They should be listed as persons and bodies to whom a report should be given as they are more interested than many other people in their companies. Section 31 places restrictions on medium sized companies in making loans or quasi-loans to directors and engaging in credit transactions on their behalf. However, small private companies are exempt. A small private company is one which does not fulfil two conditions, its turnover is not in excess of £2.5 million and it does not have more than 50 employees. That exemption means that the vast majority of private companies will not be subject to any restrictions in these because approximately 80 per cent of all manufacturing companies employ fewer than 50 people. There are over 2,000 small IDA grantaided companies with fixed assets of less than £500,000. In the context of the 75,000 plus, the number of private companies coming within the scope of this section will be very tiny indeed. I recommend that this exemption of small private companies, as described in the Bill, should be deleted and that all private companies, regardless of size, should be subject to the restrictions in section 31.

Further exemptions set out in section 32 include banks and there is no limit on the amount of money which they may advance. Another section sets down disclosure procedures for banks but we are opposed, in principle, to exempting banks from these requirements. They should be brought within the scope of section 31 and subject to the same restrictions applying to other companies.

Section 47 requires every company to keep at its registered office a register of its directors and secretaries in the previous five years. We think that it should apply to the previous ten years. In regard to the interest required to be disclosed under Part IV of the Bill, which requires directors and secretaries to disclose interest in company shares, the disclosure requirements do not apply to private companies but provision is made for similar disclosures by private companies on application to the court for a disclosure order. The interest required to be disclosed should be clarified, particularly in relation to share options and property interest. The exclusion of private companies from these disclosure requirements cannot be justified.

There have been a number of alterations in the Seanad in relation to the Bill dealing with insider trading and fraudulent or reckless trading of a company. It is difficult to relate the amendments, as they stand, to the Bill but it seems that fraudulent or reckless trading of a company is provided for under civil — not criminal — liability. I am a bit confused on this issue because section 115 provides for criminal liability for fraudulent trading but the following sections provide for civil liability for fraudulent or reckless trading of a company. In any case, these should be covered under the criminal liability provision.

Part VII of the Bill places restrictions on directors of insolvent companies and prohibits them from acting as directors or being involved in the promotion or formation of a company unless the company has a fully paid up share capital of £5,000 for a public company or £10,000 if it is a private company. It also provides for automatic disqualification of directors for a period of five years where they have been found guilty of an indictable offence involving fraud or dishonesty in relation to a company. The court may also disqualify directors where it is satisfied that a person has breached or defaulted on company duties, etc.

Restrictions on access to the privilege of limited liability should not be confined to directors of insolvent companies. Directors could evade these restrictions by not formally winding up the company or where the insolvency of the company has not been clearly established. It is generally accepted that the current situation, putting little or no restriction on the setting up of limited companies, has led to the abuse of these privileges. All limited companies, not just those who are directors of insolvent companies, should be required to have a maximum paid up share capital of at least £5,000 for public companies and £1,000 for private companies. This would assist in the point I was making about the ability of certain companies to set up a whole series of separate companies in different sites. If there was a requirement that the minimum paid up share capital was at least £5,000 for a public company and £1,000 for a private company it would be much more difficult to set up a series of companies every few months. The minimum paid up share capital in relation to directors of insolvent companies is too low in any case and should be substantially increased.

There is a provision for automatic disqualification of directors for five years if they have been involved in fraud or dishonesty. This should provide, in addition, that such directors would only be permitted to act again as directors of a company on the clear understanding that all debts from the original insolvency or fraud would be carried forward into their new business. When a company set up a new business, having been insolvent or involved in fraud or dishonesty, they should carry forward all their debts and should be liable to repay all those debts. One of the most important issues is the huge amount of debts left lying after other companies have been established. After five years the company can set up in business and leave those debts and that misery behind them. They will have no responsibility whatsoever for those debts and liabilities, whether to the Revenue Commissioners or to employees who have been left without their wages. That is wrong. They should never be permitted to set up in business again except on the basis that they bring forward all their debts to the new company.

Under section 143 there is provision for information to be supplied by the court to the Registrar of Companies. This section should include a provision whereby the companies office would keep a register of all directors who have been subject to disqualification under the previous section to which I referred. There should be available in the companies office, open to public inspection, and a register of such directors, directors who have been involved in fraud or dishonesty or for whatever reason have left companies and are subject to disqualification under section 125. That information should be kept in the companies office in a separate register. The section dealing with defaulting directors should provide that a disqualification order would automatically apply under paragraphs (a) to (f). The onus should be on such a person to apply to the court for a relief from such disqualification order.

The Bill provides for proper book-keeping and accounting, that books give a true and fair view of the financial state of a company. The company must explain their transactions and the books must be maintained consistently and continuously throughout the year. The Bill also puts personal liability on the officers of a company where it can be shown that failure to maintain proper books was a contributory factor in the case of insolvency. The liability would be on the person responsible for the books. This is a very good provision and is very much to be welcomed. The requirement is particularly important and absolutely essential in the case of small companies because in these cases the procedures in regard to bookkeeping are slipshod and nobody in particular is responsible for them. As I have said, there are 75,000 companies and 80 per cent of them have fewer than 50 employees. It is in these companies that the problems arise so it is essential that these companies in particular are required to maintain proper books of account. I would be totally opposed to any exemptions for small companies in regard to the proper keeping of books of accounts and so on.

Under section 137 a company are required to notify the Registrar of Companies in the case of the removal of an auditor and this is certainly to be welcomed. In addition, the registrar should be required to maintain a register of auditors who have been removed and this register should be open to inspection. Existing company law requires directors to act in the interests of company members only. I have said this already and I must repeat it. Under the Bill there is no specific obligation on companies to take into account or to act in the interests of employees. The Bill should be amended to include a section which states clearly that company directors have a duty to take account of the employees' interests and to act in their interests. This should be a general legal obligation. It should be acknowledge that employees have an interests in companies, at least equal to that of the shareholders, and in the proper conduct of the affairs of the company because they are the sufferers in the long run if the company go to the wall and they are put out of business.

The increasing complexity of company law has greatly increased the workload of the companies office. This Bill will add further to that workload. At present the data available in the companies office is very limited and the procedures for getting it very cumbersome. It can take up to an hour to get out a company file. The charges for looking for a file have increased rapidly in the past few years from 50p to £1.50 and then £2. This increase in charges together with the delays act as a deterrent to people going to the companies office to get information, which they are entitled to do, about as many companies as they wish. The £2 fee and the various problems and restrictions prevent them from getting that information. This might be information to which they are legally entitled in order to fight some injustice that has been done to them. They must pay for the information and spend time looking for it. When they get the information they may find that the files in the companies office are totally out of date and probably have not been brought up to date since the company were set up. The available information is totally inadequate and probably false and people find this out only at a later stage. Some years ago it was stated that up to two-thirds of company files were not up to date in the companies office.

There is no point in providing in the Bill for an increase in the amount of information available to the public if the facilities for getting that information and access to it are not provided. If the information is not available or if wrong information is available all the Bills in the world are totally useless. I do not blame the staff in the companies office. They do their best in very difficult circumstances. The responsibility rests with the Government of the day and they must ensure that the companies' office are provided with the facilities and the finance to permit them to have up to date information readily available for the public. The public are entitled to that service. We are now paying the price for years and years of neglect because previous Governments did not pay the slightest attention to that office. The set-up in the Companies' Office is totally inadequate, particularly when compared to the service that exists in other countries.

It is essential that the penalties set down in the Bill are adequate, are reviewed and updated regularly. Some of the penalties are too low and I intend to refer to them on Committee Stage. The effectiveness of the Bill in curbing abuse and malpractice, which are widespread, will depend on the allocation of resources. Therefore, it is essential that adequate resources are allocated to the Companies' Office so that the legislation can be properly enforced. Enforcement of existing obligations under company law is inadequate. Companies that fail to make annual returns as required by statute are not penalised. The Bill will be rendered totally ineffective if adequate resources are not provided.

Like other Members I welcome this complicated Bill which represents another important step in regularising affairs in the area of company law. It is one of a series of measures passed since the enactment of the original Bill in 1963. The Bill is important from the point of view of business and traders who have been or are likely to be victims of unscrupulous fly-by-night operators. Such operators have folded up leaving massive debts, people unemployed, tax and PRSI due. Their actions have led in many cases to other smaller companies being forced out of business; they have had a domino effect. The legitimate businessmen who suffer at the hands of the fly-by-night operators go out of business and suffer great hardships while the unscrupulous people manage to be able to trade again with apparent impunity. That should not be acceptable in any society. It is an indictment of us all that this has gone on for so long and for that reason I welcome the Bill. I accept that the Minister's predecessors were involved in the preparation of the legislation and they deserve credit for that. All Members welcome the arrival of the Bill in the House, having been passed by Seanad Eireann.

It is inevitable that the part of the Bill that deals with what has been called the phoenix syndrome or the Lazarus league will get most attention because most Members have had some experience of that directly or indirectly. There has been a sneaking regard in the last four or five years by society for the cuteness of the fly-by-night merchants but very little thought was given to their victims. I am glad the Bill will rectify that. It is time we tackled that scandal effectively. The Minister, and Members who have contributed to the debate, endeavoured to be constructive. I have no doubt that the Minister, and the Minister of State, will consider all suggestions put forward in the course of the debate and if they consider them suitable I have no doubt that they will be included in the Bill, as occurred in the Seanad.

The Bill is complicated and technical, as has been pointed out by commentators. The Minister has not denied that it is complicated and that is an indication of the need that has existed for an updating of company law. It underlines the gap that has existed up to now. Many problems have arisen because of the inadequacy of company law. A great change has taken place in the attitude of business people in the last 20 years. It is true to say that some time ago a handshake or the word of a person was sufficient to seal a deal or settle a contract, but now, because of the times we are living in, a team of legal experts, accountants, witnesses and so on are required before a deal is sealed. Not too long ago either if a person hired somebody to work he got an honest day's work for an honest day's pay, but today there has been a change in many people's attitude to work. The attitude appears to be to do as little as possible and hope to get away with it. That is a reflection of the fall in standards in society. It is a pity that we have to pass legislation to try to combat problems which arise from the dishonesty of people. Some people may say that I am wrong about the standards of honesty but it cannot be denied that in the last 20 years there has been a fall in standards.

It is not easy for any Member to make a Second Stage speech on a Bill that deals with so many aspects of the activities of companies. I do not think it is possible for any one speaker to cover all aspects of the Bill and most of the points that concern Members are more appropriate for Committee Stage. Indeed, the debate on the Bill is likely to take up so much time that it might be worthwhile considering establishing a special committee to deal with it. The Minister did not set out to make this a technical or complicated Bill because the thrust of his approach to business, and legislation, is to simplify it. In the Bill the Minister has endeavoured to keep a balance between the need to protect the interests of trade suppliers, employers and other unsecured creditors, and the interests of companies and the general public.

There are many important features in the Bill, but the principal ones deal with the problems caused by company directors who fail in their duties and responsibilities, or indeed who deliberately set out to defraud the company. It is inevitable when we are discussing this Bill that the various cases, as I mentioned earlier, of the fly-by-night merchants will be highlighted. This aspect of the discussion will get most media attention. However, it has to be emphasised again and again that although those cases receive huge media attention and are to the forefront the dishonest individuals are in the minority. Although they are in a minority of companies, this minority can do such serious damage, not just to their own business but also to their employees, the State and indeed to other businesses.

The explanatory memorandum to the Bill points out and stresses that the underlying aim of the Bill is to create a climate of confidence for business activity in which commercial endeavour will prosper and the prospects for economic development in general will be enhanced. I believe the Bill will create that confidence among the business and commercial sector and indeed among the general public as well. Because of what has happened in the past, it is essential if our economy is to recover that such confidence should be restored.

A major aim of the Bill is to stamp out abuses that have crept in and which have been referred to previously. I am satisfied that the Bill will contribute to stamping out abuse. The major features of the Bill are the restrictions on and the provisions for disqualifications of company directors; the introduction of the concept of reckless trading; the issue of liability of related companies in the event of a liquidation; the prohibition of insider dealing; the new legal mechanism for the reconstruction of an ailing but potentially viable company; and the appointment of inspectors by the High Court with wider powers than heretofore. The provisions of Part III relating to company directors are particularly important and will undoubtedly receive most attention for the various reasons I have already stated. Everyone in the House will support the moves being made to try to stamp out what has been termed the Phoenix syndrome. The Bill proposes penalties which will appropriately penalise those who trade in a fraudulent manner. This will help to protect all those involved in legitimate business, their employees, creditors, customers and suppliers.

However, the Bill must keep a balance between this very important and fundamental aim and the necessity to uphold the principle of limited liability which is the cornerstone of commercial enterprise, particularly in an economy such as ours. It is important that the principle of limited liability should be protected at a time when the whole emphasis of industrial policy in this country is shifting to small industry. We have to be careful that we are not on the one hand asking and encouraging people to take risks and to invest their money in enterprises, to set about creating jobs and setting up industries which will help our import substitution while, on the other hand, not allowing them some protection through the limited liability provisions that we have. We have to be careful not to discourage the entrepreneurial skills of our people. We must be willing to support initiative as well as protecting the public. That is a very difficult and delicate balance we have to try to strike in this and other legislation but it is important and very necessary to make it clear to anybody starting off in business that they cannot go into business recklessly and without taking adequate steps to protect themselves, and at a later stage expect the protection of limited liability when their enterprise collapses.

The extension of the inspectors' powers in Part II of the Bill is very welcome, particularly the power to compel witnesses to attend and also the fact that outsiders can be called to give evidence. The provision that bank accounts can be examined is also welcomed. I feel this is long overdue and should go some way towards preventing company directors from hiving off substantial sums of money from their business to their private accounts prior to the collapse of their company. We have had numerous examples of that in the past.

The provisions of the sections in Part III of the Bill are basically to ensure that company directors do not divert other people's money for their personal use. Few would disagree with the general thrust of this part of the Bill. However there is a danger in trying to curb and control the abuses which are undoubtedly there, that we could end up by imposing a huge amount of paperwork and extra bureaucracy on smaller companies. The implications of this part are that a number of registers will have to be maintained and open for inspection. Because of the proposed financial limits involved in a number of these sections in the Bill, it will mean a huge increase in paperwork for companies, which is something we are all trying to avoid. Deputy Ahern mentioned earlier that he had counted them and that five or six registers will have to be kept. I am sure the Confederation of Irish Industry and other bodies will probably suggest that many of the provisions of this part should be deleted or removed but a reasonable compromise would be to increase the financial limit mentioned in the sections, particularly in the sections dealing with loans, quasi-loans and credit transactions. If those limits were increased there would be a reduced amount of paperwork, without actually reducing the effectiveness of the provisions in the Bill.

Part V deals with what is currently termed insider dealing, a person with knowledge or access to information using that information for personal gain. Of course, this is contrary to the principle of efficient or fair markets where everybody has equal access to information. If this were to become too widespread it would hinder development of the wider ownership of shares by the public. The provisions in the Bill should help in some way to curtail insider dealing, but it would be naive to think that it will stamp it out entirely. The Bill makes insider dealing unlawful and will leave the person involved in insider dealing open to civil liability; in other words, the third party will be legally entitled to sue for compensation for losses suffered.

Another provision makes unlawful tips on the basis of inside information. The principles involved here are praiseworthy but the question remains as to how effective they will be in combating this practice. The basic question is the effective policing of this problem. The investment community in Ireland is rather small and is very closely knit. Breaches of the provisions contained in the Bill could be very difficult to detect and, I imagine, more difficult to prove particularly in an age when there is so much computer dealing taking place. Nevertheless, the problem is there and it should be catered for in the legislation.

Another difficulty in this area concerns the implementation of section 192 (1). I wonder if it will be possible to determine the loss incurred as a result of insider dealing and whether it will be possible to identify each and every shareholder who suffers such a loss to follow up on that particular breach of the law? I think it will be very difficult. I am posing the questions but, unfortunately, I do not have the answers.

Part VI is arguably the most important part of the Bill because it is in the winding of a company that most of the abuses come to light. It is at this time that there is most public demand for dishonest directors to be made more accountable for their actions. Part VI attemps to deal with the problems associated with the winding up of a company through a whole series of provisions which deal with abuses likely to come to light. There is a whole series of different provisions which are probably based on past experiences. The Minister has tried to cover most of them. This should help to tighten the law in this area. The proposals in Part VI will give rise also to a careful review of parent-subsidiary relationships particularly where subsidiary companies are experiencing various trading difficulties. The Minister should use this part of the Bill to ensure that all creditors are more diligent in collecting their debts. There has been some reference to this by previous speakers — the preferential treatment that goes to the Revenue Commissioners and to local authorities and so on. The argument used often up to now in relation to the Revenue Commissioners calling in their debt is that they should ease up on a company where the collection of taxes due could lead to the closure of a company. Many well meaning people would say the Revenue Commissioners should back off, that there are 50 or 70 people employed by the company and that the cost to the State would be so much if they were made redundant. However, I do not think such argument is sound because anybody who does not pay his debt to the Revenue Commissioners, to the local authorities or to other traders or members of the public immediately has an unfair advantage over his rivals. Failure to collect and pursue such debts may mean the collapse of a good company who are paying their debts, meeting their tax and PRSI obligations and so on. Essentially, the defaulting company are using money that does not belong to them to compete with companies who are meeting all their obligations.

At this stage when the Revenue Commissioners have, we hope, brought the affairs of most taxpayers up to date, through the amnesty, they should now collect moneys as they become due. They should not, in the event of the winding up of a company, give preferential treatment and neither should local authorities. Both of these bodies should be facilitated in law to make it easy for them to collect debts. That has happened with the Revenue Commissioners through the sheriffs, by way of attachment and so on. It still needs to be done in the case of local authorities.

The fact that the Revenue Commissioners get preferential treatment from the collapse of a company often means that small operations may have to go out of business with the consequent loss of employment and all the hardship that that entails. The loss of the amount of money owing to them, while it could be considerably less than that owed to the Revenue Commissioners, would have a more serious effect. For that reason I would urge the Minister, as other Deputies have done, to have another look at this. As Deputy Ahern has said, I do not think the Minister for Finance would look on it too favourably but, as a State, we should not prop up inefficient organisations whether State, semi-State or otherwise. The revenue Commissioners have more than adequate powers to collect their debts and they should not be given preferential treatment if they fail in their duty.

Section 118 and 119 introduce a very important principle, that is the liability of related companies. It can probably be said that the scandal of the Phoenix syndrome was only matched in the past by the scandal of the assets of one company disappearing into another before the former company was liquidated. Deputy Mac Giolla went into detail on one particular case. I am confident that the provisions in this Bill will help to tackle that problem and ensure its elimination. The danger of these sections could be that companies related to a company that goes into liquidation could be brought down in the liquidation process. However, I think the Bill has adequate safeguards to ensure that this does not occur. The fact that the courts are being given discretion in this regard should ensure that a reasonable approach will be adopted in circumstances of liquidation. This part of the Bill is long overdue. It tackles the problem which all of us have referred to, of companies and directors rising from the ashes and setting up again in business.

One of the provisions of the Bill is that companies with which directors of liquidated or insolvent companies become involved must now have a minimum paid up capital in cash of £50,000 for a public company and £10,000 for a private company. I am not sure if this is an adequate safeguard to prevent people, such as these, from becoming directors again and repeating their escapades. This section will have to be strengthened in some way. For most people this is the core of the Bill in that it tries to ensure that people cannot repeatedly go into business, build up debts, go out of business and carry on from there. I wonder if it would be possible to introduce a stipulation which would require a company where such directors are involved to produce a substantial bond, say, £250,000 or £100,000 depending on the size of the company. Such a bond would protect the public, the employees and other traders in case of liquidation. I do not think such a bonding system for the kinds of individuals we are talking of would be a major imposition on any company who were reasonably viable and doing their best to remain viable. It would probably act as a disincentive to a chancer from starting up in business again. I ask the Minister to have a look at that area and possibly to introduce some kind of bonding system. This is not a new concept. It has happened before and currently even good companies are required to have bonds to protect the public. This happens in the travel business, the insurance business and other businesses as well. It would help to stamp out the practice that was referred to by the previous speaker where companies set up for the duration of the time they want to build a housing estate but they disappear overnight when the last house is sold so that nobody can follow them up for not finishing the estate and so on. This system would help to cut down on the number of such companies.

I am unclear as to whether the provisions of section 128 apply to the formation of companies outside the State. I know that section 17 in Part II of the Bill applies to companies which are registered outside the State but I am not sure if that applies with regard to section 128. It might be useful to have this clarified because some time ago when this Bill was going through the Seanad it was brought to my attention that a number of legal firms were offering their clients the opportunity of registering companies in Northern Ireland or in the UK in order to avoid the provisions of this section. They were offering their clients a service to set up companies in Northern Ireland, the UK or in mainland Europe because at that time — and as I said I am not clear whether this has been closed off in this Bill — the Bill did not refer to directors of companies in Northern Ireland and if a company collapsed it could start off in business again. I should like clarification on this point, and if it is not covered it could very easily be covered by the inclusion of a section in the Bill.

Part IX of the Bill which allows companies to be put under the protection of the court is a welcome provision. It is an unusual provision in our legislation but I believe it is common enough in the United States and in other countries. This provision should be helpful to companies and to all those who might be caught up by the liquidation of a company. It has the obvious merit of providing a system whereby a company in temporary financial difficulties can be given some breathing space in which to reorganise or reconstruct. Because of that I believe the section can be seen as an encouragement to firms in difficulties to face their difficulties at a much earlier stage and to take the necessary actions to salvage the company instead of what happens at the moment whereby a person who sees his company getting into difficulty starts a fire brigade operation, shifting money from one section to another, half paying one fellow and using PAYE to pay creditors. The difficulties mount and there is absolutely no hope of salvation after a short period of time. This section will help companies to avoid sliding down the slope into liquidation. Most of the debts of a company are accumulated when the owners attempt all sorts of things to salvage their companies and, therefore, this provision is useful.

Under the terms of the Bill a company can seek court protection under which the rights of all creditors are temporarily frozen. It will also allow this to happen for a maximum of three months during which the court appointed examiner examines the affairs of a company and keeps a supervisory eye on its affairs while it is under court protection. At the end of the period the examiner will then make his reports. The only suggestion I have in relation to this provision is that if at all possible there should be agreement. I know the court will appoint the examiner and the court will be independent but I believe the court should be encouraged, if at all possible, to appoint an examiner who is acceptable to all of the major interested parties. It would probably smooth the way for everybody if that spirit of co-operation existed from early on.

With regard to this part of the Bill, there is a school of thought which suggests that it could and should be extended to include not only companies which are unable to pay their debts but also companies which make requests for significant extensions of credit, significant extensions of VAT on revenue payments or companies which seek an extension or roll over bank credit. I understand the thinking behind that kind of proposal but I fear that that system could be abused and that people would simply look for court protection so as to avoid paying debts or as a handy excuse for not meeting liabilities for a particular period of time. I believe the Bill is right in as far as it goes and I would be very reluctant to see it being extended any further.

Part X of the Bill deals with accounts and audits. This is very necessary in the light of the evidence available about company failures. The evidence is that many companies fail simply because of poor accountancy practices. Some of them fail because of lack of management skills but many fail simply because of poor accountancy practices. The clarification of the duties of auditors and companies in relation to keeping accounts should help to minimise this. The final section of the Bill contains a very important provision to tackle the problem of insolvent companies which cease trading without going into liquidation. In certain circumstances some of the provisions of this Bill will apply and the Principal Act provides that they will become applicable immediately. I believe that is a vital improvement on the current situation.

I referred earlier to one area which could be tackled in this Bill but which is not, namely, tax defaulting. I do not know what the position is since the amnesty for those who were in tax arrears or whether every company will at all times be up to date in tax payments now, but in the past at various times the Revenue Commissioners have agreed to the instalment payment of taxation when a customer has fallen into arrears. If that practice is to continue, the Revenue Commissioners should require personal guarantees from the traders or directors. In certain cases, in larger companies in particular the Revenue Commissioners, where they make such an agreement should be in a position to appoint nominees to the boards of the companies to protect their interests but that is something that can be dealt with on Committee Stage.

The Bill is timely. It deals with a very complex area which has received much media attention. It must be emphasised again that we are talking about a relatively small group of people and that of that small group of people a minority set out deliberately to defraud. The majority of the collapses which we witnessed probably happened through sheer incompetence on the part of the management.

Because of the complicated nature of the Bill it might merit the setting up of a committee to deal with it on Committee Stage. I congratulate the Minister and the Minister of State, and indeed the previous Government, for their involvement in drawing up the Bill and I hope it will be passed speedily.

Legislation of this nature is very complicated and a Deputy such as I must devote a large amount of time to consider all the sections or else a lesser amount of time to deal with the principle of this legislation. I will make the shorter contribution.

It would be interesting to have the views of business people on this legislation which spans 153 closely printed pages, amending four Companies Acts which are in full force although some sections have been repealed. The principal Act, the 1963 Act, is a huge enactment covering several hundred pages. The 1987 Bill refers to 15 Acts and the result is a vast complex of laws and amendments set out in a multitude of statutes passed over 25 years. This is what a businessman has to face to find out the law in relation to his company. Some of the sections are written in the most complex language with cross references which make it virtually impossible, without legal expertise to understand them. I doubt if a businessman can either trace the relevant law or understand it if he does find it. Yet, it is assumed that the businessman knows the law and he must obey it and apply it to his business. How does he do this?

The least this House might do is put company law into one Act. To the uninformed, and I suspect to many of the self-professed informed, these Acts are a muddle. They are totally inappropriate, for instance, for a young AnCO trainee who has been advised to set up his own business. It should be within the competence of this House to produce a simple Act for private companies of under 50 people. This would cover the vast majority of companies here. I accept that for international financial institutions and for big business complicated Acts may be necessary but these businesses can afford the expertise to interpret them. However, the small businessman cannot. We should legislate more effectively for the people in the business sector. The present mass of inappropriate and complex legislation is unsuitable. On top of all that there has been imposed a whole range of EC legislation which is often inappropriate to the small man starting up in business.

This House must have some regard for reality. We are all being urged to prepare for 1992. If this House is to contribute to that preparation we should supply simple legislation rather than complicated company law. This would make the law more accessible to business people. I ask the House to consider the brevity of my remarks in contrast to the length of the Bill; I hope my remarks are more understandable than the Acts in question.

The lifting of the corporate veil has preoccupied the minds of lawyers and judges for many years. Some of the most learned judges and lawyers throughout that period have failed to come up with a perfect answer. Indeed, many lawyers and judges are of the opinion that there is not a perfect answer. The task facing the legislator is extremely difficult. One has to balance the needs of trade, business and entrepreneurial skills with the need to protect creditors, workers and, ultimately, the general public. A company Bill such as this is the tightwire without the pole, for any legislator. Nevertheless, legislators are obliged to try to balance the needs of both sides.

The Bill will secure genuine creditors much better than previously. It is also fair to say that in doing that the corporate veil has been lifted ever so slightly. That is not to say that directors of companies have not always been in a trustee-like situation with the sharholders in a given company. This Bill attempts to tackle specific acts of fraud and/or recklessness. Over the last number of years all too often we have witnessed deliberate deception, fraud and larceny on a grand scale by a small minority who have no regard for their obligation under the law to their shareholders, their fellow-direc-tors and their creditors. This legislation has been needed for a considerable time to address problems in what may be described as a new busines and industrial age.

Debate adjourned.
Top
Share