Before we begin the debate on the Committee Stage let me take this opportunity to inform the House——
Companies (No. 2) Bill, 1987 [ Seanad ] : Committee Stage.
There is still some noise emanating from the Lobby.
——of my general approach to this debate and in particular to amendments. When this Bill was going through the other House I indicated that at all times I would be willing to listen to reasonable arguments and where I was convinced by the merits of the arguments I went ahead and made the amendments. I think Senators on all sides of the House were very gratified I took that approach and the Seanad generally agreed that the Bill left that House much improved. I would like to adopt the same approach in this House and, therefore, when I see an amendment which will clearly improve the Bill I will have little or no difficulty in accepting it. In some cases, while I may see some merit in an amendment I may have difficulties with the wording and may wish to look at it between now and Report Stage. In other cases, I will disagree with Deputies in regard to amendments to the Bill and I hope they will understand that I am not doing so just to be difficult but rather because I am committed to the section in the Bill.
Having said that, I am fairly happy that we have just about struck the right balance at this stage and at this point I would not see us embarking upon any major change in policy or direction but I will be more than happy to listen to the points that will be put forward. I would like to remind the House that this is major legislation which has come through the Seanad and Second Stage in this House. We are now coming to deal with the most important Stage and getting down to deal with the details of the various sections. I hope we will do so in a constructive way and I hope to accept as many amendments as I possibly can and where I cannot accept them to explain my reasons for not doing so.
That approach on the part of the Minister of State is most welcome. It has been suggested by some, including Mr. Justice Keane in his bookCompany Law in the Republic of Ireland, that we should seek to codify company law in one consolidating Act in the same way that all social welfare legislation was consolidated in one Act a few years ago. This Bill will tag many amendments onto the existing legislation rather than codifying all previous legislation. Can the Minister tell us if he thinks that codified legislation might come forth in the foreseeable future and can he indicate if other legislation in connection with company law, such as legislation arising from the EC Eighth Directive governing auditors, which would allow auditors to be bodies corporate — up until now they have only been allowed to operate in a sole capacity with full personal liability — will be brought forward? Is there likely to be more legislation in the future in this area? Can the Minister of State give us a date, if any, on which we will reach the point where it will be appropriate to say that we have made most of the changes which have to be made and we can introduce a consolidating Act?
I agree entirely with the Deputy. I would dearly love to be able to do that but at this stage it is a question of priorities and resources. The Seventh and Eighth Directives have still to be dealt with and I would hope to deal with them as soon as possible. We have difficulties in regard to resources and I have allocated our resources in such a way that we can get this legislation through. I would like to consolidate all the legislation in one Act but I cannot apply the thin resources I have to that task right now. It is certainly an objective which I will get to as soon as I can.
By referring to thin resources, I hope the Minister of State is aware of the fact that many companies also have thin resources with which to comply with the provisions of this Bill. Some of the reporting requirements which will be imposed by this Bill are quite severe and we should bear in mind that the Minister of State's Department have failed to present the annual report on companies as required by the Companies Act for each of the last three years. The Department have not yet presented a report on companies as required by the 1963 Act for the years 1985, 1986 or 1987. I am sure that if this were done by a company in the private sector it would be regarded as recklessness and possibly they would find themselves facing dire consequences, such as those outlined in this Bill. I hope the Minister of State will bear in mind that to fall behind in one's work is sometimes human and this can happen even in well-ordered and well-administered entities such as the Department of Industry and Commerce who have not presented an annual report on companies as required under the Companies Act for each of the last three calendar years. I hope the Minister of State, himself being a sinner in this matter in his corporate capacity, will appreciate that others may sin in trying to comply with the requirements of the legislation and that as we go through the Bill, he will bear in mind that many companies have a scarcity of resources with which to fulfil every last comma of statutory requirements, a problem which his Department also obviously face.
I should say to the Deputy that when he was Minister for Industry and Commerce, he kept the Companies Division of the Department extremely busy and they are still working very hard on many of the tasks which, perhaps, he initiated.
That is probably true. I am sure the Minister of State has added to their work.
I know of a member of the business community who was in touch with the Department yesterday to ask when it was expected that this Bill would become law and they were told in four or five months time. But for the Christmas recess, it could have been three months but it does not make any difference. It is important to make the point that this Committee Stage presents the last opportunity to make material changes in the Bill. New matter cannot be introduced on Report Stage if it has not been mentioned on Committee Stage and new matter cannot be introduced by the Government in the Seanad; the only purpose for which they can go back to the Seanad is to discuss amendments which have been made in this House. While the Bill may not technically become law for three or four months it should be made clear to any business entity who are concerned about any provision of this Bill that they should make their representations to the Department and Members of the House within the next week because it will not be possible to make changes in policy terms after that date. In view of that the business community should pay special attention to what the Minister said a few moments ago about his willingness to contemplate amendments on Committee Stage. The time for remedying any errors there may be in this Bill is running out very rapidly.
I want to take the opportunity to endorse publicly what has been said by Deputy Bruton. This Bill is taking shape very quickly and, depending on the work which we in this House put into it on Committee Stage, it will have the opportunity to emerge as very strong legislation. Without going through a list as such, I want to remind the public of the controversial items dealt with in the Bill — loans to directors, the disclosure of who owns companies, insider dealing and the penalties for that, the introduction of reckless trading, the lifting of limited liability, the question of groups of companies and the lifting of the veil between the groups, the disqualification of directors, tackling the Phoenix syndrome whereby companies cease trading on a Friday and start again on a Monday and the introduction of a new company rescue operation system, which has been spoken about many times before. There is a lot in this legislation and because this is the last opportunity we will get — this legislation has been in preparation for many years — it is very important that anybody who has anything to say about the legislation should say it now.
I think there are 207 sections in this very complex Bill and there is only one day this week devoted to Committee Stage. In view of the desire to have the Bill passed, can the Minister say at this stage whether we will have an opportunity to continue with Committee Stage next week or is it likely that we will have to wait until after the Christmas recess to continue Committee Stage? Obviously, that would mean a further delay in bringing the Bill into law.
I cannot see any prospect of completing Committee Stage between now and Christmas. I would dearly love the debate to be completed but because it is such a lengthy and detailed piece of legislation I cannot see any prospect of doing this.
Will industrial people still have the opportunity to make comments on the Bill?
Not in respect of the sections we will have dealt with.
That is true.
If we deal with the first 40 sections of the Bill today it will be too late for those people to do anything about them after that.
I have discussed the allocation of Dáil time with the Whip so I am in his hands.
If I remember correctly it took the 1963 Companies Act two and a half years to go through the Houses of the Oireachtas.
This Bill has already been in preparation for two years.
It think it took two years to go through the Dáil while this Bill has spent a considerable time in the Seanad. I was not here earlier — and perhaps Deputy Bruton has already asked the question — but may I ask the Minister when it is proposed to consolidate all the Companies Acts?
This was adverted to Deputy.
We would hope to have consolidation of these Acts as soon as resources allow.
I do not know what time scale can be given within which this Bill will be passed by the House but section 2 provides, by order of the Minister, for the coming into operation of different sections on different days. Throughout the debate on the various sections of the Bill I suppose we will come across different sections which will need to come into operation on different days, but if the Bill is passed by the end of the next session I believe that a particular date should be fixed for all of the sections to come into effect. There has been a plethora of companies legislation but I think the 1963 Companies Act has served its purpose quite well. If different dates are set for the coming into effect of different provisions this will make things more complicated.
My experience over the years with companies legislation — and this is a major amendment of the Principal Act, 1963 — is that the Companies Registration Office is completely overrun with the volume of work and the staff in that office are not able to cope with their normal work of registrations, annual returns and so on. I know the system is more computerised now but that has only happened in the recent past. It is fine bringing in new companies legislation but it will be of no benefit if the Department are not in a position to police its introduction. I do not think that at present the Companies Registration Office are in a position to police the introduction of the legislation because they are understaffed. Even without these new powers they are not able to keep up with the filing of annual returns. For many years the only way the staff in that office knew someone had not sent in their annual returns for the year was when someone looked at a file to find out who owned a particular company and before they put it back they checked to see whether the annual returns were up to date. In some cases they might have found that the annual returns had not been sent in for ten years. This section makes provision for the introduction of different sections of the Bill on different days, but if the Bill is passed by the end of the next session I think all sections should come into effect on a certain date so that there will be more order in this area.
I gather that this is a standard provision in legislation like this. There are some parts of the legislation which can be brought into effect immediately but there are others which may require some form of supplementary provision whether in relation, for example, to the making of regulations by the Minister after the Bill comes into effect or the making of court rules which would set out procedures which would be followed by the court. It is unlikely that we could bring the whole Bill into force at any one time given the different objectives of different parts of the Bill. I share the Deputy's interest in this area.
Will the Minister confirm that records made in any other matter will include computer records?
Yes, they will.
Is the Minister excluding the application of the provision in section 2 to this section — in other words, the Minister cannot revoke the commencement date by order but he can revoke any other order by order? Is that what is provided for in this section?
The only area I cannot revoke is the commencement date because it will already have been decided on.
Would the Minister have to repeal it?
I move amendment No. 1:
In page 12, subsection (1), line 36, after "184," to insert "294,".
This amendment simply adds a further section to the list of sections of the 1963 Act being repealed by section 6 of the Bill. What I am doing is simply adding a reference to section 294.
Why is section 294 being repealed? This section concerns the alteration or falsification of books and provides for a fine not exceeding £500 and a term in jail of two years for the falsification of books.
Section 294 of the 1963 Act penalises the mutilation, destruction and so on of documents in the case of a company being wound up. Section 205 of that Bill penalises such mutilation in the case of companies in any situation, in other words when they are not being wound up. In order to remove the overlap, the amendment would add section 294 of the 1963 Act to the list of repeals in this section 6 (1).
Section 6 (1) states that the following sections of the Principal Act are repealed: 147, 162, inserted by section 6 of the Companies (Amendment) Act, 1982, 163, 165 to 173, 184, 296, 380 and 385 and the Seventh and Tenth Schedules. This legislation is a major document. It has been under consideration for a number of years within the Department and the industry. Major work has been done by individuals in that section of the Department and in the Seanad major amendments have been made, with more work. When such effort has been put into all this, it would be just as easy to take the 1963 Act and the few Acts since and put them all together in one Bill. Before the 1963 Act, everybody operated under an Act, I think, of 1908. The 1963 Act did one great thing, it put company law into one big book. There were no amendments to it until the eighties and there have been different Acts since.
The Companies Act of 1963 is a monster. However, it brought everything into one place at the one time. Now, under this Bill we will take out provisions of the Principal Act under section 6. People who have to operate under companies Acts, such as lawyers and accountants, are under considerable stress and strain in finding relevant sections all over the place and the Department officials may not be fully aware of this. I know that nothing can be done about it now, but this legislation has taken so many years, with the easily seen amount of effort that has gone into it here and in the Seanad. The same procedure should have been carried out with a whole new companies Bill. Some sections will now be deleted from the 1963 Act as a result of section 6 of this Bill. There have been amending Acts of 1986, etc. In regard to liquidations, there are superior courts rules and so forth. The whole area is a mine-field. It is no wonder that lawyers can make fortunes. A lawyer who specialises will know what Acts he should look up and can follow them. To have all this effort put together, as was the case in the 1963 Act, could not mean any more work. People involved may not be familiar enough with the sections repealed. There are hundreds of sections in the 1963 Act and hundreds in this Bill.
I have dealt with some aspects of this. Section 6 (1) lists a number of sections of the 1963 Act which I am proposing to repeal simply because they are being superseded by sections of this Bill. The Deputy, of course, is right in principle. The difficulty is that since the 1963 Act there have been five amending Acts. This legislation started out to deal with a few particular areas, to tackle, head on, abuse in limited liability, to introduce the insider dealing concept, to bring about greater disclosure, to introduce the concept of reckless trading, to bring in a rescue system and deal with other areas of company law. It is a fairly targeted Bill, although it is lengthy and complex. There is a set number of areas that it seeks to address. I would like it to be all nice and neat in one book, removing the necessity of reading any other book. However, that is just not a practical proposition at present. It is something we will try to get to as soon as possible but I cannot hold out any hope that it will be immediate.
It would put many professional advisers out of business if the laws were not complicated enough.
Very true. The Companies Act of 1963 with its subsequent amendments is such a vast piece of legislation that I lay odds here now that in the near future, however good the officials are — and they are excellent people — they will end up in court because of some contradiction due perhaps, to the omission of a cross reference when changing that Act. I am quite sure that that situation will arise.
We now come to amendment No. 2 which proposes to delete certain sections. I am suggesting that we take amendments Nos. 2, 110, 112 and section 45 together for discussion purposes. They are related.
I move amendment No. 2:
In page 12, lines 30 to 40, to delete subsection (2) and substitute the following:
"(2) The following provisions are also hereby repealed—
(a) Regulation 8 of the European Communities (Companies) Regulations, 1973,
(b) section 6 of the Companies (Amendment) Act, 1977, and
(c) section 21 of the Companies (Amendment) Act, 1986.".
I think that this is not a good procedure. The Minister's amendments were circulated sometime yesterday. Members would have read into them in the order in which they were likely to be taken by reference to the section in the Bill to which they refer, which is more or less the order in which they appear on this green amendment sheet. I have not read amendment No. 110 for the very simple reason that it was circulated only yesterday. I spent a good deal of yesterday preparing my own amendments which I wished to have circulated in time. I am working my way through the list of amendments before us. In dealing with amendment No. 110, we are dealing with a substantive proposal, as I understand it. While I would have no wish to suggest that the Minister, in explaining what it means, would mislead the House, it is not desirable that we deal with it without having had a reasonable opportunity to read it and consult about it, if necessary.
That is a matter for the House.
I agree with Deputy Bruton in this regard. It is desirable that we follow the amendments as listed on the sheet which has been circulated this morning. As Deputy Bruton has said, this is a very complex Bill. There are provisions in later sections that would require much advance study and thought. If we take them in conjunction with earlier sections it is likely that we will not do those later sections the justice they merit. If we stick to the format of taking them in the order in which they are numbered it will be much more satisfactory.
If amendment No. 110 were defeated, I imagine that the references to it in section 6 would be amended on Report Stage.
Amendment No. 2 in the name of the Minister, which is now under discussion, amendment No. 112 and section 45 are consequential on amendment No. 110. That is why I suggested that amendments Nos. 2, 110, 112 and section 45 be taken together. We can proceed as the House wishes.
They are consequential and the Chair is proceeding correctly, from my point of view.
I take it we are not taking amendment No. 110?
No. Deputy Bruton and Deputy O'Malley are anxious that we should proceed through the amendments as listed. The Minister's observations on the matter are very important.
The background to these four related amendments is complicated. The object is to rationalise and extend the application of certain Companies Acts provisions to unregistered companies. Section 377 of the Ninth Schedule to the 1963 Act applied certain provisions of the Act to unregistered companies and the third column of that Schedule gave the Minister an enabling power to apply certain further provisions. Section 377 provides that an unregistered company is any corporate body other than, first, a body incorporated under a general statute, such as a registered company, a building society or an industrial and provident society; secondly, a non-profit making body or, thirdly, any body which is prohibited from distributing its income or property among its members. This leaves us with companies incorporated by a charter, by letters patent or by a special Act of Parliament. Perhaps the most notable example nowadays is the Bank of Ireland.
The treatment of unregistered companies in various pieces of companies legislation since 1963 has been something of a hit and miss affair, with various bits and pieces applied selectively to such companies. As a result, the legal position of unregistered companies is not very clear. These amendments represent an opportunity to consolidate existing law on these companies, with some amendments. If it is necessary I can go into detail on the amendments at this stage. We are trying to pull together the legal position in regard to unregistered companies. I am trying to achieve a little bit of consolidation, which I think is important.
I understand there are many chartered companies or corporations operating in Ireland but that very few of them carry on business for gain. They include bodies such as the Incorporated Law Society, the universities, the Royal Irish Academy, the Royal College of Surgeons, voluntary hospitals, etc. I am also advised that there are a number of companies which are incorporated by statute. These would include bodies such as CIE, the ESB, Aer Rianta, Aer Lingus, the Irish Sugar Company, the ICC, Telecom and An Post. Am I to take it that these provisions apply to all the bodies I have mentioned?
That is correct. They would apply to all those bodies.
It seems, without going into the substance of amendment No. 110, that these are very different from one another. The King's Inns is a sort of educational and social organisation.
A very important one.
Yes. The universities and those sorts of bodies differ quite radically from a body like Aer Lingus in their operational ethos. The meat lies in amendment No. 112 which applies a number of provisions in regard to such things the pre-incorporation of contracts, prospectuses and allotments, a registered office, an annual return, the validity of acts of the directors, a register of directors and secretaries, the liability of officers and others for negligence, share certificates, company records, maintenance of capital etc. These are all being applied to bodies like the Royal College of Surgeons and Kings Inns, as well as Aer Lingus and the Sugar Company. I wonder whether this is entirely appropriate in so far as certain things like the liability of officers and others for negligence should, it is argued, be different in the case of a body which is carried on for profit in the private sector, for example, the Bank of Ireland, or a body in the private sector which is not carried on for profit, for example, the Royal Irish Academy, as against a body in the public sector like Aer Lingus which is a commercial company operating in the commercial arena. Applying these provisions as to liability of directors for negligence under section 200 of the 1963 Act could be rather severe in the case of some of the bodies which are carried on not for profit and who have a purely beneficent and benevolent purpose. I stress this is very much a first reading on my part.
I am happy to follow the wishes of the House. There is quite a lot involved here and in the Schedules. I am happy to leave it until we reach amendments Nos. 110 and 112. I could do with some additional time to consider aspects of it. If the House wishes, I am happy to do that.
The Minister might use that time to look at the very wide diversities of bodies which come under these provisions. All semi-State companies will be affected, if I am not mistaken. A number of semi-State bodies are not companies. There is a distinction here which is interesting. Aer Rianta, Aer Lingus, the Sugar Company, ICC, Telecom Éireann and An Post are companies incorporated by statute. Then there are other semi-State bodies which are not companies. Why the distinction was made I do not know. They include the Electricity Supply Board, CIE, Bord na Móna, RTE, Bord Gáis, Bord na gCapall, Bord Fáilte, the Racing Board and Údarás na Gaeltachta. They are known as boards, not companies, and they are different from Aer Rianta etc. Does the section apply to semi-State bodies which are not companies?
The best advice I have at the moment is that it would not apply to State boards but we will have to look at this matter very closely. It is not clear at this stage whether the Schedule as drafted would apply to State boards.
Why? It does not make much sense to apply liability provisions in relation to officers and others for negligence to Aer Rianta and not to RTE or CIE. For instance, the air transport companies are all companies——
Some of them have their own Acts.
I accept that but they are all part of the public sector and, so far as this House is concerned, there is not much distinction between them. The point I am making is that all these provisions in regard to share certificates, company records, maintenance for capital liability or to officers for negligence etc. apply, for example, to companies in the State sector which are producing airports, air travel, sugar, telephone and postal services but they do not apply to State companies producing surface transport, turf, gas, etc. There does not seem to be a clear policy distinction as to why these requirements should apply to one set and not to the other. These provisions should be extended to include on a uniform basis all semi-State boards which are not companies in that there should be a level playing field for competition in terms of their statutory obligations between all State companies, some of which are, indirectly at least, competing with one another.
This is an interesting debate but there has been some confusion in relation to the difference between State companies and State boards. As I understand it, the Minister has direct responsibility for State boards, the ESB, Bord na Móna etc and can interfere in a way in which he cannot interfere with the running and day to day business of State companies. The Minister's direct responsibility makes the difference in relation to State boards.
In practice the ESB are far more an independent republic than many of the other bodies.
It depends on whether a Minister wants a company to remain an independent republic but the Minister can interfere in CIE or Bord na Móna or he can at any time break up a company into three companies or alter the boards. He can alter the operation of the company as he did with the ESB, as he is suggesting in relation to Bord na Móna and as he has done with CIE. He can — as he has done with the ESB — impose levies of £10 million, £15 million or £20 million in times of crisis. The Minister can really take over and change the structure of a company and of State boards. As I understand it, State companies are somewhat different and that is why they come under the operation of the Act. I should like the Minister to tell us the specific difference. My understanding is that there is a difference between State boards and state companies and, if that is so, the State boards should have a different status because the issue would be whether one makes the State boards into state companies and brings them all together. That should be the way forward.
In drafting these amendments, we were giving consideration to private sector companies particularly. In my introduction I mentioned one large banking group, for example, which is an unregistered company. The legislation was moulded to include unregistered companies in the private sector. We did not give deep consideration to the question of whether State companies not being registered companies should be included in it. My impression is that they are not included in it but I will take an opportunity to look at that matter again. Companies like CIE and the ESB have their own legislation and I am not clear whether it would not be appropriate to apply some of these provisions to supersede or interfere with that legislation. I will have to look again at the question of State companies. The amendments are targeted particularly at the private sector because there are some extremely well known unregistered companies in the private sector, one of which I mentioned earlier.
In relation to the companies or entities known to be unregistered, has the Minister informed them of his intention to introduce amendments of this kind imposing a whole range of new statutory responsibilities on them which they did not have before?
I understand that the companies in question are aware of the legislation and what is involved.
By what process of divination were they supposed to have arrived at that happy state?
I am not clear about their internal procedures but they are certainly aware of the proposals in this legislation.
Did the Minister tell them?
I am quite happy that the company in question, arguably one of the largest companies in the State, do not suffer from any lack of knowledge. I cannot quote the mechanism but I do not think the Deputy requires that.
I am not worried about the company as I am sure their resources enable them to find out what is going on in here. However, a number of bodies appear to be affected by this such as the Royal Irish Academy, King's Inns, the Incorporated Law Society, the Royal College of Surgeons and the voluntary hospitals. They might not be aware of the import for them of the amendment. Will the Minister drop them a line and send them a copy of the amendment saying that these are the rules under which they should operate in future? We do not want people to suddenly discover that legislation of which they have never heard applies to them.
The process by which legislation is drafted is perhaps more familiar to Deputy Bruton——
This is an amendment which came in yesterday.
The Deputy need not be too sensitive, I was not about to blame him for it. The Deputy is aware of the process by which legislation is drafted. We consult many people such as accountants, lawyers, companies and so on but there are many people affected by this legislation to whom we did not write. We did not write to private companies or to various other people to tell them that we were introducing new mechanisms. I have to be satisfied that the companies in question have accesss to the information and I am happy that they have that access. There are many people affected by the legislation but I do not think there is any requirement to formally write to them all to tell them we are going to enact legislation that might affect them. The companies legislation has been on the stocks for a while and those people are quite well aware of it, but whether or not they are aware of the detailed amendments I cannot be sure.
The Minister is being disingenuous. We are not talking about consultation with the commercial sector in regard to the Companies (No. 2) Bill in general. That has been on the stocks since 1986 and anybody who has not read it by now is to some extent at fault. What we are talking about here is an amendment that was published yesterday which applies in most cases not to normal commercial entities but to bodies who would not normally feel it part of their responsibility to keep up to date with the arguments about company law. It applies to bodies such as the Royal College of Surgeons, the voluntary hospitals, the Royal Irish Academy and bodies of that kind who would not normally keep in touch with company law because it is not part of their normal trade.
I would argue that while the Minister might be perfectly happy to say that he has consulted accountants, lawyers and so on about the general Companies (No. 2) Bill, in regard to this specific amendment which brings into company law a lot of entities that were not previously in it some special measures, particularly in view of the lateness of the introduction of the amendment — yesterday — should be adopted. I would urge the Minister to take some steps to communicate with all of these bodies to let them know what they are being obliged to comply with. I do not think that is an unreasonable suggestion.
I can undertake to have consultations with some of the major bodies who might be affected. As the amendment is drafted it only affects commercial profit-making organisations. It is not clear whether the non-profit making-objectives of some of the organisations which the Deputy mentioned might fit.
Where is that stated?
Section 377 (2) (b) of the 1963 Act which we are not altering. It states: "Any body corporate not formed for the purpose of carrying on the business which has for its objective the acquisition of gain by the body or by the individual members thereof".
Say that again.
Section 377 (2) (b) of the 1963 Act. We are not changing that paragraph.
Therefore it does not apply to non-profit-making entities?
That is correct.
I do not know whether or not all these bodies are non-profit making. It may be that some of them are primarily non-profit making but that they are required to make a small profit in order to enable them to continue with their non-profit-making role. I do not know whether or not it is obvious, without examining the charter of the individual body concerned, that this applies to them. I would continue to press my point that the Minister should write to them all and let them look up their charter to discover whether or not this section applies to them and then they can make whatever representations they think necessary. I do not think the Minister should rely on the provisions of section 377 of the Principal Act without allowing bodies to discern whether or not they are exempted.
There is no problem as regards writing to them but it is not our intention to apply this legislation to the non-profit-making organisations. That is why this amendment was drafted so quickly. We are under the impression that we are dealing with a small number of unregistered companies in the private sector. The provision is not meant to be as far-reaching as the Deputy is suggesting. If it were it should have been in the main legislation and not just put in as an amendment. If it affected all the areas the Deputy is considering it certainly would be a major change and one to which we would have to give much thought. In order to make sure that our intention is reflected in the wording I am prepared to leave it until we get to sections 100 and 112, which is an offer I made to the House some time ago.
I still think the Minister should communicate with all the bodies and let them examine their charters to see whether or not they are affected by section 377 (2) (b) or (c).
I will look at that matter closely. Where does one get a list of unregistered companies?
You could start with Keane'sCompany Law in Ireland.
I must pose the question as to what now is the position with the Minister's amendment No. 2. Clearly the House will appreciate that we should go through these amendments and sectionsseriatim. May I suggest respectfully that, if there is some anxiety about amendment No. 2, it would be far more effective and proper to deal with it on Report Stage than seeking to bring it up again on a further amendment or section. We cannot pass over section 6 without disposing of it clearly and decisively.
I would be happy to withdraw the amendment and resubmit it on Report Stage.
That is a far more satisfactory way of dealing with it.
I move amendment No. 3:
In page 13, subsection (2), line 10, after "require" to insert "or as may be specified by regulation under this Act".
Before talking about the amendment I will firstly, for the sake of clarity, refer to the section which it is proposed to amend. The section allows for investigations of the affairs of companies to be initiated as a result of a decision by the court following an application by a number of parties which include the Minister. Section 7 (2) as it stands, reads:
The application shall be supported by such evidence as the court may require.
It seems to me that until such time as a measure of precedent is built up in regard to what the courts will require in the matter of evidence to support an application for an investigation there will be continuing uncertainly in regard to the type of evidence a court would require. Probably this means that people making an application will have to go into court with their evidence and be told by the judge: "Sorry, you have not given me sufficient evidence. Come back here next week with more evidence." I know it would not happen quite like that, I am sure there would be a lot more convoluted and archaic procedures, but that would be the effect. I predict that a lot of time would be wasted and money spent on professional advisers and so on until it becomes an established precedent as to what are the sorts of things a court would require, both as to content and form, in terms of evidence to support an application for an investigation.
The purpose of my amendment is to allow the Minister to specify the type of evidence a court would require. The relevant subsection would then read:
The application shall be supported by such evidence as the court may require or as may be specified by regulation under this Act.
That would make for an amount of certainty and clarity in this field. Obviously the amendment is not intended to take away the discretion of the court to look for more evidence simply by virtue of the fact that the Minister would have prescribed the sort of evidence that would be acceptable. What I would envisage would be that the Minister, having consulted with the judges, would set out in a regulation what are minimum requirements as to evidence. Then if in particular cases a judge wanted more evidence to back an application for an investigation, he would of course retain discretion to ask for it; but there would be a regulation, which would act as a guideline to people seeking an investigation, a regulation capable of being consulted somewhere which would be made by the Minister.
This amendment is wholly non-contentious and is designed to facilitate the administration of this part of the Bill. I would hope the Minister would accept it.
I have listened to what Deputy John Bruton has said. I am dubious as to whether what he proposes in his amendment would benefit the Bill in any way — having the Minister bring in regulations that would direct the kind of evidence that should be produced or broaden the scope of the provisions of this subsection. The courts should be allowed to decide what evidence they require. I do not know that the provisions would be enhanced in any way by bringing in regulations. Indeed, the Minister might experience some difficulty in framing regulations that would anticipate something that, under the procedures laid down in the Bill as it stands, the courts cannot do anyway. I understand that Deputy Bruton is endeavouring to improve that subsection but I am not convinced that his amendment will achieve that purpose. I believe the courts are entirely capable of deciding what evidence should be brought before them.
I can see the reasoning in what Deputy Bruton is saying but I have a difficulty with it in that the subsection as it stands talks of such evidence "as the courts may require". Of course, a court might require varying levels of information in particular cases. But since the amount or type of evidence which would be required thus would be totally at the discretion of the court, it would be difficult to legislate in this Bill for what a court might require. Furthermore, it would be difficult for a Minister to make regulations as to the type of evidence which he thinks a court might require since he would have no way of knowing that and for precisely the same reason that, as the subsection is at present drafted, it is at the discretion of the court.
On a practical level what I predict would happen is that when the Bill is enacted the superior court rules committee would come along, put a framework on this, setting down their rules as to the minimum amount of information which would have to accompany an application for an investigation. I am advised that that is what would happen in practice, that that committee would draw up the minimum information they would require. Therefore, when a person brings forward an application he or she would automatically be bringing forward this minimum amount of information as laid down by the committee. At that stage a court might decide, depending on the circumstances of an individual case, that more information was required and could so advise the applicant.
I do not feel extremely strongly about this, but having said that I have a practical difficulty in attempting to go along with it, given that we are laying the responsibility on the court to obtain such evidence as it may require, to come along then and endeavour to tell them what evidence should be required. Again, on a practical basis probably we would not bring the provisions of section 7 into effect until the courts committee had made their rules. I presume we would have some informal input in their compilation.
In effect, what the Minister is telling me is that the superior court rules will serve the purpose that I was intending the regulations would serve?
Yes, I think that is the best way to leave it.
I accept that.
I know that Deputy John Bruton is endeavouring to improve the provisions of the Bill and I have not got strong views one way or the other. However, since the whole purpose of this Part of the Bill is to transfer the procedures for appointment of inspectors from the Minister to the courts, we should leave it up to the courts to decide on what evidence is required. I would predict that as usual the superior court rules would specify the type of evidence that would be required. Since the spirit of this Part of the Bill is to transfer the responsibility from the Minister for Industry and Commerce to the courts, we should not attempt to hamstring the courts by the inclusion of this amendment. I am doubtful whether it would improve the provisions of the relevant subsection.
Is the amendment withdrawn?
We come to deal with amendment No. 4 in the name of the same Deputy. Since amendments Nos. 5 and 6 are related, I suggest that we discuss amendments Nos. 4, 5 and 6 together by agreement. Is that satisfactory? Agreed.
I move amendment No. 4:
In page 13, subsection (3), line 13, after "amount" to insert "not less than £500 and".
This amendment relates to the provision whereby a court may require an applicant or applicants for an investigation into a company to give security for the cost of the investigation to an amount not exceeding £200,000.
The purpose of my amendment simply is to rule out mischievous applications by saying that there should also be a minimum security laid down by law of £500 so that people would know there is not much point in making an application unless they are prepared to contribute £500 at least towards its cost. One need not wait until the judge says that one has to come up with a larger sum of money. While the Bill contains a maximum of £200,000 which the court may require it should also contain a minimum and I suggest a figure of £500 just to keep frivolous applications from being made only to be shot down by the judge. A sum of £500 would not represent a barrier to any genuine applicant.
My amendment No. 6 is a slightly more complicated amendment. The section says that one may be asked to lodge up to £200,000 for the payment of costs in an investigation. Under this section an applicant may find himself paying the entire cost of the application and his entire security of £200,000 could be used to pay the cost of the investigation notwithstanding the fact that the investigation might transpire to have revealed serious malfeasance on the part of the company, of a kind that would have justified the initiative of the applicant in seeking the application. The security put in by the applicant should not be used to cover more than half of the cost of the investigation. If an applicant had been asked to lodge £200,000 and the investigation costs £200,000 he should not have to leave the £200,000 to pay costs. The maximum that the applicant should be asked to pay would be half of that. That is not an unreasonable suggestion and it is intended to achieve what Deputy Mac Giolla's amendment is intended to achieve, although in a slightly different way.
The Minister may say that it is up to the judge to decide whether an applicant applied for a justifiable investigation and whether he should get back half of three-quarters of the sum lodged. I presume there is some provision to that effect in the Bill; if there is not, there should be. However, the difficulty with that response is that it leaves a high measure of uncertainty and people, when initiating an investigation, do not know whether they will have to pay the entire cost at the end. My amendment would make it more likely that people would initiate investigations and render Part II of this Bill as a whole more useful and used than were the investigation provisions of the 1963 Act. I understand that the powers in that Act were rarely invoked and that the only investigation of any consequence in modern times took place with regard to the inquiry into Irish Estates, published on 23 October 1963, and that there has been no investigation since. This requirement of getting the court rather than the Minister to initiate the investigation could make it less likely that investigation would be initiated than was the case when one only had to get the Minister to do the job. That is arguable but the prospect of having to pay the entire cost of the application if one is an applicant is also rather daunting. While there should be a £500 minimum fee to rule out frivolous applications an applicant should not find himself at risk of having to pay all of the cost of the investigation. The most he should legally be capable of being required to pay should be 50 per cent of the cost.
I agree with the arguments Deputy Bruton made and I agree with his amendments. In regard to amendment No. 4, Deputy Bruton says that his reason for proposing the amendment is that there should also be a minimum figure. I agree with putting in a figure of not less than £500 but I do not agree with putting in "not exceeding £200,000". That is excessive to say the least. The section already limits applications for an investigation. In the case of a company with share capital the application must be made by at least 100 members or alternatively one member with one-tenth of the share capital. That is a considerable restriction on who can make an application for an investigation. On that basis one must take it that any investigation would be a serious investigation. In a non-share capital company an application is made by the company itself or by a creditor of the company. The part relating to a creditor might be a bit wide because a creditor could be a person who is owed from £5 upwards. However having regard to the other provision there frivolous applications will not be made. The problem of inserting "not exceeding £200,000" is that this is an enormous penalty to put on anybody who might make an application because once one applies to the courts one could be expected then to pay the full cost of the investigation whether it be £150,000 or £200,000. From the restrictions already in the Bill any investigation applied for would be serious. It would probably be an investigation into a problem which arose due to managerial problems or director problems in the company and a person would have a right to have the company examined to ascertain the problem.
My amendment seeks to have the maximum reduced to £50,000 which is a very substantial sum for any individual, regardless of whether he owns one-tenth of the share capital, in applying for an investigation by one or more competent inspectors. The fact that a sum of £200,000 may be involved would prevent many individuals, even 100 members of a company, from making an application even though they felt it was justified as long as there is this threat of £200,000 to cover the investigation hanging over them. If there is real cause for concern in a company and a director, shareholder, member, creditor, or any person affected by the company, wants to have it investigated, under this section they can do so before the company goes into liquidation and there are no assets left. That possibility is recognised in this Bill. If somebody sees a company in difficulties and has reason to believe that his information is correct and that the company should be investigated, he must put those reasons before the court and investigators will be appointed by the court, but this threat of £200,000 hanging over somebody ruins the effect of the section. As I said, under this section a person can have an investigation carried out into the affairs of a company when it can do some good, that is, before the company gets into the final phase, namely, liquidation which can cause trauma for workers, shareholders, creditors, suppliers and everybody who does business with the company. This has happened many times.
My understanding of the section is that anybody who knows what is going on in a company now has the opportunity to have the matter investigated, to discover which individual is responsible for the trouble or what the trouble is, before the company goes into liquidation. I ask the Minister to look at the words "an amount not exceeding £200,000". The Minister will say that the amount of £200,000 may never apply unless an investigation costs, say, £10 million or something like that. I believe a sum of £200,000 is excessive for an individual, a group of individuals, suppliers or creditors to have to put up as security and would prevent them from applying for an investigation.
I appreciate the point Deputy Mac Giolla is making but I believe a sum of £200,000 is reasonable, because one must leave it up to the court to decide the amount. Section 7 (3) says that the court may require the applicant or applicants to give security to an amount not exceeding £200,000 for payment of the costs of the investigation. Say we had a company like Guinness, which has been in the news in the United Kingdom for a few years, and somebody got wind of something illegal happening and went to the court and said they believed X, Y and Z was happening, the court would have to recommend that a very large sum would have to be provided by way of security because it would take a very great deal of money to investigate such a big company. Of course, if a smaller company were involved the amount needed as security would not be as high. I believe the court would take all this into account. I recognise what Deputy Mac Giolla said. The applicant is probably a supplier who has lost a considerable amount of money and he is faced with the prospect of losing another large sum of money, throwing good money after bad.
Deputy Bruton's amendment deals with spurious applications being made to the court. I do not think that will happen but over the last ten years we as a nation have become very interested in the law. Even the fellow drinking his pint in the pub on a Friday night knows more about the finer points of law and his rights than the legal practitioner. I would be worried about spurious applications being made to the court. As Deputy Burton said, I believe we should include a sum which would prevent spurious applications being made to the court. I suggest that £500 is too little; maybe £5,000 would be more appropriate. In a few years time £500 may not represent a vast amount to some people but a malicious person might decide £500 would be a very small sum if it meant causing trouble for a company through adverse publicity, even if the court threw out the application.
No smoke without fire.
Yes, the old Irish attitude that there must be something going on if a case has been brought to court. I would be more anxious to increase the minimum than the maximum sum. I did not know inspectors had been appointed under the 1963 Act. Why is it now thought that by giving powers to the court rather than to the Minister for Industry and Commerce greater use will be made of this facility to appoint inspectors? What is the general thinking behind that? My experience is that if a shareholder or director thinks a company is in difficulties, they will have it wound up by liquidation.
These amendments are designed to ensure that an applicant would not be inhibited from making an application to have an investigation carried out, and so far as they do that they are worthwhile. Deputy Bruton's amendment setting out a minimum sum is good because it will get rid of vexatious and spurious applications. In any event, the court has discretion as to what amount should be lodged as security to cover the ultimate costs of these investigations. While we are talking about minimum and maximum figures we should not lose sight of the fact that the court has discretion at the end of the day.
I take the point Deputies have made about inhibiting a person making an application because the amount of security they will have to lodge would be excessive. On the other hand, as Deputy McCreevy pointed out, if a very large company warrants an investigation, there will obviously be a very high cost attached to the carrying out of that investigation. One tries to pick a figure to put into the legislation, and perhaps the figure of £200,000 is correct, but one could possibly pick another figure. It is difficult to decide on the most appropriate figure. In this section, we have to rely ultimately on the fact that the court have discretion when the application is made to decide on the appropriate level of money that should apply to cover the costs of the investigation. I think it is appropriate to leave it that way. For the reasons I have mentioned I would not be very keen that we should reduce the figure of £200,000 down to the figure of £50,000 as proposed in The Workers' Party amendment. In the case of a large company which would require a major investigation the figure of £50,000 would not be sufficient to cover the costs of such investigation.
I appreciate the spirit in which the amendments were put down. It is important that applicants would not in any way be inhibited from applying for an investigation to be carried out but, I think the lower limit of £500 as proposed in Deputy Bruton's amendment and an upper limit of £200,000 would be satisfactory.
First, I will deal with amendment No. 4 in the name of Deputy Bruton. The effect of that amendment would be to require definite security although of a small minimum amount. I can accept that proposal and I am prepared to accept the amendment. It is a good idea that some security would be available at all stages and the figure of £500 is sensible. On the other hand, amendment No.5 in the name of Deputy Mac Giolla seeks to reduce from £200,000 to £50,000 the maximum amount of security which would be required of an applicant for an investigation. If we accept the idea that there should be some upper limit, we are really talking about where that figure should fall. It is important that we stitch in that the figure of £200,000 as the maximum figure and that the courts are completely free to decide on a much lower figure, indeed I should stress on no figure at all in any particular case if the circumstances warranted it. At the same time I would like us to be clear that we are not talking about a necessarily quick speedy resolution as the formal investigation envisaged under section 7 is a serious affair and experience to date would suggest that it can be very expensive to mount such an investigation. Because of the complexities of the matter, those involved feel they need legal representation and expert witnesses, which may become necessary. Getting to the bottom of the wrongdoing or other problem that is alleged to have occurred can take a substantial amount of time, and when we take this in conjunction with the need for legal representation and expert witnesses, we can see that the meter is running all the time this is going on.
The House will gather that I do not see such formal investigation being an every day occurrence. In fact, I think it would only arise in exceptionally serious circumstances, where serious wrong doings were suspected. For that reason I think the highish upper limit is required. I should also mention that in section 19 to 21, inclusive, the Minister is given considerable power to get information directly from the companies, without the need to set out on the more expensive route of a formal investigation under sections 7 and 8 of the Bill. This adds weight to my own view that because of the scale and seriousness of such formal inquiries, the scale of security involved should match the gravity of the issues concerned.
I will now deal with Deputy Bruton's second amendment, amendment No. 6. I wish to make a number of things clear. It has been the position since 1963 that the applicant for an investigation could be required to pay the full costs of the investigation, without any upper limit at all. Indeed, section 171 (1)(c)(ii) of the Companies Act, 1963, specifically provides that the applicants for the investigation shall be liable to such extent (if any) as the Minister may direct for the expenses of and incidental to an investigation. We are coming from a position where there has been no upper limit at all to——
Would the Minister give me the reference to the section again?
Section 171 (1)(c)(ii). Secondly, I can accept that where the Minister is the applicant for an investigation, he might be required to pay the expenses up to the full amount of any security he has been required to give, equally where somebody else is the applicant the same principle should apply, bearing in mind all the time that the court may ultimately decide to apportion the costs in such a way as to relieve the original applicant entirely from any liability whatsoever.
I do not think that amendment No. 6 is workable. The Deputy is suggesting that the security for costs should relate to half the costs of the investigation, but the court will not know at the time the application is made what the costs of the investigation are going to be. The amendment would give rise to practical difficulties.
Deputy McCreevy asked about the Minister and the court. We have had some technical problems with investigation procedures in the past, for example, persons refusing to answer questions and putting up legal obstacles and so on. By transferring the jurisdiction to the High Court, we thought this would bring the court into a more central role and make it easier to adjudicate on disputes. The previous system made it difficult to get some adjudication on disputes because of the legal obstacles that were being put up to the Minister. Therefore, I have no difficulty with amendment No. 4, which I welcome and thank Deputy Bruton for, but I have difficulty with amendment Nos. 5 and 6 for the reasons I have outlined.
I simply want further clarification. The Minister has said that under the 1963 Act the applicant would have had to pay the full costs without an upper limit being set. I presume that meant there were practically no applications — and I do not know if there was ever an application under the 1963 Act. I presume that as legal fees increased, the number of applications would have dropped considerably, if they had to pay the full costs of the investigations. The Minister has faced up to this. When making provisions for applications in the Act, we must not have penalties to such an extent that would prevent people from availing of the provisions. Is it intended, as Deputy O'Malley appears to think, that the applicant should pay the full cost, and if it costs £250,000 or £300,000, or £1 million to carry out the investigation, as in the case of a really big company when there is a really big investigation, they will not have to pay the full costs? Is it the case that the bigger the company the less they will have to pay? In Ireland we do not have many companies which compare with the size of Guinness and Bell's which were under investigation — and the investigation is still going on in the case of Mr. Saunders — but it is very unlikely that we will have such an incident here because we have no companies that would come up to that size. However, we have two or three companies that are reasonably big.
I have said £200,000 is probably the cost of 95 per cent of any investigations that may take place. Is the purpose that we want the applicant to stop? Is it that the applicant is being a nuisance and we would be better off if nobody applied for an investigation, therefore if you apply for an investigation you are going to have to pay the full cost of this to £200,000? That is an unbelievable sum and there is not much point in having the facility there if the person is to be expected to pay the full cost of the investigation. I think £50,000 is a fair mark for a person to go to have an investigation into a company to save his or her present investment or assets and ensure the future is going to be better, to have this company investigated in the meantime, and £50,000 in Irish terms is a fairly big maximum sum to have to pay for an investigation.
If it turns out that the investigation means nothing, that the company are impeccable and very well managed, bookkeeping and accounting are top class, there is nothing in this section to indicate that the person will have to pay any more. If it turns out that the company are in a disastrous condition, the applicant is absolutely right; not alone is he saving himself money as a supplier or whatever, he is saving hundreds of others, he is saving jobs and other suppliers by having his investigation, but there is nothing to indicate that money will come back. It is said it is security. Normally if you put up security you get your security back. There is nothing in the section about paying the cost of the investigation. Does this mean people are asked to put up this security to show they are substantial people with substantial backing and are not having a frivolous complaint, or are they putting up the money to pay the cost of the investigation? It is not clear. If they put up £200,000 security and the investigation costs £150,000, do they get £50,000 back? If it costs £50,000, do they get £150,000 back? I see nothing about paying the money back to them. It is for payment of costs of the investigation and you are estimating in advance. As the Minister said, how does the court have any clue as to what the investigation is going to cost? The whole thing is clouded in mystery.
You might have other members with you, you might have one-tenth of the shares in the company, but £200,000 is a formidable figure. As an applicant, I will have no more idea of what the investigation is going to cost than a court would have; probably I will have less idea. It could easily cost £150,000 or £200,000. How will I know? The applicant should not have to pay the full cost of the investigation. If he fulfils the requirements in the section the court then has to be satisfied that he has grounds for investigation. Therefore, why should the person have to pay? The person is not only helping himself, in the vast majority of cases he is helping a number of other people against a corrupt, inefficient company. The court decides an investigation is justified; therefore, under the Bill the applicant is performing as a good citizen. I do not understand why he should have to pay the cost. Surely the costs will be shared with the company, and perhaps with the Minister, in the interests of ensuring that companies are run properly under the Bill? Was the intention of putting in the provision that the applicant should pay the cost or most of the cost? This brings me to Deputy Bruton's amendment about half the costs.
Let me express my appreciation of the Minister's acceptance of amendment No. 4. I would like to pursue amendment No. 6. The Minister says it is not possible for the court to determine what is half of the cost of an investigation when the investigation has not yet commenced. That stands to reason. However, I understood that the way in which security being given would operate would be that you would lodge £200,000 in the court and if the investigation costs only £100,000 you would get your money back. Obviously the effect of amendment No. 6 would arise only when the investigation was over and all the costs were seen to have been established. If half the cost was less than the amount the applicant had lodged he would get the difference back. That is the way I see this amendment working.
Perhaps instead of phrasing the amendment as I have put it by including that the applicant is required to give security of an amount not exceeding £200,000 or up to half the cost of the investigation, it might have been better to put in a second amendment, perhaps to section 13, which would provide something to the effect that in the case of security lodged by an applicant under section 7 (3) such proportion of the security shall be refunded which transpires to be in excess of half the cost of the investigation. Perhaps the amendment should be put in there rather than where I have put it. Therefore, I propose on Report Stage to bring in an amendment to meet that sort of drafting difficulty raised by the Minister. However, the principle that an applicant should not have to pay more than half the cost is something I would like to pursue a little further.
The Minister referred to section 171 of the Companies Act, 1963, which is being repealed by this Bill and is referred to in section 6 as being repealed. I take it that it is being replaced by section 13 of the Bill. Section 13 provides that the following persons shall to the extent mentioned be liable to repay the costs of an investigation to the Minister for Justice: a person convicted of an offence arising from the investigation, a body corporate dealt with in the report — in other words, the subject of the investigation — and the applicant or applicants for the investigation. Let me make two points. First, it is entirely uncertain where the cost is going to fall. It is to be left to the court to decide afterwards who is going to pay the costs. No one knows really.
I presume if a prosecution is initiated nobody will know until the individual concerned has been convicted and sent to jail, which could be two years after the investigation was even completed. Only at that stage would the court be able to decide who was going to pay the costs of the investigation. That will have two or three consequences. First, either people will hold out for their money for a long time or somebody will have to pay them, presumably the court, and the Minister for Justice will not be able to get his money back from them for a long time afterwards. It is also going to be very difficult to know what the proportion is going to be in a case. A peculiar situation will arise in which a person is convicted of a crime under company law and sent to jail and he will have to pay out of his personal assets the costs of the investigation that led to him being sent to jail. It is rather like somebody who was convicted of burglary being asked to refund what he was found in possession of, serve a jail sentence and also pay the travelling expenses of the detectives who caught him. It is a very unusual legal principle that a person convicted of a crime should, in addition to suffering the normal penalties under the criminal law, that is imprisonment, and the penalties under the civil law, that is refunding the goods or services of which they have deprived the victim should also have to pay the cost of the Government or police investigation. It seems odd that we should have this provision in regard to a company law offence but not in regard to murder. Nobody would suggest that somebody who has committed a murder and is sent to jail for 25 years or whatever should be asked to pay out of his assets the costs of detectives who may have stalked him for two years before actually assembling the evidence. It seems curious that this provision applies in regard to company law but does not apply to other aspects of the law. I would ask the Minister to reflect on this. I know he will come back, quick as a flash, and say that this has been on the Statute Book since 1963 and has not caused any problem. That would not be a very good answer because this provision has never been used. There has not been any investigation under the 1963 Act; the only investigation there was was under the 1803 Act and that took place in 1963 before the 1963 Act had become law. There has been no investigation since. So this curious provision has never been implemented in practice. It is a very odd principle of jurisprudence, to say the least. If we are going to ask criminals to pay the cost of detection we should do it in respect of all crimes much as we are introducing confiscation of assets in regard to drug dealing. If we are going to go after the assets of criminals we should go after the assets of all criminals, not just company law offenders and drug dealers, the only two categories I am aware of where this sort of personal assets liability applies. What is so different about company law crimes to render them liable to this happening?
There is what appears to be an omission in section 13 in regard to people who might have to pay towards the cost of an investigation. Under the original section 171 any body corporate in whose names proceedings are brought on the conclusion of an investigation and who have, as a result of these proceedings, recovered property shall be liable to the costs of the investigation. As I see it that does not re-appear in section 13. It would deal with the legitimate point made by Deputy Mac Giolla that where one creditor initiates an investigation, the result of which benefits a whole lot of other creditors, and there is not provision whereby the costs of the investigation would be shared, the creditor who initiates the investigation could end up paying the entire cost of the investigation. That is not a reasonable legal principle. We are in totally uncharted waters because no such investigation has occurred. Indeed, we may be wasting our time because it may well be that this whole part of the Bill will be so much of a dead letter. We might be better off removing it and having a shorter Bill; but it is there now and we have to do the best we can with it.
There are a number of things we would need to do and one of them is to try to establish a clearer indication as to the likely proportions in which costs would be attributed as between various parties under section 13. One purpose of my amendment No. 6 today is to limit the amount that an applicant should pay to half the total cost. I would ask the Minister to look at this again. If he cannot accept this amendment, which I can see might have unintended effects, could he accept the principle that an applicant should not have to pay more than half of the costs and that if the security exceeds half of the costs he would get a refund? Would the Minister be prepared to accept that as a general principle, remembering that the investigation will only occur if the court thinks it is a good idea that there should be one? It is not as if the applicant can simply cause the other party to have to pay a lot of costs simply by taking an action. The court has first to agree with him that the investigation should occur. It is not like a situation where I might sue Deputy McCreevy and it is a totally foolish action which is decided in Deputy McCreevy's favour and his costs and mine are paid by me. In that situation nobody can stop me taking a court case; but in this case there is a stop before the investigation takes place in that the court must decide that there should be an investigation. There has to be some good reason for the investigation or it will be thrown out by the court. Against the background of there being sufficient evidence to satisfy the court that there should be an investigation, to say that the applicant could be liable to pay the entire cost seems to be going too far. This could be one of the key reasons this whole part of the Bill will be a total dead letter because nobody will take the risk of initiating an investigation. Let me quote from Mr. Justice Ronan Keane on this whole matter, at page 295 ofCompany Law in the Republic of Ireland:
The powers conferred on the Minister by Part V of the Principal Act have rarely been invoked. Indeed the only investigation of any consequence into a company's affairs in modern times was carried out under the corresponding provisions of the 1908 Act. This is presumably because where matters have reached the stage at which an investigation might be appropriate, those concerned prefer to petition for the winding up of the company or for the alternative remedy under s 205, rather than go down the lengthy and uncertain road of a departmental inquiry. It is all the more surprising in these circumstances to find that one of the proposals apparently under consideration at the time of writing for incorporation in amending legislation is the extension of the investigation procedure. It is apparently contemplated that the court, rather than the Minister, will have the power to appoint inspectors. It is also suggested that the powers of the inspectors as to the obtaining of evidence will be strengthened. It remains to be seen what form these proposals will take, but the history of the procedure under the Principal Act does not inspire much confidence in such proposals as providing a more effective remedy for abuses of company law.
In other words, Mr. Justice Ronan Keane, who is the leading expert in terms of publication on company law in Ireland, is extremely sceptical as to the value of this whole process. It seems to me that one thing that will ensure this legislation will not be used is the prospect that an applicant, even though he might convince a court that an investigation was necessary, might end up having to bear the entire costs of the investigation. There is no certainty as to the apportionment of costs of such an investigation.
The Minister has considerable business experience and I am sure he, like other Members, will agree that one thing that inhibits any move in the business arena is uncertainty. People like to know the risks involved and like to minimise the parameters of the risk to something that is reasonably definite. However, the parameters of the risk in terms of initiating an investigation of a company's affairs, in terms of the way one might have to meet the costs of an investigation, are so uncertain and broad that I do not think people will bother using the provisions, just as the provisions in section 171 of the 1963 Act ensured that nobody used those investigation proceedings.
I should like to urge the Minister to see if he can accept amendment No. 6, perhaps in the context of making it an amendment to section 13 rather than an amendment to section 7. I suggest that the Minister should consider introducing some guidelines as to the distribution of costs. One way of doing this would be for either the Minister or, if that is not appropriate, the superior court rules to make a regulation which would set out guiding principles in terms of apportionment of costs of investigations under the legislation. People would then know roughly where they stood; they would know the tolerance as to costs.
I do not think it is unreasonable to ask a company to pay a minimum share of the cost of an investigation into its affairs. If a company is not able to convince a court on the first day that an investigation should not take place then it is fair to say the company had something to answer for. One way of approaching this would be to say that an applicant should pay not less than £500 and not more than half of the costs; that a company should pay towards the cost of an investigation not more than £10,000 and not more than half of the costs. I suggest that we should say that a person convicted of an offence shall pay not less than £2,000 and not more than, say, one-third of the investigation and that a person benefiting from the results of an investigation by the recovery of property shall pay not less than 10 per cent of the benefit received as a result of the investigation and not more than the proportion that their debt represented of the total debts of the company. The formula may sound complicated but a procedure like that is necessary or otherwise the investigation procedure may be another dead letter.
When I was drafting this legislation as Minister there was so much involved that I did not have an opportunity to go into it in the depth that I would have liked. However, I am puzzled as to why we are bothering with the question of investigations when the main change is transferring this to the courts. What is the point? If we cannot try to address the reason why this procedure has not been used in a more fundamental way perhaps we should consider scrapping the whole thing. My amendment tends to move in that direction.
I agree with a lot of what Deputy Bruton has said. We must try to visualise when investigations will take place. I do not think any investigations took place under the provisions in the 1963 Act. It is almost impossible to visualise when these powers will be used. When a company goes into liquidation the Revenue Commissioners and other creditors will be aware of it. If the company is guilty of some wrong the Minister has power under the 1963 Act to send in an investigator and, if necessary, institute a prosecution as a result of that investigation. Section 8 of the Bill states that the Minister can apply to the courts to have an investigator appointed but a similar provision in the 1963 Act was not availed of. I do not see any future Ministers aplying to the courts if they are satisfied that a company has done some wrong when their predecessors did not bother using that procedure since 1963.
The procedure should have been used in the past where the debts of companies were allowed to run up and directors took off with a lot of money. I welcome the provisions in the Bill to correct the imbalances that have arisen in regard to such activities. I accept, as the Minister said, that it is necessary to include such provisions in the Bill because it may be necessary to use those powers, but it is difficult to understand who will use them other than the Minister for Industry and Commerce.
It is hard to visualise creditors using that provision because in my view they will simply apply for a liquidation in order to get some money. Why should they bother using this provision when they may have to put up security which may cost them up to £200,000? They will collect whatever money they can and if they cannot get it through court judgments they will apply to have the company put into liquidation so that they will get a certain percentage in the pound. I cannot visualise a situation where a creditor would go through this route to get his money back when he has other alternatives available. There may be things I am not thinking about, if he went on this route he would not end up getting his money back and it could cost him additional money because he could be caught for security to the value of £200,000.
Shareholders of very large companies might want an inspector appointed by the court in certain circumstances because they might feel they were being oppressed or that the company was run in a manner which was not beneficial to them. There are already powers under the 1963 Act regarding the oppression of minority shareholders. I cannot see a situation where the majority shareholder would be affected because his position is so strong in the first place — in a big company he is running the show in any event. I do not see him applying to the court for the appointment of an inspector. In the case of small shareholders in the company it is unlikely that they would go this route because it would be too expensive. What we are really thinking about are fairly large companies who have shareholdings in very large companies. If a company buys a 20 per cent shareholding in another company and it gets to the stage where the company is run into the ground and things are going wrong, I visualise the situation where they might apply to the courts for the appointment of inspectors. It might happen, but I doubt very much whether it would because if it got to that stage the company would be wound up and everyone paid off.
We have strayed a little from Deputy Bruton's amendments. A later subsection of section 13 is very disturbing. This is where the court can find, apportion the blame or whatever and where the applicant who has put up the security maybe liable for costs, or the court may direct that he should pay £50,000 costs and he has to put up security of £200,000. There is a subsectior in section 13 which says that, if the court finds a shortfall from any of the other people to whom the court has apportioned the blame and they have no money to come up with, they cannot stand the poor devil who initiated the proceedings in the first instance the extra £150,000. If there was an investigation which benefited everyone — and as I said earlier I find it difficult to visualise a situation where this would ever happen — then I do not think it would be fair that the person who commenced the proceedings should be penalised. He is the only one who put up the money and everyone else benefits by the investigation. As I said earlier, I do not see this happening because it has never happened under the 1963 Act. Nevertheless, it is important to have it there.
Why not have an official administrator or an official investigator appointed under the aegis of the Department of Industry and Commerce who could initiate investigations and do all this type of work? I do not see either the Minister or any of these people ever applying for an investigation because there are a whole lot of other avenues they can follow and it would not be worth the cost. Under the 1963 Act the Minister for Industry and Commerce could appoint an inspector—it was usually assumed that it would be an official from the Department of Industry and Commerce. Whom do we expect that the courts are going to appoint as inspectors? It has relevance for various sections in regard to expenses and so on. Do they visualise that they will be officials from the Department of Industry and Commerce or will they be accountants or whatever or people who investigate companies and deal with liquidations? Whom do we visualise being appointed as inspectors? Even though we are spending a certain amount of time on this amendment, investigation is a very important part of the Bill. As I said a long time ago, it will not be used any more often than the powers of the 1963 Act which were available to the Minister for Industry and Commerce regarding the appointment of inspectors. I do not see people rushing to the courts to do it under this section either; I am sure they will be very few and far between.
I am a little disappointed at the view that this whole section might never be used because the section in the 1963 Act was not used. If I seriously thought that would be the case I would be with the House in whisking all this out because it would be wasting the time for all of us. However, there are some essential differences which will make a major difference. The first thing we have to realise when investigating a company is that we are not setting up a procedure for someone who is owed a couple of hundred pounds to get their money back. There are other routes through which you can get your money back from a company —you can seek the winding up of the company or sue the company. It is not meant to be a quick way of getting back the few bob that is owed from the company. That is not what it is all about, It is a full dress rehearsal of a formal investigation into a company. The essential difference between the 1963 Act and this section is that we have transferred much of the action away from the Minister and given it to the courts. The reasons that prevented Ministers moving quicker in the past will not exist here because the courts will be in a position to adjudicate much more speedily. In the past actions by Ministers were held up by legal debate and legal wrangle. I would expect that this section would be used more often. Having said that, it is not meant to be used as a normal everyday method of getting money back from a company. This section is all about formally investigating the affairs of a company, sending in lawyers and accountants and carrying out a full formal investigation under the courts of the land in that company. I would like to dispel the notion that this is supposed to be some easy quick way of getting money back from a company. There are other routes for that. It is not meant to be that.
What is it meant to be?
It is meant to provide a formal method of carrying out a full investigation of a company's affairs.
To what end?
It is obvious, Deputy, from the legislation to what end. The end is——
It is not actually.
If there are difficulties or wrongdoings in a company somebody can arrange to have inspectors sent in, under the court, to investigate the affairs of that company. It is obvious what happens after that.
No, it is not actually. Would the Minister yield for a second?
If that is the purpose then surely it is a matter for which the Minister should accept responsibility financially? If it is to enforce the law of the land that is not a private responsibility.
I will come to that.
The whole thing is unclear.
It is different from the 1963 Act in that the courts were centrally involved in it.
That is a procedural change.
It is a major change. The reason the last one did not work — and this is the third occasion I have said this — was that the Minister was bogged down with legal and technical arguments which he was not in a position to overcome whereas the courts can adjudicate on these matters more speedily.
How many applications were there to the Minister for investigation?
I am not here to defend the 1963 Act, I am here to change the 1963 Act.
If the Minister is certain that the reason there were no investigations under the 1963 Act was that the Minister had to go through a lot of legal requirements before initiating an investigation, then the evidence would suggest that there were a lot of applications to the Minister which he turned down because he did not feel competent to deal with them. If there were not a lot of applications to the Minister then it might be that the whole procedure was not necessary or that the costs, even if the Minister had been satisfied about the legal aspect, were going to be so uncertain and so great that people did not bother even to get on to the Minister.
It would be better if we allowed the Minister of State to give his reply and following that there will be ample time to put other questions. If Deputies interrupt and then rise——
I was only trying to liven up the proceedings.
It is not going to happen. The Minister of State to reply.
Obviously what I am saying is so interesting that the Deputies cannot resist interrupting. We can speculate as to why the 1963 Act was not used. In relation to one of the changes I am now making, in regard to the figure of £200,000, under the 1963 Act an applicant could be caught for the total figure. If it costs £500,000 or £1 million, under the 1963 Act the applicant could get caught with having to pay all of that figure. Deputy Bruton refers to certainty but let me point out that there is certainty, not at the level which the Deputy would wish it to be, in that the most the applicant would have to pay is £200,000. Under the 1963 Act he could have to pay £500,000 or £800,000. There is certainty in that the most an applicant would have to pay is that figure, £200,000.
I am not saying that I want to change all of the 1963 Act so that there would be a flood of investigations. What I am saying is that we have attempted to alter the régime under the 1963 Act to make it easier, to bring the court on stage and so that there would be more certainty. Perhaps the reason for there being no applications is that people may not have been able to convince or would not be able to convince the courts that an inspector should be sent in. I am not going to go out and drag people into the courts to make applications to have inspectors sent into companies. This is a matter for the court to decide on when it sees the evidence presented to it. In the past the ministerial system has not worked. Now we are going to try the courts system. We should not panic about the fact that there has been a lack of applicants. Let us give this system a chance.
Let me refer to a number of other points made. Deputy Mac Giolla referred to the upper limit. As now proposed, the upper limit would be £200,000. If the investigation costs £500,000 or £800,000, the most the applicant would have to pay is £200,000. Let us say that the investigation costs £800,000, the most the applicant would be asked to pay is £200,000. I also want to make it clear that we are not talking about asking someone to put their money away for a number of years until the costs become known. Security does not necessarily consist of money, it could also be insurance, bonds and so on. We are not talking about leaving a sum of £200,000 aside for a couple of years until the court decides. I say this to Deputy Mac Giolla in particular that I would not like it to be seen in this way: it is not meant to fend off applicants. In many ways more protection will now be offered to the applicant than was the case under the previous Act.
There is a question to be answered here by all of the Deputies who made points in regard to the figure of £200,000. If the applicant does not pay, if the body who have been investigated do not pay, and if the convicted person is not in a position to pay, are we suggesting if an investigation costs £800,000 that the State should carry the can? The question which I would have to throw back to the other side of the House is, who would pay for the cost of the investigation if the applicant and the other parties involved were not to be held liable for the cost? It is important in referring to that figure of £200,000 that we ask ourselves: what about the balance?
Who pays for the cost of a criminal investigation?
If the purpose of an investigation is to establish criminal liability?
I want us to be clear——
It is one of the normal functions of the State.
——about who would pay. Under this legislation it is envisaged——
Who pays for the cost of a murder investigation?
I am dealing with company law.
We are talking about crime.
The Deputy should refer that question to the Minister for Justice. I am dealing with company legislation. Under section 13 and arising out of section 7 any person who is convicted, any body corporate or an applicant could be held liable. What I am trying to do is to allow the court to apportion blame, if there is blame to be apportioned. The court would be able to lay a figure of anything up to £200,000 on the applicant. The court would be able to apportion the costs between the person convicted, the body being investigated and the applicant but the applicant would only be asked to pay a figure of up to £200,000. Arguably, the applicant would be most protected in that an upper limit would be laid down. The court should be free to decide on how to apportion the blame as between the various parties but one cannot apportion the blame through some fixed formula in advance as the Deputy envisages. It makes more sense to allow the court to decide on how to apportion the blame as between the convicted person, the body who have been investigated and the applicant, with an upper ceiling of £200,000 in the case of the applicant. I am not going to quibble with the Deputy but I cannot accept the wording of the Deputy's amendment as it does not make the position clear enough. It could still cost the applicant £200,000. I take it that is so?
I want to be clear that it could still cost the applicant £200,000——
Under my amendment. If the investigation costs £200,000 he would only pay up to £100,000.
Let us suppose the investigation costs £800,000; under the Deputy's amendment he would have to pay £400,000.
No, he would have to pay a figure not exceeding £200,000.
Therefore, the Deputy would keep the maximum figure at £200,000?
I am proposing to keep the maximum figure at £200,000. Obviously, therefore, what the Deputy is talking about are smaller investigations which the amendment does not cater for. Under the Deputy's amendment——
My amendment seeks to insert the words, "up to half of".
With respect it does not say that. The Deputy's amendment——
The section if my amendment were accepted would read "an amount not exceeding £200,000, for payment of up to half of the costs of the investigation". Therefore, if the cost of the investigation is £800,000, the maximum amount to be paid by the applicant would be £200,000.
One could read it——
There is a danger that Deputies McCreevy, O'Malley and Mac Giolla may feel a little alienated. We should pursue the normal procedures in respect of a Committee Stage debate and allow everybody to have an opportunity to contribute.
There were a number of other points made and I would like to respond to them. It is sensible that we allow the court to decide on any figure below £200,000. The court may decide on a figure of £5,000 or £20,000 or any other figure below £200,000. Following an investigation, the court should be in a position to apportion blame as between three groups of people. It would be a good idea to allow the court to decide and for us not to try to decide it here. The court should be allowed to decide where the blame lies as between those three different groups of people, a person convicted, the company or the applicant. The maximum figure is £200,000 and it is not the case that that figure is going to be applied in all cases. I would not want that figure to discourage anyone from making an application. If anything, it should encourage them because unlike the position under the previous Act, they now know that the most they will have to pay is £200,000 and I am sure they can rely on the court to ensure that there will be fair play.
I think we have over debated this section. An awful lot of time has been lost in debating this section which I and many other Deputies regard as being very important. The Minister of State in his last remarks put the question as to who should pay the cost. That is a question which has not been addressed in this section. The Minister of State did make one very good point, that the court should apportion the blame. If the Minister of State can satisfy me that there is something in the section or something later in the Bill which says that the investigation having taken place and a sum of money having been lodged in the court, the court can apportion the costs, then I will be happy. As has been pointed out, first, the applicant may be doing a tremendous lot of good for other people who will benefit and, second, the company may have been lax in adhering to various procedures they should have adhered to and the investigation having taken place, the court may think it justified to allocate a share of the cost to the company. Perhaps the Minister will say whether he thinks it necessary to bring in an amendment on Report Stage which would provide that an investigation having taken place the court could allocate or share out the costs. This would be helpful and the applicant would not feel he has to take all the stick and blame and carry all the costs.
Under section 13 of the Bill, there are three groups of people over which the costs can be apportioned by the court and I think what the Deputy wants to achieve is provided for in that section. The court can apportion the costs over any person who is convicted, any body corporate — that is the company being investigated — and the applicant. We are putting an upper limit of £200,000 on the applicant. We are all talking about an applicant as though he is an individual — and that may be the case — but an applicant may also be a very powerful wealthy company, and likely to be so in many cases.
If this section is to be used I believe it will only be used by big powerful companies who have a stake in other companies. That is the only sector who will ever use this section. With regard to section 13, the costs in the first instance will be borne by the Minister for Justice. They can then be apportioned down along the line and if there is a big shortfall the Minister for Justice will pay up—and effectively this is the State and the taxpayers. This is the point I was making earlier about the most likely group of people who will ask the court to appoint inspectors. Like the Minister I believe it will be a big company who have a shareholding in another company. I do not visualise that it will be used by anyone else. I understand why Part II of the Bill deals with investigations — the concept behind it is very good and worthwhile— but in reality it is hard to visualise this Part of the Bill being used by anyone other than those people I mentioned earlier. There will still be thousands of cases where investigations could and should take place but due to the costs involved will not take place.
Under the old system in the 1963 Act, which was never utilised, investors would have written to the Minister for Industry and Commerce asking for an inspector to be appointed because they knew there were wrong doings in a company. However, because of the reasons outlined earlier by the Minister no inspector was even appointed. There is provision in later sections of the Bill, particularly in section 8, whereby the Minister can apply to the court to appoint an inspector but I do not think he will do that. Why should he bear the costs involved if it is not a matter involving wrong-doings against the public interest, which should be his prime consideration? Because the Minister did not do this in the past when he had direct power to do so, I cannot see him doing it now. However, this will not negative the fact that there will be thousands of instances where a full investigation of a company's affairs should be carried out and I believe an official investigator should be appointed — and this proposal has been put forward over the years by the Institute of Chartered Accountants, of which I am a member— to investigate the kind of things we all know really go on in companies. The official investigator could, like the Director of Public Prosecutions in criminal law, receive complaints from people who believe that a company is being maliciously run that there is evidence of wrongdoing in the company and that people have got away with thousands of pounds, having done the taxpayer and everybody else.
In respect of this section, could we get agreement to advance sufficiently in wisdom and understanding to dispose of section 7.
We are still dealing with the amendments.
Could we hope to dispose of these amendments by 1.30 p.m?
We could dispose of the amendments but we still have to discuss the section.
I will not be moving amendment No. 5.
I call on Deputy McCreevy again and ask him to deal more directly with the amendments.
Before this Bill goes through Committee Stage perhaps the Minister would consider the concept of an official investigator. This would be more worthwhile than all of the sections in Part II put together. An official investigator should be appointed who could initiate investigations of his own accord on behalf of the ordinary citizen and the State. If I had drafted this Bill that is the road I would have gone down rather than devoting a part of the Bill to investigations.
I agree with that.
Is the Minister accepting amendment No. 4?
I accept amendment No. 4 and I understand that amendment No. 5 is not being moved.
I will not be moving amendment No.6 but I will come back to it in another way.
This section is unnecessary. I want to ask a question: if there was no procedure for the investigation of companies, would we be introducing something like this? The answer is probably no. We would certainly not be introducing a procedure whereby one has to go to a court to appoint an investigator who produces a report, on the foot of which prosecutions are eventually taken or the company is wound-up. If we were going about this sensibly I do not believe we would adopt such a cumbersome procedure. I do not think we need this system of investigation of companies and the only reason it is being introduced is that it was in the 1963 Act and there is a certain residual affection for anything in the 1963 Act — and the Department are reluctant to throw it out completely.
I believe that one should first establish in the law the purpose for which investigations of this kind would be conducted. There are no criteria laid down in section 7 which set out the basis for having investigations under the section. All the section says is that "the court may appoint inspectors to investigate the affairs of the company and report there-on". It does not say "The court may appoint inspectors if it is satisfied there is a need for it on the basis of the following criteria..." It does not say, nor does the Minister or anyone else, say that the existing procedures for dealing with company affairs — that is, normal investigation by the Minister leading to a prosecution or normal investigation of the affairs of the company when it is being wound-up by the liquidator leading to a prosecution, are inadequate for finding out offences. The sensible way of detecting offences — if that is the purpose of these investigations — is for the Minister to appoint an official investigator who would, in the same way as the Fraud Squad in the Garda or any other people involved in detecting offences, go into a company, investigate it, collect the evidence and initiate prosecution, or alternatively leave it to liquidators when companies are being liquidated to detect offences, or alternatively, as I suggest in another amendment, the Minister should be capable of moving to wind-up a company.