Dáil Éireann debate -
Wednesday, 5 Dec 1990

Vol. 403 No. 5

Companies (No. 2) Bill, 1987: Report Stage (Resumed) and Final Stage.

Debate resumed on amendment No. 69:

In page 119, between lines 25 and 26, to insert the following:

"(3) A person having been an officer of a company, declared insolvent or wound-up without fully discharging its debts during the previous ten years, shall be required to make application to the court for a certificate of fitness prior to becoming an officer of any other company. The applicant must satisfy the court that his conduct as a company officer previously does not make him unfit to be concerned in the management of this different company.".

—[Deputy Rabbitte.]

Mr. Rabbitte

When my party put down this amendment initially the Bill was very different indeed and, as Deputy Seán Barrett said on the last occasion, it is really very difficult at this stage to pore over amendments as they relate to the previous format of the Bill and the Bill we now have.

Essentially, the thrust of the amendment is to require that any person who had been an officer of a company which had been declared insolvent or wound up without fully discharging the debts of that company should be required to make an application to the court for a certificate of fitness. This was designed to tackle the disgraceful syndrome which has been too prevalent in Irish business in recent years where companies which had been wound up or declared insolvent because of manifest negligence or worse on the part of officers, directors or whatever of that company, have been enabled to start up again within a matter of months or a short number of years without any regard to the damage that had been inflicted as a result of their negligent — or fraudulent stewardship — of their previous company's affairs, including serious damage to creditors, usually the loss of employment for the workers in the enterprise and so on. Notwithstanding all that, it is perfectly feasible under the law as it stands for such directors to start up again, even in the same business, with impunity.

I concede that the Bill has been changed fairly significantly. I know that the argument has been advanced by others on Committee Stage that this amendment seeks to make officers of the company — or presumes — that officers of the company which went into insolvency are somehow criminally liable. I accept that but it is not necessarily the case; companies become insolvent for reasons that have nothing to do with fraudulent or criminal conduct on the part of officers of the company, but purely because of trading circumstances. It does not at all presume on my part that, to have been associated with a company which went into insolvency, is somehow to bear criminal responsibility or to be otherwise responsible in any pejorative sense for that company's insolvency. However, the syndrome to which I referred is a phenomenon with which we have been all too familiar and the purpose of this amendment is to require the officer to make an application to the court for a certificate of fitness. In that circumstance there should not be any question because, in the overwhelming majority of cases where no responsibility rests with the officer, it would simply be an automatic process. However, in some of the more celebrated cases about which we all know, the court would then have the opportunity to make their decision and the possibility of some of these people slipping through the net — which still exists — would not arise.

I know that the Bill as now reframed imposes a number of — what the Minister described on Committee Stage — modest conditions which had not been there previously. The Minister's opinion is that that is sufficient but I continue to hold the view that it is not and that it is still possible for rogue directors, without any regard to the implications of their past transgressions, to get through the net. The only way to get over this is to require them to make application to the court for a certificate of fitness. In the overwhelming number of cases that process would be automatic but in the kind of situation I outlined, the court would obviously have the opportunity to make their decision.

Mr. S. Barrett

Deputy Rabbitte is correct in saying that the Bill has been improved somewhat in relation to dealing with rogue directors and there is agreement and consensus on all sides of the House that we should no longer tolerate individuals who endeavour to defraud the public by closing down businesses today and opening up others tomorrow. We should go as far as we possibly can in dealing with that matter but, in a free enterprise society, there will always, unfortunately, be closures on a voluntary or involuntary basis. Although that is the case the last thing we should do is to discourage people from opening up again because they failed once. We must separate people like that from what is considerd improper and unacceptable behaviour on the part of individuals who deliberately set out to defraud others or carry out their business in such a reckless manner that they endanger other people's livelihoods. We should say loudly and clearly that we have no time for that sort of practice and that the law will be further amended, if necessary, to deal with that situation.

However, we should also make it quite clear that we accept, for bona fide reasons, that people will fail in business but that failure should not be regarded as a stigma on the person for the rest of his life. Many people have started in business, failed and started again who are very successful today and that is the way commercial life will always continue. The spirit of that built into our legislation should always be the criterion on which we judge matters. For that reason I would not support the amendment tabled by Deputy Rabbitte.

Mr. O'Dea

I can understand the thinking behind the amendment in the name of Deputy Rabbitte but I am inclined to agree with Deputy Barrett. One aspect of the amendment that strikes me is that the term "officer" is not defined. Does Deputy Rabbitte intend that the definition of "officer" which appears elsewhere in the Bill should cover what he is trying to incorporate into it now, and if so what part of the Bill where "officer" is referred to does the Deputy wish to incorporate? Does the Deputy wish to have some other definition of officer in this context? We all know that the term "company officer" could include people in relatively minor management positions in companies. It would be horrendous if people in relatively minor positions in companies which through no fault of theirs went into liquidation had to go to the High Court to make an application to become a director of a future company.

Mr. Taylor

It is defined in section 156. It gives a fairly narrow definition.

Mr. O'Dea

All right. Under the Bill as it stands an officer in respect of whom a disqualification order is sought can be disqualified unless he proves to the court that he acted honourably and responsibly. Once the application is made all that has to be established is that the company became insolvent. The onus then shifts onto the officer to establish that he was honest and acted responsibly. Otherwise, he would become a restricted person for the purposes of the definition in the legislation. In view of that it is not necessary to go as far as Deputy Rabbitte is seeking to go, although I can understand the thinking behind his amendment. The Deputy is probably thinking of where a company becomes insolvent and there is not an application by anyone to make an officer of that company a restricted person. If a company becomes insolvent and an application is made to have an officer of that company restricted, that officer will have to prove he acted honestly and responsibly, otherwise he will be restricted. It is not necessary to cover what I imagine Deputy Rabbitte had in mind when he drafted his amendment.

We must control fraud by directors and officers in companies but we must not make it dangerous to become an officer of a company, so that somebody who becomes a director of a company that happens to become insolvent is treated like some sort of leper who must go to the High Court to become a director of a company at some time in the future. The Deputy's objective is noble and in theory, in debate, we could find arguments in favour of it but with regard to ordinary commercial life, it is not real. Deputy Rabbitte should not press his amendment.

There are considerable changes and improvements in the Bill in relation to the restriction of company officers and disqualification in the case of fraud. The proposals before us in that regard represent a considerable and radical innovation and improvement in the law. Until we see how this works out, it goes far enough as it stands.

An Ceann Comhairle

I am entitled to call the Minister of State. Shall we hear Deputy Mervyn Taylor? Does the Minister wish to come in now?

Minister of State at the Department of Industry and Commerce (Mr. Leyden)

No, I do not mind.

Mr. Taylor

I have no hesitation in supporting this amendment. It strikes a note that is different to anything else in the Bill and it is quite important. I know that during the progress of the Bill, and in the earlier parts of section 157, the question of disqualification arose where there has been fraud or dishonesty. That is clear enough and nobody will dispute that, but the question arose as to whether the matter should end there, or should go further. That is the issue that is raised in Deputy Rabbitte's amendment.

I am inclined to look at it in this way; the right to have the protection of limited liability is a privilege which is not to be abused or to cause tremendous difficulties for a lot of people, as frequently happens. It is meant to be there for genuine business and commercial purposes. When a company go into liquidation and do not pay their debts, which happens all the time, there are serious problems and consequences for a lot of innocent people. Leaving aside the question of fraud or dishonestly, in the ordinary evolution of business activities when companies go into liquidation members of the public, working people are left in the lurch. They are owed money by the company which they will not get. Their money will have gone down the drain.

Many people lose their livelihoods as a result of a company going into liquidation and not paying their debts. Employees of companies can be left without substantial amounts of wages by a company going into liquidation. It is a very serious business and many ordinary people are ruined by it. One has to look at the position of protecting innocent members of the public. It is wrong to describe a director who would be affected by this amendment as a leper or anything like that. It is not a question of leprosy. It is a question of a person taking the advantage and the privilege of liability and his company ending up in trouble and in liquidation. If that person was the only one affected there would be no problem but a wide spectrum of people in the normal course of events will be affected by an insolvent liquidation.

A person may come forward even assuming that he was bona fide and honest in the extreme, after a failure which affected a lot of people, many seriously, and want to have another go. He may admit that he did not get it right the last time, say he was sorry about the people who lost their savings or livelihood and express the hope to do better this time. He may make a go of the business on this occasion. Are we to say to that person to carry on with impunity and get going again for the couple of hundred pounds it costs to set up a new company. I do not think we should.

Some independent body must have a look at the position before giving the licence to this person to get up and, perhaps, wreak the havoc on other innocent members of the public which he or she wreaked on the previous occasion. The appropriate body to do that would be a court which would have a look at the position, and at the person, to try to discover if something has changed and whether the second venture has any better prospect of success than the first. If the court considers that things have changed and that there is a prospect that things will be different the individual can be told to go ahead and set up a new business and be a director of it.

One must remember one salient fact. It is not a question of saying that if such a person may not become a director again without leave of the court that that person is deprived of setting up in business again. It is not a question of bringing in this amendment and saying that a person who wants to set up in business again will not be able to do so, he will be debarred doing so. There are ways of setting up in business other than by taking advantage of the device of limited liability. For example, there is nothing to stop the person setting up in business in his own name. Many fine people do that and they do not seek the cover and protection which limited liability gives them. They set up business in their own name and carry on successfully or set up partnerships, or limited partnerships without limited liability.

The concept of limited liability is to protect oneself against the business going wrong and against personal liability. The person adverted to in the circumstances contemplated by this amendment will have had a chance and failed. It is not a question of putting blame on the person but of trying to provide protection for innocent members of the public, people who deal with companies, who supply companies or who work for companies. Their interests have to be considered as well as the interests of the director who sets up, fails once, and wants to set up again and so on. Do we not have to think about the innocent members of the public and consider what protection they may require? It is wrong to think of it in terms of attaching blame to a dirctor, blaming him, putting some mark of Cain on him or calling him a leper and so on.

It is not a question of that but rather of saying if he wants to have a second go he must justify himself because he has had his chance and failed and as a result people suffered. If he is given the freedom and impunity to get going again people may suffer again. He may have learned from the first experience and decided to do an even bigger operation with a wider spectrum of people suffering very badly in their livelihoods or their means. The amendment is fair enough. I do not see anything wrong with it. It is reasonable and fair and, even in the context of the legislation, as amended, it is not inappropriate as a necessary protection for members of the public who deal with companies.

Mr. Leyden

This amendment is identical to amendment No. 198 which was tabled by the Deputy in the Special Committee and for the reasons which were given then — and which I will now summarise — I am not able to accept this amendment. My biggest problem with this amendment is that it implies that if a person has been involved in an insolvency he is somehow guilty of something since otherwise he would not have to demonstrate his fitness to be a director again. However, I have always been at great pains to stress that we should not regard involvement in an insolvent company as a crime necessitating some form of absolution or restriction. All we are saying in the Bill is that if a person is involved in an insolvency the court can be requested to make a declaration that any company with which the person subsequently becomes involved should have to meet a number of modest conditions mainly to do with its capitalisation.

Deputies will be aware that we have now specifically provided a role for the courts rather than have the automatic restrictions applied to directors of insolvent companies as was originally proposed in the Bill. However, we have provided in the Bill for the type of cases where the director concerned is guilty of, for example, some kind of improper or dishonest behaviour. For example, section 149 (2) and (3) which, between them, require the liquidator of an insolvent company to report to the court cases where he thinks the involvement of a director concerned in any other company might jeopardise the interests of that other company or its creditors. In such cases we are giving the court a very wide discretion to make whatever order it thinks fit to meet the circumstances of any particular case.

Section 157 (2) will allow the court to have regard to a person's conduct while a director and will enable the court to make the disqualification order against him when it thinks his conduct makes him unfit to be involved in a company. I should point out that the court would not have to wait for a specific application to be made to it before being able to consider this. Subsection (2) clearly allows the court to make a judgment on the matter of its own motion in any proceedings before it.

To summarise, the Bill as it now stands already contains provisions which will deal adequately with cases where a director of an insolvent company was in some way culpable in connection with the insolvency. More importantly, however, the Bill does not regard involvement in an insolvency as something implying guilt in itself nor would I want that to be the case. For these reasons I again reject the amendment.

An Ceann Comhairle

Deputy Rabbitte to reply to the debate on amendment No. 69.

Mr. Rabbitte

I am disappointed with the Minister's response. I said earlier that the section was improved but I should have said also that it was improved from my perspective, because my amendment was carried on Committee Stage. However, the Minister was successful in excising it on the last day. I am referring to the penalty the court may apply, that it could make a disqualification order as it thought fit and for whatever period it thought fit. On Committee Stage I was successful in persuading the Special Committee to add, "or may require him to carry liability for any outstanding debts to the new company."

I saw that as an alternative to disqualification and also an opportunity to tighten up the Bill.

That was excised the last day when the Minister pleaded that it was merely the lack of diligence on the part of his backbenchers that allowed it through. There is a necessity, for the reasons which Deputy Taylor and I have outlined, to persist with this amendment. Deputy O'Dea will accept that the earlier part of his broadside against it in terms of the definition of "officer" does not stand. Section 156 defines the term for both this Chapter and Chapter III. It is restricted to the secretary and director of the company. Section 157 (2) states:

Where the court is satisfied in any proceedings or as a result of an application under this section....

As Deputy O'Dea pointed out, that presumes there will be proceedings and that the court has the opportunity of making a decision on the basis of an application made to it. In my experience as a trade union official that facility has not always been provided in court. There have been circumstances, especially in cases where the workforce were affected as distinct from creditors who would have the financial resources to prosecute an action, where the company collapsed and the workers simply did not have the resources to take a court action. In those circumstances the remedy suggested in subjection (2) would not apply. There has been a number of such cases. I have been involved in a number of cases where I believe it suited the directors to contrive an insolvency and they started up again subsequently. It suited the overall corporate interest at that time to contrive an insolvency and the workforce were got rid of because they did not have the resources to take any action, even if the law enabled them to do so, which in my view it did not adequately, at the time. Those workers lost their jobs and those directors set up a new company without any regard to the hardship inflicted on the workforce in that circumstance.

Although I concede that the Bill, as reconstructed, greatly tightens up that situation — I hope we see this in practice — it will permit the rogue director to circumvent its terms in the kind of circumstances I have suggested. Deputy Taylor has suggested an additional circumstance where the protection of limited liability can be avoided or not availed of and the terms of the Act can be circumvented by the former director setting up in a personal capacity.

I am not seeking to suggest that because a person was involved with an insolvency he is automatically guilty of an offence. That is not the purpose of my amendment. I accept that businesses fail and that sometimes they fail for reasons which have nothing to do with a lack of competence or fraudulent intent on the part of the directors. I am not suggesting that but the facts of the matter are that businesses also fail for reasons of fraudulent intent, negligence, incompetence, etc. The only things one can assume about a person associated with an insolvency where the debts have not been discharged is that that person is guilty of having been associated with a failed company. That in itself is not an offence and in a situation where this amendment requires a person to make application to the court for a certificate of fitness that would be dealt with automatically and routinely. It will only apply in a situation, like some of the celebrated cases we know of, where directors have, with impunity, shut down a company almost overnight and opened up again without any regard to the damage inflicted on the public, on creditors who were defrauded or on workers who were thrown out of their employment. When we are revamping company law in the first major way since 1963 we should make it as effective and difficult as possible for such rogue directors to function. For that reason I should like to persist with my amendment.

Amendment put and declared lost.

Bill recommitted in respect of amendment No. 69a.

Mr. Leyden

I move amendment No. 69a:

In page 121, to delete lines 21 to 38, and substitute the following:

"160. —(1) Subsections (2) and (3) apply to any person who acts, in relation to a company, in a manner or capacity which, by virtue of being a person to whom section 148 applies or being subject or deemed to be subject to a disqualification order, he is prohibited from doing.

(2) Where any consideration is given by or on behalf of a company for an act done or service performed by a person referred to in subsection (1) while he was acting in a manner or capacity described in that subsection, the company shall be entitled to recover from him, as a simple contract debt in any court or competent jurisdiction, the consideration or an amount representing its value.

(3) Where—

(a) a person referred to in subsection (1) acts, in relation to a company, in a manner or capacity described in that subsection, and

(b) the company concerned commences to be wound up—

(i) while he is acting in such a manner or capacity, or

(ii) within 12 months of his so acting, and

(c) the company is unable to pay its debts, within the meaning of section 214 of the Principal Act,

the court may, on the application of the liquidator or any creditor of the company, declare that such person shall be personally liable without any limitation of liability, for all or any part of the debts or other liabilities of the company incurred in the period during which he was acting in such a manner or capacity.".

When I looked again at section 160 I noted that before an action could be taken against a person under subsections (1) and (2) the person concerned would have to be convicted of an offence under section 158. However, such people will already have been declared by the court to be subject to restrictions under section 148 or will have been disqualified under Chapter II. I would not wish the right to take a civil action in these circumstances to be subject to the successful outcome of criminal proceedings under section 158.

Amendment No. 69a will, accordingly, remove this limitation. Thus subsection (1) of the amendment provides that subsections (2) and (3) will simply apply where a person acts in a capacity or manner from which he is prohibited either because he has been declared to be subject to the restrictions under section 148 or that he is disqualfied.

Amendment agreed to.

Amendment reported.

Mr. Leyden

I move amendment No. 69b:

In page 121, line 40, to delete "section 152 (6)" and subsitute "section 152 (5)".

This is a straightforward consequential amendment to change a cross-reference arising from amendment No. 68y which was accepted by the House the last day. That amendment deleted section 152 (5) and substituted a revised version in place of what was previously section 152 (5) and (6).

Amendment agreed to.

Mr. Rabbitte

I move amendment No. 70:

In page 123, between lines 15 and 16, to insert the following:

"(2) The registrar of companies shall keep for public inspection, a register of all officers of companies declared insolvent or wound up without discharging debts during the previous ten years.".

I want to press this amendment. As the Ceann Comhairle has already said, this matter has already been discussed and to some extent it is related to amendment No. 69 which, having regard to the configuration of the House, I did not see any point wasting time having a vote on if only the Labour Party and The Workers' Party were supporting it.

The thrust of this amendment is similar to amendment No. 69. The remedy may be less drastic, though from the point of view of other colleagues in the House, I am not sure of that, in that all it seeks to do is to cause the registrar to retain for inspection a list of officers of a company associated with insolvency without discharging debts for the period of ten years stipulated. The term "officer" is as defined in section 156 as it relates to Chapter III and has a very narrow definition relating only to a company secretary, director or shadow director. It seems only prudent that if there are proper records in the Companies Office that this information be available to any member of the public or any prospective company who might be considering taking on board former company directors who had been previously associated with an insolvency without discharging indebtedness.

Elsewhere in the Bill it is anticipated, as I think it reasonably can be, that those directors will be taken on board elsewhere. We have already dealt, in discussing amendment No. 69 with the matter of how, in certain circumstances, rogue directors can get through the net notwithstanding the tightening up we have seen here. If a list had to be kept by the registrar then any new company doing its business prudently would have the opportunity of inspecting that list and making up its mind on the basis of merely discovering the fact that the person concerned was associated with an insolvency without discharging debts in the past. That may imply no more than adverse trading conditions but if it implies more than that, then the prudent directors of the new company would only have themselves to blame if they took on board a director who was likely to add to their difficulties in the future.

Mr. Taylor

The Labour Party will be supporting this important and worthwhile amendment. Deputy Rabbitte, who moved it, put his case on the basis of knowledge for prospective companies which might want to take on to their board of directors a person who had previously been associated with a company which went into liquidation on grounds of insolvency. I would put it on an additional basis. Members of the public might be contemplating dealing with a company which would have on its officer board a person who had been a director of a failed company. Are members of the public not entitled to have that information readily available so that they would know who they are dealing with? One could contemplate a situation where a person was about to get involved in some business arrangement or to advance credit to a company and had to decide whether to deal with this company. The names of the directors reveal nothing as to the business record, creditworthiness and so on of those directors. If people had recourse to a register to see whether any of these directors had previously been involved in failed companies, causing losses to members of the public, that would help them reach a decision. Members of the public are entitled to such information.

Would such a register be any different from the register of bankruptcies which is held in the Four Courts and dates back to 1922? There is nothing wrong with that; it is right and proper. There is no great difference in this case. The register would only record the fact that a particular person had been a director of a company which went into liquidation on grounds of insolvency. When a person who is about to deal with a company discovers this information, it is for him or her to decide what weight or force to attach to that information. They are entitled to know since it is already a public matter. If a company goes into liquidation, creditors and employees incur losses and this is a matter of public record. It does not necessarily imply dishonesty or fraud but simply records the fact that it happened.

The amendment seeks for a limited period of only ten years that it should be possible to find out the record of persons one is dealing with, and whether they have an untainted record or a record of failure. Is there anything wrong in that? I do not see that it would present any great problem to the Companies Office in these days of computerisation. The Companies Office has been, or is about to be, fully computerised and liquidators are recorded there. It would be a simple matter to set up a register which would be a tremendous help to individuals and companies in embarking on important transactions. It would perhaps become routine before entering an important contract to have searches made to see with whom they are about to deal and what their record is. I cannot see any objection to that.

Mr. S. Barrett

There is a fear that we might run away with ourselves here. I have listened to Deputy Taylor and Deputy Rabbitte talking about people who fail in business and the need for information. The reality is that we spent months endeavouring to make absolutely certain that people who traded fraudulently or in an improper fashion would be dealt with fairly by the law. We equally want to ensure that persons who are innocent are kept innocent. What about a small company which goes into liquidation as a result of a rogue director of another company defrauding them? Is the director of that small company which is forced into liquidation to have his name plastered around for ten years as if he were some sort of rogue or evil person? Is he to explain his position to everyone who says he was a director of an insolvent company?

(Interruptions.)

Mr. S. Barrett

Deputy Taylor was not around for four or five months and he is now looking for publicity, as usual.

Mr. Taylor

On a point of order——

Mr. S. Barrett

I want to put it on the record of this House that we have made attempts to deal with rogue directors.

An Ceann Comhairle

A point of order has been raised.

Mr. Taylor

An allegation has been made against me by Deputy Barrett. To say that I come in here to contribute on the Fourth Stage of a Bill and——

Mr. S. Barrett

The Labour Party were not represented in the committee for five months.

Mr. Taylor

I was not the spokesman on this subject until some weeks ago. I seek the protection of the Chair. My motives have been impunged by the statement that I make contributions on this Bill to seek publicity rather than simply make the contribution which any Deputy is entitled to make. I have made reasoned and considered contributions and my motives are being impunged.

An Ceann Comhairle

The Deputy has made his point.

Mr. S. Barrett

I have all the records of the Select Committee dealing with this subject. They are there for the public and for the Press.

An Ceann Comhairle

Let us get back to the amendment.

Mr. S. Barrett

The records show quite clearly that the Labour Party took no part in this debate. People like us, who spent months debating this are castigated as being in favour or rogue directors.

Mr. Taylor

The allegation should be withdrawn. Deputy Barrett is no mean performer in seeking publicity, but I never made that allegation against him.

An Ceann Comhairle

The Chair takes the view that there was no personal imputation. It was a political charge. The Deputy has replied to it.

Mr. Taylor

It is disgraceful. I am most disappointed that Deputy Barrett should stoop to that type of attitude rather than address himself to the merits of the points I made.

Mr. S. Barrett

For months we debated this issue without assistance of any description from the Labour Party. The records of the Select Committee show that quite clearly.

Mr. Taylor

I am here to make my contribution.

Mr. S. Barrett

Yes, because the Press are now present.

Mr. Taylor

The Deputy should stick to the merits of my contribution.

Mr. S. Barrett

Section 164 of the Bill states:

Where a court—

(a) makes a disqualification order;

(b) grants or varies relief under section 157 (8); or

(c) convicts a person of an offence——

(i) which has the effect of his being deemed to be subject to a disqualification order, or

(ii) under section 158 (1) or 161,

a prescribed officer of the court shall cause the registrar of companies to be furnished with prescribed particulars of the order, relief or conviction at such time and in such form and manner as may be prescribed.

Therefore when someone is found guilty the registrar will keep information about that person. I will always defend the basic principle underlying our law and democracy that a person is innocent until proved guilty. Because a person was brought into court and subsequently found to be innocent should a record of the fact that they were brought into court be kept for ten years?

Mr. Taylor

That is utter rubbish.

Mr. S. Barrett

If a person was a director of a company which was brought down quite innocently by another company should his name be plastered all around the place for ten years? Should a person be forced back into court to prove his innocence each time he wants to take on a directorship? What are we dealing with here? In one breath there is talk about civil rights, and in the next breath about extreme centralism. We are dealing here with people who have been found guilty of fraudulent trading and who should not be allowed to continue on. If a person is innocent he is innocent, and on Committee Stage both Deputy Bruton and I argued against the keeping of a blacklist unless one's name should be on that black list, and that if a person's name should not be on that blacklist it should be taken off. If I am correct, the Minister is bringing in an amendment to assist us to ensure that will be the case.

Mr. Taylor

It is not a blacklist, it is a list.

Mr. S. Barrett

It is a blacklist——

Mr. Taylor

It is a list.

Mr. S. Barrett

——and it will be used by people every time they want to do business. They must go along to check the list and if a person's name is on the list that person's reputation will be damaged.

Mr. Taylor

Why should they not know the facts?

Mr. S. Barrett

About what?

Mr. Taylor

About whether a person was a director of a company that went into liquidation on the grounds of insolvency. That is a fact.

Mr. S. Barrett

They may quite innocently have gone into liquidation.

Mr. Taylor

That may be but facts are facts.

An Ceann Comhairle

I have to remind the House——

Mr. S. Barrett

It is quite obvious——

An Ceann Comhairle

I am sorry, Deputy Barrett, but the Chair——

Mr. S. Barrett

——that the Labour Party have suddenly taken a great interest in this affair and I am delighted that for the last two hours we will have their assistance for the first time in six or seven months.

An Ceann Comhairle

Deputy Barrett, I have to remind the House that this is Report Stage and Members may speak only once with the exception of the mover who has the right of reply.

Mr. Leyden

Amendment No. 70 was grouped, for discussion purposes, two weeks ago with Government amendments Nos. 68w and 70a. The House accepted amendment No. 68w and in principle amendment No. 70a. Both of these amendments go a long way towards meeting the point made in amendment No. 70.

Mr. O'Dea

I agree with Deputy Barrett's sentiments in this regard. Nevertheless it should be pointed out that there is a gap in the sense that a person may not be disqualified unless legal proceedings are taken and a person may not be restricted unless an application is made or unless proceedings are instituted which would allow the court of its own volition to apply a restriction. Amendment No. 70 in the name of Deputy Rabbitte could give rise to a grave injustice. Let us suppose for example that a company go into liquidation and an application is made to have a restriction order imposed on one of the directors; all the applicant need establish is whether the company went into liquidation. The onus of proof would then be shifted on to the officer or director to prove that he acted honestly and responsibly. Let us suppose that he could prove that he acted both honestly and responsibly, would it be right, fair or reasonable that his name should appear on a list for ten years with no information on the list as to whether he established before the court, with the onus of proof on him, that he acted honestly and responsibly? That is a situation we should not create under our laws.

Mr. Rabbitte

I am somewhat surprised at the excitement this amendment has generated having regard to the very boring times we had on Committee Stage.

Mr. S. Barrett

We debated this amendment long and hard.

Mr. Rabbitte

I am not convinced by the arguments which have been brought forward, and apart from amendment No. 69, where, admittedly there was a very specific imposition which some people would regard as unreasonable, I cannot appreciate how it is unreasonable to require the registrar of the Companies Office to keep a list for inspection. Not everyone wanders in off the street to the Companies Office and, notwithstanding what the Minister has said, it is my information that even if someone were to wander in today the records are still hopelessly out of date: I am advised of this by trade union researchers and other people. As Deputy Taylor said, there could be a very compelling reason why one would need to inspect a list such as this.

Deputy Barrett said we are running away with ourselves and went on to condemn those who speak about "civil rights" and "extreme centralism". I do not recall anyone mentioning in this debate either of those dimensions, but why should there be this discrepancy in relation to the ethical standards which should apply to one side of business as compared to the other side? If I fail to discharge a debt in respect of my washing machine my name could appear in Stubbs Gazette, even though I might be otherwise a law-abiding citizen. Why is that matter not a source of outrage? If I apply for many kinds of employment which are advertised every day in the newspapers, my record will be gone into, references will be required, references will have to be advanced and my prospective employer will go back over that with a fine toothcomb. If my name accidentally appears in Stubbs Gazette this could cost me the job.

Mr. Taylor

And credit too.

Mr. Rabbitte

Certainly, if one were looking for some kind of hire purchase arrangement this could make the difference between being successful and otherwise. Why is that so difficult and so different from requiring the registrar of the Companies Office to keep a list——

Mr. S. Barrett

He is entitled to keep a list.

Mr. Rabbitte

The section does not say that.

Mr. S. Barrett

It is stated in section 164.

Mr. Rabbitte

Section 164 only related to a situation where the court has actually being seized of the matter——

Mr. S. Barrett

Of course, if he is proved guilty.

Mr. Rabbitte

Yes, but we have already dealt with a number of instances where that might not arise. However, where the court has been seized of the matter all it says is that the prescribed officer of the court shall require the registrar of the Companies Office to be furnished with particulars of the order, relief of conviction at such time and in such form and manner as may be prescribed. If the Minister can disabuse me I look forward to hearing from him but it does not seem to say in what manner or how the Companies Office shall codify that information or whether it will be available for inspection, in the kind of circumstances Deputy Taylor suggests, by somebody contemplating entering into a commecial transaction or who for whatever reason wants to inspect the files to see if the information is there or not. I also instanced a situation where a new or different company may be seeking to take that director on board.

Funnily enough, Deputy Barrett ought to mention the term "civil rights". I think he is right, that it is a question of civil rights and civil liberty. I cannot for the life of me begin to understand why it has been suggested that this stigma should apply to somebody in this set of circumstances. If his involvement in the insolvency is entirely innocent where is the problem? The facts will bear that out.

Mr. S. Barrett

What facts?

Mr. Rabbitte

——the facts of the insolvency. If there was an insolvency, if the debts were not discharged, if that arose through no reasonable fault of the director——

Mr. S. Barrett

We do not want any explanation whether he is innocent.

Mr. Rabbitte

If one looks at the Official Report one will see that on Committee Stage the Minister himself rejected absolutely the term "blacklist". For example, there are directives from the EC on disclosure of company information which regrettably, because of their parameters, their size and so on, exclude most Irish companies. This is merely a question of access to information that people considering entering into a commercial transaction might require, or indeed that companies considering taking on board a financial director from a company that had failed before might require. It seems to me that that would be a major decision if one were about to appoint a financial director, with previous business experience and so on. If one were to discover his name was on a list associated with an insolvency, when debts were not discharged, it would be very prudent, in the interests of the workers and creditors of that other company, that he would have an opportunity to check out that position.

There is an important question involved here. I am not happy that the Minister — who gave an undertaking on Committee Stage to take on board the thrust of this amendment if not its precise wording, and said he would come back to it — has adequately answered the case.

Mr. O'Dea

It is the next Government amendment.

Mr. Rabbitte

I was going to say that. We have dealt with two amendments and are dealing with one more. I do not think it adequately encompasses the circumstances I am envisaging here.

Amendment put.

The Dáil divided: Tá, 23; Níl, 76.

Tá

• Bell, Michael.
• De Rossa, Proinsias.
• Ferris, Michael.
• Foxe, Tom.
• Garland, Roger.
• Gilmore, Eamon.
• Higgins, Michael D.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Mac Giolla, Tomás.
• Moynihan, Michael.
• O'Shea, Brian.
• O'Sullivan, Gerry.
• O'Sullivan, Toddy.
• Pattison, Séamus.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Ryan, Seán.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.

Níl

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Aylward, Liam.
• Barrett, Michael.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John (Wexford).
• Calleary, Seán.
• Callely, Ivor.
• Clohessy, Peadar.
• Connolly, Ger.
• Coughlan, Mary Theresa.
• Cowen, Brian.
• Cullimore, Séamus.
• Daly, Brendan.
• Davern, Noel.
• Dempsey, Noel.
• Dennehy, John.
• de Valera, Síle.
• Ellis, John.
• Fahey, Frank.
• Fahey, Jackie.
• Fitzgerald, Liam Joseph.
• Fitzpatrick, Dermot.
• Flood, Chris.
• Flynn, Pádraig.
• Gallagher, Pat the Cope.
• Geoghegan-Quinn, Máire.
• Quill, Máirín.
• Reynolds, Albert.
• Roche, Dick.
• Smith, Michael.
• Stafford, John.
• Treacy, Noel.
• Harney, Mary.
• Haughey, Charles J.
• Hillery, Brian.
• Hilliard, Colm.
• Hyland, Liam.
• Jacob, Joe.
• Kelly, Laurence.
• Kenneally, Brendan.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• Martin, Micheál.
• McCreevy, Charlie.
• McDaid, Jim.
• McEllistrim, Tom.
• Molloy, Robert.
• Morley, P.J.
• Nolan, M.J.
• Noonan, Michael J.
• (Limerick West).
• O'Connell, John.
• O'Dea, Willie.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Leary, John.
• O'Rourke, Mary.
• O'Toole, Martin Joe.
• Power, Seán.
• Tunney, Jim.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies Gilmore and Sherlock; Níl, Deputies V. Brady and Clohessy.

Amendment declared lost.

Mr. Leyden

I move amendment No. 70a:

In page 123, between lines 15 and 16, to insert the following:

165.—(1) The registrar shall, subject to the provisions of this section, keep a register of the particulars which have been notified to him under section 164, and the following provisions of this section shall apply to the keeping of such a register.

(2) Where the particulars referred to in section 164 (b) comprise the grant of full relief under section 157 (8), the registrar shall not enter such particulars on the register referred to in subsection (1), but shall, as soon as may be, remove any existing particulars in respect of the person concerned from the register.

(3) The registrar shall also remove from the register any particulars in relation to a person on the expiry of five years from the date of the original notification under section 164, or such other period in respect of which the person concerned is deemed to be subject to a disqualification order, unless the registrar has received a further notification in respect of that person under this section.

(4) Nothing in this section shall prevent the registrar from keeping the register required by this section as part of any other system of classification, whether pursuant to section 270 or otherwise.

Amendment agreed to.

Mr. Leyden

I move amendment No. 70b:

In page 125, between lines 32 and 33, to insert the following:

(3) (a) A receiver shall not sell by private contract a non-cash asset of the requisite value to a person who is, or who, within three years prior to the date of appointment of the receiver, has been, an officer of the company unless he has given at least 14 days' notice of his intention to do so to all creditors of the company who are known to him or who have been intimated to him.

(b) In this subsection—

(i) "non-cash asset" and "requisite value" have the meanings assigned to them by section 28 of the Companies Act, 1990, and

(ii) "officer" includes a person connected, within the meaning of section 25 of the Companies Act, 1990, with a director, and a shadow director.

This amendment arises from the Special Committee debate on an amendment tabled by Deputies, Seán Barrett and John Bruton. What the Deputies were after was that a receiver should not be able to sell company property to any former directors of the company who were "disqualified persons" under Part VII without the approval of the court. The Minister of State, Deputy Harney, eventually agreed to have the whole area looked at in the context of similar issues which had been raised by the Deputies on Part VI, in relation to management buy-outs from liquidators. The House will recall that the Minister tabled an amendment to Part VI to address the problem there, and this amendment is similarly framed.

Mr. S. Barrett

I welcome this amendment. It is another attempt to make certain that those who behaved improperly in business should not be able to buy back assets very easily from either the liquidator or the receiver. It is another attempt to discourage people from fraudulent practices in business. This is part and parcel of what both Deputy Bruton and I were trying to achieve during Committee Stage. I welcome the fact that this amendment will not make it more difficult to sell back to the famous rogue directors any assets of the company without proper notice being given.

Mr. Rabbitte

I welcome the amendment as well. This is a well known ruse in certain types of receiverships and what is being enshrined here will greatly limit the manoeuvrability of fraudulent persons in a receivership.

Amendment agreed to.

Mr. Leyden

I move amendment No. 70c:

In page 126, to delete lines 1 to 13, and substitute the following:

170. —The Principal Act is hereby amended by the insertion after section 320 of the following section—

"320A. —Where, in contravention of section 319 (1) (b) and section 320, a statement of affairs is not submitted to the receiver as required by those provisions, the court may, on the application of the receiver or any creditor of the company, and notwithstanding the provisions of section 320 (5) (inserted by section 169 of the Companies Act, 1990), make whatever order it thinks fit, including an order compelling compliance with section 319 and section 320".

Sections 169 and 170 in the present text of the Bill address the problem which often arises in receiverships, where directors fail, or neglect, to comply with the obligation in those sections to provide the receiver with a statement of the company's affairs within 14 days of his appointment. Although it is also an offence for a receiver to fail to send on this statement to the Registrar of Companies within two months of the appointment, receivers can, in effect, pass on the blame to the directors who did not give them the statement in the first place. The Bill sets out to address this by, first, increasing — in section 169 — the penalty for directors who fail to give the receiver the statement of affairs and, second, if the directors fail to prepare the statement, by requiring the receiver to prepare it himself. While the professional bodies representing receivers objected strongly to this approach, we have maintained the proposals up to now.

During the Special Committee debate, various alternative approaches were suggested, and it was finally agreed to have the provisions reviewed again before the Report Stage.

Recognising that the principle aim of section 170 of the Bill is to make sure that statements of affairs are actually prepared, I am proposing, in this amendment, to replace the existing section 170 by one which would give the court the power to force defaulting directors to comply with their obligation to give the receiver the statement. I think, on reflection, that this will be a better way to ensure the timely production of statements of affairs in receiverships.

Amendment agreed to.

Mr. Leyden

I move amendment No. 70d:

In page 126, to delete lines 18 and 19, and substitute the following:

"(2) Notice of such proceedings shall be served on the receiver and on the person who appointed him not less than 7 days before the hearing of such proceedings and, in any such proceedings, the receiver and the person who appointed him may appear and be heard.".

Deputies Barrett and Bruton objected to the wide scope of this section which they felt should at least specify some sample grounds on which a receiver might be removed from office. The Minister of State, Deputy Harney, maintained however that there was, no need for this, not least that exactly the same provision existed for liquidators since 1963 without apparent problems in section 277 (2) of the 1963 Act.

The Minister of State did, however, agree to including a reference in the section somewhat on the lines of section 173 (3) of the Bill and that is what this amendment does.

Amendment agreed to.

Mr. Leyden

I move amendment No. 70e:

In page 127, to delete lines 24 to 39, to delete pages 128 to 145, and in page 146, to delete lines 1 to 3.

As the House will be aware the provisions of Part IX of the Bill were overtaken by events in August this year and the Companies (Amendment) Act, 1990, effectively enacted the provisions of Part IX of the Schedule. Part IX is, however, still in the Bill and we now have to do something with that.

The overall approach I propose to take to this matter is to allow the provisions of the 1990 Act to stand, to delete Part IX in its entirety from the Bill but, at the same time, to avail of this opportunity to make some amendments and adjustments to the 1990 Act.

Thus, the first amendment to part IX before the House would delete Part IX of the Bill in its entirety, except the title thereof, and what we would be left with is lines 22 and 23 on page 127, namely, "Part IX, Companies Under Court Protection." If the House is agreeable to this approach, the next two amendments would then insert two sections into the "space" left by the removal of Part IX so that Part IX of this Bill, when enacted, will finally consist of just those two sections.

I will, of course, explain the background to the other amendments as we come to them.

Mr. Rabbitte

Let me put a query to the Minister on this rather unique legislative situation in which we find ourselves arising from the extraordinary events of last summer. Was consideration given to incorporating the amendment Act of August this year into this composite Act rather than carrying out the excision that is proposed here? Is it the considered advice that this is the best way of doing it? The Government did tell us at the time that in advancing a Companies (Amendment) Bill they were doing so for genuine reasons not pertaining to any particular company, that it was to have general application and so on. Now we know that it was introduced for a very specific reason, dismembering the substantive Bill we have here. Would it not have been a tidier arrangement to incorporate it into the main Companies (No. 2) Bill with whatever changes that would require?

Mr. Taylor

I agree with the remarks of Deputy Rabbitte. The position is that this Companies Bill was brought forward as a consolidating comprehensive measure of company law and is very important as such. In many areas of our legal system we have these scrappy arrangements under which there are a multitude of Acts going back over the years with amendments and insertions and endless complications. The idea of having, finally, one consolidating comprehensive measure that would have had everything in it up to date for once would have been something very much to be desired from the practical point of view of practitioners, lawyers, accountants and so on. We now find that we will end up without that, with the August Act in place and perhaps further amended here again with further cross-referencing and so on being necessary. It is a pity that we could not have incorporated the whole lot into this one consolidation measure fully up to date so that practitioners could have taken this Act as company law in Ireland as it stands, comprehensive at this time. Maybe it has to be that way but it is regrettable that we find ourselves in that situation.

Mr. Leydon

The points made by Deputies Rabbitte and Taylor are quite appropriate to this section but we have decided that it would be more appropriate to bring forward the procedure we are suggesting in this case. Naturally we have the advice of the parliamentary draftsman and I am quite satisfied that bringing forward amendments is the best method. I agree with Deputy Taylor that they would have to be read in conjunction with the Act; but it is not a consolidation Act as such. Deputy Rabbitte may not be aware, so I will remind him, that there are four companies under examination at the moment, not one. The 1990 Act is being used and will be used not just for one company but for many companies.

Mr. Rabbitte

They are all under examinership for the same reason.

Mr. Leyden

It is excellent legislation and the amendments we are now moving will further enhance the Bill.

Amendment agreed to.

Acting Chairman (Mr. Sherlock)

We now move to amendment No. 70 (f). Amendments Nos. 70 (i) and 70 (j) are alternatives and we will take these amendments together by agreement.

Mr. Leyden

I move amendment No. 70 (f):

70f. In page 146, between lines 3 and 4, to insert the following:

208. —(1) The Companies (Amendment) Act, 1990, is hereby amended as follows:

(a) by the substitution in section 3 (6) for "14 days" of "3 days",

(b) by the insertion after section 5 (2) (f) of the following paragraph:

"(g) no order for relief shall be made under section 205 of the Principal Act against the company in respect of complaints as to the conduct of the affairs of the company or the exercise of the powers of the directors prior to the presentation of the petition.",

(c) by the deletion in section 8 (3), of ", or past director,",

(d) by the insertion in section 8 (3), after "Act", where it secondly occurs, of "and `director' includes any present or past director or any person connected, within the meaning of section 25 of the Companies Act, 1990, with such director, and any present or past shadow director",

(e) by the insertion in section 8 of the following subsections:

"(5A) Without prejudice to its power under subsection (5), the court may, after a hearing under that subsection, make any order or direction it thinks fit, including a direction to the person concerned to attend or re-attend before the examiner or produce particular books or documents or answer particular questions put to him by the examiner, or a direction that the person concerned need not produce a particular book or document or answer a particular question put to him by the examiner.

(5B) Section 23 (1) of the Companies Act, 1990 shall apply for the purposes of this section.",

(f) by the substitution in section 10 (1) of "Any" for "Where an order is made under this Act for the winding-up of the company or a receiver is appointed, any",

(g) by the substitution, for section 16 (i), of the following:

"(i) his opinion as to whether the facts disclosed would warrant further inquiries with a view to proceedings under section 297 or 297A of the Principal Act (inserted by the Companies Act, 1990), or both,",

(h) by the insertion in section 23 (5) (b), after "Government" of ", a local authority",

(i) by the insertion in section 24 of the following subsection:

"(12) Notwithstanding subsection (4), or any other provision of this Act, where the examiner forms the opinion that the company will be able to survive as a going concern, nothing in this Act shall prevent the examiner from including, in a report under section 15 or 18, proposals which will not involve the impairment of the interests of members or creditors of the company, nor the court from confirming any such proposals.".

(2) Section 244A of the Principal Act (inserted by section 123 of the Companies Act, 1990) and section 137 of the Companies Act, 1990, shall apply to a company under the protection of the court as they apply to a company being wound up, and any references in those sections to a liquidator or provisional liquidator shall be construed for the purposes of this subsection as a reference to an examiner.

(3) Sections 32, 33, 34 and 35 of the Companies (Amendment) Act, 1990, are hereby repealed.

The amendment I have tabled would do two things: it would return to certain issues which were raised in the special committee and on which I promised to reflect and it would make certain technical adjustments to the 1990 Act arising solely from the duplication of certain provisions in that Act and in Part VI of this Bill. If the House bears with me I will go through the various aspects of the amendment. It is a long statement but it is necessary to place it on record.

Paragraph (a) of subsection (1) of the amendment proposes to reduce the period, after a receiver has been appointed to a company, within which an application for the appointment of examiner can be made from 14 days to three days. While the view of the Special Committee was that seven days might be a more appropriate period, the original 14 days period was, in the event, adopted in the 1990 Act. However, having reflected further on the matter, and listened most carefully to comments in the meantime in the context of the 1990 Act, I am now prepared to go considerably further and the amendment will reduce the period involved to three days. This will give considerable comfort to receivers who will now be much more certain of their position as well as requiring company managements, and their creditors, to make up their minds within a shorter period whether to apply to the court under the 1990 Act.

Paragraph (b) addresses a detailed issue which was the subject of a lengthy debate in the Special Committee and has to do with the wording of section 180 (4) of the Bill, now section 5 (4) of the 1990 Act. Following that debate I agreed to reflect further before Report Stage. The present position is that by virtue of section 55 of the 1990 Act the shareholder cannot, at any stage, apply to the court for relief under section 205 of the Principal Act in respect of anything that happens while the company is under the protection of the court. What paragraph (b) does is add a new paragraph to section 5 (2) to the effect that for so long as a company is under protection no action may be taken by shareholders under section 205 in respect of anything done by the directors prior to the appointment of the examiner.

Paragraph (c) and (d) of the amendment are designed to widen the possible scope of inquiry under section 8 (3) of the 1990 Act and are effectively consequential on amendments accepted by the House to section 10 of the Bill. They are, therefore, technical adjustments to the 1990 Act. The main idea behind the two paragraphs is to ensure that full information can be obtained in relation to bank accounts operated not just by directors but by people connected with them within the meaning of section 25 of the present Bill and by shadow directors who may not be actually connected as the term is defined.

The first part of paragraph (e) of the amendment would insert a new subsection (5) (a) into section 8 of the 1990 Act and is also identical to an amendment already accepted by the House to section 10 of the Bill. As in the case of section 10 it addresses the situation where an examiner fails to get information or responses to questions and reports the matter to the court. The court's only remedy is to treat the matter as one of contempt. Under section 8 of the 1990 Act the court could not, for example, direct that the person concerned need not produce documents or whatever or direct that the person should answer the questions asked by the examiner. It would seem important that in addition to contempt the court should have these powers and that is what this amendment provides for.

The second part of paragraph (e) of the amendment would insert a new subsection (5) (b) into section 8 of the 1990 Act and is designed to protect legally privileged information in the same way as section 23 (i) of the Bill does for investigation under Part II.

Paragraph (f) addresses a possible gap under section 10 of the 1990 Act. Section 10 allows the examiner to certify certain liabilities if he thinks the incurring of them is vital for the survival of the company. The most obvious interpretation of section 10 (1) is that liabilities so certified are to be treated as expenses properly incurred for the purposes of section 29 thus giving the creditors concerned a kind of super secured status. However, it is also possible that such status would only arise where in the words of section 10 (1) an order is made for the winding up of the company or a receiver is appointed. There are however other situations for example, where the court makes some other order short of winding up or receivership. In these cases the creditors' certified status might not apply leading to at best considerable uncertainty and at worst a refusal by crucial creditors to keep supplying during the protection period.

Paragraph (f) of the amendment will therefore delete the opening clause of section 10 (1) and make it clear that certified liabilities under that section have absolute security under section 29. This is identical to the first of the amendments tabled by Deputy Barrett and his amendment is, therefore, unnecessary.

Paragraph (g) of the amendment as well as subsections (2) and (3) are what I would call tidying up provisions arising from the enactment of the 1990 Act and were foreshadowed by four amendments to Part VI of the Bill which the Minister introduced the last day. Sections 32 to 35 of the 1990 Act correspond generally to sections 123, 135, 136 and 137 of the present Bill but there is no point in having two parallel sets of provisions so paragraph (b) of the amendment, as well as subsections (2) and (3), will incorporate the necessary adjustments in the Bill arising from the passage of the 1990 Act. In view of the proposals to delete, among other sections, section 35, the second of the amendments tabled by Deputy Barrett will not now arise.

Paragraph (h) of the amendment is new and would add local authorities to the definition of "State" in section 23 (5) (b) of the 1990 Act thus enabling a local authority to agree to a compromise or scheme of arrangements drawn up by an examiner in the same way as the Revenue Commissioners are entitled to. This is in response to the arguments brought forward in the Special Committee by Deputies Bruton and Barrett in particular. I was present at that meeting of the Special Committee and recall the discussion that took place.

Paragraph (i) of the amendment addresses an important issue identified in the Special Committee, that is, that the whole system is set up on that basis that a rescue plan will necessarily involve shareholders and creditors accepting less than their full entitlements. However, it was pointed out that all a company may need to survive and restore the confidence of its bankers is a change of management. The company may not even be insolvent at the stage we are now talking about. Indeed, the company may improve their trading performance during the period of protection and may actually be solvent again by the end of that time, although some changes may still need to be made and sanctioned by the court. I want to make it clear that where the examiner finds that the company are able to continue without the interests of any creditors or members being impaired but which may, for example, involve changes in management, the examiner can so report to the court and the court can confirm such proposals.

I am sorry that my introduction to this amendment went on at some length but I feel it will be of benefit to the House in considering it.

Acting Chairman (Mr. Sherlock)

I would remind Deputies that we are discussing amendments Nos. 70 (1) and 70 (j) in the name of Deputy Sean Barrett. Those amendments can be spoken to in conjunction with amendment No. 70 (f).

Mr. S. Barrett

This is one of the most important parts of today's discussion because we have had the opportunity of seeing how this legislation is working. There are obvious difficulties, some of which are being addressed here today. In relation to the part of the amendment dealing with section 3 (6) I am glad to see that the Minister has reconsidered the point made in the Special Committee. It seemed inappropriate that a court shall not give a hearing to a petition under section 2 if a receiver stands appointed to the company the subject of the petition and such receiver has stood so appointed for a continuous period of at least 14 days prior to the presentation of the petition". We all felt that was too long a period. Things happen very quickly when a company is put into receivership and I am pleased that we are now reducing that period from 14 to three days.

In relation to section 10 of the 1990 Bill, I have put down amendment No. 70 (i). It became obvious during the course of the Goodman issue that where the Irish banks wanted to fund part of the operation of the business there were difficulties about the examiner being able to guarantee that the sums advanced while the company was in receivership would be treated as expenses. The section as it stood stated quite clearly that "where an order is made under this Act for the winding up of a company or a receiver is appointed, any liabilities incurred by the company during the protection period, referred to in subsection (2), shall be treated as expenses properly incurred, for the purposes of section 29, for the examiner". That clearly stated that only moneys that had been advanced while the company was in receivership could be guaranteed if the company was subsequently wound up or a receiver appointed. That appeared to be totally contrary to the whole spirit of the legislation under which an examiner was being appointed so that the company would not be wound up or put into the hands of a receiver.

One of the main difficulties with the legislation will be the provision of finance to the examiner to enable him to carry on the business during the period in which he is examining the company. No company can survive without moneys being made available to them. I tabled the amendment so that section 10 would guarantee that any liabilities incurred by the company during the protection period would be treated as examiner's expenses, provided of course that they are properly incurred. That would be a vast improvement in the legislation and should make it easier in future for examiners to get funds while the company is under the protection of the court.

One of the main areas of concern in this legislation is the fact that when an examiner is appointed the same management remain in place. Again we can learn a lesson from the Goodman affair. Where an examiner is appointed and the same management remain in place, this can cause extreme difficulties, particularly for the lending institutions. I have an amendment down in that regard and we will be dealing with it later.

The last point I want to make relates to section 35 which the Minister is proposing, in this amendment, to delete. I am raising this matter because I am not happy with the wording used in section 35. If we were to agree with the Minister's overall amendment here I do not know whether we could still deal with the point I now wish to raise. Section 35 (1) refers to where on the application of an examiner of a company it can be shown to the satisfaction of the court that any property of the company of any kind whatsoever was disposed of either by way of conveyance, transfer, mortgage, security, loan or in any way whatsoever whether by act or omission, direct or indirect, and the effect of such disposal was to perpetrate a fraud of the company. I propose to change the word "effect" to "intent". I am strongly advised that in all other legislation which includes a similar provision the words used are "the intent of such disposal was to perpetrate a fraud". I do not know how one can say the effect of such disposal was to perpetrate a fraud. Surely where fraud has been committed there must have been an intent to commit the fraud. I am asking the Minister if he can facilitate my amendment No. 70j in the overall amendment that he is now proposing. I would like to hear his reasons why the words "the effect of such disposal" are used instead of "the intent of such disposal".

I hope this legislation, the Companies (Amendment) Act, 1990, works. I believe that everything possible should be done to prevent companies going into liquidation. The legislation has been used in the Goodman case but we will not know how good or bad it is until that whole issue is dealt with. There are certain glaring weaknesses, one of which relates to who controls the company while the examiner is in place. I believe there will still be conflict between management and the examiner. Who will give the money to the examiner to keep the business running? The amendment we are proposing to section 10 would improve the Bill but there is always a concern that if we are going to give further moneys to a company who are in difficulty already we might not get our money back. The real test of any legislation is whether the examiner is able to do the job knowing that, first, he has the wages to pay the staff while he is there; and, secondly, that he has money to purchase goods to keep the business trading. I hope the amendment we are proposing to section 10 will improve that position further. I will deal with the rest of the matter when we reach amendment No. 70h.

Mr. Rabbitte

I too hope that the 1990 legislation works. In the aftermath of the dissolution of Fóir Teoranta it is all the more important that it works. The Minister for Finance advanced as one of his main reasons over the last year or so for the dissolution of Fóir Teoranta that when the chapter 11 type system was imported to Irish law there would not be any necessity for Fóir Teoranta. That is one reason, in addition to the reasons which Deputy Barrett advanced, for hoping that the Act works. However, I am still not satisfied, even at this late stage of our discussions, that the point raised by some business sources in relation to their concern about the whole examiner process has been adequately answered.

The argument has been made in some business quarters that the chapter 11 process is not suitable for importation to Irish company law in as much as circumstances in the United States are completely different, namely, that most, if not all, American companies tend to raise their capital on the domestic market whereas, in Ireland, any substantial enterprise, as we have recently seen, would not be able to raise the necessary capital on the domestic money market and would have to raise their money in London or somewhere else. International financiers, following the enactment of this process, will be more cautious about lending money to major Irish companies because of the manner in which they can be "stayed" under the chapter 11 process. I should like the Minister to deal definitively with that point.

I continue to hold the view that it would have been neater and more desirable to have repealed the Companies (Amendment) Act, 1990, and incorporate the relevant sections in the consolidating Bill. I look forward to reading in the Official Report a long statement written by the Minister, all of which, I confess, whatever about my colleagues, I could not grasp. It is interesting that, so shortly after the enactment of the Companies (Amendment) Bill, 1990, we already find it necessary to make some improvements in that situation. I am not saying that those improvements should not be made, I specifically agree with some of them, for example, the reduction of the days from 14 to three as specified because of what we have seen. We had the opportunity of watching the process in action and, therefore, we are enabled to come forward with measures which tighten up that process.

Does it raise questions about other new concepts enshrined in this Bill which we have not had the opportunity to see invoked and in practice? I should like the Minister to deal with that point. We watched the situation in the Goodman Group in the full glare of publicity and, so far as I can judge, the measures brought forward here are merited and will improve the process. However, it is not always that we are in a position, some three or four months after an Act has been passed, to amend it as we are now, purely accidentally, because we extracted that Act from the main Bill at the time.

I am not sure of the argument in amendment 70j tabled by Deputy Seán Barrett for the deletion of "effect" and the substitution therefor of "intent". I would have thought that the important thing is the effect of what has been done and, in law, that is much easier to determine than the intent. I would have thought the legislation is safer with the inclusion of "effect".

Mr. O'Dea

I welcome the broad thrust of the Minister's amendment No. 70f which contains desirable changes, the necessity of which were demonstrated on Committee Stage and, indeed, by some of the events since.

I particularly welcome paragraph (a) of the amendment where the period for which a receiver can be in existence before a person has to make an application for the appointment of an examiner is reduced from 14 to three days. The very nature of a receiver's responsibilities, office and duties is to the particular creditor who has him appointed and it would be undesirable if a person in that position continued too long in an atmosphere of uncertainty and doubt. The sort of activities in which a receiver is expected to engage by the person who seeks his appointment means that a long period of receivership, with the possibility of it coming to a sudden end, is a contradiction in terms.

On the other hand, it is desirable that an examiner can be sent in even though a receiver has been appointed. If that was not the case it would enable the people who are generally the most powerful creditors of a company, such as a large financial institution which have a fixed charge on the fixed assets of the company, to make a pre-emptive strike to prevent the possibility of an examiner being appointed. It is a question of balance and the reduction from 14 days to three got the balance right. I had some misgivings which I expressed at the Special Committee about the length of time for which the receiver would be in office in an atmosphere of doubt and uncertainty but that has now been satisfactorily resolved. I thank the Minister for bringing forward this amendment. I also thank the Opposition Deputies who contributed and made that point on Committee Stage.

Paragraph (b) of the Minister's amendment states that no order for relief shall be made under section 205 of the Principal Act against the company in respect of complaints as to their conduct of the affairs of the company or the exercise of the powers of their directors prior to the presentation of the petition. Section 205 of the Companies Act, 1963, gives minority shareholders the right to petition the court if they feel that the powers of the directors are being exercised in a manner oppressive to them or in disregard of their interest as members. It is my recollection that the company is the proper defendant in a section 205 action. I should like the Minister to clarify, when replying, whether a section 205 action can be brought against somebody other than a company. For instance, can it be brought against named directors? If so, it would seem that the wording of paragraph (b) of amendment 70f does not achieve the very desirable objective we all want. However, if the company is the proper and only possible defendant we are achieving the objective.

The amendment refers to an order for relief being made. Will the Minister clarify whether proceedings could be instituted under section 205 while an examinership is in progress? I take Deputy Rabbitte's point about the way capital is raised by Irish companies because of the relatively small size of the economy. The introduction of this legislation may give rise to foreign financiers being more cautious. It is more likely than not that it will give rise to greater caution on the part of potential foreign lenders. However, this is again a question of balance. We must balance the admitted beneficial effects of this legislation against any possible attitude that other people might adopt. On balance, we are doing the right thing.

The potential benefits to the economy from this legislation will outweigh any inhibitions that might arise in the minds of foreign financiers in relation to lending to Irish companies. Deputy Barrett referred to the testing of legislation. The best way to test legislation is to see it work. Grave misgivings were expressed by many people as to whether the part of the legislation dealing with the examiner was workable. Now we see it working and the indications to date are that it is working quite well.

Mr. S. Barrett

I heard that two of the four companies have been wound up.

Mr. O'Dea

As defects emerge, they will be dealt with. Deputy Barrett will know that inevitably some companies which apply for the appointment of an examiner will be wound up. If no companies applying for the appointment of an examiner were wound up, it would be most peculiar and one would wonder about the necessity for the legislation.

Mr. S. Barrett

I would not say it was a roaring success.

Mr. O'Dea

Some companies will be wound up and some will be saved, and it is a good thing that jobs will be saved in this way. It will lessen the power of the large financial institutions who tend to send a company to the wall in pursuit of their own selfish interests. That should be controlled.

Deputy Taylor referred to consolidation and I agree with him in that regard from the point of view not only of practitioners but of people who will be studying company law for accountancy examinations, law examinations, business studies and so on. It is desirable to have this in one Act which can be easily referred to but I do not know if there are some technical or legal difficulties about this arising from the fact that cases are being considered by the courts. With that minor reservation I welcome the amendment.

I urge the Minister to strongly consider the possibility of consolidating this legislation. Our laws are complicated and scattered enough without people having to look to three or four different pieces of legislation. Not only have we a separate Act dealing with the examiner, but that legislation is amended in the legislation which deals with every other aspect of company law. That will cause difficulties particularly for students.

Mr. Taylor

Deputy Barrett's interjection referred to the fact that two companies involved in the examiner's procedure have been wound up. I assume the Deputy would not regard that as any criticism of the procedure. One would have to say in all certainty that those companies would have been wound up anyway. It was never advocated that the new procedures would save every company that got involved in them. They would save one company or two or 5 per cent of companies, but whatever is saved is profit and must be welcomed and we should be grateful for it. There is clearly a need for this type of procedure. It is regrettable that we did not have this years ago and perhaps more jobs would have been preserved. We were very slow in bringing in this procedure as we are slow in bringing in innovative procedures. This has an important role and such procedures have played an important role in other countries.

I have some concern about the way we have gone about the whole issue. The kind of legislative procedures that we have been involved in on this issue starting with the 1990 Act and then this pseudo consolidation measure incorporating amendments to the earlier Act of this year, at best can be described as clumsy, inept legislation which is totally unsatisfactory. What we are doing in this amendment, and Deputy Rabbitte commented on the length and complexity of the Minister's introductory speech, is introducing what ought to be an amending Bill in itself. We are presented with this amending legislation after a very short period, without having the facility of a Committee Stage to deal with these amendments which really warranted a Committee Stage in themselves because of their degree of complexity. To deal with this in this Bill as a single Report Stage amendment is not a proper and effective way in which to legislate. For that alone some criticism can be fairly levelled at the Minister.

The legislation has been in operation for a very short period. It is too soon to set about amending it at this stage. Some may be important and desirable and I have no objection to any of them in particular, but it would have been more satisfactory to allow the 1990 Act run for a while before assessing it and bringing in an amending Bill to bring it up to date and to deal with any gaps that might show. I have no doubt that within the next six months or a year further difficulties and deficiencies will arise in the 1990 Act which will require further attention and we will be adding to this piecemeal scrap-heap arrangement of building up a body of law on a new subject instead of having it cleanly incorporated in one consolidation measure. That is the main thing that troubles me about this.

The examiner procedure will not cause undue difficulty for Irish companies when it comes to trading abroad or raising loans. When foreign companies want to do business with Irish companies, they will do it in their own interests. It could even be argued that foreign companies might look favourably on the fact that there was such a procedure in place because, as Deputy O'Dea rightly pointed out, all too often one finds one greedy predator company, mindful only of its own position, paying no regard to the broader spectrum of need of the company or the good the company is doing, or its potential to manufacture, to preserve jobs and so on. Such a company will go into liquidation or receivership for its own selfish ends. The examiner procedure raises the possibility of defusing any such attempt. Many companies dealing with Irish firms would look with favour on the fact that the procedure was there. It may bring about a fair result in the broad spectrum of creditors and people dealing with companies. I would not be too concerned about it. It is a long overdue and welcome provision.

The reason I say we may be a little premature in tabling amendments at this very early stage to the 1990 Act is that we see already in regard to the Goodman Group some difficulties arising in connection with arriving at an agreed plan to preserve the company. There are threats by one or two of the minor banks, who are involved to a relatively insignificant extent in the overall picture, to throw a spanner in the works, cause great difficulties and, perhaps, put the company in a prejudiced position. It may well prove to be necessary to do something about that in amending legislation. It is too soon to say but it is certainly a matter that will have to be looked at. We should not allow a small minority interest to cause chaos, disruption, dissolution or liquidation of an important Irish company for their own selfish reasons or to use what muscle they have, as a small player in the game, to put the company off its correct path of reinstatement to fulfil an important role in the country.

Mr. Leyden

I thank Deputies for their contributions. Regarding Deputy Barrett's point in relation to amendment No. 70j, he has rightly pointed out the difference between the effect of a fraud and intent to defraud. However, the intent is not the overriding consideration here. After all fraud is fraud. Section 35 of the 1990 Act proposed that where a fraud was proved in any case it was irrelevant whether it was intended. With any new legislation there will inevitably be a settling in period while the new procedures are tried and tested. I take the view that we are lucky to have this opportunity to make some adjustments to the 1990 Act. This is a unique opportunity and it is right that we should avail of it to make amendments to the 1990 Act. I make no apologies to Deputy Taylor in connection with this issue because it was raised in the Special Committee, as Deputy Barrett has pointed out. We had a very detailed examination of all aspects of this section. Since we debated the earlier Bill at the special sitting during the summer recess, we have had an opportunity of assessing the situation. I am pleased we have the opportunity now to bring forward the amendments which I hope will improve the 1990 Act.

It has been pointed out by Deputy O'Dea that there may be a need for consolidation of the Acts involved. He said there may be a difficulty for students of company law in relation to the intricacies of joining together the 1990 Act and the Bill we are debating today. I am sure eminent lecturers, such as Deputy O'Dea, will relish the opportunity to provide all the detailed information which is readily available to him to his students.

Mr. Taylor

It will be more work for him and more fees.

Mr. Leyden

I have explained that on the advice of the parliamentary draftsman we decided on the procedure we have adopted today.

Mr. Rabbitte

And for job creation policies.

Mr. Leyden

It was the appropriate way to proceed at this stage. Fortunately, we are making great advances in the debate on the Bill and those of us who participated in it over such a long period are delighted at this. Deputy O'Dea referred to section 205 of the 1963 Act.

Mr. Rabbitte

On a point of order, before the Minister leaves that will he tell us — because everybody in the House is interested in this — why he is satisfied that this is the best way of dealing with the 1990 Act.

Mr. Leyden

I have given the reasons. I am also satisfied with the response I have received. The parliamentary draftsman, and our legal advisers, have indicated that the procedure we are adopting is the best method. There is no ulterior motive in adopting this procedure as opposed to the procedure suggested by Deputies Rabbitte and Taylor. Their suggestion to incorporate the 1990 Act into this Bill was considered but that would have involved difficulties. The 1990 Act is now in place and there is no uncertainty about it. We are amending sections of the 1990 Act which, hopefully, when it goes through the Seanad and becomes law, will be read in conjunction with the Bill we are discussing. On the advice of the parliamentary draftsman and the legal advisers the procedure we have adopted is the correct procedure. I hope that will satisfy Deputies Rabbitte and Taylor. The 1990 Act is in place. It has been passed by the Legislature, signed by the President, and has been acted on already. We have amendments to incorporate in it and this is the appropriate way to proceed.

Regarding the point made by Deputy O'Dea in relation to section 205 of the 1963 Act, our understanding is that the defendant in such an action is not necessarily limited to the company concerned although that would usually be the case. Under that section there is the possibility that someone could take an action directly against an individual. In relation to other points raised by Deputy O'Dea, section 53 of the 1990 Act would prevent any proceedings being taken except by leave of the court. Another point raised by Deputy O'Dea and Deputy Taylor concerned the consolidation of the Acts to which I have referred already. It would be convenient if we were in a position to do that. I hope that is something that can be done in the long term but, at this stage, we are satisfied we are adopting the proper procedure.

Mr. S. Barrett

Is it in order for me to reply?

Acting Chairman

No, amendment No. 70 is in the name of the Minister. Is that amendment agreed?

Mr. S. Barrett

I was hoping we could reach a consensus?

Acting Chairman

Unfortunately, there is no provision for that.

Mr. S. Barrett

The Minister did not explain why he used the word "effect" as distinct from "intent".

Acting Chairman

As a number of queries have been raised in relation to the Minister's amendment, and as I allowed Deputy Rabbitte a brief question, I will allow Deputy Barrett to put a brief question.

Mr. S. Barrett

Thank you very much. In any court one goes in to prove there was an intent to do something. In fact, something could be done that subsequently could be proved as being fraud but was never intended as fraud. Does the Minister understand my point?

Mr. Leyden

I do.

Mr. S. Barrett

I do not see how it would make any grave difference to legislation if the word "effect" was substituted for by the word "intent". If somebody intends to commit fraud that can be proved but if it has to be proved that the effect of something has led to fraud it will also have to be proved that the intent was there. I would bow to Deputy Taylor as a lawyer to guide me on this point but I am advised that it is unusual to use in legislation the wording "the effect of such disposal was to perpetrate fraud". I have been strongly advised that the proper wording should be "the intent of such disposal was to perpetrate fraud". I understand that is the wording used in most legislation.

Mr. O'Dea

The word "fraud" implies intent, as intent is a necessary component of fraud.

Mr. S. Barrett

Why does the word——

Acting Chairman

I do not want any cross-communication between Deputies. Does the Minister want to reply briefly to the point made by Deputy Barrett.

Mr. Leyden

I think Deputy Barrett is making a mountain out of a molehill——

Mr. S. Barrett

No.

Mr. Leyden

The explanatory note to section 35 of the Companies (Amendment) Act, 1990, refers to the power of the court to order the return of assets which have been improperly transferred. We are not talking about imposing a fine on anyone. The Bill deals with whether the effect of such disposal was to perpetrate a fraud on the company, its creditors or members. Therefore, the assets would have to be returned to the person involved.

We can argue about the wording but the concerns referred to by Deputy Barrett are covered by the term "the effect of such disposal was to perpetrate a fraud on the company, its creditors or members". I am satisfied from the advice which has been given to me by my Department and the parliamentary draughtsman that this wording is proper in the circumstances and that the wording proposed by the Deputy would not have any beneficial effects. We want to retain the word "effect".

Amendment agreed to.

Bill recommitted in respect of amendment No. 70g.

Mr. Leyden

I move amendment No. 70g.

In page 146, between lines 3 and 4, to insert the following:

209.—(1) The Companies (Amendment) Act, 1990, is hereby further amended as follows:

(a) by the substitution for section 2 (1) (b) of the following:

"(b) no resolution subsists for the winding up of the company, and",

(b) by the substitution in section 4 (5) (f), for "company", of "body corporate",

(c) by the insertion after section 5 (2) (f) of the following paragraph:

"(h) no set-off between separate bank accounts of the company shall be effected, except with the consent of the examiner, and in this paragraph `bank account' includes an account with any person exempt by virtue of section 7 (4) of the Central Bank Act, 1971, from the requirement of holding a licence under section 9 of that Act,",

(d) by the insertion in section 11 (5), after "towards" of "discharging", and

(e) by the insertion of the following section after section 36:

"36A. —Proceedings in relation to an offence under section 11 (6), 12 or 30 may be brought and prosecuted by the registrar of companies.".

(2) Section 30 (3) of the Companies (Amendment) Act, 1990, is hereby repealed.

This amendment deals with "new matter" not adverted to in the Special Committee, but which has struck me since these matters were last considered by the House.

Paragraph (a) of this amendment would replace the wording in section 2 (1) (b) of the 1990 Act by the previous wording in section 177 (1) (b) of the Bill, since I am advised that it could cause problems in practice. It would, therefore, seem preferable to return to the idea we had in section 177 (1) (b) of the Bill, in other words that an examiner should not be capable of being appointed once an actual resolution to wind up has been passed. Paragraph (a) of the amendment proposes, therefore, to revert to the wording of section 177 (2) (b) of the Bill.

Paragraph (b) of the amendment would involve a relatively minor change to section 4 of the 1990 Act, but one that could come in useful in a future case. The effect of the change would be to enable a relationship to be shown under section 4 (5) (f) between two Irish companies whose parent was registered abroad — technically, this could not be done under the 1990 Act as it stands.

Paragraph (c) of the amendment is intended to tackle the means by which certain creditors, particularly banks, could effectively by-pass the restrictions imposed by section 5 (2) of the 1990 Act.

I am referring here to the practice of "set-off", whereby clients who operate separate accounts agree to the bank using the funds, in credit, in one account to offset shortages in others on an automatic basis and without any necessity to seek approval from anyone, court or otherwise. This kind of practice might not actually be "frozen" under any paragraph of section 5 (2), and this is what paragraph (c) of the amendment seeks to rectify.

Paragraph (d) of the amendment would make a minor, but possibly important, amendment to section 11 (5) of the 1990 Act. Section 11 is based on section 15 of the UK Insolvency Act, 1986, and my attention has been drawn to an error in the wording as between the last clause of subsection (4) and (5) — unlike the UK provision, the word "discharging" is omitted from subsection (5). Paragraph (d) of the amendment would rectify this error.

Paragraph (f) of the amendment would allow the registrar of companies to bring and prosecute summary proceedings for offences under section 11 (6), 12 or 30 of the 1990 Act, which involve relatively minor contraventions, and subsection (2) of the amendment would consequentially repeal section 30 (3) of the 1990 Act, which currently allows the registrar to prosecute an offence under that section alone.

Mr. Rabbitte

I should like the Minister to clarify the kind of situation provided for under paragraph (c) which states "... any person exempt by virtue of section 7 (4) of the Central Bank Act, 1971...". What type of bank account will be covered by this provision which was not covered by the previous section?

Mr. Leyden

Building societies, credit unions, and friendly societies will be covered under this section, as suggested by Deputy Rabbitte.

Amendment agreed to.

Amendment reported.

Mr. S. Barrett

I move amendment No. 70h:

In page 146, between lines 3 and 4, to insert the following:

208.—The Companies (Amendment) Act, 1990, is hereby amended by the insertion in subsection (1), after `examiner', where it firstly occurs, of `or at the time of presentation to it of a petition for the protection of the court under this Act'.".

As I said before, one of the main difficulties I see in the legislation regarding the examiner is that he will have to go back into court on numerous occasions to get the agreement of the court to do various things. One of the principal powers the court should have from day one is, if it sees fit, to transfer control of a company during the period it is in examinership to the examiner. The Bill as presently drafted provides that the examiner may go back into court and the court may then transfer responsibility from management to the examiner at that time. We should give the court the power from day one to transfer control of a company to the examiner by inserting in section 9 of the 1990 Act the words "or at the time of presentation to it of a petition for the protection of the court under this Act". This would mean that when the court was hearing the case on day one it could decide that, in addition to court protection being granted to the company the examiner should be given control of management of the company in question. This amendment would strengthen the legislation in the long term.

A lot of mystery surrounds the procedure whereby a company is put under the protection of the court and an examiner appointed, but the exact same management remain in the company. All sorts of problems may arise in the future not necessarily in regard to breaking the law but making it more difficult for the examiner. We have to look at the way we do our business because companies will always be looking for finance and people will form an opinion as to the type of environment in which they do their business.

It is questionable whether the same management should be in place while a company is under the control of the court and an examiner. I do not want to mention the Goodman affair but eventually a change had to be made. One can read behind what is written in the newspapers. It would have been far better if the court had been able to give complete and absolute discretion to the examiner to run that company during the four months when investigations had to be made and arrangements put in place. Such a provision would strengthen rather than weaken the legislation. It would reduce cost by obviating the necessity to go back and forth to the court seeking agreement. We requested this on Committee Stage but the Minister was not in a position to agree. We are not saying that this should be done, rather that it should be possible for the court if it thinks fit to transfer control of the company to the examiner. This is peculiar legislation. Everybody is being told that they cannot do anything until the court decides, having considered the examiner's report, the creditors having made sacrifices and so on. There are peculiar provisions in that the majority of a class of creditors can make the decision. While this legislation could protect jobs, many people could also suffer.

The examiner may be called into the company at the request of the owner of that company and the creditors. His name is put forward by the person seeking the protection of the court, which could be the company owner. He is seen as working for the same owner and when it is all over the owner receives back the company and creditors could lose as a result. I have always had doubts about an examiner going in and being expected to do various things required by law, while at the same time he has been nominated by the person who owns the company. It would be far better if the court could give the examiner the control of the company at the outset until he had finished the job.

In a different set of circumstances the examiner can work with the person or group who sought the protection of the court in the first place. Those who were drafting this Bill possibly thought that the appointment of an examiner might be a disincentive to seek court protection. I can understand that thinking because there is a certain logic to it. We must start by encouraging companies to seek the protection of the court by getting an examiner in at an early stage. There are other circumstances where it is in the public interest that the examiner should also be given responsibility for the running of the company from the outset. The amendment gives the court the option, if it sees fit, to give the examiner control of the company. I would ask my colleagues to support this amendment.

Mr. Leyden

The effect of the amendment would be to enable the court to give the examiner the power to take full control of the company from the date of presentation of the initial petition. I would be reluctant to agree to this amendment for a number of reasons. I want all the parties mentioned in section 2 to be prepared to use the Companies (Amendment) Act. Directors of a company are, after all, closest to the company's affairs and ought to be the first to know if the company is heading for the rocks. Thus in many cases it is the directors who ask a bank to appoint a receiver.

If I accepted the amendment directors would clearly see that the first thing a court might do is remove them, in certain circumstances. I suggest that they would be very reluctant to present a petition if by so doing they would effectively be removing themselves from the management of the company.

My second problem with the amendment is that when the petition is presented the information available to the court, particularly from independent sources, would be unlikely to be of any great use, if indeed there would be any available. This contrasts with the present text of the Bill where at least the examiner will have some time to assess the position of the company. In the third place, the whole concept of the examiner could best be linked to a doctor who examines a patient and prescribes a remedy. If the examiner is to be caught up in managing the company from the start it reduces his scope to perform his primary task.

I wonder if this amendment is necesary. Section 9 provides that where the examiner considers that he ought to have full power to run the company he can apply to the court on the grounds listed in subsection (2). We are not limiting the time within which the examiner can go back to the court. In some black and white cases he could go back to the court the day after his appointment. Any of the paragraphs of subsection (2) apply. The amendment is unnecessary. On the other hand, it could be damaging for the prospects of saving the company if we were to put any discouragement in the path of the people we want to encourage to make applications to the court in the first place.

Mr. O'Dea

I can see certain merit in what Deputy Barrett is saying and in the thinking behind this amendment. The Minister, Deputy O'Malley, expressed concern on Committee Stage about the constant references to the court throughout the Bill. We must give credit where it is due. A very helpful amendment was proposed by Deputy Spring to reduce costs where the Circuit Court was the appropriate court of reference when a company is below a certain size. That will have the effect of removing costs to some extent. If the examiner is not to have total autonomy and the court must become involved at a number of stages while the examiner is in place, there must be some provision for reference to the court. The question is whether the legislation is drafted in such a way that the court must be referred to too often. This is important in the light of costs and the size of companies here relative to companies in the United States where the Chapter 11 procedure has been in operation for some time. It may be that when we see this in operation we will be able to find some way to reduce the number of times the examiner has to refer to the court for guidance in the performance of his functions.

The Minister stated that one of the arguments against Deputy Barrett's amendment is that it would discourage directors from availing of the examinership procedure. I would not go all the way with that argument——

Mr. Carey

That is a figment of the Minister's imagination.

Mr. O'Dea

——because the directors may be faced with Hobson's choice — with an examiner, a receiver or a liquidator taking over from them because the situation had become so hopeless. The real objection to the amendment is that the application to put a company into examination is ex parte, akin almost to a habeas corpus application in another branch of law, it is an emergency application and would be made ex parte. Only the minimum amount of information will accompany the application. It is not that it would not be right sometimes for the court to appoint the examiner with total control or as manager from day one——

Mr. S. Barrett

That is all we are asking.

Mr. O'Dea

——but the problem is that the court would not be in a position to make a decision on whether this should be done on day one given the scarcity of information available to it.

Mr. S. Barrett

How was the court able to appoint an administrator to the ICI and PMPA?

Mr. O'Dea

I will discuss that matter with the Deputy if he wishes. There is no point writing provisions into our legislation which would give the court the power to prejudge issues. In retrospect, one might say that an examiner should have been appointed as the boss from day one but, there is no point writing laws which give the court the right to make decisions of this sort having regard to the fact that the information available to it on the day the application is made would be so scanty that they would be in no position to make that decision.

Mr. Taylor

I support the amendment on the basis that in all probability there would not be many instances where the court would be required to operate it. However, there could be the occasional case where it would be necessary not only to appoint an examiner but also to vest powers in the court. I think we can have sufficient confidence in our judges and in the judicial system not to exercise that power except in exceptional cases. I do not believe that this power would in any way discourage directors from seeking to avail of the examination procedure if they were minded to do so. In any case this would be a very major step for any company and they would only take it if they were at their wits end and in considerable difficulty.

One could envisage a circumstance where it is obvious that the assets are about to be dissipated, jobs about to be lost, moneys about to be done away with or that all sorts of nefarious activities are going on, that the court would say they will exercise this exceptional power in those exceptional circumstances. I cannot see any possible harm in this. If, as Deputy O'Dea has said, there is a scarcity of information no court would take such a serious step because they are cautious and rightly so. They are very cautious in the orders they make and the steps they take. We could confidently leave this matter with the court to decide whether they have sufficient material which would persuade them to make such an order.

It is true that the examination would be carried out on a one-sided basis, ex parte as Deputy O'Dea put it. That is perfectly true but at the same time there would be nothing to stop a judge saying that, having considered carefully such an application he is not going to make an order, that he requires further information to help him make up his mind and that he is putting the case back until Thursday when the directors or creditors will come back with the information he requires. If the judge sees that queer things are going on in the company, he may decide that it would be too late to put things off for a few weeks. The object of the legislation, namely, to save companies, could perhaps be lost and dissipated if the court is not given this power.

To suggest that we should deny the court this power, even for use in exceptional cases, is to display a lack of confidence or trust in our judicial system and judges. To suggest that a court, for some outlandish reason or on insufficient evidence or material, would make such an order displays a lack of confidence in the Judiciary which is totally unwarranted. They are very careful and cautious people and know what is required and what the score is. They would not make such order lightly and it is a pity that the absence of such a power, for use in exceptional cases, would on occasion dissipate the object of this legislation, which is to preserve companies.

Delays can be extremely dangerous. Delays of even a week in the affairs of a company on a slippery slope could be disastrous and indeed could tip that company over the edge. There could be nothing left to save if the court does not step in on an emergency basis and secure the power in the hands of the examiner and save it. Why should we not consider it? It is not unreasonable to anyone that this should be used in exceptional cases and I think we could have every confidence and place our trust in the Judiciary to only exercise it where it was warranted.

Mr. Rabbitte

I tend to agree. The power we are talking about here is an exceptional and emergency measure. It is not impossible to envisage an instance where this power would be necessary to confer on the judge hearing the action. It is not as if the judge is compelled, on presentation of the petition, to make the order to vest total control in the examiner. Surely it would depend entirely on the merits of the case. If the merits of the case are such, the process could be undermined if the judge did not have the power to make the decision there and then.

For example, on previous amendments, we dealt with what the Minister referred to as the "set off" where it was possible to have separate bank accounts as a method of circumventing responsibilities not envisaged when the Bill was enacted last August. I presume there are other instances where a judge may come to the conclusion, based on the information, that it would be desirable there and then to give the examiner full control. The amendment is a reasonable one and, like Deputy Taylor, I doubt if it would be abused by the Judiciary.

Amendment put.

The Dáil divided: Tá, 66; Níl, 72.

Tá

• Ahearn, Therese.
• Allen, Bernard.
• Barnes, Monica.
• Barrett, Seán.
• Barry, Peter.
• Bell, Michael.
• Boylan, Andrew.
• Bradford, Paul.
• Browne, John (Carlow-Kilkenny).
• Bruton, Richard.
• Byrne, Eric.
• Carey, Donal.
• Connaughton, Paul.
• Cosgrave, Michael Joe.
• Cotter, Bill.
• Creed, Michael.
• Crowley, Frank.
• Currie, Austin.
• D'Arcy, Michael.
• Deasy, Austin.
• Deenihan, Jimmy.
• De Rossa, Proinsias.
• Doyle, Joe.
• Durkan, Bernard.
• Farrelly, John V.
• Fennell, Nuala.
• Ferris, Michael.
• Finucane, Michael.
• Flanagan, Charles.
• Garland, Roger.
• Gilmore, Eamon.
• Gregory, Tony.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael D.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenny, Enda.
• Lowry, Michael.
• McCartan, Pat.
• McCormack, Pádraic.
• McGahon, Brendan.
• McGinley, Dinny.
• Mac Giolla, Tomás.
• McGrath, Paul.
• Mitchell, Gay.
• Mitchell, Jim.
• Moynihan, Michael.
• O'Keeffe, Jim.
• O'Shea, Brian.
• O'Sullivan, Gerry.
• O'Sullivan, Toddy.
• Owen, Nora.
• Pattison, Séamus.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Reynolds, Gerry.
• Ryan, Seán.
• Sherlock, Joe.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Aylward, Liam.
• Barrett, Michael.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John (Wexford).
• Callely, Ivor.
• Clohessy, Peadar.
• Connolly, Ger.
• Gallagher, Pat the Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Charles J.
• Hillery, Brian.
• Hilliard, Colm.
• Jacob, Joe.
• Kelly, Laurence.
• Kenneally, Brendan.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• Martin, Micheál.
• McCreevy, Charlie.
• McDaid, Jim.
• McEllistrim, Tom.
• Molloy, Robert.
• Morley, P.J.
• Nolan, M.J.
• Coughlan, Mary Theresa.
• Cowen, Brian.
• Cullimore, Séamus.
• Daly, Brendan.
• Davern, Noel.
• Dempsey, Noel.
• Dennehy, John.
• de Valera, Síle.
• Ellis, John.
• Fahey, Frank.
• Fahey, Jackie.
• Fitzgerald, Liam Joseph.
• Fitzpatrick, Dermot.
• Flood, Chris.
• Noonan, Michael J. (Limerick West).
• O'Connell, John.
• O'Dea, Willie.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Leary, John.
• O'Rourke, Mary.
• O'Toole, Martin Joe.
• Power, Seán.
• Quill, Máirín.
• Reynolds, Albert.
• Roche, Dick.
• Stafford, John.
• Treacy, Noel.
• Tunney, Jim.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies J. Higgins and Boylan; Níl, Deputies V. Brady and Clohessy.

Amendment declared lost.

An Ceann Comhairle

I am now required to put the following question in accordance with the order of the Dáil of this day: "That amendments set down by the Minister for Industry and Commerce and not disposed of, including those in respect of which recommittal would in the normal course be required, are hereby made to the Bill; that Fourth Stage is hereby completed and that the Bill is hereby passed."

Question put and agreed to.

Minister of State at the Department of Industry and Commerce (Mr. Leyden)

I beg your indulgence, Sir, to express my appreciation to all those who participated in the passage of this very significant Bill. I should like to thank Opposition Members, Deputies S. Barrett, Carey, Rabbitte and Taylor, and Deputy O'Dea and others, the present Minister for Finance who introduced the Bill in 1987 and, indeed, the Minister for Tourism and Transport, Deputy Séamus Brennan who participated in the debate as Minister of State. On behalf of the Minister I should like to express thanks to all and particularly Deputy Cowen, Chairman of the Special Committee, on having brought this Bill to such an advanced stage. Finally, I should like to thank all of the officials who participated in the process.

Mr. S. Barrett

I should like to avail of the opportunity to thank the officials of the Department of Industry and Commerce who were very patient over a long period, who did a great job in assisting us put this Bill through the House. I thank the Minister for accepting a large number of amendments tabled by Deputy J. Bruton and myself, and my colleagues who served on the Special Committee. It is a great pity we do not utilise the committee system more often for this type of legislation. However, that is understandable when one considers the amount of work and effort put into this Bill, with practically no attendance on the part of the media and without the availability of the broadcasting service to that Special Committee. There is a major weakness there. This legislation and its huge effects on industry and business in the future should have been more broadly known by the public at large. It is a sad reflection on the way this House has gone that unless you have something very sexy to say you have less chance of getting a line in the paper. I always thought the media were there to report to the public important things that were happening in both Houses of the Oireachtas, but I was rather shocked at the insignificant coverage this massive legislation got at the Select Committee and the lack of broadcasting afforded to it both on Committee Stage and when we dealt with it in the House.

I hope sincerely that Irish industry, business and employment will grow as a result of the efforts that have been put in over the last three years in passing this legislation. Again, I thank all concerned who helped to bring it about.

Mr. Taylor

I thank the Minister for his very kind words. My own involvement in this Bill was miniscule in the extreme, and I am well aware of that, in comparison to many of the other Deputies who were involved on Committee Stage and here in the House. Really it arose only when I was appointed my party's spokesman on Industry within the last couple of weeks. Nonetheless, I was happy to come in here for the last session or two and make some contributions to the best of my ability with the intent, let me say, of trying to be helpful, not to seek publicity as was suggested here this morning. As has been said, a Companies Bill is not the sort of measure that attracts any great degree of publicity. It is an excellent piece of work that this very long, difficult and complex measure has been finally passed and adopted by Dáil Éireann.

Mr. Rabbitte

I thank the Minister for Industry and Commerce for his courtesy, and I want to acknowledge the extraordinary volume of work put into this very substantial legislation by the officials, requiring very considerable technical competence. I agree with Deputy Barrett that it would be a pity if the experience were to undermine the value of the Select Committee idea. Notwithstanding the fact that they may not always have proceeded as quickly as they could, the Select Committee were ideally suited to teasing out what is probably going to be one of the major pieces of legislation enacted by this Government and this Dáil. I am proud to have been associated with it throughout the period of the Select Committee. Especially I would like to acknowledge the contribution of the officials.

Sitting suspended at 1.50 p.m. and resumed at 2.30 p.m.