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Dáil Éireann debate -
Thursday, 31 Oct 1996

Vol. 470 No. 8

Irish Takeover Panel Bill, 1996: Second Stage.

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

The Irish Takeover Panel Bill, 1996, provides for the designation of a takeover panel to monitor and supervise takeovers and certain other transactions in relation to securities in certain companies — mainly public limited companies quoted on the Irish Stock Exchange. The designation of the takeover panel has two main objectives: to protect shareholders in situations where takeovers or other relevant transactions, for example, substantial acquisition of securities, are contemplated and/or put into effect; and to provide support and credibility for the Irish financial markets following the separation of the Irish Stock Exchange from London.

The Stock Exchange Act, 1995, which was promoted by the Minister for Finance, provides for the regulation of stock exchanges and their members. This Act was the first major legislation relating to the stock exchange in almost 200 years — it replaced the Stock Exchange (Dublin) Act, 1799. Essentially, the 1995 Act provides for a new supervisory system under which the Central Bank, as the supervisory authority, will have substantial powers concerning both the initial authorisation of stock exchanges, member firms and their ongoing supervision. With the enactment of this Bill, the Irish Stock Exchange, Dublin, which up until then formed the Irish unit of the International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd., separated from the combined exchange.

When the Dublin stock exchange formed part of the combined Dublin and London exchanges, the takeover code and rules of the takeover panel in London applied, respectively, to takeovers of companies listed on the Dublin, as well as the London, stock exchanges. However, with the separation of the exchanges, the takeover panel indicated it no longer wished to retain responsibility for supervising takeovers in this jurisdiction.

A working party drawn from a cross section of those involved in the Irish financial services industry, established in 1993 under the chairperson of the then president of the Irish Stock Exchange, examined the need for an Irish takeover panel in the new situation following the separation of the exchanges. The working party recommended that such a panel be established. The majority of the working party favoured a statutory backed panel essentially to avoid any uncertainty in the area of takeover and merger activity in Ireland following the separation of both exchanges.

Until now takeovers of companies listed on the Irish Stock Exchange were subject to the UK takeover code and rules governing substantial acquisitions of securities. These rules were operated on a voluntary basis. However, because of the nature of the London market, parties involved in takeovers would generally respect any directions or rulings given. In the new situation arising with the Irish exchange separating from London, there was concern that, if the takeover rules and panel were to operate other than on a statutory basis, there may not be the same respect for the rules and rulings given. Such a situation would be totally unacceptable.

Besides, while neither the UK panel nor its takeover code operate under any statutory or other public legal authority, the operation of the code is recognised and supported by the mechanism of the UK's Financial Services Act, 1986, which provides the regulatory framework for the protection of investors and the conduct of the financial markets in the United Kingdom. The Securities and Investments Board, as well as the Securities and Futures Authority, the Investment Management Regulatory Organisation and other bodies discharging supervisory functions under the 1986 Act have imposed obligations on firms authorised to carry on investment business in the United Kingdom which relate to and support the code and its application by the panel. For example, SIB has imposed the so-called "cold shoulder" rule which, in essence, obliges an authorised firm to which SIB's rules apply not to act for any person in connection with a takeover, merger or relevant acquisition of shares if the authorised person has reason to believe the persons for whom the firm would so act where not likely to comply with the code.

Following consideration of the matter, the then. Minister for Enterprise and Employment accepted the recommendation of the working group and undertook to provide the necessary statutory backing. This Bill is the culmination of this undertaking. The takeover panel will operate principally to ensure fair and equal treatment of all shareholders in the takeovers which fall within its remit. The rules currently being drawn up by the panel will provide an orderly framework within which takeovers will be conducted. As far as possible it is the intention of the panel to replicate the rules of the UK panel.

The code is not concerned with the financial or commercial advantages or disadvantages of any particular takeover. These are matters for the company and its shareholders. Equally, the code is not concerned with issues such as competition, which are the responsibility of the Minister for Enterprise and Employment under the Mergers, Take-overs and Monopolies (Control) Act, 1978, as amended.

Pending the enactment of this Bill, the UK takeover panel has continued to accept responsibility for monitoring, etc., takeovers which fall within the takeover code. This is being done on a grace and favour basis. Also, following the confirmation that the Minister proposed to legislate for a takeover panel, the proposed nominating members of the panel have formed an interim panel and the Governor of the Central Bank has appointed a chairperson designate, Mr. Dan O'Keeffe, SC. An interim director general designate, Mr. Leo Conway, formerly of Ulster Bank Finance, has also been appointed. The preparation of the draft Bill has involved close and protracted discussions and consultations with the interim panel.

The Bill is essentially concerned with giving statutory backing to a company to be known as the Irish Takeover Panel to monitor and supervise takeover activity here with a view to ensuring fair and equal treatment of all shareholders in takeovers which fall within its remit — in the main, these will involve companies currently quoted on the Irish Stock Exchange.

The Minister will designate this company to discharge this task subject to certain conditions being met. The company must be incorporated under the Companies Acts as a public company limited by guarantee and the Minister must be satisfied that the company's memorandum and articles of association are consistent with the provisions of the Act.

There will be five members of the panel drawn from the various interests in the Irish financial markets. The Minister can, by regulation, alter the membership if circumstances so require in the future. The board of the panel will have seven directors. Each of the members will nominate and appoint one director each.

The Governor of the Central Bank nominates and appoints the chairman and vice-chairman and he will take account of the general public interest in making these appointments. The directors so appointed can co-opt three further directors as required. There is provision for alternate directors to be appointed where conflicts of interest arise. The directors will be independent of the members in the discharge of their monitoring and supervisory functions.

The panel will operate for this purpose through the medium of detailed rules which the panel will draw up. However, in a number of key areas the Bill specifies what these rules must contain and provides, in relation to some of this number, that the Minister be consulted or approve them.

The rules, which will be modelled where possible on the UK rules, must reflect the general principles set out in the Schedule to the Bill. The Minister can amend the Schedule, by regulation, after consultation with the panel. The panel can give rulings, directions, etc., as required in each case arising. It can apply to the courts to have these rulings enforced, if necessary, and an aggrieved party can seek a judicial review in the courts in relation to specific rulings or directions etc., of the panel. The panel will be self-financing and required to submit an annual report which will be laid before the Houses of the Oireachtas. I now propose to deal with the detailed provisions of the Bill.

As the title of the Bill makes clear, the task of the takeover panel will be to monitor and supervise takeovers and other relevant transactions, terms which are defined in section 1 of the Bill. The reference to other transactions would include all matters that are incidental to takeovers, including work on the preparation of a takeover offer. It also includes substantial acquisitions of securities. These involve ways in which parties acquire shares in a company which falls within the remit of the panel but can only do so at a predetermined rate within specified timeframes.

Other terms defined in section 1 which are also fundamental to the Bill are the definitions of "acting in concert" and "control". "Acting in concert" is a concept that is very important in the context of activities in which the takeover panel will be interested. Essentially, it deals with circumstances where two or more parties act together. It would be quite easy to avoid the provisions of the Bill if parties were able to so organise their affairs that no one of them fell within the size criteria laid down. That would enable interested parties to drive a coach and four through the requirements of the Bill and the rules made by the takeover panel. "Control", as defined in the Bill, will arise where a party holds, in aggregate, not less than 30 per cent of the voting rights of the company. This is also central to the activities of the takeover panel in that, when somebody acquires control, the party or parties acting in concert will have to make a mandatory offer to the remainder of the shareholders.

In terms of the scope of the Bill, section 2 defines the companies to which the Act will apply — that is public limited companies or other bodies corporate incorporated in the State, whose securities are currently listed on the Stock Exchange or have been traded there within the previous two years. It also enables the Minister to provide, by regulation, that the Act should apply to the securities of other public limited companies in the future if the need arises. Specifically excluded from the remit of the panel will be UCITS and investment companies under Part XIII of the Companies Act, 1990. The former are excluded because of the particular manner and purpose for which the shareholding of such companies are brought together, namely, investors with a common purpose. The same consideration essentially applies to investment companies within the meaning of Part XIII of the 1990 Act.

Section 3 provides for the designation by the Minister of the Irish Takeover Panel as the body to undertake the functions of the panel as set out in the Bill. Certain conditions must be complied with before the designation can take place. The specific conditions are that the panel be registered under the Companies Acts, 1963 to 1990, as a public company limited by guarantee, to be known as the Irish Takeover Panel, and that the memorandum and articles of association of the company be approved by the Minister. Section 3 also specifies the provisions of existing Companies Acts that are disapplied in respect of the panel, and who will be the members of the panel. There will be five members of the panel and these are the bodies specified in section 6, namely the Consultative Committee of Accountancy Bodies -Ireland, the Law Society of Ireland, the Irish Association of Investment Managers, the Irish Bankers' Federation, and the Irish Stock Exchange. In the case of any of these bodies not being a body corporate, section 3 provides that an individual or body corporate nominated by the unincorporated body will be the member of the Irish Takeover Panel. The membership of the panel is representative of the various interests involved in the Irish financial markets.

Sections 4 and 5 deal with the other matters relating to the memorandum and articles of association of the panel. Section 4 is designed to ensure that, following the incorporation and designation of the panel, the members will not be able to alter either the memorandum or articles of association without the prior approval of the Minister. As already indicated, section 3 provides that the memorandum and articles have to be approved by the Minister prior to the designation of the company. The particular section 4 provision will now ensure that no changes are made without the Minister being made aware of and agreeing to them.

Section 5 sets out the principal objects that must be included in the memorandum of association of the Irish Takeover Panel. These are the monitoring and supervision of takeovers and other relevant transactions to ensure that the provisions of the Act, including the scheduled principles and any rules made by the panel under section 8 of the Bill, are complied with as respects each such transaction. It further provides that the panel can include in its memorandum such other objects and powers as are reasonably necessary or proper to enable it to discharge its functions, provided these are consistent with the provisions of the Bill.

Section 6, already referred to, makes provision for the directors of the panel. Effectively, the directors of the panel will monitor takeovers and issue any directions and rulings pursuant to the rules which they make under section 8. Accordingly, it is vitally important that the panel and its directors should be able to discharge their functions without hindrance or other improper direction from the members who have nominated the directors. The panel will have seven directors who will be nominated by the five specified bodies already referred to, representing the various interests in the financial industry. In addition, the Governor of the Central Bank will appoint the chairperson and deputy chairperson. While not stipulated in the Bill, the Governor will have regard to the general public interest in making these appointments.

In particular cases, conflicts of interest could arise, and it is accordingly proposed that the directors should be able to have alternates nominated to take their place in such circumstances. In addition, particular takeovers may arise where the expertise available to the panel may be wanting in some respects. In such circumstances, it will be possible to co-opt up to three additional directors to the panel whose term of office may relate to the individual takeovers, but is not so limited. Because the provisions of section 182 of the 1963 Act override any provision in the articles of a company, and provide that the members of a company may remove a director, it is necessary to disapply that particular provision in respect of the panel, given that we want the panel directors to be totally independent of the members who nominated them. Provision is made for the Minister to either add to or remove any of the nominating bodies in the future, if circumstances arise where this proves necessary or desirable. The consequence of such a removal is that the director, nominated by such a member who is removed, should automatically relinquish his position and this is provided for in this section.

Section 7 sets out the general duty on the panel to monitor and supervise takeovers to ensure compliance with the provisions of the Act, including the scheduled principles. However, to avoid circumstances where parties try to encourage the panel to undertake activities that are not within its remit, subsection (2) provides that the panel cannot be compelled to act in circumstances where it would not otherwise be required to. The section also provides that the Minister may amend the scheduled principles following consultation with the panel. This will require a positive resolution of the Oireachtas.

Section 8 is a key provision of the Bill and will enable the panel to make rules to set out the various requirements to be complied with by parties engaging in takeover activity. In general, the approach is that it will be the panel's responsibility to draw up the rules in accordance and compliance with the Act. However, in three specific areas, section 8 lays down requirements that must be included in the rules. Subsection (2) provides that the Minister must be consulted in regard to the determination of what will amount to a "substantial acquisition of securities". The reason this is proposed is that the rules in this instance will determine percentage limits and time limits within which acquisitions can only take place, but which will not result in actual control of a company arising. For instance, under the present UK substantial acquisition rules, no party may acquire 10 per cent in any company in a seven day period if, as a result of the acquisition plus what he already holds, a person would end up holding between 15 and 30 per cent. This follows the same approach as in the case of a takeover in that it is the Minister who will determine the percentage limit as to when control arises.

Subsection (3) of section 8 provides that the panel must make rules for the making of a mandatory offer where a person acquires control of a company, whether acting alone or in concert with other parties. The takeover panel rules may also apply to companies that are subject to the Mergers, Take-overs and Monopolies (Control) Act, 1978, as amended, and this section provides that the rule must make specific provision for what happens if the Minister makes a reference under the said 1978 Act to the Competition Authority. The possibilities that would arise include the suspension of the take-over offer while the matter is considered by the Competition Authority and the Minister, through to the lapsing of an offer where a reference is made. However, the detailed rules will be subject to the approval of the Minister.

The section also provides that the panel may grant derogations or waive rules in the particular circumstances of an individual case. However, this can only be done by reference to the scheduled principles.

Section 9 deals with the power of the panel to make rulings, give directions, etc. As already indicated, there was concern that, if the Take-over Rules and Panel were to operate here other than on a statutory basis, there might not be the same respect, as applies in London, for the rules and rulings given.

Consequently, section 9 is one of the central pillars of the activities of the panel, in that it underpins rulings and directions that will be given by the panel. In addition, the provision provides that where the panel issues rulings and directions, it may publish these. This will ensure that all market participants are aware of the decisions given and taken by the panel.

To enable the panel to operate effectively, it must also be able to obtain information, this section will ensure that the panel can seek information and the parties who are asked for the information will be obliged to provide it.

Section 10 is designed to ensure that, following appropriate inquiry or examination on the matter, the panel may, if it thinks fit, advise, admonish or censure parties in relation to their conduct in a take-over. The section further provides that the panel can publish its advice, admonition or censure. As a protection for parties the subject of the sanction imposed by the panel, such parties will be empowered to apply to the court, and the court, following a hearing on the matter, can either confirm the decision of the panel or annul the decision and make certain orders.

Section 11 is essentially a procedural section, and makes provision for a number of practical matters that will enable the panel to exercise its powers. In the first instance, it provides for the power of the panel to conduct hearings. Secondly, it provides that these hearings can be held otherwise than in public. The panel is given the power to ensure the attendance of witnesses and the production of documents by such witnesses. It also provides for the position of a witness appearing before the panel. Finally, it creates an offence for a person who fails to obey a summons of the panel.

Section 12 provides that the panel can apply to the court to have its rulings or directions enforced. One major difference between the preexisting code dealing with take-overs and the new regime proposed under the present legislation is the involvement of the court.

As mentioned earlier, the respect of parties involved in take-overs for the code and rulings of the London Takeover Panel derived in many respects from the international standing of the UK market. The same could not be said to apply in the case of the Irish market.

Accordingly, it is possible that some parties the subject of rulings or directions might, for their own reasons, be prepared to defy the panel. Section 12 is designed to enable the panel to go into court to get the court to enforce a ruling or direction where this is being ignored by the party in question.

When an application is made to the court, the court can make interim or interlocutory orders as it deems necessary. However, the panel cannot apply to the court earlier than seven days from the making of the ruling or giving of the direction. This is designed to allow the party against whom the ruling or direction was made to consider its position and, in particular, to consider whether or not it wants to make an application to the court under section 13.

In fact, the court is specifically precluded from making an order where such an application has been made. However, the panel may apply and the court may grant interim or interlocutory relief as is considered appropriate by the court under section 13(8). This would ensure that in particular cases, where urgency was involved, and this is likely to be the case in some take-overs, the panel would not be debarred from going into court at an early stage.

While respect for the rulings and directions is a very important feature of the take-over code, inevitably circumstances will arise where a party will feel aggrieved at the rules, ruling or direction given by the panel.

Section 13 is designed to provide a mechanism which will enable such parties to have their concerns examined by the court and, where necessary, obtain relief. However, it is designed that applications to the court will not be entertained otherwise than on substantial grounds.

In addition, the timeframe within which applications to the court must be made is extremely tight. However, the court can extend the time limit in certain cases but, inter alia, must bear in mind the nature of the relief that can ultimately be granted.

Moreover, where the High Court gives its decision, any appeal to the Supreme Court will only be possible where the High Court certifies that its decision involves a point of law of exceptional public importance. Of course, the right of appeal on constitutional grounds is preserved.

As mentioned in relation to the previous paragraph, this section also ensures that, in particular cases, while awaiting the outcome of a judicial review, the court may grant interim or interlocutory relief as it considers appropriate.

Overall, section 13 is designed to provide a balanced approach to ensure that parties can protect their interests while at the same time ensuring that take-over activity is not unduly impeded.

Section 14 deals with provisions with respect to appeals, applications, etc., to the court. Time is a huge factor in most take-overs. Accordingly, it is considered appropriate to try to ensure that the court will be available to deal with matters that arise, in particular take-overs, and deal with them as speedily as possible.

Furthermore, it is desirable that as far as possible, one judge should deal with all applications. This would enable the judge to become familiar with the rules, rulings and directions of the panel and should assist the process of ensuring speedy decisions from the court.

Moreover, having regard to the confidential nature of some of the information in relation to take-overs, this section also provides for the court, in particular cases, to hear the case in camera.

Section 15 is designed to ensure that where transactions in relation to a take-over have been completed, the provisions of this Bill cannot be used to have them unwound. In many cases when the take-over is concluded, the offeror will immediately move to introduce new arrangements in the company which has been taken over. This could involve the sale of property, the rearrangement of existing facilities, the redeployment of management and so on. It would be invidious to allow for the unscrambling of a take-over when it has been completed, having regard to such circumstances.

Essentially, the only circumstances in which a take-over can be unscrambled will be on the basis of an application by the takeover panel itself under section 12. It will be recalled that under that section, where the panel considered that parties were likely to ignore their rulings, they can go into court immediately to have the ruling or direction, etc. confirmed.

This would thus become all the more important having regard to section 15(a) where a party could seek to ignore a ruling or direction of the panel in the knowledge that when the take-over has been carried out, no other party other than the panel could seek to have the take-over unwound.

Even where a take-over has been carried out in accordance with a rule, ruling or direction, even though this is subsequently declared invalid or quashed, it cannot result in the unwinding of the take-over, again, save for the action that can be taken by the panel. For the panel to take such action, it would be of the view that the circumstances justified the unscrambling of the take-over, and the fair treatment of all the shareholders involved.

Essentially, the panel will be self-financing and it is not proposed that Central Government funds will be used to meet any of the expenses of the panel. In the circumstances, it is necessary to give the panel the power to defray the expenses incurred in performing its functions and section 16 does this.

It is proposed that, subject to the consent of the Minister, the panel will impose a levy on relevant companies and other parties which are involved in a take-over. Before agreeing to any charges, the Minister will consult any persons or parties considered appropriate.

Since the Minister's announcement of his intention to legislate for a takeover panel, an interim panel has been in operation. While it is not yet involved in vetting any take-overs, much preparatory work has been undertaken. This involved extensive consultations with the Department in the preparation of the draft legislation, and then the preparation of draft memorandum and articles for approval by the Minister as well as the preparation of the draft rules and code with explanatory notes.

The interim panel also has close contact with the UK panel and has benefited from training and other information provided by the UK panel. It is intended that the expenses incurred by the interim panel can be defrayed by the panel when it becomes operational.

Section 17 is designed to ensure information obtained by parties directly or indirectly involved in the work of the takeover panel will be regarded as confidential and will not be disclosed other than in accordance with the provisions of the Bill. In this regard, it is provided that: disclosure can be made where this is necessary to explain why a ruling or direction was given or where disclosures are made to certain parties to facilitate their operation, e.g., to the Garda or the Director of Public Prosecutions. This section also provides a penalty for failure to observe confidentiality.

Section 18 will ensure that confidential information that would not normally be disclosable in legal proceedings will have the same benefit under this legislation. This could be important in ensuring the privacy of confidential communications between the client and his legal adviser in particular.

Given that it is now proposed to legislate for the operation of the panel, it is considered appropriate that an annual report should be submitted on its activities and in turn the Minister should arrange for the publication of the report. Section 19 provides accordingly. It also provides that the Minister can prescribe the matters and information that he wants to see addressed in the report but there is the proviso that information which could materially injure or unfairly prejudice the legitimate interests of any person should not be disclosed in the annual report.

The panel will operate in a particularly sensitive area. It will issue rulings and give directions. There is always a possibility that certain parties would feel aggrieved. Provided the panel and the members, directors and so on do not act in bad faith, section 20 will give them protection against being held liable for damages. Separately, the section makes provision that will enable the panel to indemnify any member, director, officer or employee of the panel in respect of their activities on behalf of the panel. The section provides for the inclusion, in the Defamation Act, 1961, of a provision that would ensure that any report of the activities of the panel will benefit from qualified privilege as provided for under that Act.

Because of the interest of the panel in matters in the corporate area, it is considered appropriate that the panel should be specifically identified as a party which has access to reports of investigations carried out under Part 11 of the Companies Act, 1990, or reports of relevant authorities of a recognised stock exchange under Part IV of the Companies Act, 1990, dealing with insider dealing.

These reports could relate to areas in respect of which the panel will have a particular interest. The primary legislation already provides for the availability of those reports to other interested parties. Now that we will have an Irish takeover panel, it is considered appropriate that it should be specified as a party to whom access to the reports should be made available. Section 21 provides accordingly.

In a number of provisions, there is reference to prescribed matters. "Prescribed" means prescribed by the Minister by way of regulations. Section 22 deals with the manner in which such regulations are made. In certain instances, it will be sufficient for the Minister to lay the regulations before the House. However, in two instances — those in section 2 (1) (c), where the Minister could extend the companies to which the panel's remit applies and section 7 (3), where the Minister would effectively change the scheduled principles — it is provided that the regulations made by the Minister should have positive approval by the Oireachtas. The other circumstances where the Minister would exercise his power to make regulations would involve the prescription of a recognised stock exchange or the threshold at which mandatory offers must be made.

Section 23 is a reasonably standard provision included in legislation where reference is made to a particular body, and it simply provides that any document sealed with the seal of the panel will be accepted by a court in evidence unless proof to the contrary is shown.

One of the central features of the activities of the takeover panel will be the issuing of notices, directions and other rulings to parties involved in a takeover.

Section 24 makes provision on the manner in which the information is to be conveyed. It also provides that in the case of a company registered under the Companies Acts, the registered office will be the residence of the company.

Sections 11(5) and 17(3) provide for an offence. Section 25 provides for penalties for persons found guilty of an offence under these sections. It also provides that in the case of offences under-section 11(5) the proceedings may be prosecuted by the panel, while in the case of proceedings for an offence under section 17, these may be prosecuted by the Minister. In addition, the time limit within which proceedings can be brought is two years.

Section 26 is also a standard provision that ensures that any expenses incurred by the Minister in the administration of the Act will be ment out of general funds. As mentioned in relation to section 16, it is not proposed that the Minister or the Central Government funds will be involved in providing any funding to the activities of the Irish takeover panel.

Section 27 contains the short title as well as the manner in which the Act can be commenced. The Schedule to the Act contains the principles which will be applicable to the conduct of takeovers.

Essentially the principles are a general expression of the matters that will govern the activities and rules of the panel in ensuring that all takeovers are operated in a fair and reasonable manner. Principle 1 simply provides that all shareholders of the same class will receive equal treatment. Principle 2 provides that all shareholders of the company which is the subject of the offer will obtain equal information. Principle 3 is designed to ensure that the parties making the offer will be able to implement the offer. Principle 4 is designed to ensure that appropriate information and advice should be made available to the shareholders and in a timely fashion. Principle 5 is designed to prevent the creation of false markets by making misleading statements or engaging in inappropriate conduct which could mislead the market or shareholder. Principle 6 provides that the directors of a company which is likely to be the subject of an offer should refrain from taking any action which could prevent the offeror completing his offer, unless approved by shareholders in a general meeting. Principle 7 provides that the directors of the offeree company should ensure they do not compromise their position by entering into any commitments with an offeror. Principle 8 provides that the directors on all sides should act in the general interests of the shareholders as a whole. Principle 9 is designed to prevent the oppression of minority shareholders. Principle 10 is designed to ensure that the offeror makes certain they will be able to complete an offer. Principle 11 provides that the affairs of the offeree company should not be disrupted by any unreasonable length of time. Principle 12 provides that a substantial acquisition of securities, for example, where control will not result, should only take place at an acceptable speed and that there should be adequate disclosure.

I commend the Bill to the House and look forward to hearing the contributions of my colleagues.

I thank the Minister for presenting the Bill to the House. This legislation becomes necessary as a result of the separation of the Irish unit from the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited. The Irish exchange is now incorporated as the Irish Stock Exchange Limited. For many years it was felt in certain quarters that it was not appropriate for major transactions in this country to come under the effective control and guidance of a London takeover panel when the Irish and UK stock exchanges were combined. The London panel was firm when firmness was required, it was strong when strength was necessary, it had recourse to the necessary expertise and showed a capacity to respond quickly and give recognition, where appropriate, to the fact that Ireland is a different geographical area and differs enormously in size from the United Kingdom. Above all the London takeover panel was, and was perceived to be, independent. This last quality is always of particular value but was especially important for us in the relatively small size of our economy with the inevitability of individuals having to wear more than one hat.

It is entirely appropriate that this country should have its own separate takeover panel and for that reason alone I welcome the Bill. The Bill defines "control" as being "... not less than 30 per cent (or such other percentage as may be prescribed) of the voting rights ...". While I am in favour of the 30 per cent level, which represents a continuation of the status quo, I have some concerns that the Bill prescribes that the Minister alone may alter this percentage by ministerial regulation. I am not happy with legislation which has been extensively discussed in the House and signed by the President being subsequently altered solely by ministerial regulation. The figure of 30 per cent is an important trigger in the legislation and it should not be altered without reference to the Oireachtas.

The Bill covers companies trading on the Stock Exchange now or who have done so in the last two years. This provision should be extended to cover companies which have a listing on the exchange, although suspended, irrespective of the duration.

Two major challenges presented themselves in the drafting of the Bill. One is the establishment of a truly independent body and the other is the establishment of a statutory body with power and authority in a country where there is ready access to the courts and constitutional protections. The takeover panel in London, while not a statutory body, did not have to worry about constitutional challenges and derived its effective authority from the fact that any party which did not accept its rulings found it difficult to do business in the UK. This was effected through voluntary regulation, a system much favoured in the UK and one which operates well.

With regard to the issue of independence, in a merger or takeover it would not be unusual to have three or more firms of stockbrokers, lawyers, merchant banks, reporting accountants, PR consultants, etc. acting for the various parties, including minority interests. Other firms may be precluded due to conflicts of interest, perceived or otherwise. In the stockbrokers' profession this would greatly reduce the options in choosing an independent stockbroker to act as a representative of the Irish Stock Exchange on the proposed panel. The same applies to a lesser extent to accountants, lawyers, investment managers and bankers.

The proposed panel will comprise five persons from the bodies mentioned and a chairperson and deputy chairperson nominated by the Governor of the Central Bank. These seven directors may nominate up to three further persons giving a maximum complement of ten. At least one or two of these places should be reserved for professionals residing outside the State. The Judiciary has traditionally led the way in showing how independence can be practised and preserved.

We can secure and enjoy the services of a truly independent takeover panel. However, one should consider that the chairperson and deputy chairperson will be appointed by a person nominated by the Minister for Finance. I wish to make no reflection on the Minister for Finance or the Governor, the Central Bank or any already designated panel chairperson but I wonder if it is in the best interests of the State to have its appointees as chairperson or deputy chairperson of the panel. After an initial period of two years the panel should have the power to appoint its own chairperson for a fixed term of, for example, three or four years, subject to a maximum of two terms.

Owing to the contraction in the number of companies listed on the Stock Exchange which is only partly offset by new entrants, the proposed takeover panel will have periods of inactivity and will not be able to benefit from experience gained from regular involvement in takeover transactions. Therefore, it is of prime importance that the panel be properly constituted from the beginning.

I wish to refer to the powers of the panel and the issue of effective sanctions. In this Bill the panel gets its power from the courts. I do not see a ready alternative to this solution which is by no means perfect because it is possible to envisage fair and reasonable bids being thwarted by contrived delays in the legal system which do not require a great degree of expertise to attain. The Bill could be improved through a provision whereby parties seeking a judicial review of the panel's findings would be required to make a substantial deposit of £50,000 or more before seeking access to the courts. In the event of the court deciding that a judicial review was not appropriate the moneys would be forfeit to the panel.

Section 16 deals with the power of the panel to impose charges. I estimate the cost of maintaining the takeover panel for five years at over £1 million. In the absence of takeover activity for a prolonged period funding will be a problem for the panel. There are about 75 companies quoted on the Irish Stock Exchange — we have one of the smallest exchanges in the EU. There are many plc companies which are not quoted and I do not understand what makes it so unattractive for them to go on the market. However, only 20 or less of those quoted are actively trading and the number likely to be involved in contested takeovers with a consequent involvement of the panel will not be great. The London stock exchange, one of the world's leading markets, has an enormous level of activity when compared to the Irish Stock Exchange. It fell substantially yesterday due to interest rate movements. Any undue levies on Irish companies may encourage them to seek their primary listing in London rather than Dublin. A number of companies already have listings in Dublin and London.

Section 19 provides that the Minister shall cause copies of the panel's annual report to be laid before the Houses of the Oireachtas. There should be a stipulation that this should be done by 30 September of each year at the latest. A period of nine months should be more than adequate. The long delays before some State companies' accounts are placed before the Oireachtas are not acceptable.

The Schedule to the Bill sets out the principles applicable to the conduct of takeovers. This is an excellent set of principles. Company directors should direct their attention to the sixth principle which states:

It is the duty of the directors of an offeree when an offer is made or when they have reason to believe that the making of an offer is imminent to refrain from doing anything as respects the conduct of the affairs of the offeree which might frustrate that offer or deprive shareholders of the opportunity of considering the merits of the offer, except upon the authority of those shareholders given in general meeting.

The eighth principle reminds the directors in laudable terms of their duties to the respective shareholders thus:

... to act in disregard to personal interest when giving advice and furnishing information in relation to the offer; in discharging that duty the said directors shall be bound to consider the interests of the shareholders as a whole.

The eleventh and twelfth principles seem to have been tacked on and their deletion would improve the thrust of the first ten principles. The eleventh principle refers to "... beyond a reasonable time... " without trying to define this and the twelfth principle makes reference to "acceptable speed" and "adequate and timely disclosure" which are also matters of opinion.

During the time the London Takeover Panel had jurisdiction over the Irish Stock Exchange it worked well and there was little abuse in the financial area. The only problem in modern times which comes to mind is the one involving stockbrokers and Greencore which had to be investigated by the London Takeover Panel. The Minister was in Opposition at that time and he was very vocal about the matter, but he is in charge now. The findings of the panel in that case were in the best interests of investors and shareholders. This company is now one of the flagships on the Irish Stock Exchange and has traded on the London Stock Exchange. The Bank of Ireland and Allied Irish Banks, which have been flagships for Irish investors, are internationally renowned, are quoted on the London and Irish Stock Exchanges and have traded successfully. The takeovers in this area in the past have not created any problems for the economy or the Stock Exchange.

I welcome the Bill. I congratulate the Minister, his officials and all concerned in drafting legislation to deal with this difficult area. Only time will tell whether the legislation fulfils the task required of it and assists all those involved in business. It is understandable why such a small number of companies are trading on the Dublin Stock Exchange. The press and public galleries are empty and people do not really know what the legislation is about. I am glad the Minister, who has different views, is taking this very important legislation. I have no doubt he will encourage further privatisation which will lead to a more developed Stock Exchange. Many large companies would benefit from extra capital from a cheaper source.

I join Deputy O'Keeffe in congratulating the Minister in bringing this measure before the House. I identify with all the sentiments expressed by him in his excellent contribution. I do not propose to go through the legislation on a line by line basis but I intend to make a number of remarks which ought to be considered at the very least and if, on consideration are deemed to have some weight, should be taken on board.

I agree with Deputy O'Keeffe on the definition of "control" in section 1. If control is to be varied from a 30 per cent figure to, say, 20 per cent, 25 per cent or 40 per cent this is a matter of such significant import that the regulation making such a change should also belong to the category of regulations which requires a positive resolution of this House to bring it about. The concept of control is central to the entire takeovers code and this House should not simply delegate to a Minister the process of determining what amounts to control. Control will be a central concept of the legislation after its enactment and we should not say a central concept means whatever a Minister says it means at a given time.

I am not suggesting we should freeze the figure of 30 per cent in stone and make it immutable thereafter. There should be a capacity to change the definition of "control" if there are good reasons for so doing, but it is not desirable for Members to wake up one morning and find that somebody has passed a statutory instrument which says control now means 35 per cent, 20 per cent or whatever. The effect and meaning of the legislation will be changed considerably by a regulation of that kind made in those circumstances.

I strongly urge that the provision in section 22(3) which requires a positive decision of the House — this already applies to matters dealt with in sections 2 and 7 — be extended to the definition of "control" if regulations are made under section 1. The term "prescribed", where it is used in the definition of "control" in section 1(1), should be subject to the same requirement as the matters specified in sections 2 and 7 and identified in section 22(3). There is a minor misprint in section 22(3) which refers to section 2(1)(c). There is no subsection (1) in section 2 and perhaps this can be amended on Committee Stage.

I agree with the Minister it is desirable that the cost of supervising takeovers and the expenses of the panel should not be defrayed by the ordinary taxpayer who has enough calls on his or her wages in the form of tax, levies, etc. The Minister said he envisages that the panel will be self-financing by means of the imposition of charges under section 16 which states: "The Panel may, for the purpose of defraying the expenses incurred by it in performing its functions under this Act, impose charges at such rates as are from time to time determined by it with the consent of the Minister...".

In other words, the panel will put forward the proposal and the Minister will consent to it. The charges will be (a) on relevant companies; (b) on a person, not being a relevant company, in respect of an offer made by that person; (c) on any person in respect of a dealing he or she has in the securities of a relevant company and (d) on any person in respect of a document furnished by him or her to the panel in accordance with rules under section 8 in relation to a takeover or other relevant transaction or in relation to any proceedings of the panel concerning a takeover or other relevant transaction.

A series of charges can be imposed under section 16 but I am not clear whether the term "charge" implies that there must be a transaction in relation to the panel to which the charge relates or whether it will be a standing levy on every quoted company on the Stock Exchange. Under section 2 "relevant company" means a public limited company or other body incorporated in the State, the securities of which are for the time being traded on a market regulated by a recognised Stock Exchange. Will there be a general power to levy the expenses of the panel on the companies quoted on the Stock Exchange by way of an annual levy or will the charges be imposed in respect of a particular transaction relating to a particular company? In other words, is this a general power of levy or is it confined to specific transaction-related levies?

I do not mind which it is but if the takeover panel has a predictable budget — the panel not only has a chairman but also a director general — then presumably it will have some expenses.

No budget has been laid before the House as to the level of expenses the company is envisaged to have in any given year. If its expenditure amounts to many thousands of pounds — it will vary from time to time depending on the volume of attempted takeovers — and it is proposed to recoup those expenses by reference to a varying volume of takeovers, will the annual overheads of the body be visited on the one or two poor idiots who come to the attention of the panel in a given year? Will they be required to pay charges or will the panel take a long-term view of what would be necessary to make it self-financing? Will it take the view that even though there were no chargeable transactions in a given year, there could be some the following year? The expenditure of the panel could vary dramatically from year to year, but its income, unless it is entirely transaction related, would not necessarily vary correspondingly. Will the Minister elaborate on that matter?

Section 11 gives the panel the power to compel people to attend a hearing, to examine them on oath and to produce documents. This section suffers from a deficiency which is common when such provisions are incorporated in legislation. If a person does not conform with the direction given by the panel he or she will be guilty of an offence under section 11(5). To bring such a prosecution procedure into effect, a file must be sent to the Director of Public Prosecutions, his office must consider it and the person must be summoned to appear before the District Court, with the right of appeal to the Circuit Court. Given the length of time involved in this procedure the person concerned may decide that the nature of the proceedings and possible penalties make it worthwhile to take a risk rather than comply with an obligation under the legislation. The Minister should provide that the panel can apply to the High Court on motion for an order directing people to comply in its behaviour and thereby invoke the contempt of court procedures on the basis that if they fail to do what they are required to do under the other provisions of section 11, they will be liable to be attached and committed by the High Court for contempt. That sensible strengthening procedure would make up for some of the weaknesses which arise from simply penalising in a criminal manner disobedient or non-co-operative behaviour under section 11(5).

Section 6(2) states, "The Panel may perform any of its functions through or by any of its officers or employees or any other person duly appointed by the Panel in that behalf." Is the Minister suggesting that an employee can perform any function of the panel? I do not believe that is what he wants. I am in favour of the panel being able to carry out its day to day functions through its staff, but important functions should not be discharged by employees. This is a quasi-judicial body and that provision is equivalent to saying that the Registrar of the Supreme Court can perform any of the functions of that court. I am unhappy with this provision. It should be re-examined to ascertain if we are using inappropriate language. The purpose of the provision is to enable the panel direct a member of its staff to summon a person before it, but the term "any of its functions" is so widely cast that it includes functions of admonition. Perhaps the Minister could reassure me that there is some other provision in the Bill which ensures that is not the case. The provision is overly widely cast as it stands.

In general, for an orderly stock market to exist it is desirable that takeovers should be conducted in a manner in which every shareholder is guaranteed equity both in regard to the value of his or her shares and in the way in which his or her directors and the directors of the offeror company deal with that person. The reason is to create an artificially but fair market in which everybody is accorded equal treatment. This means a person with a 25 per cent shareholding should not be given a better offer for his or her shares than a smaller shareholder, that inside information or behind the scenes deals are not done in a way to make shares with a certain value less valuable or that a shareholder is not prevented from getting added value on a transaction to which the panel's activities relate.

I am pleased the Bill has been introduced. However, it highlights the virtual drought of investment opportunities here, the blame for which lies chiefly with the Labour Party. We do not have an enterprise culture. The Labour Party is committed to preventing——

Is the Deputy saying members of Democratic Left have?

I always accord them the benefit of the doubt. They have not been strident opponents of any form of disengagement from the State. Deputy Rabbitte could be converted to these points of view. Some of his benighted colleagues on the so-called left of the Irish political spectrum are incorrigible in this regard. Some of them are adamantly opposed to the proposition that there should be any decent opportunities to invest in many areas where Irish pension funds and small Irish shareholders and investors would be willing to invest if they could. For example, why should Irish pension funds and investors not be in a position to invest in Irish airports and capitalise on them when Irish airports, in the form of the Aer Rianta monopoly, have taken advantage of English and Australian laws in privatising airport control to compete and purchase assets in those jurisdictions? Why do we allow State monopolies take advantage of other countries' privatisation arrangements and not offer shareholders the right to invest funds in similar activities here?

Debate adjourned.