More amendments to the Companies Acts, 1963 and 1990, are provided for in the Bill than is first apparent. The debate on Second Stage is on the principles of the Bill and we will not go into detail today. There will be a necessity to look more closely on Committee Stage at each of these amendments to the Companies Acts. The Bill is not merely about setting up the office of the director of enforcement, there are a number of changes. Section 71(6) is an example of what I have in mind. Part 8 sets out a good regime for the recognition of auditors, auditor bodies or bodies that qualify auditors and also for the duties and responsibilities of auditors. Section 71(6) intrigues me.
Some Members will recall the battle here a few years ago prior to the enactment of the Finance Bill, introduced by my colleague and party leader, Deputy Quinn, when he sought to require auditors to blow the whistle on wrongdoing in client companies. The mother and father of a resistance was organised by the same auditors. When I read this section, which is generally a good section, I wondered whether it was reintroducing this matter, now that we are more mature, having regard to the water that has gone under the bridge since then and the conduct of auditors that has been revealed since then. In his response I ask the Minister to deal with section 71(6) which reads: "Where the auditors of a company have reasonable grounds to believe that the company is being used or may have been used for a fraudulent purpose, or that a director or directors of the company may have defrauded the company, its creditors or other persons, the auditors shall forthwith notify the Commissioner of An Garda Síochána and the Director" and so on.
I support that but the reason I draw attention to it by way of illustration is because of the focus that will be required on these detailed amendments to the Companies Act. I am curious about the phraseology "the company is being used or may have been used for a fraudulent purpose". That would seem to imply a circumstance where the company has been set up for the purpose or is being exclusively used as a vehicle for that purpose or whatever, in other words, that it is some kind of front company used to launder money or whatever. It does not seem to provide for the situation that I thought initially was being provided for that if an auditor discovers in its normal client company there are breaches of the law or actions being carried out for a fraudulent purpose he may blow the whistle. This seems to relate to a particular kind of company. The phraseology used "the company is being used or may have been used for a fraudulent purpose" is not something I have seen before. This is purely an example. There are more amendments to the Companies Acts than was apparent when I glanced at the Bill, and I welcome that.
In respect of Part 8 which provides for quite a good regime in respect of auditors, the question arises as to why this is not provided for directors and management. Is there any reason we cannot put in place a system of recognition and a similar regime for recognised bodies, whether IBEC, IOD, IMI or whatever? There is such a regime on a non-statutory basis in existence for banking with the Central Bank in the role of supervisor and regulator.
I emphasise a nuance of difference on a point with Deputy Naughten that he welcomes the independent status of the director of enforcement and supports the notion that it should be taken out of the political arena. I question in a philosophical way whether that is always right as it involves the erosion of the position of the Minister and the diminution of accountability. The explanatory memorandum refers to the transfer of the Minister's powers under Part II of the Companies Act, 1990, to the director. It states: "It was judged to be more cost-effective, more efficient and less politicised if the decision on whether to initiate a company law investigation or a criminal investigation in any particular case was centralised with the Director." Perhaps it does. I have an open mind on it.
I have some concerns about the gradual erosion of the position of Ministers in different ministries in recent years where a body, an office, an agency, or a quango takes the power out of this House and causes it to reside in a body where it is not clear how accountable it will be in practice – the National Roads Authority and the ODTR are good examples. I say that in the full knowledge that there are arguments that can be advanced as to why that is the case. It is not entirely clear in tangible terms what the accountability will be in this case. Under the provisions of section 16 the director is required to furnish a report to the Minister which she is required to lay before the Houses of the Oireachtas and so on but I do not know if that amounts to much.
The compellability Act is being amended to put the director on a par with the DPP and to ring-fence him from questioning on certain matters. I can understand why in certain circumstances it might damage the investigation if he were required to answer questions on the specifics. I wonder whether we have to go so far as to amend the compellability Act. I do not think the director is in the same category as the DPP. The DPP is not unamenable to appearing before some committees of the House and his office is accountable to the Committee of Public Accounts through the Accounting Officer. I would have thought the role of the Director of Public Prosecutions is significantly and substantially different from the role envisaged here.
I concur with something that has already been said that we might reasonably have expected the Tánaiste to use the opportunity today to update the House on the various investigations she has under way. She has been coat-trailing these for almost three years. Some, if not all, Members on this side of the House have supported her enthusiastically but she is in danger of undermining her credibility if she does not soon produce results from a number of these inquiries. I am a little surprised she did not take the opportunity today to bring us up to date.
The regulatory and supervisory role in Ireland, such as it is, lies with the Minister and, to some extent, the courts. This Bill envisages the transfer of the powers of the Minister to the new office of the director of enforcement, the extension of these powers and the introduction of what might be called a more proactive element as opposed to the essentially passive philosophy of the present regime. Broadly, I am happy to go along with this except for the apparent weakness of the accountability under section 16 of the Bill. I am concerned that there is an implicit idea that politicians cannot be trusted and, as a corollary, that independent officers always can. That is by no means a swipe at the excellent person who has been appointed director. I acknowledge his calibre and conscientious approach to his job and I wish him well in it. He is an excellent choice. The Minister is also fortunate to be advised on this Bill and other matters of company law by the senior civil servant concerned. I know from experience the calibre and intellectual acuity of that official.
However, I still raise the philosophical question about Ministers being able or required to come to this House and be accountable during major controversies deriving from breaches of company law and matters that develop into significant controversies. Accountability to the House will be diminished as a result of this Bill and we will not have the opportunity to pursue it in the way we would like.
I am anxious that the Minister respond to the question regarding section 28 of the Bill which provides for the repeal of section 19 of the Companies Act and the substitution of a new section 19. Section 19(6) of the 1990 Act remains and reads as follows:
A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.
I wish to put on record part of a submission by a friend of mine who did not authorise me to give her name. She made the submission in the context of the review group on auditing. She says:
Since the 1990 Act was implemented there have been a series of court actions in relation to allegations of corporate malpractice in the National Irish Bank. One of the Supreme Court judgments arose from an action taken by the Minister's inspectors and whilst this was in reference to statements given to the inspectors, it was held that there is a constitutional right not to have involuntary evidence accepted at a criminal trial. ... Subsequent to this judgment it seems most inappropriate to retain the wording of subsection (6). Moreover, including this form of words in the Company Law Enforcement Bill will hardly send encouraging signals to employees that disclosure of malpractice is recognised as being laudable in any respect. A more appropriate signal would be to use the form of words adopted in section 29(6) of the Merchant Shipping (Investigation of Marine Casualties) Act, 2000. This Act was passed in the same month as the Bill was published and the relevant section of the Act reads as follows:
If a person objects to answering a question asked of him or her as a witness at an investigation or inquiry on the grounds that the answer might tend to incriminate the person or make the person liable to a penalty, and the person is informed of his or her obligation to answer the question, the person shall not refuse to answer the question but the answer given on that occasion shall not be admissible as evidence in criminal or other proceedings against the person other than proceedings against him or her in respect of the falsity of the answer or the failure to answer the question.
It should be noted that the investigations that are the subject of the Act I quoted are likely to include death and serious injury which are, by definition, of even greater seriousness than corporate malpractice. I am anxious to hear the Minister address that.
I welcome the Bill. It is significant reforming legislation. I apologise to the Minister that due to another commitment, I cannot remain in the House to hear his reply. I look forward to Committee Stage.