Vol. 550 No. 5
3 Mr. Flanagan asked the Tánaiste and Minister for Enterprise, Trade and Employment if she is satisfied that, under the company law code, the true identity and beneficial ownership of companies trading here may remain secret, unidentified and unidentifiable; and the proposed changes she has in mind in this regard. [9358/02]
Under section 125 of the Companies Act, 1963, a company is required to file, once at least every year, an annual return with the Companies Registration Office. This return must include a list of the past and current members of the company and details of the number of shares held by each member. Section 123 of the Companies Act, 1963, provides that the identity of the persons entered in the register of members kept by the company and as notified to the registrar of companies must be the legal owners of the shares and not the beneficial owners where these are different from the legal owners.
The purpose of these provisions is to create legal certainty for a company in its dealings with the registered owner of the shares and means that the company is able to treat the registered shareholder as owner of the shares for all purposes without regard to any contract or agreement that may exist between the legal owner and third parties.
There is a legal requirement, under section 59 of the Companies Act, 1990, for the beneficial interest in a company's shares to be disclosed by a company's directors, including shadow directors, and by the company secretary. This information must be recorded in a separate register kept for that purpose by the company and be publicly available. Failure to so disclose is an offence. There is, however, no provision under company law for the disclosure of interests by a third party where the third party is not a director, shadow director or secretary of a company.
Sections 14 and 15 of the Companies Act, 1990, empower the Director of Corporate Enforcement to investigate and inquire into the ownership of a company, while section 16 empowers the director to impose restrictions on the transfer of shares where he encounters difficulty in his inquiries being made pursuant to sections 14 and 15. Fur thermore, the beneficial interest in shares may be required to be disclosed on foot of a court order under section 98 of the Companies Act, 1990.
It is important that the legislative provisions relating to the ownership of shares be re-examined. Accordingly, I have requested the company law review group to examine the whole area of shares and share capital as a priority topic in its current work programme.
Notwithstanding the earlier part of the Minister's reply, there is a real problem which I hope will be addressed by way of legislative reform. The point to which I refer is topical in so far as the State deals with or approves certain contracts with certain companies that are unidentifiable. This is of great importance in the context of the current debate over the national aquatic centre. How could it be possible for the Government to approve a contract with a company the beneficial ownership of which is actually unknown and, worse than that, unidentifiable?
I refer the Minister to another case that is in the news concerning the Jackson Way company. Does the Minister consider it desirable and satisfactory that the State could be engaged in a lucrative compensation deal with a company the beneficial ownership of which we do not know? In spite of the various sections of the Companies Act to which she referred, it appears there is no way of tracing the labyrinthine connections of many of these offshore companies. There must be a public interest argument for lifting the veil of secrecy surrounding such companies, particularly in cases where the State is involved. I have cited the examples of Waterworld UK and Jackson Way. Given the legislative base to which the Minister referred, why is it not possible for the State to determine with whom it is dealing? It is a banana republic type of situation.
The problem that Deputy Flanagan outlined is one facing countries around the world. I know of no country that has a set of laws whereby such difficulties can be dealt with quickly. Even here, where we have had various inquiries with full court powers, it has on occasion been difficult to establish who the beneficial owners might be. Due to the deficiencies of the law in this area, the company law review group is now operating on a statutory basis and has just presented its first report. We recently agreed the second programme with the group which includes examining the issues of shares, securities and related matters, including beneficial ownership. Where there are deficiencies in the law, they must be rectified. It would be wrong of us to assume, however, that the type of problems outlined by Deputy Flanagan can always be resolved satisfactorily.
Does the Minister agree that it is entirely improper for the State to commit to public contracts or expenditure in any way with any company where the beneficial ownership remains unknown?
If the Deputy is talking about the current controversy about the aquatic centre, that company was registered in the United Kingdom and it is a matter for its law. The issue does not revolve around the matter he mentioned. The difficulty arises from a different set of issues, including track record and experience.
No, but as a general principle?
Yes, as a general principle, we should be clear who the directors of companies are to whom we give public contracts.
