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Dáil Éireann debate -
Thursday, 14 Dec 2006

Vol. 629 No. 5

Investment Funds, Companies and Miscellaneous Provisions Bill 2006 [Seanad]: Report and Final Stages.

Is the Minister of State moving to recommit amendment No. 1?

Is that agreed? Agreed.

Bill recommitted in respect of amendment No. 1.

Amendment Nos. 1 and 34 are related and can be discussed together.

For the information of Members, in amendment No. 1 there should be a comma at the beginning of the substitute text. The substituted text should, therefore, read: ", THE CONSUMER INFORMATION ACT 1978 AND THE NETTING OF FINANCIAL CONTRACTS ACT 1995".

I move amendment No. 1:

In page 3, lines 9 and 10, to delete "AND THE CONSUMER INFORMATION ACT 1978" and substitute the following:

", THE CONSUMER INFORMATION ACT 1978 AND THE NETTING OF FINANCIAL CONTRACTS ACT 1995".

I spoke about amendment No. 1 earlier and I do not consider it necessary to do so again.

Amendment agreed to.
Bill reported with amendment.

Amendments Nos. 2, 3 and 5 will be discussed together.

I move amendment No. 2:

In page 3, line 22, to delete "This Act" and substitute the following:

"(1) Subject to subsections (2) and (3), this Act”.

I will discuss amendment No. 5 first. In a number of provisions in the Companies Acts, documents that require to be filed in the Companies Registration Office, CRO, must contain a statutory declaration. Examples include section 60 of the 1963 Act in the context of a company providing loans to employees and others for the purchase of its shares.

Usually, it will be a director of the company who must make the declaration. Such declarations must be made before one of a number of persons who are authorised to receive and witness them.

In most instances the statutory declarations are substantive requirements, not simply procedural, and in most instances form part of documentation that is required to be submitted to the CRO for registration in the context of the transactions in question.

Under general law, statutory declarations made in the State are required to be made under the Statutory Declarations Act 1938. They can be taken before a person authorised by law such as a solicitor, a commissioner for oaths, a peace commissioner or a notary public.

Statutory declarations made outside of the jurisdiction are required to be made under the Diplomatic and Consular Officers (Provision of Services) Act 1993. Essentially, this Act requires that the declaration be made before a diplomatic or consular official.

For many years, the practice operated by the CRO permitted the registration of statutory declarations taken abroad when made before persons authorised to administer oaths in the jurisdiction in question, including in the case of Northern Ireland and the UK, before practising solicitors in those jurisdictions. However, as a result of a detailed analysis of the situation, in the first instance by the Law Society of Ireland, and subsequently in the Office of the Attorney General, it emerged that the existing practice was incorrect. Consequently, since April of this year, the CRO has changed its practice so that it now only accepts statutory declarations made abroad where they comply with the 1993 Act.

The Law Society has strongly argued that the essence of the previous process and procedures should be restored.

Amendment No. 5 will allow statutory declarations to be made abroad by Irish practising solicitors, for the purposes of the Irish Companies Acts, or a person such as a notary public authorised in that state to administer oaths. In the case of the latter, it is proposed that the signature would be expressly required to be subject to existing arrangements regarding authentication under conventions to which Ireland is already a party.

In that regard, where the state in which the declaration is made is a contracting party to the EC Convention, as defined in subsection (9), the terms of that convention, which provide for the complete freedom of movement of public documents without the requirements for authentication, shall apply. Where the state in which the declaration is made is a party to the Hague Convention, which provides for the "apostille" system of authentication, and is not a party to the EC Convention, then the terms of the Hague Convention will apply as far as authentication is concerned. Where the state in which the declaration has been made is not a party to either of these conventions, the authentication procedures applicable in that jurisdiction shall apply. In all instances, where the CRO has a concern about the authenticity of documentation submitted, it can seek such proof as it considers appropriate or as permitted by the conventions, as applicable.

Subsection (7) will retrospectively validate statutory declarations made abroad which have already been delivered to and registered in the CRO in accordance with practice and guidance that was previously issued by the CRO.

The essence of amendments Nos. 2 and 3 to section 2 is to ensure that a number of provisions of the Bill will come into operation on the passing of the Act. Apart from the provisions of Part 1 of the Bill, which contain the usual preliminary and general matters, provisions coming into operation will include the provision regarding statutory declarations, which I have just described, as well as some of the existing and other new provisions which we will be discussing later. Perhaps most noteworthy among these are the provisions dealing with the increase in the audit exemption thresholds. There has been a universal welcome for the increase in the audit exemption threshold provided for in section 6 of the Bill, and the amendments to section 2 will ensure these become applicable immediately on enactment of the Bill.

I commend these amendments to the House.

Amendment agreed to.

I move amendment No. 3:

In page 3, between lines 25 and 26, to insert the following:

"(2) Section 1, this section and sections 3 to 6 and 6, 7,9, 10, 11 and 27 shall come into operation on the passing of this Act.

(3) Sections 7 and 8 shall be deemed to have come into operation on 1 July 2005.

Amendment agreed to.

Amendments Nos. 4 and 28 to 33, inclusive, are cognate and may be discussed together by agreement.

I move amendment No. 4:

In page 3, between lines 27 and 28, to insert the following:

""Act of 1997" means the Irish Takeover Panel Act 1997;".

These are simply technical drafting changes. In section 2, it is proposed to define the Irish Takeover Panel Act 1997 as the Act of 1997, in the same way as the 1990 and 2005 Acts are defined. This then enables a more convenient usage in the other sections where the Act is referred to, namely, sections 17 to 22 inclusive. I commend the amendments to the House.

Amendment agreed to.

I move amendment No. 5:

In page 4, between lines 15 and 16, to insert the following:

"6.—(1) A statutory declaration made in a place outside the State (in pursuance of or for the purposes of the Companies Acts) shall be regarded as having been validly made (in pursuance of those Acts or for the purposes of them) if it is made in such a place before—

(a) a person entitled under the Solicitors Act 1954 to practise as a solicitor in the State, or

(b) a person authorised, under the law of that place, to administer oaths in that place and subsection (3), (4) or (5), as the case may be, is complied with.

(2) Subsection (1) is—

(a) without prejudice to the circumstances set out in the Statutory Declarations Act 1938 in which a statutory declaration may be made, and

(b) in addition to, and not in substitution for, the circumstances provided under the Diplomatic and Consular Officers (Provision of Services) Act 1993 or any other enactment in which a statutory declaration made by a person in a place outside the State is regarded as a statutory declaration validly made (whether for purposes generally or any specific purpose).

(3) In cases falling within subsection (1)(b) and unless subsection (4) or (5) applies, the signature of the person making the declaration (the “declarer”) and, to the extent that that law requires either or both of the following to be authenticated:

(a) the capacity in which the declarer has acted in making that declaration,

(b) the seal or stamp of the person who has administered the oath to the declarer,

shall be authenticated in accordance with the law of the place referred to in subsection (1)(b).

(4) If the place referred to in subsection (1)(b) is situate in a state that is a contracting party to the EC Convention, then (unless that Convention does not extend to that particular place) the provisions of that Convention with regard to authentication shall apply in relation to the statutory declaration concerned, including the procedures for verification of any matter in circumstances where serious doubts, with good reason, arise in respect of that matter.

(5) If the place referred to in subsection (1)(b) is situate in a state that is a contracting party to the Hague Convention but is not a contracting party to the EC Convention, then (unless the Hague Convention does not extend to that particular place) the provisions of the Hague Convention with regard to authentication shall apply in relation to the statutory declaration concerned, including the procedures for verification of any matter in circumstances where serious doubts, with good reason, arise in respect of that matter.

(6) The registrar of companies may, before receiving any statutory declaration purporting to be made in pursuance of, or for the purposes of, the Companies Acts, being a declaration—

(a) falling within subsection (1)(b), and

(b) to which neither the provisions of the EC Convention nor the Hague Convention apply as regards the authentication of it,

require such proof, as he or she considers appropriate, of any particular requirements of the law referred to in subsection (3).

(7) A statutory declaration made before the passing of this Act—

(a) in a place outside the State,

(b) before—

(i) if the place is not a place in England and Wales, Northern Ireland or Scotland, a person authorised, under the law of that place, to administer oaths or a person entitled under the Solicitors Act 1954 to practise as a solicitor in the State, or

(ii) if the place is a place in England and Wales, Northern Ireland or Scotland—

(I) a person entitled under the law of England and Wales, Northern Ireland or Scotland, as the case may be, to practise as a solicitor in England and Wales, Northern Ireland or Scotland, as the case may be, or to administer oaths there, or

(II) a person entitled under the Solicitors Act 1954 to practise as a solicitor in the State,

and

(c) purporting to be made in pursuance of, or for the purposes of, the Companies Acts,

shall, if the declaration was delivered to the registrar of companies before that passing, be valid and deemed always to have been valid notwithstanding anything in the Diplomatic and Consular Officers (Provision of Services) Act 1993 or any other enactment and anything done on foot of that declaration's delivery to the registrar, including any subsequent registration of that declaration by the registrar, shall be valid and be deemed always to have been valid notwithstanding anything in that Act or any other enactment.

(8) Nothing in subsection (7) affects any proceedings commenced before the passing of this Act.

(9) In this section—

"EC Convention" means the Convention Abolishing the Legalisation of Documents in the Member States of the European Communities of 25 May 1987;

"Hague Convention" means the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents done at the Hague on 5 October 1961;

"statutory declaration", in addition to the meaning assigned to it by the Interpretation Act 2005, means a declaration that conforms with the requirements of the Statutory Declarations Act 1938, save for any requirements contained in section 1 of that Act, or any other provision of it, expressly or impliedly limiting the class of persons who may take and receive a declaration or the places in which a declaration may be received or taken."

Amendment agreed to.

Amendments Nos. 6 and 7 are related and may be discussed together.

I move amendment No. 6:

In page 4, between lines 15 and 16, to insert the following:

"7.—The following section is substituted for section 33 of the Companies Act 1963:

33.—(1) For the purposes of this Act, ‘private company' means a company which has a share capital and which, by its articles

(a) restricts the right to transfer its shares, and

(b) limits the number of its members to 99 or fewer persons, not including persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were, while in that employment, and have continued after the determination of that employment to be, members of the company, and

(c) prohibits any invitation or offer to the public to subscribe for any shares, debentures or other securities of the company.

(2) A provision of a company's articles that prohibits any invitation to the public to subscribe for any shares or debentures of the company shall be construed as a prohibition on any invitation or offer being made to the public to subscribe for any shares, debentures or other securities of the company.

(3) Where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this section, be treated as a single member.

(4) Subsections (5) and (6) shall apply for the purposes of—

(a) subsection (1)(c), and

(b) unless a contrary intention appears in the company’s articles, any provision of a company’s articles which—

(i) corresponds in its terms to those of subsection (1)(c),

(ii) incorporates by reference the terms of subsection (1) (c), or

(iii) has the same legal effect as subsection (1)(c) even though its terms are not identical to those of subsection (1)(c) (and the cases to which this subparagraph applies include the case where subsection (2) applies to the interpretation of the provision).

(5) Each of the following offers of debentures by a company (wheresoever made) shall not be regarded as falling within subsection (1)(c) or the provision of a company’s articles referred to in subsection (4)(b), namely—

(a) an offer of debentures addressed solely to qualified investors,

(b) an offer of debentures addressed to fewer than 100 persons, other than qualified investors,

(c) an offer of debentures addressed to investors where the minimum consideration payable pursuant to the offer is at least €50,000 per investor, for each separate offer,

(d) an offer of debentures whose denomination per unit amounts to at least €50,000,

(e) an offer of debentures where the offer expressly limits the amount of the total consideration for the offer to less than €100,000,

(f) an offer of those classes of instruments which are normally dealt in on the money market (such as treasury bills, certificates of deposit and commercial papers) having a maturity of less than 12 months.

(6) The following offer of shares by a company (of any amount or wheresoever made) shall not be regarded as falling within subsection (1)(c) or the provision of a company’s articles referred to in subsection (4)(b), namely an offer of shares addressed to—

(a) qualified investors, or

(b) 99 or fewer persons, or

(c) both qualified investors and 99 or fewer other persons.

(7) A word or expression that is used in this section and is also used in the Prospectus (Directive 2003/71/EC) Regulations 2005 (S.I. No. 324 of 2005) shall have in this section the same meaning as it has in those Regulations.

(8) For the purposes of subsection (7), the Regulations referred to in that subsection shall have effect as if Regulation 8 were omitted therefrom."

Prior to the enactment of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 — in particular Part 5 thereof — and the Prospectus Regulations 2005, SI 324/2005, practitioners had been able to advise their clients that on the basis of existing law, and in particular a combination of sections 33, 51 and 61 of the Companies Act 1963 and section 21 of the Companies (Amendment) Act 1983, it was possible for a private company to make offers of their shares and debentures to potential investors, provided the offer was structured in a particular way.

Thus, while offers of the kind which were permitted were not expressly spelled out in the law, as long as they were considered as being, in the terms of section 61(2) of the Companies Act 1963, "regarded, in all of the circumstances, as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation, or otherwise as being a domestic concern of the persons making and receiving it," they could be made by private companies. However, along with a number of others, this section was repealed with effect from 1 July 2005 as part of the transposition of the EU Prospectus Directive. This has resulted in a certain degree of uncertainty as to what types of offers of their shares or debentures can, or can not, be made by private companies.

Separately, as we are all only too well aware, other developments have been occurring in the economy. In this context, with the advent and growth of the financial services industry in general, and the securitisation industry in particular, the use of the private company as the investment vehicle of choice for particular types of offers has grown. This is because, inter alia, it only requires two members to form a private company, as opposed to a public company requiring seven, pursuant to the Companies Acts. A private company does not have to have a specified minimum capital, and time wise it is easier to actually form and commence business with a private company than with a PLC. The changes effected by the law, both primary and secondary, transposing the EU Prospectus Directive have removed one of the interpretative building blocks used by the practitioners advising clients on the manner in which private companies can be used for their purposes.

The issue of private companies making offers of their debentures or other debt instruments to raise capital has also been considered by the Company Law Review Group, CLRG. In the context of the CLRG's recommendations for the major reform and consolidation Bill, it is being recommended that the proposed model private company — the company limited by shares — will not be able to offer shares or debentures in the manner under consideration. However, the proposed private company that has an objects clause — to be called a "designated activity company" — and where it specifically provides for the matter in its constitution will be able to make offers of the kind in question, as long as the manner of doing so does not give rise to the need to publish a prospectus under the national law transposing the EU Prospectus Directive.

This proposed approach is broadly in line with the approach adopted in a number of areas of company law in recent times, such as in transposing the Prospectus Directive, or availing of the maximum audit exemption thresholds, as we propose in section 6 of the current Bill, where the limitations or thresholds set in European law are adopted in determining the appropriate boundaries for the application of national law. Thus, in the application of the Prospectus Directive, the requirements in what was then the existing Irish company law to publish a prospectus in national law, even where one qualified for an exemption under the law transposing the earlier EU prospectus law, was repealed in the 2005 Act and replaced by a simpler requirement to make particular disclosures.

The approach being adopted in the proposed amendments to section 33 of the Companies Act 1963 and section 21 of the Companies (Amendment) Act 1983 is to explicitly permit a private company to make offers of the type which benefit from an exemption under Regulation 9 of SI 324/2005, or which otherwise fall outside of the scope of the implementing regulations. The opportunity is also being taken to increase the permitted number of members a private company may have to 99, in line with the recommendations of the CLRG, which would otherwise have to await the implementation of the main reform and consolidation Bill.

Amendment No. 6 replaces section 33 in the Companies Act 1963. While it repeats to a large extent the existing provision of that section, it spells out in new subsections (5) and (6) the precise types of offers that private companies will be free to make if they wish to do so. Subsection (2) is designed to remove scope for argument as to whether an offer is different from an invitation. That said, it will be noted that the wording of this subsection and subsection (4) will enable companies that wish to do so to make offers of the kind specified in subsections (5) or (6) without the necessity to have to change their memorandum of association, if their existing memorandum is worded so as to have the same legal effect as the wording of subsection (l)(c).

Section 21 of the Companies (Amendment) Act 1983 contains the criminal sanctions applicable where a private company offers or allots shares or debentures to the public. Amendment No. 7 essentially substitutes a new section 21 in the 1983 Act which will mirror the adjustments being made to section 33 of the 1963 Act, such that offers made by a private company of the type now being permitted will not attract any sanction. I commend the amendments to the House.

Amendment agreed to.

I move amendment No. 7:

In page 4, between lines 15 and 16, to insert the following:

"8.—The following section is substituted for section 21 of the Companies (Amendment) Act 1983:

21.—(1) A private company and any officer of the company who is in default shall be guilty of an offence if the company—

(a) offers to the public (whether for cash or otherwise) any shares in or debentures of the company, or

(b) allots, or agrees to allot, (whether for cash or otherwise) any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public.

(2) Subsection (1) does not apply to the following offers or allotments (wheresoever made):

(a) an offer of debentures addressed or allotment made solely to qualified investors,

(b) an offer of debentures addressed to fewer than 100 persons, other than qualified investors,

(c) an offer of debentures addressed to investors where the minimum consideration payable pursuant to the offer is at least €50,000 per investor, for each separate offer,

(d) an offer of debentures whose denomination per unit amounts to at least €50,000,

(e) an offer of debentures where the offer expressly limits the amount of the total consideration for the offer to less than €100,000, or

(f) an offer of those classes of instruments which are normally dealt in on the money market (such as treasury bills, certificates of deposit and commercial papers) having a maturity of less than 12 months,

(g) an offer of shares addressed to-

(i) qualified investors, or

(ii) 99 or fewer persons, or

(iii) both qualified investors and 99 or fewer other persons,

(h) an allotment of shares or debentures, or an agreement to make such an allotment, with a view to those shares or debentures being the subject of any one or more of the offers referred to in paragraphs (a) to (g).

(3) A word or expression that is used in this section and is also used in the Prospectus (Directive 2003/71/EC) Regulations 2005 (S.I. No. 324 of 2005) shall have in this section the same meaning as it has in those Regulations.

(4) Nothing in this section shall affect the validity of any allotment or sale of shares or debentures or of any agreement to allot or sell shares or debentures.

(5) A person guilty of an offence under subsection (1) shall be liable on summary conviction to a fine not exceeding €1,904.61."

Amendment agreed to.

I move amendment No. 8:

In page 6, between lines 7 and 8, to insert the following:

"7.—(1) The amendments effected by section 6 shall apply as respects—

(a) a financial year of a company that commences not earlier than the commencement of that section, and

(b) subject to subsection (2), a financial year of a company that ends not earlier than 2 months after the commencement of that section (not being a financial year to which paragraph (a) applies).

(2) In cases falling within subsection (1)(b), section 6 shall have effect as if, instead of the subsection (2) inserted by that section in section 33 of the Companies (Amendment) (No. 2) Act 1999, there were inserted the following subsection in that section 33:

"(2) In cases falling within section 7(1)(b) of the Investment Funds, Companies and Miscellaneous Provisions Act 2006, a notice under subsection (1) may be served on the company not later than 1 month before the end of the financial year to which the notice relates.”

Deputies will recall that during the exchanges on Committee Stage on the amendments which I tabled to section 6 of the Bill, I said that I intended to review the provisions to ensure that in deleting the former section 6(2), I had not inadvertently removed a necessary provision. At the time I had emphasised that I wished the availability of the significantly increased thresholds which I was introducing for balance sheet total and turnover to enable companies to avail of the exemption from audit, to be available at the earliest opportunity, consistent with protecting the rights of members of companies who would be entitled to object to their company availing of the exemption to do so. I believe that this was also the purpose of the amendment tabled by Deputy Quinn.

Amendment No. 8 will insert a new section after section 6 to deal with application and transitional arrangements. Effectively the new section provides that under subsection (l)(a), the new thresholds will apply to all financial years of companies that begin after section 6 and this new section come into effect. Under subsections (l)(b) and (2), for the current financial year of companies, if there is more than two months to run before the year finishes, a company can avail of the increased thresholds in the current year. In the period before the end of the financial year, members holding 10% or more of the voting shares can object to the company availing of the exemption, and they would have to signify such an objection at least one month before the end of the company’s current financial year.

It will be clear, therefore, that a company with less than two months between the commencement of these provisions and the end of its current financial year will not be able to avail of the increased exemption thresholds until its next financial year. I remind Deputies that section 6 and this new section will come into operation on the passing of this Act and hopefully it will be ready for 1 January 2007. I commend the amendment to the House.

Amendment agreed to.

I move amendment No. 9:

In page 6, to delete lines 8 and 9.

This amendment is essentially a technical amendment to remove a superfluous definition of the Act of 1990, as it is already defined in section 2 of the Bill. I commend it to the House.

Amendment agreed to.

Amendments Nos. 10 and 11 will be discussed together.

I move amendment No. 10:

In page 8, between lines 39 and 40, to insert the following:

"10.—The following section is substituted for section 45 of the Act of 2005:

45.—(1) The prohibition in subsection (2) only applies in relation to a prospectus if EU prospectus law requires the inclusion in the prospectus of a statement of the kind referred to in paragraph (b) of that subsection.

(2) A prospectus including a statement that is attributed to an expert shall not be issued unless—

(a) the expert has given and has not, before the publication of the prospectus, withdrawn, in writing, his or her consent to the inclusion in the prospectus of the statement in the form and context in which it is included, and

(b) a statement that the expert has given and not withdrawn, in writing, that consent appears in the prospectus.

(3) If any prospectus is issued in contravention of this section the issuer and every person who is knowingly a party to the issue thereof shall be guilty of an offence and liable to a fine.".".

In recent weeks, a particular difficulty has been raised by a number of legal practitioners who advise clients on the raising of capital through the issue of debentures, which involves the issue of a prospectus.

The problem relates to the way in which the EU prospectus directive, to which I have already referred in the context of previous amendments, was transposed into Irish law through a combination of the Investment Funds, Companies and Miscellaneous Provisions Act 2005, and the separate transposing Regulations, SI 324 of 2005, which were made under section 46 of that Act. The specific problem arises from the requirement in section 45(1) of the Act that, where a prospectus includes a statement made by an expert, that expert has to give his or her consent to the issue of the prospectus, and that consent must not have been withdrawn before the issue of the prospectus.

It has now emerged that this requirement, which was modelled on section 46 of the Companies Act 1963, which itself was repealed as part of the transposition process, goes beyond the requirements of the prospectus directive, which is a maximum harmonisation directive. To address this problem, amendment No. 10 substitutes a new section 45, the essence of which only requires an expert to give his or her consent to the inclusion of the expert's statement in the prospectus.

Due to the way Part 5 of the 2005 Act is structured, it is necessary to make a large number of consequential changes to sections 38, 41, 42, 44 and 48 of the 2005 Act, and these are being made in amendment No. 11. Some of the changes add or substitute new text, some amend existing text, while others repeal text that is now superfluous. They are all designed to reflect the new approach whereby the expert simply consents to the inclusion of his or her statement, as opposed to actually giving consent to the issueof the prospectus, which is the essence of the first amendment to section 45 that I have just described.

I commend these amendments to the House.

Amendment agreed to.

I move amendment No. 11:

In page 8, between lines 39 and 40, to insert the following:

"11.—The Act of 2005 is amended—

(a) in section 38, by inserting the following subsection after subsection (3):

"(3A) Without limiting the meaning of that expression in any other context in which it is used in this Part, "statement" in section 45(2) (other than paragraph (b) thereof) and any other section of this Part that makes provision in respect of an expert includes a report and a valuation.",

(b) in section 41—

(i) by re-numbering the existing section as subsection (1) thereof, and

(ii) by adding the following subsection:

"(2) In addition to the persons specified in subsection (1) as being liable in the circumstances there set out, an expert who has given the consent required by section 45 to the inclusion in a prospectus of a statement purporting to be made by him or her shall, subject to sections 42 and 43, be liable to pay compensation to all persons who acquire any securities on the faith of the prospectus for the loss or damage they may have sustained by reason of an untrue statement in the prospectus purporting to be made by him or her as an expert.",

(c) in section 42—

(i) by deleting subsection (1),

(ii) in subsection (3)(d)(ii), by substituting “and, where required by section 45, that that person had given his or her consent to the inclusion of the statement in the prospectus” for “and that that person had given his or her consent to the issue of the prospectus”,

(iii) in subsection (4), by substituting "the inclusion in the prospectus of the statement concerned" for "the issue of the prospectus concerned",

(iv) in subsection (5), by deleting "as a person who has authorised the issue of the prospectus",

(v) in subsection (6)—

(I) by deleting "as a person who has authorised the issue of a prospectus", and

(II) in paragraph (a), by substituting “the inclusion in the prospectus of the statement” for “the issue of the prospectus”,

(d) in section 44—

(i) in subsection (1)(b), by substituting “the inclusion in a prospectus of a statement purporting to be made by him or her” for “the issue of a prospectus”, and

(ii) by deleting subsection (3),

and

(e) in section 48, by deleting subsection (4).

Amendment agreed to.

Amendments Nos. 12 to 27, inclusive, will be discussed together.

I move amendment No. 12:

In page 8, between lines 39 and 40, to insert the following:

"12.—Section 9(2) of the Companies (Auditing and Accounting) Act 2003 is amended by inserting the following paragraph after paragraph (m):

"(ma) to perform the functions conferred on it by transparency (regulated markets) law (within the meaning of Part 3 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006) in respect of the mattersreferred to in Article 24(4)(h) of the Transparency (Regulated Markets) Directive (within the meaning of that Part);”.

During the course of my contributions at special committee, I explained that Part 3 of the Bill was designed to partly transpose and partly pave the way for the transposition of the EU transparency directive. This directive deals with and requires disclosure of specific information by companies whose securities are listed on a regulated market and is due for transposition by 20 January 2007.

Due to the nature of some of the disclosure obligations arising, relating as they do to the financial situation of listed companies, it has been decided that the Irish Auditing and Accounting Supervisory Authority, IAASA, be appointed competent authority in respect of these aspects of the directive. The other competent authority for the transparency directive will be the Financial Regulator, which is also the competent authority in respect of the transposing law for a number of related EU directives dealing with the publication of prospectuses and market abuse.

Amendment No. 13 will make a number of amendments to section 10 of the Companies (Auditing and Accounting) Act 2003, which established IAASA. That section sets out the general powers that were given to IAASA and the additional powers now being given are specifically designed to enable IAASA to discharge the functions arising from the EU transparency directive. In particular, IAASA will have the power to apply to the High Court to secure compliance with any of its rules relating to, or arising from, its new functions under transparency regulated markets law.

Amendment No. 14 is to substitute section 29(7) of the 2003 Act in a way that accommodates the expanded grounds arising from these new functions whereon IAASA can petition the High Court to ensure compliance with its rules etc.

Amendment No. 25 will amend section 14(6) of the present Bill by including rules adopted by IAASA within the remit of the subsection and this is directly linked with the changes being made to sections 9 and 10 of the Companies (Auditing and Accounting) Act 2003, to provide for IAASA's new functions under the transparency directive, one of which I have just referred to. The essence of this revised section 14(6) is that the provisions of the regulations that will transpose the EU transparency directive and that will make provision for administrative sanctions will also be applicable to contraventions of rules adopted by IAASA that arise from its functions as competent authority under the law transposing the EU transparency directive.

While section 10 of the present Bill was added by way of amendment at special committee, and while it deals with the conferring of additional functions on IAASA as competent authority under the law transposing the EU transparency directive, its more correct location would be in Part 2 of the Bill, which deals with amendments of Companies Acts, and amendments Nos. 12 and 15 are designed to achieve this.

Deputies will also notice that this group of amendments contains a number of identical amendments to various sections in Part 3 of the Bill whereby we are substituting the defined term "transparency (regulated markets) law", using a lower case "t" in the word "transparency". This responds to the amendments tabled by Deputy Hogan at special committee and the discussion thereon in which Deputy Quinn also participated. Following review of the matter, Parliamentary Counsel agrees that it is unnecessary, in this instance, to have the initial word in the defined term with a capital "T", and the amendments will address this issue.

For the sake of completeness, I notify Members that Parliamentary Counsel has confirmed that the retention of initial capital letters in the defined term, "Transparency (Regulated Markets) Directive" in section 11, and its use in this form elsewhere in the Bill, are appropriate.

I commend the amendments to the House.

I envisage a massive surge in political support for this group of amendments, particularly the later one proposing lower case "t." The people of Kilkenny will rise up in adulation.

I will make a general point on the substance of the amendments. Some of the interpretation and adjudication will be carried out by IAASA, others by the Financial Regulator. The Minister of State will be aware that I am seriously concerned about the number of regulators in the country. Genuine confusion is creeping in over the number of obligations on businesses and consumers alike and over which regulator is responsible for which sector. The State, inadvertently or otherwise, is allowing empire-building by regulatory bodies in addition to their regulatory functions. In the budget, the Minister for Finance announced a number of measures to reduce the regulatory burden on small business, which I welcome. Some 8,000 businesses of 250,000 in the sector will benefit, which is a welcome start, as I said during the course of the debate on the Financial Resolutions.

This Bill provides for two bodies to adjudicate on transparency and financial control over shares, debentures and investments, which is a perfect example of the objective criticism I have had of the regulatory regime in recent years. The time has come for synergy among regulators and, indeed, the Competition Authority. Various professional studies have been carried out by the Competition Authority recently. One such study into the Commission for Energy Regulation proposed a review of the structure of electricity and gas prices, rather than the substance of whether an increase in energy prices was appropriate. Within days, the Commission for Energy Regulation decided to have a second look at the file and, instead of a massive increase of 34%, imposed an increase of 23%, for which we were supposed to be grateful. The same regulator stated it could only set prices on an annual basis, which would have meant no further review until September 2007. Regulators ended up with egg on their face after that decision and the time is appropriate for the Minister to review the role of the regulators, particularly those which affect the competitiveness of the country and the disposable income of households. They should be forced to work with greater synergy, rather than having separate legal, financial and accountancy departments to make their decisions.

At a time when the Minister of State is discussing the consolidation of company law, there is significant scope for the consolidation of these matters. On Committee Stage, I tabled a number of amendments to this effect, but they were ruled out of order on the basis that they would incur a charge on the Exchequer. I tabled them on the basis that they would save the Exchequer money. Fewer people need to be involved in the regulation of taxis, aviation, energy or telecommunications whereas the Financial Regulator and the IAASA have been mentioned in this context.

I hope that the Minister of State understands the context in which I am speaking and that when we address these issues, we should bring a number of the regulators before the committee to determine what they are doing daily and how it impacts on business and the disposable income of ordinary householders.

I fully support Deputy Hogan's comments. Our political and administrative systems are relatively new to the world of the regulator and we have understandably taken our steer from the island across the water, as we have done traditionally. We have also taken a steer from the framework directives and regulations proposed at European level.

Irrespective of who was responsible, I am not sure that we could have got the matter right the first time because it is uncharted territory, but I am satisfied that in an economy and population of this size and a fairly homogeneous political society, having separate offices for the regulation of energy, telecommunications and so on was not the right thing to do. I am saying this with the wisdom of hindsight, which is always right.

The Labour Party has prepared a policy paper that I hope will be included in our manifesto. It proposes a commission for regulation in which there would be a shared analysis of the economy's performance. The analysis would be an agreed diagnosis and, while one cannot gender balance the Latin language, a gender-balanced triumvirate would have the wisdom of three heads rather than one. In the case of utilities rather than commercial undertakings, there are only one, two or three players. If there is a personality clash between the regulator and the chief executive officers of the operations, there can be unforeseen and unnecessary side effects.

While I welcome the Bill and thank the Minister of State and his officials and colleagues for taking on board some of the spirit of the suggestions made on Committee Stage, which is the manner in which such legislation should be handled, we need wisdom and humility when examining how the system works. This is the area of our open and globalised economy that we control, namely, it is not subject to fluctuations in oil prices. If we do not get it right, no one will get it right for us.

Speaking as someone committed to the European project, Ministers and not just civil servants have been too eager to comply with standards set in Brussels without being satisfied that their eagerness is balanced by a critical analysis of what suits the State's terrain and the size of the economy and its players. We have been more dutiful than many member states.

The Bill is based on what we have learned and will continue to learn. The closed cross-subsidisation that was the national marketplace of many EU countries is no longer the case and the matter of regulation is fraught with complexity. Due to the high cost base of our economy, we do not need to overburden our performers when competing with many lower cost competitors.

The question of competitiveness has raised its head. In the past year or so, Vice President Günter Verheugen of the European Commission has published a paper calling for a 25% reduction in regulation. I do not know to what degree that proposal has been developed, but it is concentrating the minds of Commissioners.

At a meeting, Commissioner Verheugen wondered why strange regulations, such as those regarding straight bananas, were being made. He went on to say that people are trying to justify their existence.

Deputy Hogan raised an important issue. We want to reduce the burden of compliance and section 6 goes a long way towards doing so. The Financial Regulator and the IAASA will operate in this area, but they will do different jobs. While there was much discussion on whether financial recording should be handled by the Financial Regulator, it will be dealt with by the IAASA, which includes people with experience in auditing and financial reporting. The Financial Regulator will deal with the issue of share prospectuses, the trading of shares and the EU transparency directive.

There will be no duplication of work, but the two authorities will share information. The Deputy was right to raise the matter of duplication, but we examined the issue to ensure that another empire-building organisation was not being set up. I agree wholeheartedly on the need to ensure an examination of the question of regulation, which the Minister, Deputy Martin, will do before he rides off into the sunset.

We will help him ride into the sunset.

I support the Minister 100%. I thank all Deputies who partook in the debate.

We have not concluded. There are amendments outstanding.

Are there more sections?

We must dispose of amendments Nos. 12 to 27, inclusive, and a number of others.

I was jumping the gun.

Amendment agreed to.

I move amendment No. 13:

In page 8, between lines 39 and 40, to insert the following:

"13.—Section 10 of the Companies (Auditing and Accounting) Act 2003 is amended—

(a) in subsection (4)—

(i) in paragraph (a), by substituting “section,” for “section, or”,

(ii) in paragraph (b), by substituting “recognition of that body, or” for “recognition of that body,”,

(iii) by inserting the following paragraph after paragraph (b):

"(c) a person on whom a relevant obligation or obligations is or are imposed to comply with that obligation or those obligations,”,

and

(iv) by substituting "the body or other person concerned may fail or has failed to comply with the rule, guideline, term or condition or obligation or obligations, as the case may be." for "the body concerned may fail or has failed to comply with the rule or guideline or with the term or condition, as the case may be.",

and

(b) by adding the following subsection:

"(5) In subsection (4), the reference to a relevant obligation or obligations that is or are imposed on a person is a reference to an obligation or obligations that is or are imposed on the person by—

(a) provisions of transparency (regulated markets) law (within the meaning of Part 3 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006) that implement Article 24(4)(h) of the Transparency (Regulated Markets) Directive (within the meaning of that Part), or

(b) rules adopted by the Supervisory Authority under subsection (3) concerning the matters that relate to its functions under section 9(2)(ma).”.”.

Amendment agreed to.

I move amendment No. 14:

In page 8, between lines 39 and 40, to insert the following:

"14.—Section 29 of the Companies (Auditing and Accounting) Act 2003 is amended by substituting the following subsection for subsection (7):

"(7) On application under subsection (4) of section 10 for an order compelling compliance with—

(a) a rule adopted or guideline issued by the Supervisory Authority,

(b) a term or condition of recognition, or

(c)an obligation or obligations referred to in that subsection,

the Court may make any order or give any direction it thinks fit.".".

Amendment agreed to.

I move amendment No. 15:

In page 8, to delete lines 43 to 45 and in page 9, to delete lines 1 to 7.

Amendment agreed to.

I move amendment No. 16:

In page 9, line 16, to delete ""Transparency (regulated markets) law"" and substitute ""transparency (regulated markets) law"".

Amendment agreed to.

I move amendment No. 17:

In page 10, lines 20 to 21, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 18:

In page 10, lines 42 and 43, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 19:

In page 11, lines 4 and 5, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 20:

In page 11, lines 10 and 11, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 21:

In page 11, line 13, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 22:

In page 11, lines 20 and 21, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 23:

In page 11, lines 28 and 29, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 24:

In page 11, line 38, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 25:

In page 11, to delete lines 43 to 52 and substitute the following:

"(6) The provisions of transparency (regulated markets) law that are expressed by that law to be made for the purpose of enabling the imposition of administrative sanctions shall apply in relation to a contravention of—

(a) rules under this section, and

(b) rules adopted by the Irish Auditing and Accounting Supervisory Authority under section 10(3) of the Companies (Auditing and Accounting) Act 2003 concerning the matters that relate to its functions under section 9(2)(ma) of that Act,

as they apply in relation to a contravention of a provision of transparency (regulated markets) law and, accordingly, a sanction that may be imposed pursuant to the first mentioned provisions of transparency (regulated markets) law in respect of a contravention of a provision of that law may, in accordance with that law, be imposed in respect of a contravention of rules referred to in either of the foregoing paragraphs.".

Amendment agreed to.

I move amendment No. 26:

In page 12, lines 2 and 3, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

I move amendment No. 27:

In page 12, lines 18 and 19, to delete "Transparency (regulated markets) law" and substitute "transparency (regulated markets) law".

Amendment agreed to.

Amendments Nos. 28 to 33, inclusive, were discussed with amendment No. 4.

I move amendment No. 28:

In page 12, line 27, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

I move amendment No. 29:

In page 13, lines 33 and 34, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

I move amendment No. 30:

In page 14, lines 26 and 27, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

I move amendment No. 31:

In page 14, line 32, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

I move amendment No. 32:

In page 14, line 48, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

I move amendment No. 33:

In page 16, line 6, to delete "Irish Takeover Panel Act 1997" and substitute "Act of 1997".

Amendment agreed to.

Amendment No. 34 was discussed with amendment No. 1.

I move amendment No. 34:

27.—Section 1 of the Netting of Financial Contracts Act 1995 is amended by substituting the following definition for the definition of "party":

"‘party' means a person constituting one of the parties to an agreement and includes, and shall be deemed always to have included—

(a) any number of persons who share a single, identical interest in the agreement referred to subsequently in this definition if there is no differentiation in the rights and obligations of each of them in that agreement,

(b) the partners in a partnership or limited partnership, including any limited partnership established under the Investment Limited Partnerships Act 1994 or the Limited Partnerships Act 1907, and

(c) the participants in—

(i) a common contractual fund authorised pursuant to the Investment Funds, Companies and Miscellaneous Provisions Act 2005, the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (S.I. No. 211 of 2003) or the laws of a Member State (other than the State) adopted to implement Council Directive No. 86/611/EEC of 20 December 1985, as amended, or

(ii) a sub-fund of a common contractual fund referred to in subparagraph (i),

(whether or not the fund is acting through a manager or a delegate of a manager),

in circumstances where any of such persons or such partners (acting in their capacity as such) or such fund or sub-fund enters into an agreement.".".

Amendment agreed to.
Bill, as amended, received for final consideration.
Question proposed: "That the Bill do now pass."

I thank Deputies Hogan and Quinn for their co-operation in what Deputy Quinn referred to as technical legislation that is important to continued growth in the financial services sector. The proposal to go through this in detail at a meeting is welcome and we will arrange that with the chairman on the committee in the new year. We will bring in those who know what they are talking about to discuss it.

I thank my officials for their assistance with this Bill. I understand it to a much greater extent as a result of the work they have put in. I also wish the Deputies a peaceful and happy Christmas.

Question put and agreed to.
Sitting suspended at 1.05 p.m. and resumed at 1.15 p.m.
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