The next item on the Order of Business is the draft report on the draft fourth directive on company law which deals with the annual accounts of limited liability companies.
Paragraphs 1 to 7, inclusive, agreed to.
Draft Fourth Directive on Company Law: the Annual Accounts of Limited Liability Companies.
Senator Alexis FitzGerald has tabled an amendment to paragraph 8.
I move the amendment standing in the name of Senator FitzGerald:
" To add to paragraph 8 the following subparagraph:
‘ When all the Directives dealing with company law are finally adopted the Companies Act, 1963 will have to be amended extensively to comply with Community obligations. It seems to the Joint Committee that at that point a suitable opportunity will arise for reviewing the provisions of the Act from the viewpoint of domestic needs as well as Community requirements. The Joint Committee considers that this work could usefully be undertaken by a joint Committee of the Dáil and Seanad specially appointed for the purpose. It would obviously be of great benefit to have in a single statute all the statutory law relating to companies appropriately revised to meet all present day requirements.'"
We can adopt this suggestion by Senator FitzGerald. It is very sensible. I take it that we agree to incorporate the amendment in the draft report.
Amendment agreed to.
It is interesting to note that the draft directive provides that goodwill should be written off over a maximum period of five years.
We discussed that with officials from the Department of Industry and Commerce. We objected to it. The report says:
The Joint Committee considers that a company should be free to follow its own policy in regard to the writing off of goodwill subject to the policy followed being disclosed in the notes on the accounts.
That is reasonable.
It is reasonable because the goodwill that would be written off varies from company to company and can vary from year to year.
The main worry in this whole thing is that all the traditional privilege, and the special position, which we afford to private companies because of the contribution they make to our comparatively undeveloped economy will be eroded. Most of us feel that because of the advanced state of the economies in the mainland of Europe, Germany, France, Belgium and so on, they can proceed much further in these areas than we are yet ready to do. Our report reflects that general attitude on our part. Harmonisation is alright provided everybody is at an equal level of development, but it can be injurious to us in certain circumstances.
How much of the Transport Union's submission dealing with information to the general public and so on will be incorporated in our report?
It is dealt with on page 6 of the draft report:
The Joint Committee agrees with the submission of the Irish Transport and General Workers Union that the enjoyment of limited liability by entrepreneurs is a privilege for which, in return, companies should be required to make such disclosures as are desirable in the interests of creditors, employees and the general public interest. The Committee however remains concerned at any requirement of disclosures which would be to the disadvantage of the companies and would place limitations on their contributions to the general aim of economic growth.
Many of the submissions from the Transport Union were not strictly relevant to this particular draft Directive. They were more relevant to the disclosure by management to workers inside the concern. I am advised that that aspect will come up in relation to the third and fifth Directives which we hope to deal with later. In general one cannot object to the point that the Transport Union makes, that if a company has the privilege of limited liability it also has a corresponding obligation to disclose. This Directive is only concerned with the disclosure to creditors and shareholders.
I think they are particularly concerned about the use of the private company and the way they are multiplying in Ireland. As the law stood, they could hide certain facts about the personnel involved in the company. This was one of the union's basic points.
I think they were also concerned with the situation where their members, the workers in an organisation, would not be aware of the fact that the organisation was going bankrupt until it was too late. That is a very valid point.
It certainly is.
This Directive also provides for a management report and prescribes rules for determining valuation, which probably covers what your are dealing with; you know what the strength of the company is.
There is no doubt that we are moving slowly but surely towards greater disclosure, especially in the case of private companies, when all the Directives come into effect.
This is one of the reasons, I think, that motivate some of us in supporting Senator Alexis FitzGerald's suggestion about reform of our company law. Most members here will recollect that a committee was set up here before the last Companies Act was enacted, and while that Act is based on the 1948 Companies Act in England, there were quite marked variations from the English Companies Act because of the preponderance of private firms operating from this country. In other words, there were not many public companies; a different business structure existed here. I think that adds strength to the suggestion by Senator FitzGerald that we might again consider a similar approach. His suggestion is that this proposed review of our existing company law would not just be for the purposes of enacting a Consolidation Bill but would produce a new Bill in essence. Probably that would be the best time to deal with the situation and these various matters that arise. The proposal from Europe is a sort or harmonisation proposal on minimal matters that have to be covered to try to make a fair review of company procedures both here and in our European partners. I gather from certain people that our disclosures are probably a little more effective than some of the European disclosures. Probably this Directive is aimed more at the corporate system that exists among our European partners.
Paragraph 8, as amended, agreed to.
Paragraph 9 agreed to.
Draft Report, as amended, agreed to.
Ordered: To report accordingly.
- Proposed Directives on Packaging: Labelling, Presentation and Advertising of Foodstuffs; and Ranges of Nominal Quantities.
- Back to table of contents
- Proposed Directives relating to Securities: Admission to Official Stock Exchange Quotations, Prospectuses and Conditions of Admission; and Indirect Taxes and Transactions.