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Seanad Éireann debate -
Wednesday, 22 Aug 1934

Vol. 19 No. 1

Public Business. - Agricultural Co-operative Societies Debentures Bill, 1934—Second Stage.

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

For some time past—perhaps, the last four or five years—there has been a Co-operative Bill in preparation by my Department. It is rather an elaborate Bill and, when it does appear, will be one of the most massive documents that ever was presented to the Oireachtas. There are, however, a few matters that are very urgent in connection with co-operative legislation and we have thought it advisable to take these few matters out of that Bill and to have them hurried along before the big Bill comes before the Oireachtas, possibly about Christmas time.

There are two matters dealt with in this Bill. The position in some co-operative societies is that they need money. The co-operative societies registered under the Industrial and Provident Societies Act of 1893 are not entitled to take benefit under the present law. The second point we think urgent is the matter of loans issued by the Agricultural Credit Organisation in regard to these societies. First as regards debentures. These co-operative societies cannot give debentures. The result is that when a co-operative society is in difficulties the committee is compelled to go to a bank and the bank, in providing a loan for the society, asks for the personal guarantee of members of the committee. That has certain reactions. In the first place men cannot be members of the committee unless they are men of standing. Therefore the smaller suppliers are no use to the committee because they would be no use to the bank. So that the first reaction is that in the ordinary way the bigger men in the district are put on the committee because they are good marks in the eyes of the bank and having once given their names to the bank they must be left on the committee. So that the whole spirit of co-operation is destroyed. You have the same men reelected on the committee: they must be re-elected because they have given their names to the banks.

In the past, when many co-operative societies have gone down, the banks have come forward to claim what was due to them, and, not getting enough through the liquidation of the society, they have claimed from the individual members of the committee. We have cases of where good, public-spirited men in a district have been absolutely ruined because they were guarantors for such co-operative societies. There you find the best type of men in the district willing to come in and sign their names on behalf of the co-operative society. The cute, selfish type do not do so. They get all they can out of the society, but take care that if it goes down they lose nothing; it is the decent man that loses all. It is only fair that if there is loss, the society, as a whole, should suffer in such a case. That is why it became rather urgent to allow that some societies—fairly big societies—should be allowed to offer debentures for loans. It is stated in this Bill that they can only get debentures from certain institutions, such as the ordinary banks, the Agricultural Corporation, the Industrial Credit Corporation, and the Dairy Disposals Board. The people from whom they can get credit are limited. There is also the precaution here that the Minister for Agriculture must certify that the society is eligible, and, secondly, the Minister must sanction the loan.

These precautions are put in to prevent societies going into large expenditure at the present moment that perhaps is really not needed nor justified. When the main Bill comes into force there will be a Registrar, but the difficulty here is to get somebody to act as Registrar until the main Bill comes on. The Registrar of the Industrial and Provident Society was not willing to undertake that duty, and the Minister for Agriculture is named more or less to fulfil the function until the main Bill is brought before the Oireachtas.

The second point is as to loans issued by the Agricultural Credit Corporation to certain creameries. About 1929 I think a number of new creameries were built, particularly in the midlands, and the way they were financed was particularly favourable to the shareholders. The shareholders paid in about half-crown per £1 share, and on the uncalled portion of the share— 17/6—the Agricultural Credit Corporation gave a loan to the society to build and equip the creamery, and to provide a sum to carry on. A large number of farmers in a district, by putting down a comparatively small deposit, were in the position to start a creamery, and become absolute owners of it, because the Agricultural Credit Corporation could not call in its loan quicker than a stated period—that is, at the rate of 2/6 per annum for seven years, so that it would take seven years to pay that off. But at the time it was stated that the Agricultural Credit Corporation were not sure that the society was legally entitled to give the Credit Corporation the necessary loan. The Credit Corporation was assured by my predecessor, or by the officials working under him, that that matter would be made right in the Co-operative Bill which was to be introduced. It was to deal with that particular matter, and make it right. When made a legal charge upon the uncalled capital, the Agricultural Credit Corporation will be entitled to collect its outstanding shares so far as the law is concerned.

It is quite possible, though there is some doubt about it, that if the Credit Corporation proceeded to collect without this Bill they would be entitled to do so. But as there is a doubt, it was felt to be only fair that we should take this opportunity to redeem the promise made by my predecessor in 1929. These are the only two points dealt with in this Bill. There is just one other matter I should mention. We are only dealing here with agricultural co-operative Societies. The Agricultural Co-operative Society is more or less correctly defined in sub-section (4) of Section 3. That is, it must be, first of all, a co-operative society under the Industrial and Provident Societies Act. Secondly, it must be mainly agricultural; and, thirdly, it is in want of funds. If the society can make its case, then the Minister for Agriculture may certify that it is an agricultural co-operative society under this Act. Once certified that it is so, then that society may go out and look for debentures and make its arrangements. But having made its arrangements, then the transaction must be sanctioned by the Minister for Agriculture before that particular transaction becomes legal.

In reading through the sections that come afterwards, it might appear to Senators that we were taking rather drastic powers to control co-operative societies, but Senators must remember we are only taking powers to watch very closely agricultural co-operative societies; that is, societies that have come under this Act and have got a loan under this Act or are seeking a loan. Once they become agricultural co-operative societies and come under this Act, I have very definite powers controlling them with regard to their change of rules and so on. These are the two main points dealt with in this Bill and, as I said in commencing, I hope that the main co-operative Bill, which is very badly needed from other points of view, will be brought forward as soon as possible. There is a very great need of a general co-operative agricultural Bill. That Bill has been in preparation by the Department for the last five or six years and has now gone to the draughtsman, but it will take a long time to draft because on many points on which the draughtsman raises a difficulty we have, in turn, in my department to consult various interests affected by that Bill. I hope, however, to have it before the Oireachtas, perhaps, between Christmas and Easter.

I have had a good deal of experience in co-operative societies. A good many years ago the whole country was very enthusiastic about them and I, personally, started six or seven different societies in very poor districts in the West of Ireland. There were all sorts of prognostications to the effect that they would not do any good and so on. Nevertheless, we went on, and I am sorry to say that the prognostications were right in a great many cases. The people were enthusiastic at first and looked after the business in committees for a time, but gradually they began to think that it was getting on very well and they left matters entirely in the hands of secretaries. As long as those secretaries were first-rate in character and everything else, things went on pretty well; but secretaries change and sometimes people got into that position who did not deserve to be in it, and the result was that several of these societies became bankrupt on two or three different occasions. Each time it was put right again and worked for a while. I was a good deal disappointed that this should be the case, but it was not the fault of the people themselves.

The committees which the Minister has mentioned did undertake to pledge themselves for interest with the bank and they carried on in that way. At first we were told that nobody would pay us and that the money would be all lost. However, that did not happen on any single occasion. There was not one occasion in which there was a single pound left unpaid. We bought chemical manures in Dublin, transported them down and distributed them through the country, and in no case was there any person who bought those manures who did not pay the money for them within a few months after getting the manures. We started a bank in the same way to help it and had a small capital put into it. We warned the people that it was only meant to help poor people and that we did not expect rich people to come to the bank. The result of that explanation was very extraordinary. Nobody asked for any money. When we asked them why they did not ask for it, they said that they were able to buy themselves and that they had money of their own. We explained to them that if they were in poor circumstances there was no reason why they should not borrow this money. After a while we persuaded a number of people to borrow money, and very reluctant they were. I am speaking now of the far West of Ireland—the very poorest districts—and they are the most honest people in the world, because every single one of them paid up the money due by them.

The real difficulty is to keep up the interest in this matter. People lose interest after a while and leave it to somebody else to carry on. They have their own work to do, and they do not bother about this. They think that the priest or somebody else will look after it, and so it falls into bad hands. I do not know, but I think that this Bill will have a good effect. At all events, I think that it is desirable that it should be tried so as to see what can be done, because, certainly, there were faults underlying the original ones. They failed, and there was always a reason for failure. Things may not have been so bad in the richer parts of the country. Many of them still exist, and are still carrying on. I do not see that there is any necessity for failure. What is really wanted is to have two or three people in the district who will give personal attention to the matter and see that things go on right. If you have not that it will be rather difficult to carry on. I, for one, would vote in favour of this Bill.

I think that this Bill is something like the curate's egg— parts of it are good, and there are other parts that require very considerable attention. There is no question that its intentions towards the bankers and the Agricultural Credit Corporation are excellent. I think that also its intentions are excellent as regards the people to whom the Minister has referred; that is, people who, being patriotic, put their names down for sums of money as guarantors for those societies. To put it shortly, the way the Bill really works for all of them is the grip it is going to give upon the uncalled capital of those various societies. To enable these things to be carried out, I should like the seanad to look carefully at the conditions of Section 4, because here a thing is being done which, if it were being done to other businesses than agricultural co-operative societies, would lead to a tremendous lot of trouble, and it is a thing for which, if the directors of companies chose to act on it, they would probably be put in jail; because it says here in Section 4 that no matter whether according to the articles of association the issue of debentures is or is not authorised, or is or is not forbidden by the rules of the society, these debentures can be issued now when this becomes an Act.

All of us—directors of companies at any rate—must work according to the rules and articles of association of the company or, as in this case, the society. This Bill goes on in this case and it says in effect: "We will scrap all orders and regulations and articles of association on which this society was originally founded." When this Bill is passed, the ruling body or committee, I suppose, of this co-operative society will have power to do a thing which according to the articles of association they had no power to do at all. The individual who seems to be hurt in this case is the ordinary shareholder. The ordinary shareholder comes into this thing. What has happened is something like this: He took, say, a £1 share and he paid upon that £1 share 2/6, leaving 17/6 due on it. Then the committee of management borrowed from the bank some money to carry on, because the 2/6 paid on the £1 share did not give them enough working capital. But the shareholder knew what his articles of association were, and he knew that the committee of management had no right to issue debentures. He knew there were probably various other things which they could not do in the way of pledging the credit of the association to put charges of which he was not aware upon his unpaid capital.

This Bill enables the society to issue debentures and to give an outside lender a right of action against the ordinary shareholders of the society— a right which did not exist previously. It is giving a right on which as an ordinary shareholder he will have no opportunity of expressing his opinion. If there were a section here to say that before the society could go to the Minister and ask for leave to issue debentures, they should summon a meeting of their shareholders and that if the thing is approved of by the shareholders, then this matter would be all right as they would have an opportunity of accepting the liability. I dare say the matter could be worked in that way. But to say that we are to take away the right from the shareholder of having any voice in this way in the management of the affairs of the society is quite a different thing. This was a right which he was guaranteed when the society was originally established: the issuing of debentures was a thing which the committee could not do. Making such a thing legal here is a thing we have no right to do. In some way or another, this Bill should be so altered that the shareholders would have a voice before any application is made to the Minister.

Take the case where a society is now in existence. Such a society could be wound up and the loss on the winding up of that society would mean a loss to the ordinary shareholder of, say, 10/- per share. In such a case it would be open to the members of the society to say: "We will suffer the loss of the 10/- per share and wind up the society." Under this Bill, without the ordinary shareholders being consulted at all, the managers of the society could issue these debentures, giving to the institution, from which they are borrowing the money, a right over the uncalled capital of the society whether the members like it or not. The result may be that the shareholder who is willing to lose 10/- on the winding up of the society or company may find himself in the position that when eventually the society or company is wound up he may have to pay 17/6 of his unpaid capital, and this without ever having been asked a question about it or consulted about it. That is a point that I would ask the House to consider in connection with this Bill. That, at all events, is my reading of this section and it is a correct reading, because I have asked several people to look into it and they say that this gives the right to the managers of the society to issue debentures which will be a charge on the ordinary shareholders without asking by your leave or with your leave.

I suppose the objects of the Bill are really quite good. As to the present lenders to the society—the creditors— we have to consider Section 7 of the Bill. That section talks of the Agricultural Credit Corporation, Limited, which it puts ahead of everybody else. It enables them to come in now where the society had no right to issue debentures. This is a very extraordinary phrase to put into an Act of Parliament "that when such loan was so made there was an arrangement or understanding between the said corporation and such society." In the name of goodness, who is going to give you any evidence as to what that arrangement or understanding was? It is a talk between some manager or representative of the society and some official of the Agricultural Credit Corporation, Limited. It will be a case of what one representative was told by another when the loan was being got by the society. Will people lend their money on such an agreement? Who could go into a court of law on such an understanding? We are legalising such an understanding. Really, putting such a thing into an Act of Parliament seems to me to be accepting a principle which we should not accept. I do not think you ought, by an Act of Parliament, sanction an agreement made between two individuals of whom we have no knowledge whatever.

Here we are sanctioning such an agreement and giving on the strength of that prescription a right to the Agricultural Credit Corporation, Limited to get debentures and to come in and rank before other creditors. Undoubtedly, when they get these debentures the other creditors of that society will be in a much worse position than they were before these debentures were issued. This is another point that I would like the Senators to consider— whether it is wise, in a Bill of this nature, to put in a sanction and make legal the mere word of mouth agreement between two officials. That is a thing that nobody should do. These are the two things which step over bounds. They are things which the Oireachtas ought not to do.

There is not much more to be said about the Bill. The rest of the measure seems to be all right. As a banker, I have not the slightest objection to the Bill. I do not think there can be any objection to it except on these two points. Bankers would be unonimous on that. I submit that the Seanad ought to look into the rights of the individual shareholders and see whether we can, by amendment, or otherwise, protect them against these things. Senators should consider whether they ought to sanction such clauses as these to which I have objected.

I think the criticism of Senator Jameson is well founded. On both points made I put forward two amendments rather with a view to eliciting from the Minister some information. These he has partly met. Touching the latter part of Senator Jameson's speech, as I understand from the discussion in the Dáil, the Agricultural Credit Corporation, Limited, would require those powers only in the case of three or four societies. It is only in these cases that they would be concerned with these special powers. It seems to me that the case the Minister wants to make could be met by putting into a schedule to the Bill these particular societies, so that inquiry could be made as to the nature of the agreement or understanding. In speaking on this Bill I prefer to call the shareholders of these societies members rather than shareholders. That is the practice in the case of the industrial societies. I agree with Senator Jameson that there should be some obligation in this Bill that the members of the society will have to concur in the issue of these debentures before the certificate of the Minister is sought. That is to say, before the committee of management has any power to make application to the Minister, the members of the society should first agree that the application should be made.

I am rather curious to know whether it is expected or intended that only a few societies shall apply for these certificates, or if it is intended that societies, as a general rule, shall apply for them. The Minister here to-day referred to the practice of societies getting a few substantial men in the locality to go bail and to become members of the committee. He wants to remedy that, but if the purpose of this section of the Bill is to induce societies, as a general rule, to seek certificates of this kind, then it seems to me that there should be some further amendment. If that is to be the expectation, then agricultural co-operative societies are going to be segregated into two classes—that group which has sought these certificates, and that group which has not sought these certificates. We all think that we understand what an agricultural co-operative society is, but in future we shall not understand what an agricultural co-operative society is unless we have some evidence that it is a certified society—that is to say, that it has obtained a certificate for the purposes of this Act.

It seems to me that if we are going to assume that this power will be sought generally by the societies for the purpose of remedying this evil which has grown up amongst societies, then we should consider some of the later sections of the Bill. Take Section 11, to which I have put forward an amendment. If societies in general are to become certified under this Bill, then the position is going to be that the Minister will have power to prevent a society from fulfilling its traditional functions of being a voluntary organisation capable of changing its rules. I understand now from the Minister's statement to-day that this term, "the Minister," is only intended as a temporary requirement until a registrar is appointed under the new Bill that is in contemplation. But at present we have a registrar of friendly societies, industrial and provident societies, etc. He is bound to approve of any alteration of rules if it is within the law. He is bound to approve of the alterations before they become operative. I cannot see the necessity for this departure—why in addition to the approval of the registrar there has to be specific approval by the Minister of a particular Department as to a change of rules in such a voluntary society.

In Section 8, there is another point to which I have put forward an amendment. The section provides that where a society has applied for and obtained sanction in regard to debentures, whenever any part of the called-up capital of the society is applied, in contravention of the section, every member of the committee shall be guilty of an offence and shall be liable to a fine of £25. I would ask the Minister to explain the position that might arise where you had a committee of management, consisting let us say of six members. Five of them might have voted for an undesirable or illegal proposal and one against it. That one is going to be made suffer equally with the five. That appears to me to be, on the face of it, unjust. It throws an obligation on him, or on any other larger minority, to retire immediately from his position as a committee man and possibly, even probably, leave the society in a position of ill-direction because such men would likely be most valuable members of the committee. I think it is unjust to make a minority of just men suffer for the sins of the majority of unjust men. I do not know what line the Minister might take in remedying that defect but he might take a leaf out of the recently enacted law relating to local government under which the names of members of local authorities, who vote for a particular proposal that is illegal, are taken. They are made to pay a penalty or to suffer an obligation. That might be a way of meeting this particular point, but it should certainly not be made an offence carrying a penalty where a person opposes the action of a committee but is overborne by the majority of the committee. He should not be made liable for the offences of the majority.

If the proposed Co-operative Bill is going to set up a special registrar whose functions will be very similar to the functions of the present registrar of friendly societies—industrial and provident societies—then I would have little objection to Section 11, but I would have a strong objection to giving this power to the Minister to override the action of a society in respect to alterations of rules. The precedent that such a change of the law in respect to this class of voluntary society would make, might be a very dangerous one. I certainly would like to have some strong assurance as to the effect of this section and the Government's proposals for the future.

I think that this is a Bill that requires to be examined very carefully. It raises a totally new principle with regard to the control by the Minister of what has hitherto been regarded as an independent and autonomous concern. Whether that concern is registered under the Industrial and Provident Societies Acts or under the ordinary Companies Joint Stock Acts makes no substantial difference to the principle where the ostensible object of the Bill is to give co-operative societies power to raise debentures without the embarrassment of such debentures becoming a bill of sale. Senator Comyn is not here and I am not clear as to what objection is involved in a bill of sale. I know it is more serious and that it does create alarm in the minds of creditors but surely it would be possible by a simple Act to remove that stigma and to give co-operative societies powers to raise money in the same way as any other company? That would appear to me to fulfil all that was really necessary in the present case. Instead of that we have all this elaboration, to which we are now getting used, of bureaucratic control over the lives, destinies and actions of every citizen. I would first of all, in regard to Section 2, ask the Minister why an individual is not eligible to become an authorised lender? There has been a good deal of misconception in the debate heretofore as to what is involved in the finances of these societies.

We have heard about the banks. We know that they are creditors, secured or unsecured. In the case of co-operative societies, they are generally very well secured—secured on joint and several guarantees and, very often, on one or two strong names. I mention that case because nobody appears to have referred to the position of the guarantors. The guarantors are really behind the banks, and the banks are happy because they can always pass the burden on to the guarantors. It is quite conceivable that, in a case of this kind, the bank would call in the guarantee and, if one or more strong men amongst the guarantors be put in their place, is it not only just that such guarantor or guarantors should be allowed to seek a debenture? The guarantor may possibly be the chief creditor involved and, yet, under this Bill, no individual can become an authorised lender. I consulted a certain authority who is expert in the management of these co-operative societies, and he sees no objection whatever to having an individual, same as a corporate body, an authorised lender. I shall introduce an amendment to secure that at the proper time.

Next comes a very important point raised by Senator Jameson—the power of the Minister to impose, without the consent of the shareholders, debentures on the society. That is a very drastic and, conceivably, a very unjust act. Incidentally, since I discussed this matter with Senator Jameson, the same authority to whom I have referred told me that that is not the case. I should like the Minister to pay particular attention to this. The authority with whom I recently had a conversation says that the shareholders have to agree in every case to the creation of a debenture. Perhaps the Minister will enlighten us on that point because, if the Minister has power under the Bill to create a debenture, I hope the Seanad will not pass the Bill. Look at the position when a debenture is registered as a bill of sale, or merely registered as a debenture. Companies are loth to create debentures, because it puts creditors on the alert. If the Minister can create a debenture, when that debenture is registered the ordinary trade creditors and the guarantors will become aware of it and, if they are alive to their interest, they will proceed to writ the society and pull it down. In that way, the Minister will have created a position, without the authority of the shareholders, which may have very serious consequences for the society. This particular power has been introduced for the first time, so far as I know, into an Act of Parliament, and it should be very closely examined by this House.

A further question arises as to the power of the Minister to withhold authority if the shareholders desire to create a debenture. Why should they not be allowed to raise a debenture if debentures are permissible under the Act? Why should the Minister have authority to refuse shareholders the right to create debentures if debentures are permissible under the Act without the attachment thereto of the conditions of a bill of sale? These societies have always been autonomous bodies. What is the justification for coming down on one class only of societies under the Industrial and Provident Societies Act and applying to that class this very drastic form of legislation? Senator Jameson referred to another point, though he did not mention guarantors in connection with it. The guarantors or shareholders may say that they are masters and owners of the society. Do not let us forget that, however important the public interest may be, ownership still remains in the legal body—the people who promoted the society and put up the shares. They may say: "We can go into liquidation now and get out with 10/- in the £1. If debentures are created without our authority, further commitments are involved, prior liens are created and the assets of the society pass out of our hands into the hands of another authority which holds the debentures." That seems to be most unjust and it can only be remedied by making the owners the final authority in a matter of this kind. The Minister may say that by creating debentures and by lending the society more money, the society can be put on its feet and the loans of the past recovered. That is only a matter of opinion. Guarantors or shareholders may say: "We do not agree with you. We think that you are increasing the obligations of the society and depriving us of our right to put the society into liquidation and get out as best we can." That attitude on the part of the Minister would seem to be very wrong and very unjust, and I hope this matter will be dealt with on the Committee Stage of this Bill.

I should like the Minister to make quite clear to us what power he is taking under the Bill. Is he taking greater power than the Registrar of Industrial and Provident Societies already possesses? I am not quite clear as to what powers the Registrar does possess at present. He has power to scrutinise and refuse or approve of the rules of the society, but under what conditions I do not know. If the society wants to raise a debenture in the form at present permissible, can the Registrar say "No"? If a society wants to increase its borrowing powers, can the Registrar say "No"? That is a matter on which I should like the Minister to inform the House. Senator Jameson dealt with the very important point as to the placing of the Agricultural Credit Corporation in a position of a preferred creditor—an act that may, as I have already said, make other creditors anxious and force the society into liquidation. I think I have said enough to show that this Bill raises new principles which should be carefully examined by this House. Time will be required to frame amendments.

I happen to be a member of the committee of an agricultural co-operative society. I am not a very active member, but I feel a great responsibility in this matter. I should like to express my appreciation of the criticism of the Bill which we have heard, especially from Senator Jameson. He has done a very great service to the ordinary shareholder, who does not bother about the management of these co-operative societies. A few people on the committee do everything; the shareholders just pay their money when they are asked. The society with which I am connected was several times on the brink of bankruptcy, and members of the committee, including myself, went around amongst the people and canvassed for membership and shares. We are under a great responsibility to these people. I am very much alarmed by what I have heard, and I hope that every opportunity will be given to those people to understand the position in which they are placed. As a rule, the managers of these societies manage everything, and I think that the Minister was more in touch with these managers than with the committees when he was framing this Bill. That is my impression. A few people are guarantors. They are generally the better off members of a committee. They are in a very peculiar position with regard to this Bill. I wish to thank the three Senators who have explained the position so clearly. I hope that every care will be taken in connection with this matter. The situation that will be created under this Bill is a most extraordinary one. I must confess that I did not understand it fully until I heard the criticisms made by the three Senators I have already spoken of. As a result of their criticisms I feel very alarmed as regards the position of the ordinary shareholders of these societies. I feel a certain amount of responsibility in the case of the people who were canvassed to put their money into the society which I belong to for the position they are in. I hope that the matter will be put right before the Bill is allowed to become law.

I feel this is a very useful and necessary measure. There is one matter to which I would like to call the attention of the House. It is contained in sub-section (1), paragraph (b) of Section 7, which gives power to the Minister to charge uncalled capital. The section provides:—

"(1) Whenever the Minister is satisfied, on the application of the Agricultural Credit Corporation Limited,—

(a) that money is owing to the said Corporation by a society registered under the Industrial and Provident Societies Act, 1893, in respect of a loan made by the said Corporation to such society before the passing of this Act, and

(b) that when such loan was so made there was an arrangement or understanding between the said Corporation and such society that the amount of such loan and the interest thereon would be secured....."

The point I wish to call attention to is this. There are two words in paragraph (b) which are practically unknown to the law.

Hear, hear.

The words are "arrangement or understanding". If it is an arrangement it must be an agreement: that is an agreement in law. That is the construction that I consider would be put upon it: that it was an agreement known to the law.

It is the Minister who construes it.

The other is the word "understanding." Now, what is an "understanding"? Is an understanding an agreement, and is it an enforceable agreement? The reason why I think that the word "understanding" is a very unfortunate word is this: that I think in my earliest case at the Bar I happened to use the word "understanding." I asked: "Was there an understanding between ye that the price of the horse was £15?" The judge said to me: "What do you mean by an understanding? Was there an agreement or not?" I think that the word "understanding" is unfortunate in this section, and that it might really interfere with the smooth working of the measure. I am sure that the Minister has probably considered it, but I think it would be a very dangerous thing if he was entitled or allowed to act on an understanding which the court would not enforce.

Hear, hear.

I desire to give my support to that part of the Bill which provides for the distribution of the debentures of a society rather than having the responsibility put on a few men. I have known of cases where such men have been victimised on many occasions. There are a few points on which I would like to have information from the Minister. Will the Minister say if a society can create debentures to pay off an old outstanding debt, and whether this measure can be applied retrospectively in that connection? Can it be applied retrospectively so that the lenders will be compelled to accept the newly created debentures? Would a society for the curing of bacon say, be included in the category of agricultural societies?

In regard to the point raised by the last Senator, under the definition section a bacon factory would come under this Bill. As regards the other point he raised, these debentures could be issued to pay off an old debt, but there is nothing in the Bill to say that the lender of the old debt must accept the debentures. There would have to be agreement between the society and the lender that the banker would accept the debentures in respect of the old debt. That is a matter for agreement between the parties. With regard to the point raised by Senator Johnson, I do not know if the Senator is satisfied with the present wording of the section. It appears to me that, if the offending committee is brought before the court, the judge would in all probability absolve all those who tried to keep within the law from any fine, and would, probably, inflict a fine on those who formed the majority of the committee and voted for doing the wrong thing. If Senator Johnson is dissatisfied with that it may be possible to do something on another stage of the Bill to make the point more clear. I think that Senator Jameson and Senator Sir John Keane are under a misapprehension with regard to Section 4. It means that it is the society that must agree and not the committee. The society can only agree at a general meeting to which all the members are summoned. The shareholders, summoned to a general meeting for the purpose, must agree to the debentures being issued. In fact, that must be done at an extraordinary general meeting. All the members are notified of that meeting and the purpose for which it has been called.

A member of a society who gets a notice, asking him to attend an extraordinary general meeting, is told what is the purpose of the meeting, to issue debentures. He knows before going there that there is a question about issuing debentures, and every member has an equal voice, no matter what the number of shares, as to whether debentures shall be issued or not. On the other hand, societies are absolved from the formality of changing rules specially for the issuing of debentures. When a general meeting approves of the issuing of debentures, societies are thereby authorised to do so without changing the rules for that purpose. If that wording was not in this Bill perhaps four general meetings would be required. First of all one would be called with regard to changing the rules. Senator Comyn will correct me if I am wrong, but a second meeting would have to be called to approve of that, after which another meeting would have to be called to issue the debentures. Three meetings would have to be called to allow the society to get through the business. That would take some time, as there would be an interval of seven days or, perhaps, fourteen days between the meetings. The object here is to give societies an opportunity of getting through the business quickly, by calling an extraordinary general meeting and doing the work at one meeting. Every member of a society has a voice, and no debentures can be issued unless the majority of the members agree to do so.

Here we are critics of the Bill, but we do not see where this is necessary. Will the conditions that the society must comply with and the rights of the shareholders be set out in the Bill?

I have no doubt that Senators are aware of the various stages that have to be gone through in getting Bills prepared. When I send the heads to the draftsman, and tell him that I want certain things done, when the Bill comes back from his office it may appear different to what I wanted. I questioned the draftsman on this, and he explained that every member must have a voice. If I asked him to do more, he would probably ask me what more I wanted him to do. Perhaps Senator Jameson would explain what other safeguards we can put in.

I can put them in the form of an amendment and we can discuss it on the Committee Stage.

I have been asked what Section 11 really means. Senator Jameson was anxious to know what power we have. We can only interfere with societies that come under this Bill. They are to be called agricultural co-operative societies. There is no such thing as an agricultural co-operative society at present, but once a society comes under the Bill, and is looking for debentures, it becomes an agricultural co-operative society. It may not be any more agricultural than other societies, but that is the legal name a society will have when it comes under the Bill. It is only these societies that the Minister for Agriculture can interfere with as regards the changing of rules. In the main Co-operative Bill there will be three authorities. There will be the Co-operative Council, which will be, more or less, formed much the same as the Agricultural Organisation Society. Senators will recognise it better if I say that it is the one at Plunkett House. The committee which will run the whole co-operative movement in the main Bill will be known as the Agricultural Co-operative Committee, or some such name, and will have certain functions over co-operative societies. I am not sure whether that committee or the registrar will have this function of saying whether a society shall be allowed to issue debentures or not. One of them will have that power. The point has not really been decided yet. It will come up for discussion on the main Bill which will come before the Dáil and Seanad. A registrar will be appointed to look after agricultural co-operative societies. He will have certain functions, principally with regard to auditing and inquiring into the position of societies where there are defalcations, and to look into their affairs generally. To a limited extent the Minister also comes into the main Co-operative Bill. There are certain appeals to the Minister on a few points from the governing body elected by the societies, or from the registrar. Either the registrar or the governing body will have this function that the Minister has, the sanctioning of the issue of debentures by co-operative societies when that Bill comes along.

There is an objection to a bill of sale even from the legal point of view. A society would be much more restricted. They cannot sell anything, practically, when there is a bill of sale there, without going through the formality of registering their sales. There is much more freedom with debentures. Apart from the legal restrictions there is no doubt that people look upon a bill of sale as the last step. If there is a bill of sale, a society's credit is ruined. Debentures are not looked on the same way. We know that some of the biggest and the most prosperous companies have debentures, and that that does not prevent them carrying on. I was asked why any society should be forbidden to issue debentures. It was urged that if we must have power over the issuing of debentures, why not leave it to the societies to look for debentures, if they feel they needed them, and why should the Minister come into it? My Department has been in consultation with the different co-operative interests, mainly the society at Plunkett House. Other people are also interested in the co-operative movement, such as the I.A.W.S., and big bodies of that kind. They are all agreed that while we should take their advice in co-operative matters, some body should have the giving of sanction for the issue of debentures by societies. We have not yet decided in the main Bill what that body should be. I was asked if the Minister was taking powers which the registrar has not got. The answer is yes. If the Bill was to go through, giving societies powers to issue debentures without any mention of sanction from the Minister, then the registrar would have no control except to see that they complied with the law. If everything was done legally the registrar would have no power to interfere. The Minister is taking power that the registrar has not got, and would not have unless his name was specially mentioned in the Bill. I mentioned, when introducing the Bill, that the Registrar of Industrial and Provident Societies was asked to take the power, but he refused to do so. He said he did not think it was a matter for him, and that as we were taking over these powers in the near future, someone in the Department should take the power which could be passed on to the registrar, or to whoever may be appointed when the main Bill comes along.

Can the Minister say why the right to issue debentures is being taken away from the societies?

The point I want to make is that in the drafting of the main Co-operative Bill we have been in consultation with various advisers, if you like to call them that, of the co-operative movement. We have consulted many times with those who have been in charge of the co-operative movement for the last 25 years and they have been very insistent that somebody should have the right to give sanction or to refuse sanction to these societies for the issuing of these debentures. They are anxious that somebody should do it. As I say, when I was bringing in this temporary Bill I asked the Registrar of Industrial and Provident Societies to take on this duty and he refused. He said that we were, at any rate, taking over these societies in the near future and that we should set up the machinery now. I did not feel in a position to set up the machinery immediately for a controlling body and the most obvious way was to let the Minister do it in the meantime. I can assure Senators, however, that it is not a position which my Department would advise me to take or which I would be willing to take myself, except as a temporary expedient until the main Bill is brought in.

Would it not be better to leave it out for the present until the final Bill is brought in, because you do not want it and the registrar does not want it? You are taking away from these societies the right of issuing debentures which might be very useful. If this is only a temporary Bill, why not leave it as it is for the present, giving them the power to issue debentures if they find it necessary, and then, when you get the proper officials appointed under your final Bill, let that go in? This is only a temporary measure and it seems a pity in the meantime to take away the right from the societies.

What I want to make clear is that the Committee in Plunkett House, who have been running the co-operative movement for 25 years and who know the pitfalls and difficulties of co-operation and, perhaps, the weaknesses of the societies at times, have asked me to put somebody in charge of this. As a matter of fact, they are keen that the Minister for Agriculture should do it because they look upon it as temporary. If, for instance, the Minister for Finance or anybody else was put in they might think that was going to be permanent, and we want to keep it for this controlling committee when it is set up. That is why they are anxious that the Minister for Agriculture should do it. I want to make it clear that it was more the wish of the co-operative movement itself than of the Department of Agriculture that I should take this.

Senator Sir John Keane asked why should not an individual get the right to lend money by means of debenture. That would be against the whole policy of the Department of Agriculture for a number of years past. As Senators are aware, a considerable amount of money was voted by the State to buy out the proprietary creameries and hand them over to co-operative societies. If we were to allow an individual to take over the affairs of a creamery and so get that creamery into his own hands virtually, we would be going back to the old proprietary system once more and all the money which the State has spent would be gone for nothing.

There is nothing to prevent a guarantor now stepping into the shoes of a bank and controlling the stock of a society. How do you propose to deal with that? The bank calls in a debt and a guarantor takes over the debt and he is in control.

It does not appear to me to be exactly the same. I am afraid that if we were to sanction an individual getting debentures we would be, as it were, giving our blessing to that movement. We have gone as far as possible to prevent what Senator Sir John Keane has referred to. On a few occasions when a creditor came in and took over a creamery and was willing to work it, we refused to give a licence to him to do so. We told him he must get rid of it either to the co-operative society or to some other society. We have always refused to give a licence to any proprietor to run any creamery, whether he comes in as a creditor or by any other means.

Question put and agreed to.
Committee Stage to be taken on Wednesday, August 29th.