Seanad Éireann debate -
Wednesday, 12 May 1971

Vol. 70 No. 3

Industrial Credit (Amendment) Bill, 1970: Second Stage.

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

Minister for Finance (Mr. Colley)

The main purpose of the Bill is to remove certain restraints on the operations of the Industrial Credit Company which experience over the years has shown to be no longer necessary. The opportunity is also being availed of to increase the limits on the company's authorised share capital and borrowing powers and to introduce certain minor amendments to the existing legislation to give the company more flexibility in relation to the appointment of a managing director and general manager and to facilitate it in relation to the submission of its annual accounts to the Minister for Finance. A provision in relation to the position of directors and staff of the company who may become Members of either House of the Oireachtas is also included in the Bill.

The ICC has been in operation since 1933 when it was set up to provide financial facilities for Irish industry. During the 37 years since its establishment, it has provided capital for industry by way of loans, share investment, machinery finance and guarantees to the extent of more than £52 million and in addition it has underwritten capital flotations in excess of £21 million. It has now established a position as the major institution providing long-term loan capital for Irish-owned enterprises.

Under existing legislation—the Industrial Credit Act, 1933—the ICC may issue loans to companies operating in this country, whether or not they are registered here, but it may not take up shares in foreign-registered companies even to finance their Irish operations. The restriction in relation to share investment in foreign-registered companies was originally based on the principle that, as share capital cannot be secured by a charge on the assets, there was no way of ensuring that finance injected into a company in the form of share capital would be used for a particular purpose.

This differentiation is not considered to be justified in modern conditions and it sets an unnecessary limitation on the scope of the ICC's facilities. Section 3 of the Bill has the effect of removing this limitation and gives the ICC power to invest in the share capital of any company which operates a business in this country, whether or not it is registered within the State. The company will ensure that any such share investment is used for the benefit of projects within the State.

Section 3 of the Bill also provides that the ICC may issue unsecured loans. Under present legislation the ICC may not lend money without security and this restriction is considered by the company to be anomalous. At times there are practical difficulties in obtaining adequate security for a loan and potentially desirable clients may be deterred from approaching the ICC for facilities because of their inability or unwillingness to give security for a loan. Competitor organisations are free to issue loans without security and the ICC feel that the existing legislation places them at a disadvantage. In the event of the winding up of a business concern loan capital even though unsecured would rank before share capital in the distribution of the assets. I might add that over 80 per cent of the ICC's investment in industry is in the form of loans including hire-purchase and leasing.

With the advent of free trade it is already apparent that the need for Irish businesses to have external associations for the marketing of their goods abroad is becoming increasingly important. While the ICC may at present assist Irish-based companies in the acquisition, establishment or development of overseas subsidiary or associated companies, it can only do so by lending to or investing in the Irish parent company. It may not assist the overseas subsidiary or associated company direct. This is considered to be a shortcoming which should be removed so that, if a particular situation requires, the ICC may provide finance directly to a subsidiary or associated company rather than to the parent company. Section 3 of the Bill gives the extra power to the company in this regard subject to the overriding safeguard that such investment is likely to be of benefit to a trade or industry within the State. Before a company can qualify for subsidiary or associated status for the purposes of this section, more than one-fifth—in nominal value—of its voting shares must be held by the parent company.

In removing these various restrictions it has been considered preferable to restate in full the principal objects of the company rather than merely to amend the existing provisions of the 1933 Act. Section 3 has been drafted with this in mind.

The present authorised share capital of the ICC is £10 million while the limit on the company's borrowing powers is £15 million. The issued share capital is now approximately £8.8 million, virtually all of which is held by the Minister for Finance, while total borrowing by the company is approximately £12 million. The company's activities have expanded rapidly over the past few years; for instance, the provision made in the Public Capital Programme for 1971-72 for assistance to industry by the ICC is £9.3 million —including £1.8 million for loans by its subsidiary, Shipping Finance Corporation—compared with an outturn of £6.3 million—including £2.0 million for Shipping Finance Corporation—in 1970-71. It is expected that the present expansionary trend will continue and, accordingly, it is desirable to ensure that the statutory limits of share investment and borrowings will be adequate to meet the company's needs over the next four or five years. It is proposed, therefore, to raise the share capital limit to £12 million—section 2 —and the borrowing limit to £30 million—section 3. It is hoped that an increasing share of the company's new capital requirements will be forthcoming from non-Exchequer sources including receipts from its recently introduced deposits scheme.

Under existing legislation the ICC must have a managing director. This arrangement is considered to be too inflexible as it requires that the chief executive must always be chosen from among the small number of board members. In fact since May, 1969, when the latest serving managing director retired, the post of chief executive has been filled by a general manager in anticipation of amending legislation. Section 4 of the Bill covers the proposed change in the arrangements.

I have mentioned earlier that provision is being made in section 5 for raising the statutory limit on borrowing by the company to £30 million. The same section also provides that the company may borrow in currencies other than Irish currency. The existing statutory provisions relating to borrowing by the company have been interpreted as empowering the company to borrow in Irish currency only. Suitable opportunities for foreign borrowing may arise from time to time and in fact arrangements for a loan from the World Bank have been substantially completed. It is considered that there should be no restriction on foreign borrowing where it is in the national interest. Since the 1933 legislation no borrowing could be undertaken by the company except with the consent of the Minister for Finance and it is not the intention to alter this arrangement. For the sake of simplicity section 5 sets out in full the new proposed borrowing powers which will replace the earlier provisions.

At present the ICC is required to submit its annual accounts, duly audited, to the Minister for Finance within 90 days after the end of each accounting year. As the volume of its business grows the company is finding it increasingly difficult to meet this deadline and has asked for some relief. Provision is being made in section 6 that in any year, on application by the company, the Minister for Finance may extend the 90-day period to whatever extent he considers reasonable.

Existing legislation empowers the Minister for Finance to guarantee the company's borrowings. As a consequence of the extended borrowing powers being provided for in section 5 it is necessary to extend similarly the Minister's existing powers to give guarantees and this is the main purpose of section 7. The section also provides that in addition to guaranteeing principal and interest of a loan the Minister may guarantee any incidental expenses payable by the ICC in relation to such a loan. The World Bank has specified that a condition of the loan, to which I have already referred, shall be that, in addition to guaranteeing the principal and interest, the Minister for Finance must also guarantee the commitment fee payable in respect of the loan and also any premiums for which the ICC may be liable in the event of its repaying all or part of the loan prior to the scheduled dates for repayment.

The Bill also makes certain provisions—section 8—as regards membership of the Houses of the Oireachtas by directors, officers and servants of the company. These provisions which for some time past have been included in legislation relating to State-sponsored bodies are not in the ICC legislation and it is considered that the opportunity offered by the present Bill should be taken to extend them to the ICC. No provision is being made, however, in regard to superannuation arrangements for officers and servants seconded to the Oireachtas because this is being dealt with in a general Bill concerning the directors and staff of State-sponsored bodies who become Members of either House of the Oireachtas which is at present being prepared. The intention of the general Bill will be to introduce uniform arrangements for all State-sponsored bodies including those which already have their own provisions governing this matter in their individual legislation. So far as superannuation provisions are concerned the intention will be to ensure that the period of Oireachtas service of a staff member may not be reckoned both for an Oireachtas pension and for a staff pension. If, however, he does not qualify for an Oireachtas pension he will on payment of the appropriate pension contributions have the period of his Oireachtas service, during which he was seconded from his employment, reckoned for pension purposes under his occupational scheme.

Since it was set up in 1933 the ICC has operated on commercial lines with due regard to its role as an instrument of national development. Its facilities have been availed of over the entire range of industry and in all parts of the country by large, medium and small undertakings. It provides a full range of industrial financing facilities to promote both the establishment of new industries and the development of existing ones. Its recent entry into the field of finance for the distributive sector, the establishment of a separate company — Mergers Ltd. — to initiate and facilitate mergers and the introduction of a scheme for the provision of finance for under-capitalised concerns are all indicative of the company's flexibility in servicing the varying requirements of the business community. The new mergers subsidiary specialises in the field of mergers and takeovers, undertaking share evaluations, advising on terms and assisting in negotiations for mergers.

The capital requirements of both existing and new industries have changed materially in recent times both as to their nature and extent, and the current activities of the ICC must, therefore, be seen against a much more sophisticated and developed situation than that which prevailed up to a few years ago when demands for capital were relatively small and the sources from which these demands might be met were very few. It is essential that the company should be in a position to provide capital on very flexible terms towards the further development of Irish industry. For this reason it is considered that in the present industrial environment the existing restrictions on share capital investment and unsecured loans should be removed. It is equally important that adequate funds be available for the company's expanding activities.

I might say that Senators will have noticed that a motion was moved by the Leader of the House to dispense with the rule requiring three days' notice of this Bill. The reason for this is that the World Bank Loan, to which I have referred, has been sanctioned subject to the enactment of certain provisions in this Bill. Consequently, I should be grateful to the House if it were possible to take all Stages of this Bill today.

Mr. Russell

We on this side of the House welcome the Bill as a further indication of the progress made by the Industrial Credit Company since its establishment in 1933 on the initiative of the man to whom generous tributes were paid today by the Leader of the House and by Senator Michael O'Higgins, the late Seán Lemass. It is a pity that a Bill of this type was not initiated in the Seanad because most of us would agree that this is the type of work for which the Seanad is perhaps best suited. I regret that the Minister now finds it necessary to ask for the co-operation of the Seanad in getting all Stages of the Bill through today, but I should like to assure him that we shall certainly cooperate with him in that regard. However, it does prevent any question of amendments to the Bill and for that reason our discussions and observations must be largely of an academic nature.

I should like to avail of the opportunity of paying a generous tribute to the work of the Industrial Credit Company since its establishment 37 years ago and, in particular, to its chairman, Dr. Beddy, who for many years has been associated with industrial development, the financing of new industries and the extension of existing industries. He has shown himself to be a man of outstanding ability and a man who understands the national needs in regard to economic growth and expansion, and how important it is for the provision of increased industrial employment. As one who has known him for some years, and who has had some experience in dealing with him in matters of industrial development, I am very happy to be in a position to pay a well-deserved tribute to Dr. Beddy.

Since the ICC was established it has adopted a policy of taking calculated risks while at the same time exercising reasonable prudence in advancing the taxpayers' funds to commercial and industrial concerns. In the vast majority of cases the investments have paid off, notwithstanding the fact that at all times they have not been free of political pressures. Over the years the ICC have built up a team of expert and experienced personnel who are fully competent to engage in negotiations with industrial and financial experts over a wide field. This is most important in this age of mergers and take-overs, which cross national boundaries and involve huge sums of capital, and to which the Minister has referred in his speech. While naturally the primary consideration of the Industrial Credit Company has been the prudent use of the taxpayers' funds in companies offering opportunities of growth and expansion, the board of the company has at all times been mindful of the human element where employment has been in danger due to shortage of long-term capital, involving an element of risk. In this way the Industrial Credit Company has filled a void which existed between the commercial banks, on the one hand, who understandably were principally concerned with the safety of their depositors' capital, and on the other hand institutions and individuals whose main concern was the higher reward which they demanded for capital put at risk.

As the Minister has indicated, the conditions which operated at the establishment of the Industrial Credit Company in 1933 and for several years afterwards have vastly changed. The company was established in an era of protection which has now passed and we are engaged in an era of fierce international competition in which no rules or regulations in regard to the protection of national boundaries now obtain.

I should like to make some brief comments on the Bill as presented to us and, while I realise that they cannot now be incorporated in amendments to the Bill, I hope that at least they will be worthy of the Minister's consideration, when he is bringing further legislation before the House in regard to the expansion of the Industrial Credit Company, which I hope will be reasonably soon. I am sorry that the Minister did not see fit to increase the share capital to at least £15 million, in view of the continuing depreciation in the value of money and the penal rate of company taxation. It is obvious that companies will, more and more, be unable to fund expansion from their own resources, and consequently will have to resort to the Industrial Credit Company for financial help.

I am glad to see that under the provisions of this Bill the Industrial Credit Company will be in a position to advance financial help to companies with subsidiaries outside this country. I hope that this means in effect that Irish companies with enterprising boards of directors will be assured of the necessary financial help if they should decide to expand overseas in any foreign country, either by way of establishing new industries, extending existing industries, or by taking over companies outside this country. If this country is going to expand its industrial arm under free trade conditions, it is vitally necessary that an offensive attitude should be developed among more of our businessmen. In other words, instead of thinking in terms only of defending our home market, which in some cases will be indefensible anyway, we should be thinking of going into enemy territory, so to speak, and establishing new or branch industries in sectors which offer reasonable chances of expansion and profitability.

In reading through the Industrial Credit Company's report for last year, I notice that a branch of the company was established in Cork. I should like to suggest to the Minister, and perhaps through him to the board of the Industrial Credit Company, that it would be a wise provision to extend this establishment of branches to other areas outside Dublin and Cork. Naturally, I have in mind the Limerick-Shannon area but there are other areas in the country designated or indicated as obvious growth centres where a branch of the Industrial Credit Company could be established with considerable advantage to the area.

I am glad to see that the Bill provides for the appointment of a general manager for the reasons outlined by the Minister in his introductory speech. In securing personnel for the Industrial Credit Company the board should not be inhibited in any way. If necessary they should go outside the country to get the best possible man for the important position of general manager. It would be very shortsighted policy if they were restricted in any way by appointing one of their own number to the position of managing director. This is a very useful provision and certainly opens up a much wider field for the selection and appointment of expert staff to the key position of general manager.

When I first read through the Bill I thought that the Minister was going to take his courage in his hands and to bring in a Bill which, in respect of one State-sponsored company, would cease to include the provision that, if a director or a member of the staff or an officer of the company is nominated to either House of the Oireachtas, he must cease to be a member of the company. However, I see that the Minister is now making a provision to include in this Bill that unwarranted provision to which a lot of people have objected down the years. I cannot see any reason why if a man is nominated—it does not mean elected—to a House of the Oireachtas he automatically ceases to be a member of the board or a member of the staff of the Industrial Credit Company. I think this is a retrograde step. This practice has crept into all the State and semi-State companies and now it is obviously going to be included in any new company that is set up by the State. I think it is an indefensible provision. It is undemocratic. I am sorry that the Minister found it necessary to follow what I think is a very wrong precedent in introducing it or bringing it into the provisions of this Bill.

The Bill provides a very substantial increase in the borrowing powers of the company to £30 million. This is a very wise and very necessary provision. It also provides that the company can borrow outside the country, which is another very necessary provision. I agree with the Minister when he says that in this day and age a company that wants to succeed must get capital. It must not be inhibited from borrowing outside the country. In saying this I think I have the Minister's agreement in the viewpoint that borrowing outside the country apart from the inflationary tendencies is, or rather should be, limited, and that the raising of funds inside the country is a far more desirable way of not alone expanding industries individually but also of providing capital for the expansion of industry generally. I hope that the board, although they have got this permission to do so now, will be reasonably prudent in seeking capital for their activities outside the country.

I do not think there are any other points of a general nature which I would like to make at this stage. I should like to say one or two things when we come to the Committee Stage of the Bill. I welcome the Bill. I think all the Senators welcome it as a further indication of the progress of this company. I hope that the Minister will be coming back to us shortly to remedy some of the defects that I see in the Bill. They are of a minor nature but I hope that the company will be requiring an increase on the share capital limit of £12 million which is suggested in this Bill.

The company have indicated to the Minister that they might find it difficult under certain conditions to comply with the requirements of the present Act by submitting their accounts within 90 days after the end of the financial year, which happens to coincide with the calendar year. I looked at their last two or three accounts and I find that they have been extremely prompt in submitting them within two months of the end of the calendar year. I am just wondering now why this provision is required. I think they are asking for rather too much and I think that some provision should be made whereby a limit should still be written into the Bill to provide that the Minister may extend the period but not further than, say, six months. I am still rather at sea as to why the company have put in this request having regard to the fact that they do not appear to have used the full 90 days in submitting their accounts. That is all I wish to say at this stage.

Mr. Nash

I, too, welcome this Bill, I appreciate that at this stage, having regard to the fact that all Stages of the Bill had to be taken today, there is not very much point in suggesting what appear to me to be possible improvements that could have been made. First of all I noticed that where 20 per cent of the capital of a foreign subsidiary is held by an Irish company loans may be made. I would have liked to have seen that figure 25 per cent. Subject to correction, I believe the law in this country, and I think in very many countries, is that you can make certain alterations in a company only if you have more than a 75 per cent floating capital. That means that anybody who holds 25 per cent is reasonably secure. If he holds less than 25 per cent of the capital he is completely at the mercy of the foreign capitalists who have the money in the company.

I notice that the Bill gives power for borrowing abroad. Like Senator Russell, I welcome that authority, but I feel that borrowing abroad has a very grave inflationary effect on the economy of the country and that is one thing in particular at the present time which we must be on guard against. I would say that money could be got at home much more readily by the Industrial Credit Company if they would make their terms for loans more attractive than they are at the moment. I took the trouble, on behalf of clients who wished to lodge money on deposit either with the Agricultural Credit Corporation or with the Industrial Credit Company, of inquiring from both. At first glance it would appear that the terms of the Industrial Credit Company are attractive but there is a provision that unless one leaves one's money there for 12 months one does not get the full benefit. On the other hand, theoretically there is the same provision with the Agricultural Credit Corporation but they have found from experience that where clients approach solicitors—and very many people do lodge very substantial sums over the years through their solicitors—that though the money is on call within one month usually it is never withdrawn for a period of two, three or four years. It would leave a very considerable amount of money on their hands instead of borrowing abroad and, therefore, it would avoid this inflationary possibility. It would be an encouragement also to saving money on deposit with the Industrial Credit Company. I am sure they do not need any amendment of the Bill to do that. I find from my experience that some people would have sums varying from £5,000 to £20,000 which they are prepared to lodge on deposit either with the Industrial Credit Company or with the Agricultural Credit Corporation. I find that there is an inhibiting effect there and I would submit that it should be considered.

Unlike Senator Russell I welcome section 8 of the Bill which provides that the director of a company may not be a Member of the Oireachtas.

Mr. Russell

No. I did not say that. "Nominated" was the word.

Mr. Nash

Nominated. If he is not elected he can later be reappointed on the board if they think he is really worthwhile. It is most important that party politics and business be kept completely separated because not only must those in power act fairly, justly and honestly in dealing on their merits but they must appear to do so. Among other things it prevents unfair criticisms of the Government. If somebody is appointed to a board of directors, even though he is very highly qualified if he happens to be a party supporter he is immediately open to suspicion and to criticism. To avoid the possibility of such criticism I think that a provision to this effect dealing with all State companies is very useful. Those are the only suggestions I can make in reference to the Bill. I think it is a most useful piece of legislation and a most important and necessary one.

Dr. West

In joining with other Senators in welcoming this Bill I should like to ask the Minister for some information, as somebody who knows very little about the Industrial Credit Company, but anything I do know is to the credit of that company—and that is not an unpleasant pun! I should like to ask the Minister the size of the staff employed by the company and if he could give an estimate as to the wages bill that the company pays out and the managerial expenses. This is just to put it in perspective. I should also like to ask if it is proposed, seeing that the company's facilities are being expanded and their borrowing power increased, to increase the actual size of the company in terms of employment and, therefore, the wages bill.

Dr. Belton

The first question I was going to ask was answered by the Minister in his final remarks in his introductory speech, or at least he attempted to give an explanation. That is: why hurry this Bill through the Dáil in one day and through the Seanad the next day? He gave as the reason that both Houses must pass this in order to avail of the loan from the International Monetary Fund. I think that was his statement. If that is so, we must have applied for a loan from the International Monetary Fund at some stage or other, and why could this Bill not have been introduced then and dealt with in the usual fashion? This is a point that is not very clear to me. From what I know, this has been on the stocks since 1970.

I do not wish to criticise this Bill at any great length. It might be an aid to you, a Chathaoirleach, in reference to Ministers' speeches if the pages were numbered so that we could refer to what particular item we are speaking about. I think if the pages were numbered it might help Senators.

Mr. O'Higgins

Theoretically we do not get a copy.

An Cathaoirleach

Ministers speeches are recorded in the unrevised Official Reports.

Dr. Belton

I see, the Minister referred to shares invested in foreign registered companies. He said that the restriction on such investment was originally based on the principle that share capital cannot be secured by a charge on the assets. In other words a loan will enter in as a common and ordinary debt but if a company goes into compulsory liquidation a share will not enter as a common and ordinary debt. Its payment has to to await the payment of all common debts. That is correct. The Minister's point here is valid. He ends up that particular paragraph on the second page:

The company will ensure that any such share investment is used for the benefit of projects within the State.

If the Minister can do that, I am pleased to hear it. Can the Minister explain how or why he can ensure that will be so?

Mr. Nash

May I help the Senator? I think he has got his pages out of order.

An Leas-Chathaoirleach

All the Leas-Chathaoirleach can say is that continual references to a duplicated version of what the Minister said is most confusing and, in my opinion, is to be deprecated.

Dr. Belton

In any case it is stated by the Minister:

The company will ensure that any such share investment is to be used for the benefit of projects within the State.

Mr. O'Higgins

That conforms with the note of the Minister's speech.

Mr. Russell

It is in the Bill also in practically the same wording.

Dr. Belton

Yes. I did not go through to the Bill. I had no opportunity, of course, as the Minister will appreciate. It is very difficult for the Opposition at this stage to be quite accurate, but I should like to know from the Minister in his reply how he can ensure that what he states will be done. I am in agreement with what is in this Bill, but I have doubts about the implementation of certain things stated in this Bill. The sureties given are not as adequate as they appear.

Lending without security raises another grave doubt in my mind but again I will go along with the Bill and say that we have got to do it. However, it is something none of us likes to do.

The question of foreign borrowing was dealt with by Senator Russell and Senator Nash, with both of whom I agree on this particular point. Not alone is foreign borrowing inflationary and internal borrowing deflationary, but internal borrowing also allows the profits of the loans raised to be spent within the country, whereas with foreign borrowing the profits on those loans are spent outside the country. I cannot make a general statement that I would never accept the idea of foreign borrowing, but I would go 90 per cent of the way in saying we should not have foreign borrowing. There may be occasions where it would be necessary. However, in general I dislike the idea completely.

I will just advert to the point Senator Russell raised about membership of the Oireachtas and with which Senator Nash did not agree. I oppose this provision. I cannot remember exactly what Bill it was, but this provision was also contained in another Bill. I opposed it but it went through. The Minister said he wants this to conform with other State bodies. But if he means that, is there not an omission in section 8 which says: "where a director of the Company is nominated he shall thereupon cease to be a director of the Company." Should there not be an addition here that, where a person is nominated to one of the Houses of the Oireachtas, he should not therefore be appointed to the Company? Is that not an omission?

Mr. Colley

Section 8 (3) covers that.

Dr. Belton

It does not include what I have said. Subsection (3) does not include that a person nominated for either House of the Oireachtas shall not become a member of the body. That is not included. Is that so?

Mr. Colley

That is correct.

Dr. Belton

That is all I have got to say. Generally, I support it. Those are my only criticisms.

Mr. O'Higgins

My remarks will be very few. I think the point which Senator Belton made on section 3 is a valid one. It is one on which I should like to hear more from the Minister, that is, the question of the Industrial Credit Company being able to ensure that share investment of the type visualised is used for the benefit of projects within the State. That is not what is stated in the Bill. It is what the Minister argued when he was introducing the Bill and it may very well be that the Minister or the company have some scheme worked out whereby they can ensure that the share investment will be used for the benefit of projects within the State.

Section 3 (1) (c) (ii) refers to where it "is likely to be of benefit to a trade or industry in the State". Again, in subparagraph (iv) of that section it says "that every such loan or advance is likely to be of benefit to a trade or industry in the State". That is as far as the Bill goes. I should like to know if the Minister has something further in mind when he puts that—in the Bill the word "likely" is used—virtually on the basis of a guarantee that the company are going to ensure a particular thing.

The second point I want to make is in connection with unsecured loans. I am a bit doubtful about this. I can see the advantages from the point of view of the Industrial Credit Company that their hands should be freed in the matter and that they should be put on a more competitive basis in being permitted by this legislation to give loans which may be unsecured. But it is necessary to remember in this connection that here we are dealing with money provided by the State, that is, money provided by the taxpayer. The position of the competitors of the ICC is that they are using their own money or their shareholders' money. They are not using the State's money or the people's money. I think it is only right to express some degree of doubt that we should by legislation in the Oireachtas give carte blanche to the Industrial Credit Company or any other State or semi-State body to give loans without security.

The Minister said in his statement that in the event of the winding-up of a business concern loan capital, even though unsecured, would rank before share capital in the distribution of assets. That is all very fine but it is still not any security so far as the public, for whom we in this matter are trustees, are concerned. We are saying here to the Industrial Credit Company: "You may give money out on loan without any security at all." That is the effect of this. I know that the practicality of the matter will be that the Industrial Credit Company are not going to give loans without security unless they are as satisfied as they can be that the loan is all right and that it is going to be repaid. However, I think it is only right that that doubt should be expressed in this House.

The final point I want to make is on the question of giving loans direct to non-Irish based companies. The Minister points out in his introductory speech that at the moment assistance can be given by the ICC by the machinery of giving the assistance to the parent home-based company but not direct to a subsidiary based abroad. I think that summarises the Ministers remarks reasonably accurately. He then made the point that if a particular situation requires it the ICC may provide finance directly to a subsidiary or associated company rather than the parent company. I would like to know if in using the phrase "if a particular situation requires"—I take it that it was used deliberately by the Minister—if there was a particular situation in the Minister's mind or in the minds of the ICC when this particular relaxation was decided upon? It does not seem to me to be any particular hardship, from the point of view of the ICC in any event, that the existing machinery should continue to be adopted, namely that the financial assistance or loan provided by the ICC should be to the Irish-based parent company and that the Irish-based parent company should then make their own arrangements with their subsidiaries for passing on the benefit of the loan or finance of an equivalent amount to their subsidiary companies. It may be that some particular problem has arisen which requires this but in the absence of knowing that such a problem, which was of a nature that is not easily surmountable, has arisen I cannot readily see the necessity for bringing about this particular change.

Mr. E. Ryan

I wonder if Senator O'Higgins in expressing doubts about unsecured loans is also, by expressing that doubt, expressing doubt about the desirability of the Industrial Credit Company investing in shares. It seems to me that the order of desirability, from the point of view of the security of public funds, should be firstly secured loan capital. The second desirability in order of preference is unsecured loan capital and the third is the investment of shares. We reckon that secured loan is better than unsecured loan. If you object to unsecured loan you must necessarily say that the Industrial Credit Company should be very wary indeed about purchasing shares in any concern.

Mr. O'Higgins

I agree.

Mr. E. Ryan

I cannot see how, if you are still going to accept the proposition that in certain cases the investment in shares is desirable, you can object to the giving of unsecured loans.

Mr. O'Higgins

I agree with the Senator. I was talking about unsecured loans although perhaps that was not the best phrase to use. It was the non-security I was querying, whether in relation to shares or loan capital.

Minister for Finance (Mr. Colley)

First of all, I would like to express appreciation of the general welcome given to this Bill by Senators. Senator Russell paid a tribute to the work of the Industrial Credit Company and to the work of Dr. Beddy. I should like to endorse that tribute which I think is well deserved.

Now I should like to refer to the specific points raised. First, I should like to refer to the point raised by Senator Russell where he thought that the increase in the share capital should be bigger. All I can say to him is that it is envisaged that the increase proposed in this Bill in the share capital and in the borrowing limit should be adequate for a few years. After that time it will be necessary to come back to both Houses of the Oireachtas to amend it. As Senators will appreciate, this is the normal procedure with regard to State companies for which money is provided by the Oireachtas. It is a machinery by which a periodic review of the work of these companies comes up and enables the Oireachtas to have a look at their work and comment on it where necessary. I do not think that the increase would be inadequate for the next few years at any rate.

A point which was raised by Senator Russell and referred to by a number of other speakers was the provision in section 8 about membership of the Oireachtas. There is a difference in the section between the method of dealing with a director, a member of the board of the Industrial Credit Company and the method of dealing with an officer or servant of the company. In the case of a director, he ceases to be a director on being nominated to stand for election or, indeed, on being nominated directly to the Seanad by the Taoiseach.

In this case it is felt that, as a member of the board, he is a policy maker and he is involved in the final decisions on loan applications. If he were nominated to stand for either House he would clearly be involved whether he was a party member or not, in canvassing and party political activity. In these circumstances it is desirable that he ceases to be a member of the board of the ICC which is a part-time appointment. The situation is treated differently in the case of an officer or servant to whom this applies; if he actually becomes a Member and serves in either House of the Oireachtas, he is on secondment from the ICC until his membership of either House ceases.

Senator Belton raised the point that there is no provision in the Bill to prohibit the appointment of a director who has, in fact, been nominated for election to either House of the Oireachtas. The Senator is correct in making that point. It is a risk which hardly needs to be guarded against because the intention is set out in the section. If a man who is a director has to cease being a director on being nominated, it is contrary to the spirit of the section that such a man should be newly appointed then as a director of the ICC. I cannot conceive of any such appointment being made. I will bear this matter in mind and see if we should tie up that end completely when further legislation in connection with the ICC is being brought forward.

Reference has been made to foreign borrowing and I agree that this is not as desirable as borrowing at home. Excessive foreign borrowing is totally undesirable. I do not wish to get involved in a discussion on the economic aspects of borrowing. If we must borrow at all, and we must to some extent, there is a good deal to be said for borrowing from the World Bank if we can do so. The terms to be obtained from the World Bank are much more attractive than are available from other sources abroad.

Dr. Belton

Germany?

Mr. Colley

Senators will realise that borrowing from the World Bank is not a simple proposition. It involves putting forward projects which fit within the terms of reference of the World Bank and very detailed assessment and negotiation takes place.

Regarding the point made by Senator Belton it is true that the Bill was prepared and was in the pipeline some time ago. This point made by the World Bank arose in the course of protracted negotiations and after the Bill had been prepared. I moved an amendment to the Bill to deal with this point in Dáil Éireann yesterday. I mention this to illustrate that the point arose late in the day and this is the reason it was not dealt with in the Bill originally, as the question had not arisen at that time. It arose out of negotiations with the World Bank.

With regard to the question of the 90-day limitation on the furnishing of the audited accounts of the ICC, the end of the financial year for the ICC is the 31st October. Senator Russell was mistaken in this.

Mr. Russell

I accept that.

Mr. Colley

In fact the last account was some days late. This illustrates the point I was making that the company are having increasing difficulty in meeting the time limit.

The idea of laying down a time limit within which the accounts must be furnished, as suggested by Senator Russell, is an idea that occurred to me, but on further thought I felt that this could be an invitation to extend the time laid down in the Bill. What we are providing puts the onus on the company in any year where they have to go beyond the 90 days to make a specific application to the Minister and then the Minister, having questioned as to why the extension is required, can lay down the limit appropriate to what the particular difficulties of that year are. To lay down a limit now in the Bill would act as a permanent extension and inducement—inducement may be too strong a word but something similar—not to get in the accounts as fast as possible.

Regarding the point raised by Senator Nash in connection with the 20 per cent or more than 20 per cent of voting shares being laid down as a requirement to qualify as an overseas subsidiary or associated company, this provision is related to the provision in the Companies Act, 1963. It provides that the qualification for constituting one company as an associated company of another is more than 20 per cent of the voting shares.

I take Senator Nash's point about the attractiveness or otherwise of the deposit rates offered by the ICC and I will pass on his comments to the company. Perhaps their terms can be altered in order to attract more deposits.

Senator West asked a number of questions. For the year ended 31st October, 1970, the number of employees was 71. Wages and salaries amounted to £123,000 and administrative expenses £83,000. There is no specific proposal to increase the number of the staff, but the activities of the company have been growing considerably. We are anticipating further growth and it is quite likely that there will be an increase in the staff.

With regard to the question of lending without security, there are two points I should like to make. One is that the ICC are in competition with a number of other commercial companies who can and do on occasions lend without security. Since they are in competition, their activities are somewhat restricted if they cannot have the same kind of approach where this makes sense. Of course, there is no question of the Industrial Credit Company offering unsecured loans on a widespread scale. Senators will realise that this is something that does not happen. The kind of situation where it can arise is one in which the particular package deal that can be offered to a borrower might well include a loan which is secured and a further loan which is unsecured. This can be related to the circumstances of the particular company in regard to its existing borrowing, and to its capital structure in general. It is a situation which is unlikely to arise very often. However, in any case in which the board of the ICC were to decide to give an unsecured loan, Senators can rest assured that the assessment is made very carefully and that there is no undue risk being taken.

There was a point raised about my use of the phrase "The company will ensure that any such share investment is used for the benefit of projects within the State". This is in relation to section 3. The phrase in section 3 corresponding with that is "likely to be of benefit to a trade or industry in the State". Senator O'Higgins suggested that these are not the same things, that in order to conform with what I said one would really need a guarantee and of course one could not give a guarantee in these circumstances. I would suggest that the Senator is mistaken because the company can ensure this in so far as they can lay down specific conditions under which they are prepared to make such share investment and ensure that such conditions are carried out before they make the investment; or at least they should have some form of right of action if the conditions laid down are not complied with. To this extent they can ensure that the share investment is used for the benefit of projects within the State.

Mr. O'Higgins

What the Minister is really saying is that they will endeavour to ensure.

Mr. Colley

No. I was about to say something which perhaps misrepresents what the Senator has in mind. It just occurred to me as I was about to say it. I took it that what he was really saying was guaranteeing that in the long term this was going to be of benefit. What I had in mind was that you cannot guarantee that a particular project will be successful. It may go wrong, in which event I suppose it would not ultimately before the benefit of a trade or industry within the State. But in so far as you can ensure that the money is invested for the benefit of a trade or industry in the State, this can be done and will be done. However, you cannot guarantee that it will, forever more, remain for the benefit of a trade or industry in the State, in the sense that the business may fail. Subject to that, you can ensure it in the case of any particular share investment by applying the necessary conditions.

Dr. Belton

Can you ensure that they will remain in the country?

Mr. Colley

As the Senator will appreciate, this is the point we are at.

Dr. Belton

There is a difference here. It is not the success of the operation, but whether the value of the shares taken up will remain in the country?

Mr. Colley

Yes. As the Senator will appreciate, however, not that the shares will be taken up in an Irish company but in a company abroad. If it is £20,000 in shares, that £20,000 of benefit would accrue to the Irish trade or industry. In so far as this can be ensured it will be ensured and this is the onus that is being put on the ICC in relation to such investments.

Senator O'Higgins also questioned why the ICC could not carry on as it does at the moment in dealing with a company abroad having a subsidiary here, and simply invest the money or give the loan to a company here instead of giving it to the parent company. I am not aware of any particular case having arisen which would call for this amendment, but I am aware or I can visualise circumstances in which this difficulty could arise. If the Irish subsidiary were so geared financially that a further loan from the Industrial Credit Company would put its performance out of gear and would not be able perhaps to repay the loan, then one can see that the investment might perhaps have to be made to the parent company.

Mr. O'Higgins

If it had limited borrowing powers, for example.

Mr. Colley

Yes. I think these are the main points that were raised. I hope that I have dealt with them to the Senator's satisfaction.

Question put and agreed to.

Agreed to take remaining Stages today.