Industrial and Provident Societies (Amendment) Bill, 1978: Committee Stage.
Section 1 agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
There are two points which occur to me. One detects a frantic element with regard to getting this Bill enacted. We must not regard ourselves as being in a situation in which the soldiers are surrounding Leinster House if we do not do something radical very quickly. We have to look at the Bill to see if there is anything in it we do not like. I wish I had more time to look at it than I have had. If there are any points that occur to us as we go through this, it is vitally important to doing our job properly that we consider them and not just simply note them on the basis that they will be taken care of in a comprehensive Bill which will come forward God knows when, with all the good intentions that one allows to everybody. There are all sorts of obstacles to the realisation of good intentions in the business of these two Houses. One of the obstacles is getting things into a queue and getting them marching along. The Minister and everyone else in the House will be glad to hear that I have not too much to say about it, but I should like to feel I am not just wasting my time.
The Minister indicated that she will be proposing a new section, section 36, and it seems to me that a new prohibition is to be proposed in that section. The prohibition is directed at an animal known as an investment trust company. We are now at the definition section of the Bill and it would be extremely useful if the definition section contained, as the Central Bank Act did, a definition of what an investment trust company is. Not getting into the merits or desirability or demerits or undesirability, of the section when we come to it, at least we ought to know before we get on to that section, if we do prohibit an investment trust company, what exactly we are prohibiting. We will know when we get to the section what we will be prohibited from doing. We should have a definition of an investment trust company.
I do not know that I necessarily agree with the definition in the Central Bank Act, because it is defined in the Central Bank Act as a company whose main business consists of the investment of its funds in securities. I am not aware that the Central Bank ever operated any section with regard to investment trust companies and perhaps it failed to do so because of the perhaps excessively extensive nature of the definition. An investment trust company as defined in the Central Bank Act, and as it might hereafter be held to be without definition under this Bill, might be any family company, or any company holding shares in a group of companies. It might be at the peak of a whole apparatus, a whole structure of industrial and commercial activity which engaged, as so many of these companies do, in the double exercise of providing management expertise all over the field, the group itself, the individual units, being assisted from the top which does this planning and which is a holding company holding these securities.
Something might be proposed which, with regard to the prohibition of deposits, was so extensive in its impact that it hit at all sorts of institutions which cannot be in our mind as bodies whose activities we require to control to ensure that the mischief is cured. In this section there should be a definition of an investment trust company. Perhaps that definition will receive better consideration when we come to hear the Minister on the proposed new section 36. Allied to that is the absence of a definition of deposits. In the Central Bank Act the matter is dealt with and it is so defined as to include both time and current deposits. It is of importance to know what we intend when we are engaging in prohibitions. It may be necessary, if the legislation is to be successful, that the courts will not be required, when faced with the criminal consequence of breaching the prohibitions, to give a narrow definition to deposits.
In the part of this Bill which will impose controls on the taking of deposits, it will be any kind of deposits, whether current deposits, or deposits repayable on demand, or repayable in one month, or three months, or whatever, or on the happening of a specified event, or condition, or whatever it may be. The Bill may seem to be frail in the objective it is intended to secure, if there is no definition of deposit which indicates the full extent of the prohibition which it is intended to impose on industrial and provident societies who are, in fact, caught by the provisions with regard to the taking of deposits. It may be that this could be done in this interpretation section, or when we come to the reference to deposits, by which time I hope I will have found out the reference to deposits in the Central Bank Act. Some other Senator might be able to assist me on that.
If we are to have a prohibition on investment trust companies doing something, we do not want to create a greater mischief than we are trying to cure. Say, for example, somebody has an investment trust holding company for his family, and say a member of the family has £5,000 and he wants to place it on deposit with the investment trust holding company, is it intended that that should be an illegal act, that the company should be in breach of a statute, that the officers should be guilty of criminal activities if they have never read this? It cannot be thought that the Industrial and Provident Societies (Amendment) Bill will be read by people running family holding companies. Certainly it will not be read by them, or even by all their advisers, to put them in a position where they will find themselves criminally liable? Presumably there will be criminal liability, or there ought to be, if we are serious about the prohibition. A breach of the prohibition should give rise to an offence. It will be no answer to me to be told the prohibition will not give rise to an offence which will be prosecutable because then we are letting a toothless animal roam around and we might as well not have the prohibition. If there is not an offence as a result of a breach of the prohibition, we might as well not have the prohibition, because people will breach it.
First of all, a Chaothairleach, Senator FitzGerald mentioned that there was tremendous urgency about this Bill. When we talked on the Second Stage of the Bill all of us realised what the tremendous urgency was about. I should not like Senator FitzGerald, or any other Senator, to feel I was trying to stymie discussion at any stage of any Bill, regardless of its urgency. Senator FitzGerald above all other Senators must appreciate that. Senator FitzGerald has had cooperation from my Department at all times on any Bills which have come before this House as, indeed, that cooperation would be available to any Member of either House of the Oireachtas if he felt he had constructive criticism to make on any Bill.
Senator FitzGerald made a point that the investment trust companies are now being included under the new section 36 which is proposed in a Government amendment. He felt the definition of an investment trust company should be clearly set out in section 2. Under the new section 36, we are defining what an investment trust company is. Therefore, I do not think it is necessary to re-define it in section 2. He made the point as well that "deposits" should be defined in section 2. The word "deposits" is used in other Acts, for example, the Central Bank Act, the Credit Union Act and the Building Societies Act, and no definition is given. Senator FitzGerald is busily going through the Central Bank Act to find a definition——
If the Minister could go busily at it, I could stop going through it busily.
Section 2 of the Central Bank Act reads:
"banking business" means business which consists of—
(a) the business of accepting deposits payable on demand or on notice or at a fixed or determined future date, but excluding deposits with a trader from persons employed by him in his trading business or from his customers in the normal course of his trading business and deposits or instalments in respect of the letting or selling of goods under a hire-purchase agreement or a credit-sale agreement....
In each case it has been left to the courts to decide in fact what the definition of "deposits" should be. I feel it would be best to leave it again to the courts in this situation.
Section 2 of the Central Bank Act refers to deposits within the definition of what a banking business consists of, and makes it clear that banking will be carried on whether or not the deposits are of a current nature. It does not leave it to the courts to do so; it excludes deposits which are regarded as appropriate for exclusion in a code relative to banking. It excludes deposits with "a trader from persons employed by him in his trading business" and so on. I do not know whether, if we take the definition of an investment trust company from the Central Bank code, that is at all sufficient.
The Minister did not deal with the point I made and I should like her to deal with that point. She did not deal with the question of the definition. I was remiss in not seeing the amendment which arrived at 2 o'clock today. The definition in the Central Bank Act does not deal with the point that it catches private investment trust companies as well as public ones. In the Central Bank Act, it at least excludes deposits from traders with such companies. Even the definition in the Central Bank Act, in my view, is far too extensive for what is intended to be done in this Bill. This Bill is presumably concerned to deal with the particular type of industrial and provident society engaged in taking deposits all round the place. Why do you need a definition, whether or not you extend it to an investment trust holding company, unless you are trying to catch—which no doubt is what you are at—conversions of industrial and provident societies into investment trust companies? On that definition an investment trust holding company resulting from the conversion of an industrial and provident society is such as to be caught by this prohibition. That is a very simple amendment and it does not have this wide-ranging effect. The Department do not know the consequences involved. They cannot possibly know the range of actions affected by this, or the range of people who may find themselves, even if only technically, in breach of it. It is no use telling me they will not be prosecuted. It is not a very good system of running the country to say people will not be prosecuted for committing offences. It needs a narrower definition.
The whole question of investment trust companies is coming up in a new section, section 36. Perhaps discussion about them, and about what should be covered and what should not be covered, could best be left until that amendment is being discussed.
Question put and agreed to.
Section 3 agreed to.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."
A point has been made in the Dáil with regard to the use of the word "insubstantial". Is there any precedent in the Statute Book for the use of this word "insubstantial"? The words "not material" are very well understood by the courts and I should have thought very much better words. Could I draw the Minister's attention also to this? What is to be looked at to discover what is insubstantial is not merely the acceptance of deposits; it is acceptance of deposits and the making of loans. What do they look at? What is the guide? What is insubstantial?
The Minister may give me a quick answer on my last point, that is, why is it only the agricultural co-operative societies that can get rescued and not the fishery co-operatives? I am sure there is a simple answer to that under subsection (3).
The term "insubstantial" which has been raised by Senator FitzGerald was also raised by his colleague in the Dáil. Insubstantial is a subjective term and there are precedents for the use of terms of this type such as fair, reasonable, equitable, just, expedient. Our legal advice is that "insubstantial" is legally acceptable.
Is the Minister satisfied it is a word to begin with?
Yes; our legal advice is that it is legally acceptable.
Why not use the words always used in this kind of case?
We accepted the legal advice and the draftsman drafted the Bill accordingly. This term was used and, after Deputy Kelly raised it in the other House and the Minister assured him about it, it was re-checked and we were told definitely that there was no problem with it legally.
I am not satisfied with that answer.
Question put and agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill."
I have given some indication to the Minister that I would be asking this question. I am not clear what the position is of an external society incorporated before or after the date. How is it caught by any of the provisions of this code? I genuinely do not know the answer to that question. I note that there are provisions for the registration of an external company under the Companies Act. I know the Central Bank Act requires any such company with banking objects to supply additional information, but I just do not know what the position is here. In Britain industrial and provident societies are not allowed to take deposits except to a very limited degree. Say we have external body corporates or bodies corporate, whatever you call them, how does this code deal with them, or is it intended that it should?
The position of external industrial and provident societies is quite simply that, if they have a branch in this country which is registered here, then they are caught by the Bill. We have no power to stop people here from investing in an industrial and provident society which is, as the Senator suggests, in a different country or in a different place, outside the jurisdiction of the State. I am not sure if that answers the Senator's point——
Would the Minister explain to me how the external society is caught? Under section 15 it is proposed that the Registrar will have power to appoint a person to the society's management committee. How can that be done?
The exemption from the 1971 Act refers to industrial and provident societies in our jurisdiction only. Therefore any foreign society and any other legal entity operating in a banking business here are governed by the Central Bank Act 1971, if they are registered here.
How are they effectively governed? How do you appoint people, particularly in management, to produce books if they do not wish to do so? How is it enforced against them? We are talking about strange animals that may be wandering in from Europe but who never thought of doing so to date. We have long since provided for such creatures under the companies code. They cannot come in here. We can catch them for an offence under the Companies Act if they try to do business here without being registered. As external companies they must do so. We can catch them by making them comply with the requirements. They have to tell us if they are carrying on business here, whom we can sue and whom we can make responsible for breaches of the law. There is no procedure under the industrial and provident code or generally in relation to bodies corporate other than companies, whereby we can find out effectively how we can go after the fellow who is doing business here in a manner that we do not allow our own institutions to do.
I am sure the Minister and everyone else understands that I am not opposed to the principles of this legislation. I am not opposed to the idea of introducing these prohibitions or to stopping what is desired to be stopped. I am interested to see how we protect ourselves from activities that we disapprove of. We have no procedure requiring them to register; no procedure whereby they can give us local names and it is only local names whose bodies will be here and who are going to, in effect, see that they comply with our laws. This is a very important point.
Industrial and provident legislation deals only with Irish societies or companies under the Industrial and Provident Societies Acts. The Central Bank and the Minister for Finance are responsible for all foreign companies or societies which are involved in the banking business.
The Central Bank Act does catch bodies corporate within the Companies Act but it does not seem to catch other institutions similar to the Industrial and Provident Society one. For example, under the existing code why could a UK industrial and provident society not be caught by the Central Bank code at the moment if that is, in fact, in the Central Bank code?
The Central Bank Act, Part II, section 7, covers any person inside or outside the State. Section 7, subsection (1) reads:
Subject to the provisions of this Act, a person, other than the bank, shall not, on his own behalf or on behalf of any other person in or outside the State, carry on banking business or hold himself out or represent himself as a banker or as carrying on banking business unless—
and there are various conditions: he is the holder of a licence or he maintains a deposit in a bank. Therefore, the foreign companies or societies which Senator FitzGerald refers to are covered by the Central Bank Act and are not a function for my Department or for the Minister. They are under regulation by the Central Bank Act and by the Minister for Finance.
My point is rather oblique to what has been going on between the Minister and Senator Alexis FitzGerald and it is more the responsible layman's view. It seems that in section 5 the people whom the Act sets out to protect are to a certain degree penalised. I would like the Minister to explain this point because people who have invested already with existing deposit-taking societies could be at risk by the very stern provisions of section 5. I am referring in particular to the clarification of that that is in the Minister's speech on the Second Stage. I quote from column 9 of the Official Report 1 November 1978:
The effect of section 5 will be to leave an existing deposit-taking society with three main options on enactment of the Bill.
(a) First, to gear itself towards applying for a banking licence from the Central Bank,
That is fair enough. If they get that it is fine.
(b) Secondly, to arrange alternative sources of finance, for example, bank loans, to enable it to continue with its lending business, or
(c) Thirdly, to arrange for an orderly running down of its business.
No matter how orderly that running down of business is, and running down businesses tends to be a disorderly affair and get out of control, surely the people who have invested with that society are going to be at risk. I find it very hard to see how they would not. The Minister goes on to say:
To ensure, however, that the interest of investors are, as far as possible, borne in mind by such society, whatever the option chosen by it, the registrar is being given sufficient powers in subsequent sections to monitor its affairs effectively and on a continuing basis.
That is fair enough and it sounds reassuring. The question I am putting to the Minister is: is there not a danger in this Bill, which seems to be admirably adapted to protect the little man and the people who have invested their savings in such a society as this, that there will be casualties with the rather stern provisions under section 5 and that, these small investors may go to the wall and suffer losses in their investment where this is happening? If that is not the case, I would be very glad to have it explained.
The whole purpose of the Bill is to ensure that investors are protected and that societies such as these do not go to the wall in the morning because—it was to avoid this type of situation that the Bill was introduced in the first place—depositors would be severely hurt. The fact that the Bill allows for the orderly running down of the business within a period of five years with the option to extend that period if necessary means that the orderly running down is done under the jurisdiction of the registrar. Naturally one of the registrar's functions will be to ensure that investors or depositors are not hurt under any running down of a business. I feel that, at all times, his job would be to minimise the risks involved for investors. That is the job of the Bill itself. I would agree with Senator Martin that there are risks. It is not possible to remove them altogether, and we have to be fair and acknowledge that. Most of the risks will be removed by the fact that they have five years to ensure the orderly running down of the business, and this would be done under the careful eye of the registrar to ensure that investors whom we are trying to protect will be treated fairly and will not stand to lose.
Question put and agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."
The offence only relates to the breach of section 6(1). Is that correct?
Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."
On subsection (3), what does "shall not make any payment" mean? Does it literally mean what it says?
It means exactly what it says.
Interest is only against the society in question. That means that they cannot pay their income tax bill?
No payment will be permissible before repayment to depositors, unless, of course, they have been authorised by the registrar.
The priorities that would arise in bankruptcy are being displaced in this. What if there are wages due to employees and stamp moneys due to the Department of Social Welfare?
We can be assured that the registrar would operate this.
I am sure the registrar is a splendid person. Does this mean that the normal code of priorities—wages and salaries, social welfare payments, value-added tax and pay-as-you-earn money deducted from employees—is to be dislodged and that the registrar can authorise one payment rather than another? This cannot be the right way of doing it. We are reversing the priorities here. The priorities of the Department of Social Welfare and the priorities of revenue in relation to pay-as-you-earn, are ahead of the depositor. The priority payments must be paid or there will be a most disorderly state of accounts. Why is the registrar not told to say "yes" by putting it into the section rather than having the complete administrative nonsense of getting his permission to make payments? The officers concerned may be committing offences if they do not make these payments.
Perhaps between now and Report Stage the Minister will be able to get together a proper subsection on that. It is a complete prohibition on payments, particularly when there will be an offence. We are going to make it a criminal offence for the manager of an industrial and provident society to pay back tax that he has deducted from his employees and which is due to the registrar without the registrar authorising it. It would be bad law to make something an offence without clear provisions as to evidence that it has been committed. There should be something in writing if a person is to be indicted. It is outrageous to make it an offence for people to do what the law at the moment obliges them to do. I am only talking about these payments. There may be other kinds of payments.
The registrar would have to authorise all payments. I am sure we could depend on the dictates of common sense to ensure that what the Senator refers to as priority payments would be made. On the other hand, it is important to remember that the repayments to depositors would certainly be priority payments.
Either that is the law or it is not. Where is it the law that depositors of an industrial provident society will displace the money that may, if that society is bankrupt, be due to the employees by way of, for example, arrears of holiday money? Does that mean that the depositors of such a society are going to be ahead? This requires a great deal of consideration. It says here that it is an offence to make payments which at the moment are due and which if not made will themselves constitute an offence.
The Senator is unduly worried. I do not imagine that anyone would be put ahead, as the Senator refers to it, of anyone else in this situation. The very genuine fears which the Senator expressed are shared by all of us. The registrar would have to take all matters into account when he would be authorising payments whether they would be made to depositors, employees or whoever else may be involved.
It is an outrageous position to put the registrar in in relation to societies that they are guilty of offences capable of being prosecuted in court if they pay what is clearly due to people ahead of their depositors. Surely it is a very wrong thing to make that a breach of the criminal code.
Whatever payments are clearly due, the registrar would authorise them and any payments made that are clearly due and which are authorised by the registrar would not be offences.
Which are clearly due, which are authorised by the registrar.
Suppose there are payments due which he has not authorised or someone makes a mistake in forgetting to look for an authorisation. Suppose someone in charge of paying the bills of the society got an urgent demand to pay the pay-as-you-earn or back money due to people. They will have worked for a certain period of time and there will be holiday money due to them or they may be leaving their jobs—particularly when they hear that this Bill is going through—and be looking for payment for what is due to them. Is it the position that he-can say to them "I would be committing an offence unless the registrar, whom I am not obliged to ask, authorises me to make the payment to you. You do not want me to commit an offence; I am not going to give you your holiday money." This could be considered between now and Report Stage.
The registrar must control all outflow of money from these societies. I do not think the situation that Senator FitzGerald is putting before us would arise in the event of these societies having to make payments. There would be no such thing as priority claims.
If your landlord is due the rent today and makes a distress on the office furniture one cannot stay there at all unless one pays the fellow his rent. He will get the sheriff out. It is an offence to pay off the sheriff. No person should be put in the position where he can force somebody into a position where he will be committing an offence. It is unrealistic and impracticable. There should be somebody who is entitled to go in and make the payments that have to be made, if that is the situation in certain cases. If the window is smashed it has to be repaired. If the roof is leaking onto the deposit books that the registrar will be wanting to look at, is he not to pay whoever is required to repair it? Do the people who are working sit down and do no more? It is impracticable.
We are talking about a situation where straightaway there is a crisis situation in every one of these societies. We have been told there are 14 of them getting deposits. I do not know how many people are employed. We have not been told. We are enacting legislation largely in the dark. We are aware of the general financial problems. We are aware of the fact that this sort of situation ought not to have been allowed to grow over the years. Now that it has grown we should be coping with it in a sensible and practical way.
All that Senator FitzGerald could expect is that the registrar would give immediate clearance for essential payments. We are talking just now about essential payments which have to be made. I would expect that the registrar would give immediate clearance for such payments.
I cannot accept this. I will have to table an amendment to this on Report Stage. I could not let this pass. It is wrong. We are talking about coping with emergency situations that may exist in these societies, on their promises, in relation to what they are doing. We are going to make it an offence for them to do what may be vital in their interests, and in the interests of the human beings around them to do unless somebody permits them to do it. I do not know what it might be. Ring up the fire brigade or anything. There is no sensible procedure being outlined. If we have situations of extreme urgency, let us deal with these and take the risks involved.
One has to have a very specific position here in which the registrar is given full authority. One could not have a grey area in which some matters, which could subjectively be deemed urgent, were not necessary to be referred to the registrar and other matters on which the registrar's authority was necessary.
I am pursuing this point which I find very interesting. I share Senator FitzGerald's disquiet about it because it is not as clear as it might be. It does not seem to me that the Minister has the answers quite crystal clear at her fingertips. I do not blame her for this because it is a very subtle point and one that should be looked at. I would like to know just for the sake of clarification as a layman, what would be the availability of the registrar? Supposing one takes the situation dramatised by Senator FitzGerald that there is a creditor literally on the doorstep or that the sheriff's men have arrived. I am trying to visualise the registrar's office. The proprietor or the managing director rings him and looks for this kind of clearance. Would the registrar have the same kind of likely response as most civil service Departments have to requests like that?
I was being ironical when I was talking about the likely response of Government Departments to requests made over the telephone. Sometimes it takes months to get a response of any kind. I am just trying to visualise the registrar. Is he——
Not in this Department, Senator.
I am glad to hear things are so well. It would be a big decision, though. He might have to make a fairly elaborate decision. I would like either to have the point clarified a little further here or I would be interested in seeing what kind of amendment Senator FitzGerald would put forward for the Report Stage. It seems that he has put his finger on a weakness.
I am sorry I have not had time to study this adequately. Subject to that, I think the Minister is better surrounded by advisers to do this. If it is required, I will try my hand at an amendment—not that I want to. It is very wrong not to have this situation provided for. What offends me about this is that we are going to make it an offence for people to do what may be a matter of life and death for them to do. To survive and make their case to the registrar about their scheme of repayment may involve them making a payment. What are we afraid of? Is it a scheme of repayment for depositors? Any payments to whom? In order to be helpful on an amendment, what payments are we afraid of?—that they will give it to their brothers and sisters in alms? Is that it? It is easy enough to make that a much graver offence than anything we have been talking about.
I am talking about the ordinary human situation which may arise. The Companies Act, for example, gives priority to all wages and salaries, whether or not earned wholly or in part by way of commission. There may be other people employed getting these deposits on commission for all I know. They may not be in on the loot involved but their daily bread may depend on their getting their commission on the deposits. They have priority. Are they to be told: "I have been committing an offence unless the registrar authorises me to pay your commission"? It does not make sense. If there were 25 registrars, it would not make sense. There must be a scheme for the registrar himself for his own protection. What if he authorises payments to 25 customers and disallows payments to 25 more and subsequently the society goes into bankruptcy and somebody tries to make the registrar liable for having authorised payments that led a displacement of priorities or fraudulent preference of somebody? Fraudulent preference is a concept which does not connote fraud. It merely means an act of preference of one creditor over another. It has certain very serious legal consequences.
Holiday remuneration, wages and lots of other things are given priority. In relation to pay as you earn do not forget it is the employee's tax we are talking about. Why should the employee's tax be given to any depositor? I accept Senator Martin's proposed assignment to me but I would much prefer if the Minister would do it.
We are trying to catch everything under this section. If we had a situation where a society could make payments to its directors or to the board of management or whatever before thinking of the depositors, then the depositors would be left holding the baby at the end of the day.
I am saying that they should not be allowed to make such payments. But let us say the nature of the payments that they are not to make unless authorised——
The registrar would think in exactly the same way as Senator FitzGerald is thinking here now.
We have to agree on that and that he would agree on what the preferential, the essential payments were. He would have to give immediate clearance and would have to give, as Senator Martin nicely put it, lightning response to such a situation.
I cannot accept that we can enact legislation in this way. I do not think that what we are trying to make an offence will be a successfully indictable offence.
Is the Senator prepared to put this to a division of the House?
That would prevent us from putting down an amendment for Report Stage.
The Senator suggested that he was going to put down an amendment. We have discussed the matter at some length. I have explained it to the best of my ability and I feel I have dealt with the Senator's point but if he feels that he needs to put down an amendment at this stage let him put it down and we can put it to the House.
I will put down an amendment when, in accordance with the rules of this House, I am required to do so.
Question put and agreed to.
Sections 8 to 10, inclusive, agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill?"
What would be the position if somebody under section 11 does not allow the inspection of the copies of the extracts, books or whichever documents are involved, or if he does not produce the books, accounts, deeds or records?
He would be guilty of an offence under section 28 (1) (c).
Is this section being amended?
Section 21, clauses (a) and (b) are being amended and also section 28, subsection (3).
I take it that paragraph (c) of subsection (1) is being left as it is.
That is where the offence comes in.
Question put and agreed to.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill."
Is it the position that if a society do not furnish what is required here under the proposed amendment it would be an offence?
It would be an offence under the amendment that we are proposing.
Could the Minister tell me why the words "in writing" appear in paragraph (ii) and not in paragraph (i)?
This section is copied directly from the Central Bank Act.
That is not an answer to the question.
I would imagine it was not considered necessary to have it in section 12 (i).
There is going to be an offence committed here. Under (i) an offence will be committed if a society, and presumably that includes members and management and so on, do not furnish to the registrar such information returns concerning their business as the registrar may from time specify and which he considers necessary to have in the performance of his statutory functions. Under (ii) a society shall furnish any other information concerning the business which is requested in writing. I am at a total loss to understand why it must be in writing under (i) and not under the other. Presumably the written request is to facilitate the proof of the committing of the offence.
Section 12 (i) would be the request by the registrar of certain information which he would be requiring on a regular basis from time to time and (ii) would deal with specific information that would be requested by the registrar at any particular period or at a particular time. That is the difference. The first one would be to deal with a regular return of information which would be required and the second one would be when the registrar would ask in writing a society to submit to him specific information.
Question put and agreed to.
Sections 13 and 14 agreed to.
SECTION 15.
Question proposed: "That section 15 stand part of the Bill."
Again, a question of information here. That part of section 15 which is concerned with the appointing by the registrar of somebody to the board of one of these societies looks like a good provision. It seems to me that the spirit of the matter is that if a society are in the process of, to quote the Minister's speech "arranging for the orderly running down of its business", that one of the means by which the registrar can supervise that obviously is to make sporadic raids and also to look for the kind of information that Senator FitzGerald has been talking about, to ask for regular returns and so forth. In other more difficult situations he would insist that one of his nominees or somebody that he would suggest or appoint would sit on that board and intervene actively in the day-to-day running of the organisation, which on the face of it looks like a very good way of protecting both the investor and indeed what is left of the company.
It strikes me that the kind of person needed for this kind of job would have to be a very sensitive and intelligent person, and I am wondering if such a person would be drawn from the ranks of retired civil servants, whether it be somebody active in business or whether he would be an academic, an economist or somebody of that kind, what would his hours be? What kind of responsibility would he have to the company other than the protecting of the interests of the depositors? In other words I am asking the Minister for, if possible, a kind of identikit, the kind of people which the registrar would have available to call upon to handle this delicate business.
The first person to be appointed would more than likely be a financial expert. This would be desirable because a person might be appointed in a situation where a society was partially or marginally insolvent and where the registrar would be doing his utmost to ensure that they managed to get back on their feet again. Therefore, the person appointed would have to be somebody who would be a financial expert. He could be taken from anywhere. We would not necessarily have to be a retired civil servant or be from the registrar's office. He could be somebody from the Central Bank who would help and advise. It is important that the power would be there to appoint somebody just as the bank have at present whereby if they give a substantial loan to a company they may demand to appoint somebody from the bank to the board of the company.
Would the Minister agree that it is very important that such person would not be merely a theoretician or merely a banker? The kind of person who could help best there would be somebody who was an active businessman and who understood the market and the day-to-day running of business.
Yes, or a management consultant or somebody of that level.
Question put and agreed to.
Section 16 agreed to.
SECTION 17.
Question proposed: "That section 17 stand part of the Bill."
This gives rise also to an offence under subsection (2). How could a person be prosecuted for not making reasonable arrangements for using the funds of the society to meet applications for repayment of money? How could he be indicted of a criminal offence for making unreasonable arrangements? The Minister should refer that to the law officer who is advising her before it is enacted.
This point was brought to our attention before the Bill came into either House and was in fact referred back to our legal advisers, who have assured us that such a prosecution is possible, and I think he would agree that we must be directed by the advice of our legal advisers.
I will have to consider it further myself.
Question put and agreed to.
Sections 18 to 20, inclusive, agreed to.
SECTION 21.
Question proposed: "That section 21 stand part of the Bill."
I am not particularly concerned with what is in this section but rather more with a later section but what is the problem about credit unions? They are an extremely good movement which have progressed exceptionally well and they need every encouragement. Before we get to the section that concerns me I would like to know why have we all these sections. What is the background that we would have to think about? What is the background to the situation? Are we aware of tawdry situations here and there or elsewhere that would be justifying the generality of our approach?
I do not think that on the Second Stage reading I gave reason for doubt on the part of the Government in regard to the credit union movement. All of us would encourage its development and its use as a movement. It is an excellent movement. I said at that stage that with the considerable amount of money involved, something in the region of £60 million, being handled by part-time people on a voluntary basis, dangerous situations and risk situations can arise. I think the Senator would agree that it is better to avoid those type of situations now and to provide for happenings of this kind to prevent them happening. It is better to do that now rather than wait until we have a bad situation and then try and rectify it at that stage. I think Senator FitzGerald will accept that. This provision has been welcomed by the Credit Union League.
I was just going to ask whether it was one of the points submitted by the Credit Union League in their submissions before the preparation of this legislation.
This was not submitted by the Credit Union League. They did submit a separate submission which is being looked at at the moment but on the publication of the Bill they accepted and indeed welcomed this provision.
I should like to express a general unhappiness about a number of these provisions. I think there is a different situation here too because of the nature of the credit union definition—part-time people managing funds—but there is no question of these being anything other than their funds, funds created by themselves, those who share these common bonds, common bonds of occupation, common bonds of residence or employment or bona fide organisations such as residential organisations or families. We are dealing with a kind of body that industrial and provident societies originally were concerned to encourage but you do not encourage by way of mandatory movements. There is nothing like this in the old industrial provident code. Given all the money that is involved in credit unions there would not appear to be justification for providing that all of them must be subjected to investigations. We ought to have more information, as much as the Minister may have, especially as there are common bonds of a family for example. It arises in a later section, section 25, that where the registrar is to be entitled to appoint somebody to the management of the credit union, somebody, a total stranger, may come into your area, come into your factory, come into your family or whatever, where the justification in relation to the industrial provident societies, was that they were getting money on loan and advertising for deposits. They have called in the company. Therefore, they have a right in the public interest to control them. There is no public element. They are genuine credit unions. There is a privacy situation. They are even more private than are private companies. We do not have any power whereby the Minister for industry, Commerce and Energy may appoint people to boards of private companies. We do not have any analogous power at all. Here we have got situations that we wish to encourage. If people are subject to restrictions which are unnecessary they will not perform well. It is one of the great virtues of freedom that people may make mistakes and if they make mistakes they face their families or fellow workers, their partners or people who reside in the same area with them but I would require to hear a lot of facts to justify that they should receive a more severe treatment than private companies operating for profit. These people as far as I know have invested their money in each other for the benefit of those who are in need at any given time of the savings in question. I do not see how any outsider is damaged by that. Maybe they themselves may be damaged but that is the price of freedom. They should be left free.
I am not saying we should give power to appoint somebody to the board of directors of a private company, because if a lunatic happens to be in charge of the affairs of the company or if we think he is not well equipped to run the company, is it right that some civil servant should put some other civil servant in to look after the private company? I think that is a very dangerous principle. I certainly would need a lot of convincing that it should be done now. I know I shall be told we have got something similar in the building societies' code and in the industrial provident societies with regard to loans, but they are different situations. There is a public element in these cases which is not here. They are not going to be credit unions under the Act unless they have these common bonds binding them together.
Would not the Minister agree that perhaps it is particularly important that for some of the reasons Senator FitzGerald has mentioned, if we have a credit union in a neighbourhood or in a works, factory or whatever, it is particularly important that there be some way in which an outside person if necessary can be put in? Are these not in many ways particularly unsophisticated investors who are putting up deposits of money? I would think it is particularly important that there should be, if anything, very stringest measures for the supervision, control and inspection under these circumstances and this section is particularly useful in this respect.
On that point it must be borne in mind that an individual credit union is only a member of the Credit Union League of Ireland and that, therefore, the League may impose any restriction on a member that is considered appropriate.
Credit unions, as I have said, are excellent bodies and have been encouraged by everybody on all sides of the Houses of the Oireachtas for many years. As Senator FitzGerald rightly said, they have many members, one must remember that credit unions are run by elected members, and these are few. If we have few people operating or managing large sums of money such as £60 million then we must ensure that it is being run effectively and efficiently. Credit unions are run by elected members who operate in their spare time, who need have no business experience whatsoever, and the presence of someone on the board who has a business or managerial acumen could help to introduce efficient organisation and prudent management systems into the running of what might be an ailing credit union. Expert advice of this nature could help greatly in setting an ailing credit union back on to its feet. I think it should accommodate the injection of outside expert help where a credit union is beset by bad management, which may happen. There have been problems in the movement in the past and, as I said, if we are going to have problems, the time to try and rectify the problems or to prepare for the eventuality of a bad problem arising is now in this legislation and not to wait until the problem has arisen, when we would have to deal with an emergency situation.
Recognising the part the credit unions have played in the social development of this country since they were set up in the early 'sixties, I wonder are we not ignoring altogether the function and the part which the Credit Union League has played in this whole credit union development, whereby the registrar can go in and carry out an inspection notwithstanding the wishes or the observations that the Credit Union League may have in regard to the matter.
Of course the Credit Union League have played an important role in the past and they will continue, I should hope, to provide the same role in the future. I did say, of course, that the Credit Union League had welcomed the provisions under this particular section which is important. Of course the registrar would co-operate with the Credit Union League in the event of inspection being necessary or whatever investigation might be necessary, but the particular paragraph in the Bill and the subsections are necessary now.
Question put and agreed to.
Section 22 agreed to.
SECTION 23.
Question proposed "That section 23 stand part of the Bill."
As in subsection (1), is failure to produce an offence?
It is an offence under section 28 (1) (d).
I am a little concerned about subsection (2). I am afraid I weak-mindedly agreed to having this debated today. I have not had a chance to collate this with the Companies Act at all. I do not think that refusing to answer any question in the case of an investigation by an inspector gives rise to an offence. In the case of a company, if I remember it correctly, it then goes to the court to decide whether it is an offence of contempt of court. It is a matter for court determination as to whether it constitutes a contempt of the court. We are always talking about the rights of silence. There are all sorts of situations where a man may decline to incriminate himself by refusing to answer. We have it in the Offences Against the State Act.
In fact it was a colleague of Senator FitzGerald who pointed out the error which was in this in the beginning. If the Senator would look under section 14 (2) he will see that when this section was introduced in the Dáil Deputy Kelly pointed out on Committee Stage its invalidity constitutionally in the light of the findings of the Supreme Court in the case of in re Haughey 1971. Subsequently, on making inquiries from our legal advisers, Deputy Kelly was found to be correct and this is the reason for the subsection now.
With respect, the Minister had a subsection along these lines already and this is a reformulation of it to make it a constitutionally correct one. My point is a different one. It is whether or not we had anything similar. My memory of the Companies Act is that if one did not answer a question in the course of an investigation one could be guilty of contempt of court but it was not an offence under the Companies Act apart from that. Maybe I am wrong in that but that is my recollection.
The Senator is right of course in saying that there is. no such provision in the Companies Act.
The Minister has actually said I was right. I will get her to repeat that some time.
I have said that a lot of times. I have always been very co-operative. Because of the decision of the Supreme Court in the case of in re Haughey and because of the question mark which was over the constitutionality of the phrasing as it was decided, at the request of Deputy Kelly who was right as we discovered when we checked with our legal adviser this week, to change it and we have changed it in section 14 and again here.
Question put and agreed to.
Section 24 agreed to.
SECTION 25.
Question proposed: "That section 25 stand part of the Bill."
I am not happy with this without more limitation, more restriction than there is in it. For the reasons I have given, I think this is a very private situation. There may be a considerable number of credit unions and there should be some clearly defined procedure whereby these powers are exercised in any given individual case so that no individual credit union may feel there is any power to trespass and that a total stranger will come in and be equal to them in relation to their own affairs. It may be well that in modern circumstances that kind of approach may be more desirable, what I would describe as the administrative approach rather than the judicial. I do not agree with unnecessary court procedures at all but I would like to see a very strong prima facie case to justify the exercise by the Minister or the registrar or anybody of the power of putting somebody on the committee of management. That is my view on the subject.
Question put and agreed to.
Sections 26 and 27 agreed to.
SECTION 28.
Government amendment No. 1:
In page 16, to delete lines 33 and 34 and substitute the following:
"28.—(1) A person or a society shall be guilty of an offence if he or it—
(a) contravenes section 5 (1), 5 (2), 6 (1), 7 (2), 7 (3), 8 (1), 12, 14 (2), 14 (13) (b), 17 (2), 23 (2), 23 (13) (b), 27 (2), 29 (1), 29 (3), 29 (4), 30 (1), 30 (2), 30 (3), 30 (4), 31, 32 or 36,".
This arose directly as a response to a point made by Deputy John Kelly on Committee Stage during the Bill's passage in the Dáil. He pointed to some loose drafting and on investigations we found he was correct. It is merely a drafting amendment.
Amendment agreed to.
Government amendment No. 2:
In page 17, to delete subsection (3), lines 17 to 24, and substitute the following subsection:
"(3) Where an offence under this Act is committed by a body corporate or by a person purporting to act on behalf of a body corporate and is proved to have been so committed with the consent or approval of, or to have been facilitated by any wilful neglect on the part of, any person who is an officer of the body corporate that person shall also be guilty of the offence.".
This is also a drafting amendment.
Amendment agreed to.
Section 28, as amended, agreed to.
SECTION 29.
Question proposed: "That section 29 stand part of the Bill."
The Minister mentioned the keeping of books. This section is emphatically welcome. I would not like to let it pass without specifically welcoming it.
Question put and agreed to.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill."
I made the point on this and Senator Donnelly, who I am sorry is not here, made a helpful and useful contribution. He is quite right too. He presented a true and fair view. But I would say with regard to it that it is not sufficient. As we have it at the moment the auditing orbiting of the societies is governed by section 13 of the Principal Act and the accountancy bodies—which include the Institute of Chartered Accountants, the Association of Certified Accountants, the Institute of Cost and Managing Accountants— made representations to the Department with regard to section 13 and expressed surprise that this legislation did not include proposals to amend section 13 which specifically requires the auditor to state whether the accounts are in accordance with the law, whereas the Companies Act requires the auditors to state whether in their opinion the accounts give the information required by the Act; there is an important distinction and I think this should at least be contained in this section. I am not at all satisfied that this cannot be done and done adequately within the time which is there for it to be done, particularly as it will be going back to the Dáil anyhow.
I am also extremely unhappy at having this situation. We are talking about very large concerns with very substantial business; increasing business; increasingly successful business. These businesses very much affect the interests of the economy and many other people operative in the economy. We are here going to have in relation to them a situation in which, on the one hand, they can be required to produce any type of accounts in any form that the registrar may determine; they may be required to produce much more than is required for the company and on the other hand, they may be required to produce much less. Whatever it is proposed that they should be required to do they will be in the unique position that the legislature would have no voice, their elected representatives would have no voice in considering what the requirements should be. They would be uniquely so because, even if it is coming from Brussels in the form of directives, the Joint Committee of the two Houses is in a position of commenting on the draft directives, of considering how the directives should be implemented, of looking at and criticising and examining the actual implementation. If it is a matter of the Companies Act, it is set out and the Companies Act can only be amended in this matter by another Act which we will consider. In this case it is not even the Minister who will make an order. We will not have even a draft order; we will not have an actual order, let alone a draft order. We simply have a registrar who will be without criticism from anybody on behalf of the people; he will possibly be somebody who is in the executive and whose mind may change. He would have benefited from listening to me or anybody else here for example before he decides what he should put in the order. He will not have this benefit or the benefit of any views other than those he chooses to collect himself.
This is not an adequate way of dealing with such an important matter. We are not dealing with something small; we are dealing with something very large, very significant. It is something peculiarly Irish in its shape and in its history. There are third party interests involved here as well as the individual interests of members of the co-operative movement itself. I do think that their accounts in whichever form they should be, should be considered by the Legislature at one stage or another. I would object to it if it were in the form of a ministerial order. But I put the view very strongly everywhere I had a chance to express my voice on this that this kind of thing should be in the form of Bill. I have done at all stages no matter who was in power. I would be of the same opinion always because it is extremely important. If it is in public there would be an opportunity for every affected person to express an opinion. There would be an opportunity for all informed people to become aware of this. As things stand now the informed people will not necessarily know what the registrar is proposing to do with regard to this. The hope would be that he would do it all right but there are all sorts of questions where there would be issues that were in debate between accountants which will have to be judged, questions of principle as to what is in the national interests with regard to these as to whether we make the accounting more or less easy. That is a matter for political judgment in the largest sense of that word. This ought not to be a matter to be left in this form.
There will, of course, be full consultation with accountancy and other representative bodies which is of course happening at the moment under the Building Societies Act with which the registrar is dealing as well. On the other hand I would say that, as Senator FitzGerald rightly says, auditors have operated under the constraints of a particular section since 1893 and, I am afraid, may have to do so for another while. I did mention in the course of my Second Stage speech that I would like to have included in this Bill this item regarding accounts and very many other matters. Senator FitzGerald has agreed with that point of view. But in the time available it was not possible to prepare that type of Bill; it would take too long. It would be my hope that these matters would be included in a consolidation Bill as soon as priorities permit such a Bill.
With respect, it would be very simple to amend that to provide that the income and expenditure account and balance sheet of the society should be in such form and contain such particulars as the Minister may, by order, direct and provide for a draft order to be made on the floor of both Houses before it is completed. I suggest that ought to be the form, and the building societies were taking almost two years to produce an order from the registrars so that is not going to delay it.
Question put and agreed to.
Sections 31 and 32 agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."
This is a highly complex and roundabout way of saying that the amount that one can deposit with the industrial and provident societies is henceforth to be dealt with by regulations relating to credit unions even though one is not a credit union.
Question put and agreed to.
Sections 34 and 35 agreed to.
NEW SECTION.
Government amendment No. 3:
In page 19, between lines 13 and 14, before section 36 to insert the following new section:
36.—(1) An investmen trust company shall not accept or hold deposits.
(2) Notwithstanding subsection (1), an investment trust company incorporated before the 4th day of October, 1978, and which on or before that date had accepted or held deposits shall not hold deposits after the end of the period of two years commencing at the passing of this Act.
(3) In this section `investment trust company' has the same meaning as in the Central Bank Act, 1971.".
This provides a new section 36 which caters for the inclusion of investment trust companies, which in this case has the same meaning as that stated in the Central Bank Act, 1971. The effects of the amendment are threefold. It prevents investment trust companies from accepting deposits after the date of enactment. Secondly, it obliges an existing investment company, that is one which was incorporated before 4 October 1978, which is in fact the operative date of this Bill, which on or prior to that date had accepted or held deposits to repay them within two years after enactment. Thirdly, it prevents usage of the device which Senator FitzGerald mentioned himself here earlier that an existing deposit-taking society could convert into or amalgamate or transfer its engagements to an investment trust company.
That is the only thing that justifies the section. I am totally opposed to this and I think it is completely wrong. It is the wrong way of doing it. A very common situation arises with people of money whereby there are funds flowing in, money is lodged to the company account or the individual account. That will be a deposit. The company will be in breach of this Act. It will be an offence for the company to take the deposit and the people will be liable to be prosecuted for a criminal offence. The thing is completely insane. It is stretching out to hit all sorts of situations which cannot be intended. I did think it was a weakness in the Bill when I read it that it had not contemplated the conversion of an industrial and provident society into a company which is the simplest thing in the world, as the reverse operation is. I wonder if the possibility of that has been considered. This is not the way to do it. One has results from conversion of an industrial and provident society into a company if this is solely what one is after. But if there is more to it than that let us then define what deposits are; let us then define more precisely investment trust holding companies.
Amendment agreed to.
Section 36 agreed to.
Title agreed to.
Bill reported with amendments.
I understand that the Minister is bringing this Bill back and arrangements have been made to take it some time in the Dáil tomorrow. I wonder would Senator FitzGerald agree to take it tomorrow morning?
It probably could not be done.
It is of considerable urgency and if its Report Stage is deferred until tomorrow morning it should be possible to deal with it then.
It is absolutely impossible for me to be here tomorrow morning and I had no way of knowing that I might be required to be here tomorrow morning, it is now 4.20 p.m. and the Seanad is not finishing its business now, is it?
I suggest that we sit tomorrow morning but if Senator FitzGerald would consider taking it——
I cannot be here tomorrow morning.
——some time this evening, say 7 o'clock tonight.
Yes, if it is possible to consult with the Minister on it. I do not know whether it is possible.
The next item is a motion on which there is a limit of three hours on the debate.
It may not actually take three hours.
Perhaps we could deal with the Report Stage at 7 o'clock or as soon as possible after that time, depending on how the next motion goes, if that would be acceptable.
Report Stage ordered for 7 p.m. today.
