In considering this Bill I would ask the Senators to recognise, as I do, that it is a very small Bill. It is largely technical in nature and deals with only a small number of matters each, perhaps, important in itself, but it does not try to effect a major reform of company law nor is it intended as such.
As Senators will be aware, the Companies Acts, 1963-1977 are the basic statutes governing the operations of different classes of companies in Ireland. As such, they have a vital importance in that they provide the framework within which a very substantial part of the economic activity of the country is conducted. The basic statute, the Companies Act, 1963, although nearly twenty years in existence on the whole has stood the test of time and has served us well. However, there have of course been considerable changes in the meantime such as the rapid growth in industrialisation and, as a consequence, the extent and complexity of the activities of commercial entities.
The period has been marked also by our entry into the European Economic Community. It will be recognised that substantive revision of the Act is now necessary to keep pace with the changes brought about by those developments. Only minor changes have been made to date, first in a regulation in 1973 to give effect to the first EEC directive on company law about the publication of documents and information on companies generally. Then there was a short Act in 1977 which dealt with the method of transferring securities on the stock exchange. Therefore, I would like Senators to view the present Bill as a first instalment of an extensive legislative programme which will up-date our code of company law to cater for the corporate circumstances of the latter part of the 20th century and will enable us to fulfil our obligations as a member of the EEC.
The EEC company law harmonisation programme alone will necessitate the preparation of a number of extensive and highly complex legislative proposals and I expect to introduce the first of these very shortly. I intend also to introduce as soon as possible a further measure arising from domestic considerations, the intention of which will be to attempt to remove abuses which are far too frequent in commercial and business activity. In addition, there are various other EEC measures, including the Fourth Directive, to be implemented shortly.
It is important that Senators should have regard to that background when considering this Bill and that they should not be unduly disappointed at the size and scope of this first step of a major company law reform programme.
I would now like to summarise, on general terms, the provisions of the Bill. They comprise the following:
—a number of minor adjustments to facilitate the more efficient operation of the Companies Registration Office,
—an amendment to the provisions in relation to persons who may act as company auditors and public auditors,
—the amendment of a particular provision rendered unconstitutional by a Supreme Court decision,
—improving, in the interest of employees, the provision about preferential payments in the winding-up of companies,
—the removal of the restriction on the number of partners in the professions of accountant and solicitor to enable them to broaden the scope of their services,
—increasing fines to take account of inflation and revising the provisions in relation to certain legal proceedings in the interests of more effective implementation of the Companies Acts,
—the repeal of sections 29 and 30 of the Industrial Research and Standards Act, 1961, to enable service, as opposed to industrial, companies to use the word "standard" in their names.
The provisions dealing with the Companies Registration Office will speed up some of the processes used in that office in the carrying out of the registrar's functions and will strengthen his powers in enforcing the law. It is also necessary to tighten up some of the procedures to ensure that maximum information under the relevant clauses will be available to the public at the earliest possible date.
As Senators know, registration of a company with limited liability confers considerable advantages on the promoters and shareholders. By comparison, the corresponding obligations in regard to filing of returns are not onerous. It is only reasonable, therefore, that these obligations should be observed to the maximum extent, so that people dealing with such companies will have adequate information about them readily available. One of my principal aims in sponsoring this Bill is to secure more regular and faster filing of annual returns and much improved observance of the law in this regard.
I would refer, for instance, to the new procedures governing the striking off of companies no longer trading and companies which fail to furnish annual returns for three consecutive years. This provision should help to update considerably the records of the Companies Registration Office. So too should the availability, prior to incorporation, of information as to the directors, secretary and registered office of a company.
In addition to these statutory measures, I am also arranging for the introduction of a programme of mechanisation of methods and systems at the Companies Registration Office. This combination of improvements should be welcomed by practitioners and the business community in general. Moreover, the volume of work involved for the Companies Registration Office in securing lodgment of returns of defaulting companies will be reduced to some extent by virtue of these new procedures.
Accountants will be especially interested in changes proposed in section 6 of the Bill which substitutes a new section for section 162 of the Companies Act, 1963. The new provision has two main objectives. The first is to end, six months after the commencement of the Bill, the arrangement under the existing provision whereby the Minister may authorise a person for appointment as auditor of a company on the basis of having obtained adequate knowledge and experience in employment by a member of a recognised body or as having practised in the State as an accountant, in either case prior to the operative date of the 1963 Act. It will be generally accepted that persons satisfying those provisions have had long enough to establish that fact and that the provisions are no longer realistic.
I would draw attention to the fact that the provision whereby authorisations may be granted on the basis of similar qualifications otherwise than from a recognised body still stands. This is an arrangement which enables us to grant recognition, in appropriate circumstances, to accountants from abroad and by so doing to enable, in some cases, Irish people who qualify abroad to return home.
The second objective of the provision in section 6 of the Bill is to give statutory force to what has been the practice, since 1967 of making appointments of public auditors by reference to the same criteria as those for auditors of companies. The phasing out of the knowledge and experience criteria, which I have just mentioned, will also apply to appointments of public auditors. In addition, there is the ending of the present administrative arrangement under which public auditors must apply on a continuing basis for reappointment. Authorisation of all public auditors will, in future, be on a permanent basis and members of recognised bodies will be automatically entitled to act as public auditors just as they are now entitled to act as company auditors.
I should explain that public auditors are those who audit the accounts of industrial and provident societies and of friendly societies and they have, up to now, been appointed on an individual basis under the provisions of very old legislation relating to such societies.
Because of a Supreme Court decision of some years standing it is necessary, for constitutional reasons, to amend section 168(3) of the Companies Act relating to obligations on officers or agents of a company to make statements and produce books or documents to any inspector investigating the affairs of that company. As I am including this provision on the advice of the Attorney General I trust that it will be generally acceptable.
Employees will no doubt welcome the changes I propose in section 285 of the 1963 Act which deals with preferential payments in a winding-up. I am improving, considerably the position of employees in that I am extending the preferential list to include pension fund payments owing by a company whether in respect of its own contribution or of contributions deducted from its employees. I am also improving the provisions in so far as they relate to sick pay accruing to employees.
In addition, I am increasing from £300 to £2,500 the sum to which priority is given by the same section for employees' salaries or wages in respect of services rendered during the four months prior to winding-up. The Bill, as originally published, included £1,500 as the revised figure but following discussion in the Dáil I amended it to £2,500. In addition I also amended the Bill, as originally published, to provide power to vary by order the sum of £2,500.
It would be as well to recognise that there are limits as to what can be achieved by legislating for the position of employees in relation to preferential payments in a winding-up. If the assets available for distribution are minimal, a preferential right under statute confers little advantage.
The Bill contains features which should be welcomed, in particular by the accountancy and legal professions. I am removing the limitation imposed by section 376 of the 1963 Act which prevents the formation of partnerships consisting of more than 20 persons. I accept the argument that firms of accountants and solicitors may wish to expand so as to identify and concentrate on appropriate areas of specialisation with a view to improving and extending the range of services to their clients. I recognise, too, that these firms may wish to provide organisational structures which will encourage and provide advancement opportunities for their more outstanding practitioners.
Since the Bill was published strong representations have been received from professions other than those of accountant and solicitor to be relieved of the limitations of section 376. Accordingly, the Bill before this House provides for power to extend by ministerial order, the relief granted to accountants and solicitors to other professions.
A general measure which strikes at all aspects of the Companies Act, 1963 and which, it has to be admitted, is overdue, is the provision at section 15 of the Bill to increase all fines to reflect the fall in money values and thus increase their deterrent effect. These are the penalties for failure to comply with all the requirements of the 1963 Act including matters such as the filing of documents, returns and statements, holding meetings and providing other information to the Registrar of Companies. This is another measure, which, it is envisaged, would effect some saving in the resources of the Companies Registration Office which are taken up in pursuit of companies failing in their obligations.
In concluding I would emphasise again that I recognise that this Bill is a relatively small measure — a first step — in a series of amendments of company law. These will reflect the need for change arising from developments in commercial activity generally and, more immediately from the necessity to translate into Irish law the provision of EEC Directives already adopted. The next Bill, which will give effect to the Second Directive, about the formation of public limited companies and the maintenance and alteration of their capital, will be introduced shortly. Work is proceeding on a Bill determined by domestic considerations and on the measures necessary to give effect to the Third and Fourth Directives, and proposals on these will be made as soon as possible.
This is the general background against which I present this Bill. I consider that the amendments it proposes are worthwhile and accordingly, I recommend the Bill for the approval of the House.