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Seanad Éireann debate -
Wednesday, 9 Jun 1982

Vol. 98 No. 3

Companies (Amendment) Bill, 1981: Second Stage.

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

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.

I welcome the Minister and I also welcome this Bill, while, like the Minister, recognising its limitations. As he rightly said, it is a very short Bill and, considering the amount of change that has occurred and has been outlined by the Minister both within the European Community and our own economic situation, a major overhaul is urgently needed. I welcome the Minister's promise to introduce such legislation quickly and urgently.

I question the delay in some of the more urgent areas. At present here there is a facility for some shady fly-by-night companies to operate which, as far as I can gather, does not happen in the UK. For example, companies can set up here with an address and can advertise to give mail order business on receipt of money. Too often they literally fly-by-night. When they receive the money they do not deliver the goods. That is an example of the need for proper legislation.

I welcome section 3 which gives an indication of the officers of the company and who is promoting it. Sometimes searches in a company's office merely show the names of law clerks or two typists within the office, and the background of the real shareholders or of the company's viability, can be shielded behind that small amount of information.

The Minister has dealt with section 6 and with the qualifications of persons for appointment as auditors to companies. We all welcome the fact that people working abroad and returning will get an opportunity to work here. I also note that the conduct of an auditor shall be looked at and if an auditor is convicted of a criminal offence in connection with the performance of his duties or his conduct as an auditor he shall not be qualified for appointment as auditor of a company.

When the Minister is undertaking the complete overhaul of the Companies Act I would like him to consider whether persons should be precluded also from acting as auditors if they continuously report on accounts in a negligent fashion, without making due inquiry into the validity of the accounts laid before them and see them as merely something to be signed at the end of the page.

Section 7 provides for revised procedures and penalties in the case of an agent or an officer of a company refusing to co-operate with an inspector investigating the affairs of that company. Given the very difficult and delicate situation within our economy and, as a result of that, a lack of confidence among the public with regard to the collapse or the rumoured collapse of companies, everything that can be done should be done to secure such confidence, to examine the companies and make sure that we are not open to collapse after collapse but might have some warning signals that would avoid some of the very damaging consequences. Following such collapse I would ask the Minister to give some thought to broadening the scope within which inspectors can be appointed. If we have not enough inspectors to look into this and protect the public and the people within the company it will give rise to cynicism that will damage confidence in the economy.

It would appear that the sections in the principal Act dealing with the inspection of companies without the number and the strength of the inspectors would be mainly geared towards the protection of the shareholders of the company, too little with the right of the creditors and not at all with the rights of the employees.

I will comment later on the fact that the rights of employees have been strengthened through this Bill. However, section 7 could be looked at again. The whole provisions of the Companies Act, 1963, should be geared for an age that must take cognisance of the fact that not alone must shareholders be protected but that the employees and the creditors will be safeguarded as far as possible. I do not know whether one can legislate for this but I would like to believe we can. This may have to be a holding situation until further fundamental legislation comes in. Such legislation should take into consideration the fears of the creditors, and particularly of the employees within such companies. Knowledge is a great remover of fear. I cannot stress strongly enough or with more emphasis that we must keep the employees of the company fully informed. We must involve them as far as possible in the day to day working of the company. If there are profits to be shared, they should be the first to share them. If there is a company coming under stress or in danger I believe that, without damaging confidence too much, the workers should be appraised of this. Too often, tragically and destructively, the employees are among the last to hear that their livelihood and the skills they have given to a company are to be wiped out. I would like to feel that, with the use of inspectors, with more confidence shared between management and employees, we could work much more constructively to saving the businesses through the participation and the co-operation of the employees and also to remove the fears which are no help to industrial relations.

The Minister in his speech said he was improving considerably the position of employees and extending a preferential list to include pension funds claims owing by a company. The Minister also said it would be well to recognise that there are limits as to what can be achieved by legislation for the position of employees in relation to preferential payments in a winding up.

I would like to refer again to it on Committee Stage, but I believe that we can achieve more by legislating for the position of employees. As the Minister rightly pointed out, the situation has changed very dramatically since 1963 when the Companies Act was first set up. One of the principal ways in which it has changed is that many additions have been made with regard to the schedule of preferential payments, for instance, PAYE, social welfare, sub-contractors' tax, VAT, corporation tax, capital gains tax and other assessed taxes, redundancy, minimum notice and unfair dismissal. All these additions affect the rights of the employees and the rights of the State. While the provisions in relation to the rights of the employees are increased and are to be welcomed — I again emphasise that — the right of the State to claim preferentially in a winding-up has also increased.

This is detrimental in a number of respects. For the State to claim VAT as a preferential creditor enormously increases the take of the State in a winding-up situation at the expense of unsecured creditors and holders of floating charges. This has three effects: first, as preferential creditors rank before a floating charge holder, the financial institutions are now very reluctant to lend funds on a floating charge. The ability of the company to borrow necessary working capital is very often severely impaired. Secondly, financial institutions are increasingly endeavouring to secure fixed charges on book debts, chattel mortgages and stocks and by other legal strategems to endeavour to overcome the problems they face as a result of the increase in preferential creditors. Thirdly, unsecured creditors, who are the last to be paid in a winding-up, are now sceptical of the results they can achieve and the moneys they will receive in a winding-up. The net result of this is that the State is decreasing the ability of companies to continue to supply goods when they are in any way doubtful about a customer's viability. It would appear to be manifestly unfair that the suppliers of goods and services should be asked to take last place after the State when the State is slow in collecting taxes. Again, I ask the Minister to perhaps limit the State to rank as a preferential creditor for a period of three months rather than the 12 months which it has now allowed.

It is unfair and unjust also — and this applies right across the board — in a democratic society but which also has the privileged and unprivileged, that the creditors with the best legal advice and knowledge rank ahead of other creditors who have not got the same financial or expert advice to enable them to place themselves in an advantageous position. I would like to acknowledge the Minister's commitment to amending company legislation that will, I hope, guarantee the rights of everybody concerned. However, up to now and even under the 1963 Act, there was an advantage to shareholders and management and, as I explained, the emergence of the different State demands on companies in a winding-up situation also affect the State. It has led to a tremendous lack of confidence when, as we do tragically today, get so many companies in receivership. There is panic by all the groups concerned and naturally, each group tries to grab, to put it crudely, as much as it possibly can. This is not conducive to the group concerned in that winding-up situation; they have enough problems, psychologically and financially, to cope with.

With regard to the whole economy and the public confidence we have and should have in a well-run economy, it certainly is not helpful. I know the Minister will agree with me and the Members of this House that this is a particularly sad time for us to be introducing legislation because we went through a period of entry into the EEC of what could and should be described as a boom time in our economy. Then we went into a very bad recession and companies are now coping with this. What Government have to do, particularly in striving towards a just society, is to take cognisance of and control situations, whether they are good or bad. Therefore, it is all the more urgent that every possible safeguard be given to people involved. It is with that in mind that I have touched on some of the considerations I would like the Minister to have on the areas and sections which he has already worked on. I hope to go into it in more detail on Committee Stage next week. In the meantime, I emphasise once again the urgency of the more fundamental legislation needed in the face of the many great and almost overwhelming changes encountered worldwide, but particularly here in Ireland.

I would like to congratulate you, a Chathaoirligh, on your appointment and I wish you every success. I would also like to be associated with Senator Barnes when she welcomed the Minister to the Seanad.

I welcome any change in the Companies Act and therefore I welcome this Bill, however limited it may be. I am a believer in the philosophy of worker-democracy. Therefore I am against the law that states that the sole duty of directors is the protection of shareholders. The law should state that the duty of the directors is to the employees first and the shareholders second. If this were achieved, an equal sharing would be acceptable. If this were adopted and written into the Statute Book, the decision regarding the closing of many factories causing many redundancies would not be taken so lightly.

We have thousands of limited liability companies. Nearly 99 per cent of them are private limited companies. The majority of these companies are owned by two people; normally and in a lot of cases they are owned by a husband and wife. They cloak under the protection of limited liability and more and more the argument must be whether limited liability companies are havens or shields for crooks and gangsters. We have cases of builders going broke and taking with them the lifesavings of many young marries couples in the form of their deposits. Then the same builders, under a different name, start up in another place. The law should be amended to protect these young couples and prohibit the taking of deposits by builders. Instead these deposits should only be taken by the auctioneer or the solicitor and should not be given to the builder until the house and transaction are completed. As far as bank facilities being awarded to the builder are concerned, the bank will, in effect, accept the security on the strength of the deposit taken, so that argument does not hold.

I also appeal for far more disclosure in dealing with companies. There is no reason why accounts should not be registered with the annual return. Each company has a legal responsibility to produce annual accounts to the tax inspector. There is no reason why the accountant at that stage should not furnish a copy of his accounts to the company's office. This disclosure would be of major benefit to employees and to other companies dealing with that company. They would be in a position to see the good side as well as the dark clouds gathering on the horizon. This disclosure should be linked with a report on the other companies owned by these directors. An index of the companies owned by these directors should be shown in the company's file. There are, in a number of cases, as many as 15 companies owned totally and run by the same directors. Ninety nine per cent of all companies are private companies and directors tend, in many cases, to be husband and wife. There is also a grave and important position in the movement of funds from one company to another but still remaining within the law. Disclosure of accounts and the linking up on an index basis would highlight this.

In recent months the name of the liquidator has become a household name. The way small private limited companies are financed at the moment, the cash flow funding, liquid assets against liability of any company, is maintained by non-payment of VAT and PAYE. The VAT will come to a head in September with the introduction of VAT at the point of entry. This will force many companies into liquidation as the banks have a stated policy at the moment that no credit is to be given for this purpose. After September the number of liquidations and the number of people out of work will be increased. The companies office has for too long been a rest place for some civil servants from the Department of Trade, Commerce and Tourism and other Departments. It should be one of the most important Departments in the Ministry. The setting up of an inspector of inquiry, who would have his or her own staff with the power to investigate companies, is urgently needed. The setting up of a consultancy unit with the power to investigate the accounts of companies would be of major importance to the Government as well as to other individual companies trading with these organisations. It would be in a position to report to the Government how much funds are in these companies owing to PAYE and VAT. In my opinion they are enormous.

The Companies Act should take into account large payments made to political parties. There should be a separate heading in the same way as audit and accounts are marked out charged with this disclosure. This would affect and limit the vast amounts of money flowing from businesses to political parties and would hasten the day of direct State financing to public parties and the control of money spent on elections, as the State would pay for elections on the basis of each vote received by that party or individual at the last election. Therefore, the political parties would be subject to the court of auditors appointed by the State. On setting up the company, the names of the principal directors should be submitted before the company commences trading. The registration number given to each company should be linked to VAT, PAYE and income tax registration. VAT, PAYE and income tax registration tend to be the same nowadays. The registration office would have a direct link with the number given to the company. Therefore it would be of much benefit when trying to investigate various companies. Personal liability of directors is present in the case of fraud but not in the case of bad management. If two small electrical businesses go broke because of bad management and one has the word limited after its name and the other has not, the person with limited liability is protected but the one who has not got limited liability is hounded by creditors, by the bank and by the Government for VAT payments. One is let off scot free and the other one is hounded, put out of business and his life destroyed.

I welcome the Minister's acceptance of the proposition to increase the claim for outstanding amounts to employees from £300 to £2,500. This is a welcome achievement and is long overdue. On the question of penalties, a fine on companies is not an incentive to give the information to the companies office. If the methods used in the construction industry by the issuing of a contractor's certificate applied in the building industry, were in some way linked to trading companies by means of the issue of a trading certificate, it would be of enormous benefit to companies in making sure that all their affairs are in order. The certificate of trading should be withdrawn if the Minister finds irregularities in the company, if the affairs of the company are not in order, or they have failed to register their proper papers with the companies office because a fine is of no great consequence. I do not know of any case where the fine was actually imposed.

The case of limited liability is central to this whole problem. The Minister spoke about the registration of a company and said limited liability confers considerable advantage to the promoter and shareholder. In the case of limited liability, I have yet to be convinced that the largest contribution to trade in this country has been marked by protection of limited liability. Many businesses would still be in operation but chances taken by the directors under the cover of limited liability have injured in many cases their employees who have given their services to the company and in many other cases, by their risks, have injured many companies dealing in good faith with that company. The situation of limited liability is one which should fundamentally be looked at. The advantages and disadvantages should be weighed up. The cover which limited liability gives to individuals should be looked at and investigated as a matter of urgency. We have the youngest population in Europe facing many problems on every front. Employment is our major problem. On the other side, we find with the blessing of the law people of very doubtful purpose operating against the common good and with the protection of limited liability. It is no wonder that many young people find no hope in this country and no relevance in the institutions of the State. I welcome however this move to strengthen the Companies Act. It is long overdue.

I preface my remarks by congratulating you on your new office and, as a fellow county woman, we in Clare are very proud to have you in the Chair. I also welcome the Minister to his first meeting of this Seanad.

This Bill is particularly interesting. As the Minister said it is the first of a series of such Bills he intends to put before the House. It is generally acceptable in so far as it is at least an improvement in the area of company law as it at present exists.

There are some sections in particular that are very welcome. Section 10 proposes to amend section 285 of the 1963 Act. I refer in particular to the pension payment fund for employees and to the preferential sick benefit payments. I would hope that at a later stage the Minister may be able to consider these in a more serious light and extend them further than what the present proposal intends to do.

Section 11 of the Bill is also welcome because in the past it has been common for companies to be defunct for six or seven years and to be still on the register in the Companies Office, an unsatisfactory situation. This is a very good improvement.

Section 13 is also a major improvement in so far as it amends section 376 of the principal Act. It removes the limit of 20 persons in partnership of accountants and solicitors, and I was pleased to hear the Minister state in his speech that he intends to have that extended in the matter of properties. This can be done by ministerial order. It is important in the type of industrial times we live in to have this extended.

Section 15, which increases the penalties to keep in line with modern inflation, is also very welcome because they were very outdated and it was very often more expedient to commit the offence and pay the fines than to do what one was obliged to do according to the Act. There are, however, some areas in company law which need examination, and I refer in particular to what I feel is the very essence of company law, that is the area of limited liability. Basically, a company that has limited liability is given a licence to form a company, to go out and deal with the public, incur debt and responsibilities to the public in general, and yet if they go into liquidation the public in general have often little comeback. Debts are paid only to the limit of the liability of the company, and often people who have their companies liquidated, at a future date go into business again in the name of another company to operate a different product. It is very difficult for the public to see this happening and to see themselves being victimised. Such people can re-establish a position in high finance in the country. This is an area that the Department should look into urgently.

This Bill deals mainly with the technicalities of company law, and we have to get to the very soul of company law, which is the actual company itself and the actual type of liability that company has. There are some areas in particular that should be examined, and I should like to highlight a number of areas in which people are badly hit by limited liability. You have companies manufacturing goods and they go and sell them on the open market and they give a guarantee maybe for a year or two years, or whatever. In the meantime the company may go into liquidation and the purchaser then has no guarantee. The directors of such a company should have their liability restrained and personal responsibility imposed on them to some degree to ensure that the consumer will be protected.

At the moment, despite the recent consumer legislation that was introduced, there can be still serious damage by companies going into liquidation. In recent times it is becoming more and more blatant in relation to building companies and development companies. Such companies usually have to maintain and provide services on housing estates until the local authorities take them over. If companies which develop housing estates go into liquidation the purchasers of the houses in the estate find themselves with increased overheads to maintain the roads and the services in their estates until the local authorities take over. When these companies give guarantees to maintain services, the people affected should be more familiar with their financial situation.

The Minister should consider having personal responsibility imposed on directors of companies at the time that the guarantees are given. Normally development companies have to give to the local authority or the building society who give a loan a guarantee that the house will not suffer from defects for a certain time. If the company goes into liquidation the houses may suffer from defects and the purchasers have no comeback on the company from which they bought the house. This problem has to be examined and personal responsibilit has to be put on the directors who give the guarantees.

When somebody is buying a house it is normal procedure for the solicitor of the vendor to hold the deposit as a stakeholder until the purchase is complete and if something happens in the meantime the purchaser will get the deposit back, but companies seem to operate their own type of rules, laws and regulations, and often they get the deposits and it is not the company's solicitor who holds the actual deposit payment or the various payments which can follow. These go right into the hands of the company. If that company goes into liquidation a very serious problem arises, and in most cases you are talking about young couples who are trying to purchase houses. They lose their deposits and may lose not alone their deposits but the stage payments, depending on the type of liability the company has.

This is a very serious situation. At the moment there are a number of young people in the country who are in fear that they might find themselves in this position, and I feel that the Department should treat this matter as urgent because there is a danger that more and more young people will find themselves never to have houses because of the serious experience they would have on the first occasion when they pay their deposit, money that they have been saving for years, and their various stage payments after that.

In general there is public lack of knowledge about companies and how they operate and the type of laws that govern them. Companies who have debentures should show this in their various communications, be it advertisements in the public papers, their receipt books, their letterheads, whatever. Something should be done to ensure that all communications made by a company with any person or groups of people should have on the paper on which the communications are, or any other form of communications, a note of the fact that it has debentures the same as the registration number of the company is evident on the letterhead.

These are a few areas that I feel need serious and urgent examination. In general, the Bill is to be welcomed because it is a move in the right direction, and I hope that the Minister and the Department will be able to move pretty fast on the other areas that he proposes.

I should like to thank the Senators who have spoken for their welcome for the Bill and its provisions. A number of Senators said they look forward to some of the things being done which I mentioned. Much of what was talked about by them in the debate are things one would like to see in forthcoming company legislation. It is very frustrating to realise in practice how excruciating it is to get this legislation moving. Even this, a minor Bill, has been going the rounds for about 18 months. I had hoped to have a Bill published within a few weeks on the Second Directive. I passed it about three weeks ago to go to the Government and I am told it arrived back today from the printers. It takes three weeks even to print the Bill, which gives us an idea of how frustrating it is when you want to get on to do things, and these things are necessary in terms of amending company law.

Senator Barnes said more inspectors should be appointed under the 1963 Act. I am probably the first person who ever used inspectors, and I have appointed two sets. As far as I can recall, I appointed both sets of them about three years ago and neither of them have yet completed the inspection. It is not the fault of the inspectors but of the people into whom they are endeavouring to carry out inquiries. Quite obviously the relevant sections of the Act need to be strengthened in order to give the inspectors greater powers to enforce their investigations or their right to investigate. At the moment I get the impression that they are being laughed at and, as is so often the case, the courts take the view that the rights of somebody being investigated are superior to everyone else's rights and superior to the rights of the community as a whole. The only way that I think we can change that situation is by trying to change the law in relation to it. Unhappily that cannot happen as rapidly as one would wish.

Senator Barnes made the point that she felt the State's preference in terms of a preferential creditor is too great as against the employees. The truth of the matter is not like that. The employee preferences are not just those that are set out in the section in the 1963 Act. We have to look at all the preferences that employees have under modern legislation which puts them in a stronger position virtually than anybody else: we can think of all their rights under the social welfare Acts, the redundancy Acts, the health Acts, the Unfair Dismissal Tribunal and many other Acts that have been passed in recent times.

The State has often found itself in the position of being an unwilling financier, almost, of companies in trouble. I saw a report by auditors on a series of companies that went into receivership about a year ago and to my amazement I saw that the Revenue Commissioners were owed £650,000 by that group of companies in respect of the PAYE deductions which were made from the wages of the employees and which were not paid over to the Revenue Commissioners. It is only right that the Revenue Commissioners should have equal priority in that case to get their money. What is remarkable is that they could allow an amount of that kind to remain outstanding for so long when frequently they seem to put enormous pressure on individuals for small sums of money, like £500 or £1,000. I think that the State's preference would have to be maintained at its present level, but in practice the State is not really competing with the employees: the possibility of an employee being owed any significant amount of wages is negligible because he simply would not work more than a week if he was not to get paid.

Senator Conway made the point that many of the fines are not adequate. They are being increased five-fold in this Bill. In particular, the fines for not lodging documents are not adequate, even though they are being increased five-fold, but the registrar will have power to strike the company off the register after three years, and I think that is more effective than the level of fines.

In the other House, Deputy Kelly made the point that there is a very finely drawn hierarchy of fines in the 1963 Act and he did not see much point at all in all the distinctions between all the different levels of fines. I agree with him and I hope we can abolish the distinctions and have just one set maximum fine, say £5,000 or £10,000 or some such figure in the Bill to be published shortly. It is meaningless to have some of the figures that are in these Bills where companies are concerned. The difficulty is apparently arising from a ruling of either the High Court or the Supreme Court some years ago that in their view £500 was the maximum fine which a court of summary jurisdication should be allowed to impose. It seems a very low figure, but that decision was given about ten years ago. I would hope that a corresponding figure, which today would be about £1,500, might be substituted.

Senators Taylor and Conway raised the whole basic question of limited liability and the abuse of it. I spoke on that in some detail in the Dáil as something that one would wish to tackle. Unfortunately we cannot tackle it in this Bill, but in one of the up-coming Bills I would hope we can. The instances of abuse of the privilege of limited liability generally given in this and the other House were, unhappily, of some house builders who have frequently, deliberately and consistently set out to abuse the privileges that the 1963 Companies Act affords them to the detriment of unfortunate customers.

So far as house building is concerned, the kind of reform that I suggest is desirable is that if a building company were liquidated it would not mean the end of the company's and its directors' liability, but that the liability would remain in a personal way with those who were in effect directing the company. Very often they are not the directors, only typists in a solicitor's office, or people like that, who have been put as the shareholders and the directors, and they do not know the first thing about the company. If a building company was liquidated in circumstances when it had not fulfilled its obligations, for example to lay out a housing estate or to remedy defects in a house, then the operators behind it would become personally liable for the obligations of the company. It is remarkable to see in Dublin in a half mile stretch of the same road, the same people building three different sets of houses under three different names, having formed three different companies, and each one saying it has no connection with the others.

Senator Conway spoke about the need for more disclosure. That is appropriate for the Bill which we hope to introduce shortly and which will be related to the implementation of the EEC Fourth Directive. It might be more fruitfully debated on that Bill, which will be dealing with those matters and with the degree of disclosure that will be needed, rather than on this Bill.

I think that these were most of the points raised in the course of the debate, and I would like once more to express my thanks to the Senators for their remarks in relation to the Bill.

Question put and agreed to.
Agreed to take remaining Stages today.
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