I shall not take long on the Second Stage of this Bill because the Bill is primarily a Bill to be considered in detail at Committee Stage. I would like to make a few general comments about the Bill, and briefly, as the Minister has done, review a number of the sections of the Bill so as to give the Minister the benefit of our thinking in advance of Committee Stage so that he can focus his attention on certain areas of the Bill which I feel require expansion.
First, the implementation of the Fourth Directive is long overdue as the Minister indicated in his speech. In general, the manner of its proposed implementation finds support on all sides of the House. The Bill, however, has, in addition to the important matters relating to the Fourth Directive, certain implications for the general body of companies legislation. It is only right that it should be subject to the most careful scrutiny on Committee Stage, as I know it was in Dáil Eireann, before its eventual enactment in an amended or unamended form.
It is welcome that more information will be available to the general public regarding limited liability companies. Limited liability companies are a privilege conferred on individuals for the purpose of easing the financial responsibility of undertaking risky ventures. One of the earlier judges made the famous statement: "all limited liability companies are a potential fraud on their creditors." That statement has at least an element of truth in it while of course exaggerating the position slightly. In that regard the protection to be afforded to the general body of creditors in a limited liability company must be under constant review and the initiative of the European Community in including in one of its directives information on the necessity for the enactment into legislation of information to be made public in respect of all limited companies is indeed welcome.
Briefly, before dealing with the details of the Bill I will refer to a number of problems in that area. Senator Lynch has already referred to the problem associated with the Companies Office. It is important that the Companies Office should be given the help and support of the House and the Minister in reinforcing the very difficult job it has of policing the enormous number of limited companies which now exist. From my involvement in business over the years I am well aware that a proliferation of companies in a particular business enterprise is something which can happen very easily. The paper work associated with keeping those companies right with the Companies Office is a very onerous responsibility. That responsibility is not being fully met by those responsible to the Companies Office at the present time.
At present the requirement is to file an annual return and to make such further returns as are necessary with regard to security and so on. The annual returns are not being made with the pace and consistency necessary in order to keep the files up to date. In the past as long as the register relating to securities and the property of the company was up to date and the appropriate documents were lodged in the Companies Office then the failure to lodge an annual return inconvenienced those who were inquiring about the company rather than misled them, by and large. We must recognise that with the enactment of the Companies (Amendment) Bill, 1985 that will change and the responsibility of the directors and secretary of a company to make those returns will be elevated from a matter of mere administrative convenience to one where it will be a fundamental part of the permission which they have for the operation of the company to make those returns because on those returns certain credit decisions will be taken.
We should point out to those involved in those companies that failure to make those returns may lead to a situation where directors will be personally responsible for debts. That development in the law of equity, even though it is not a statute law is possible. It is possible that a creditor who is aggrieved by not having his full repayment made on the liquidation or receivership of a company may be able to go personally against the directors of the company if those directors have not fulfilled their duty of filing accounts, particularly where the filing of those accounts would have forewarned the general public and the creditors with regard to impending problems in the company.
Given the right circumstances where a person did in fact make the inquiry and where the accounts were not properly filed and where if they had been filed the person would have been warned, a very onerous responsibility might rest with the company's secretary or the company's directors with regard to the failure to lodge those accounts. I will deal with that and also with the problems with regard to accountants and their duties later on. It is no longer a matter of administrative convenience if a company does not file accounts; it will become a matter of absolute necessity that returns are made in time and as a result of that it will be a matter of necessity that an early warning system in the Companies Office would be used to warn the general public and those in authority in the Companies Office of the failure of certain companies to make returns. In that regard the striking-off of companies who fail to make returns and fail to file accounts should be examined on a much more systematic basis than previously. This is a very important development of this new companies legislation.
In addition to the question of filing returns, there are tremendous duties which will fall on the officers of a company with regard to the various additional requirements. The officers of a company in that regard include the directors, the secretary and, of course, the auditor of the company who in this Bill is elevated to a position of extreme importance to which I will refer later on.
I do not quibble with the Minister — he has my full support — on his decision to have three categories of companies. That is right and proper. I do not quibble with the Minister regarding the question of the division of companies into small, medium and large and the criteria he has used for the division. The Minister has shown great flexibility in that regard and, while I will be interested to hear what other Members of the House have to say, I am predisposed to accept the Minister's view and the decisions with regard to the various criteria to be adopted and the fact two out of three of them is the operative number — all these things — find support with me.
The general principle of the Bill and, indeed the general thrust of the Bill is to be supported. I would like to say that to the Minister because the Minister will be aware that it is normally the position in the Seanad that people from all sides of the House put down amendments, not to embarrass the Minister or the Government but to seek to improve the legislation — that is our responsibility. The Minister can be assured that in this regard the principle behind the legislation is certainly enthusiastically accepted by all members of the Fine Gael Party on this side of the House. Our comments will be constructive to try to improve the legislation if possible. It may well be, as happens very often, that the discussion of a particular amendment shows that the Minister and his advisers have got it right. In that case, of course, the amendments are withdrawn. Very often amendments are withdrawn also because the alternative is to have a vote which might not be appropriate in the circumstances. We are hopeful that the Minister would adopt the same constructive approach as we do. If this is a good Bill I am quite happy to see it come from the Seanad unamended. If, on examination on Committee Stage, we see any defect in the Bill I would hope the Minister would recognise that defect.
I have read the Bill three times. I read it when it came out first but by the time I read it again I had totally forgotten what it contained because it is so complex and complicated. However, the Bill appears to be quite well drafted and the number of drafting points we will be talking about will be quite small. There are, however, a number of points of substance to which I will now refer. Before doing that, I should say that while I am now a lawyer I practised for some time as an accountant. I am still a member of an accountancy body which is a member of the Consultative Committee of Accountancy Bodies of Ireland. There are three bodies who are members of that. They are the Institute of Chartered Accountants in Ireland, the Association of Certified Accountants and the Institute of Cost and Management Accounts. I am a member of the latter institute.
