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Seanad Éireann debate -
Wednesday, 24 Feb 1988

Vol. 118 No. 13

Companies (No. 2) Bill 1987: Committee Stage (Resumed).

Question proposed: "That section 48 be deleted from the Bill."

I have circulated — because sometimes there is confusion in these cases — a list of Government amendments and the groupings of the amendments. Having been on the floor of the House myself I realise that one may become bogged down, and if anybody is confused regarding the amendments being taken together, please ask me or use the lists. We will deal with it as we go along. We are now on section 48.

Before we begin, I would like to make a general point about the amendments we have before us today. I certainly do not want to be difficult or obstructive but the progress of this Bill into the House and through the House has been quite unorthodox and most unusual. The Bill was published. It was introduced into this House. There was a very long, detailed Second Stage debate on the Bill. During the course of that debate the Minister invited outside submissions. This is highly unusual. This is normally done before a Bill is published.

There is a certain element of discourtesy to this House in the way in which this has happened because submissions have been made to a Bill which was published and debated in this House. If that was to be done the submissions should have been filtered through an Oireachtas committee where those of us who were involved with the Bill would have had access to what was happening. We would have seen the submissions and we could have evaluated them. That did not happen. The submissions were made to the Minister privately, something which normally happens before a Bill is actually published.

Obviously the large number of Government amendments which we have before us today and the next day are the result of these very detailed submissions made by outside groups after the publication of the original Bill. It would be fair to the House if the Minister — perhaps not straight away because he may not be prepared for this — were to report to us on the submissions made to him since we last discussed this Bill and the points which have been taken on board in response to various pressure groups or interested groups in this matter.

I dislike interrupting anybody. What you have said would be more appropriate on Fifth Stage. I appreciate that you would like to have that information for the betterment of the Bill and for the Minister's benefit. Before the Minister takes section 48 he might like to make some reply to Senator Manning.

I understand the Senator's concern. I do not think he has anything to worry about. This Bill has 189 sections. There are some 42 sections in Part IV of the Bill. We have 66 amendments to 42 sections. The Bill was first published in January 1987. Some 60 interest groups submitted their suggestions and proposals after the Minister's invitation.

All of this points to one simple thing, that this is major legislation. It is extremely complex. We have come forward today with many amendments from the Government side as a direct result of what the Seanad told us the last day we discussed it. If there was any discourtesy in continuing with outside submissions that is regretted. The only purpose is to ensure that we get this Bill right. This is not a political Bill from the Government's point of view. It is a Bill on which we want the maximum amount of assistance from this House and the other House. The reality is that it has been knocking around since January 1987 and was the subject of much political debate before that time. It has been around for a long time; it is time we moved on it.

It is important to get a balance into the Bill between the needs of business and the needs of other interests in the business. I appreciate the Senator's concern, but there is nothing underhand or unusual about it. Submissions are made. They are published by interest groups. They appear in the newspapers. Almost anybody who would make a submission to the Department would almost always issue it for publication. It is a process whereby we just listen to what outside interest groups and the Seanad and the Dáil are saying. There is certainly no attempt in any way to go past this House. We are trying to get it right.

We are on section 48 and it is proposed to delete section 48.

I want to ask if the Minister would set the ground on this.

That is a good point. Perhaps I could use section 48 to do just that. We are asking that section 48 be removed in that it does not serve any necessary or useful purpose. It would help in tidying up the Bill now to remove that section.

Before I deal with Part IV of the Companies (No. 2) Bill, which we are going to deal with today, let me just say there are a number of clear objectives, to remind ourselves. First, we are trying to eliminate abuses which have grown up in company law over many years, to stop the Phoenix syndrome which many commentators have pointed to, the people who abuse the privilege of company liability. We are setting out to stop that abuse, which the previous Government and this Government set their minds to doing.

Secondly, we are setting out to make insider trading a serious offence. That will be dealt with in the next part of the Bill. We are setting out to balance this business of tackling people — the company cowboys — who abuse private liability or limited liability. There is a balancing system in the whole legislation, that is, a system whereby companies can be rescued by putting them under the court's jurisdiction for a limited period of three months. In that time, for example, their debts are frozen and the company can be restructured and re-organised and nursed along.

It is not identical but it is close to the American Chapter 11 system, whereby there is a situation between a company going along from day to day and suddenly going into liquidation. There is a three months frozen period of intensive care in which the company, if it has any real chance of survival, can be nursed back to health. That is a rescue system and it is a positive system. It should reduce the number of companies going into liquidation, or at least put them into intensive care for a period. There was a need to have a gap between the sick company and the death of a company. That new ground has been put into this Bill, an intensive care system to give the company a chance to get over its illness or at least make some final decisions.

That is the general thrust of what the Bill intends to do. Today we are dealing with Part IV of the Bill, which deals with the disclosure of interests in shares. Part IV of the Bill contains detailed provisions about disclosure of interests in shares and debenture of companies. Under section 90 of the 1963 Act every company must keep a register of the shareholding and debenture holdings of the directors and secretary of the company. This information must also be given in respect of their holding in any member of the same group of companies.

This information must be given whether the shares are held by the director, by the secretary himself or herself, or by his or her spouse or children. It must also be given if the property is held in trust for him. Section 193 of the 1963 Act requires the directors and the secretaries of the company to give notice, in writing, to the company of such matters relating to himself and to his or her spouse and children as may be necessary for the purposes of section 190. That is the existing situation.

There is a new approach here. Part IV of the Bill not only replaces the existing provisions relating to holdings of directors and secretaries with new expanded provisions, but it also introduces new requirements relating to disclosure of significant shareholdings by all beneficial owners of shares or debentures in a company. Under this new approach, which we are discussing today, the extent of the disclosure will vary according to whether the company is a public limited company or whether it is a private company and also according to whether the person involved is a director, or a secretary, or merely an individual shareholder in the company. That is the broad framework for what we are trying to do in Part IV of the Bill, a new approach making it essential for people to disclose what holdings they have and that disclosure depends on various ifs and buts which emerge throughout the Bill.

Chapter 2 of Part IV of the Bill deals with directors and secretaries. This chapter is going to replace section 90 of the 1963 Act, register of directors' shareholdings, and so much of section 193, which is the general duty to make disclosures, as relates to section 190. Under the new provisions the directors and secretary of a company must disclose their interests, no matter how small, to the company itself. The new provisions are more wide-ranging then those they are replacing. For example, what is to be regarded as an interest in shares is defined in considerably more detail in this chapter than has been previously defined. Also, interest held by spouses and minor children of directors will be regarded as being held by the director. There are more extensive requirements than previously about registers of interests which must be kept by companies and considerably more public disclosure of interests held.

While Chapter 2 deals with disclosure of interests by directors and by secretaries specifically, Chapter 3, which we hope to get to today, on the other hand includes a new regime of disclosure aimed at all shareholders, that is, whether they are directors of the company or are not directors of the company. The general idea here is that, where a person is the beneficial owner of at least 5 per cent of the issued share capital of a public limited company, he or she will be required to declare that interest to the company. Following that such information will be available to directors, shareholders, employees and creditors of the company. In addition, such information may be considered desirable by persons who wish to establish a relationship with the company whether as shareholder, creditor, or in some other capacity.

This chapter in section 72 provides for a register to be kept by every public limited company of the information supplied under section 59 and for the inspection of that register by not only members of the company but any person. There are also provisions in Chapter 3 of this Part which will require an individual who is part of what is known as a consort party — Senator Ross might know something about those, I do not — to disclose his interest if the total holding of the consort party, as it is called, that is parties acting in consort to acquire shares, exceeds 5 per cent of the share capital of the company. A consort party is essentially a group of persons acting together to defeat the object of the notification requirement of the statute, the interest of none of them reaching the notifiable percentage of 5 per cent, but that of all of them together amounting to a substantial, or even to a controlling interest. This is an anti-avoidance measure.

Chapter 4 deals with disclosure order in private companies. A general regime of disclosure is not being provided for in relation to private companies. Chapter 4 contains provisions which, in exceptional circumstances, would allow a person with a genuine financial interest in such a company to go to the court and obtain a court order compelling disclosure where he or she can show the court that their interest would be prejudiced by non-disclosure. There is no general regime of disclosure in regard to private companies but one has access to the courts in that area.

In a general sense the objectives of the Bill are eliminating abuses, tackling the Phoenix syndrome, the insider trading elements and the new company rescue system. Today we are dealing with Part IV of the Bill which deals in general with how the public and other interested parties find out who owns a company, what an interest in the company is and what notification there should be. Section 48 does not serve any useful purpose at this stage. We suggest that it should be removed from the Bill. If Senators require any more detail I will be glad to expand on that.

In response to the broader framework in which the Minister has placed this section it was helpful to have the context in which we are now looking at a substantial number of Government amendments. I do not know whether the Minister is in a position to say why the Government have taken the step on Committee Stage of altering substantially the nature of the disclosure provisions and broadening substantially the scope of them. Section 48, an interpretation section which was in this Bill on Second Stage, is to be removed. The interpretation section provides an interpretation of four concepts which are used in this section. Was it a mistake to have a separate interpretation section initially in this chapter, or is the Minister of the view that because of the amendments now being proposed by the Government it has become redundant? If so, could the Minister explain why it has become redundant?

We are now of the opinion that it was a mistake to have an interpretation section here. That is the view of our drafting people in the Department. On Senator Manning's point, the result of those submissions has given rise to a large number of technical amendments. While there may be some criticism of the timing of the submissions, there was no doubt that some of the technical points raised with us have been helpful and useful and, no doubt, are points which will be made by the Seanad in due course. With the exception of one substantive item in the whole Part, most of them are of a technical nature. That substantive one is section 49 which we are coming up to now.

I take issue with the substance of what Senator Manning was saying. I welcome the fact that a Bill can evolve quite substantially on Committee Stage, particularly when it is introduced in this House. We have had the experience of the Status of Children Bill. The National Monuments Bill was substantially altered on Committee Stage. I do not object to the Minister either seeking representations or receiving representations from interested parties. There is no reason why that process should be suspended or should not go on.

It is helpful that Members of this House should be aware when there is a significant shift in the approach being adopted to a chapter. I am happy if the Minister is deleting section 48 as having been unnecessary at the beginning. It is unusual to have an interpretation section in a Bill in relation to a chapter but, as the Minister said, this is a very long and complex Bill.

I go along largely with what Senator Robinson said, but it is very hard to separate section 49 from all the sections which deal with the disclosure of interest in shares.

I am trying to get rid of section 48.

I will not mention section 82. It is not easy to deal with it in isolation because one of the problems in getting down to section 83, is that in the way it is framed, unless the amendments say otherwise, it is an impediment directed more at preventing disclosure of information. The reference to an application for a disclosure order being made in contemplation or in furtherance of a trade dispute should be deleted from section 83 (5) (b). I am not opposed to section 48 being deleted. There is interpretation backwards, but there is no interpretation forwards. There is nothing to substitute for section 48 to cover the other sections. It might be taken to be preventing the disclosure of information particularly when there might be contemplation of the furtherance of a trade dispute and this causes problems.

Section 48 has nothing to do with the business of disclosures. It is a definition section. It does not affect the rest of the Bill. It is an interpretation section and from a technical point of view we do not need to make those definitions at that stage so we feel we can take it out. It is to tidy up the Bill.

On the other point the Senator made about less disclosure the Government would say that the purpose of Part 4 is to have greater disclosure. Perhaps that is something we can talk about when going through the sections. I am adamant that the drift of this Bill is to give more disclosure. One could argue that there should be more, but that is a matter of degree. Our point of view is that this provides for more disclosure of who owns a company, who the real power behind companies is and the general right to know who pulls the levers in the corporate world. That is what is behind a lot of this Bill but there are some safeguards built in for a number of specific areas which are important. The Senator mentioned trade disputes. That comes up in a later section and we can deal with it then.

Question put and agreed to.

Amendments Nos. 42 and 43 are similar and may be discussed together.

Government amendment No. 42:
In page 48, lines 22 and 23, to delete "public limited".

I do not know whether Senators will wish me to refresh them on the contents of the section or whether we should go straight into the amendments. We could be here for a long time if we adopt the former course.

We could deal with the amendments first and then deal with any questions Senators have on the section.

We are dealing with amendments Nos. 42 and 43 together. This is section 49 (1): in page 48, lines 22 and 23, to delete the words "public limited" and in page 48, line 27, to delete the phrase "public limited". It has been correctly pointed out to us by a number of representative bodies that the scope of section 49 and therefore of all Chapter 2 is defective. These people have rightly said to us that, under the Bill as it now stands, the disclosure requirements in Chapter 2 apply only to public limited companies and not to private companies.

On the other hand, the provisions of the 1963 Act, namely, sections 190 and 193, which are replaced by Chapter 2 of the Bill, currently apply to all companies, both private and public. We agree it is undesirable that the scope of the new provisions should be less than the provisions which they replace. The effect of this amendment, therefore, will be to provide that all companies, whether public or private, will be subject to the disclosure requirements of Chapter 2 of Part IV. For that reason we need to remove the phrase "public limited" to include all companies under the disclosure requirements for directors and secretaries.

I am not very happy with the statement the Minister of State has just made in relation to disclosure. I understand more than 5 per cent of a shareholding in a private company would have to be disclosed under the terms of Part II of the Bill.

On a point of information, if you are a director or a secretary all your shareholdings must be notified to the company. There is no 5 per cent bar there. Every single share you hold must be notified to the company if you are a director or a secretary.

Would that have to be notified to the registrar? Would that have to be placed on the register of the Department as well?

When you notify it to the company it will go on the company's register.

It is automatically in the Companies Registration Office.

No, it will be on the company's own register. It will not be in the Companies Registration Office.

The reason I am worried about this total disclosure of shareholdings in private companies is that we have to be extremely careful that we do not militate against any investment that will take place to create employment. I know from my own profession that there are vast sums of money which are lying dormant and which should be going towards investment to create employment. They do not perceive that they would get the necessary financial return from doing so when compared to other investments they would have at their disposal, whether in insurance companies, Government gilts and securities or whatever. The incentive for people to take their money and invest it in a private company is something which this Bill should encourage.

I can give an example of where this amendment could cause difficulty. A community organisation, or a community enterprise organisation, could be funded by the Department of Labour under FÁS. The Youth Employment Agency could give a grant for an enterprise worker of £17,000 a year to help communities to create employment, to help a self-help community association to create employment in their own community to keep people at home in their communities rather than going off as illegals to Britain or America. In order to safeguard the directors' own individual interests it would have to be a limited company. For example, there might be eight directors in that company who want to invest in 51 per cent of the shares of that company. Those people, even thought in a voluntary capacity, would have to register themselves, would have to disclose their interest to the Companies Registration Office because it is a private company. That would certainly cause tremendous difficulties for many people becoming involved in a voluntary way in communities in helping to create employment. If I am to be asked as a voluntary person to put my name to a certain number of shares to get a private company in a community off the ground to create employment in my community, it would cause tremendous difficulties for me to enter into that because of the consequences it could have on my personal guarantees and on my personal company which I would have laboured for in my personal capacity. I would like clarification on that before I agree to withdraw my reservations about the deletion of "public limited" company.

I support this amendment in principle because the distinction in the original section confining it to public limited companies is a bit of an arbitrary one. Some of the largest companies in the State happen to be private companies. For example, Bord Telecom and An Post are private companies. They may not, in fact, have the same relevance in relation to disclosure of shares as other companies, but it is not a very real distinction. Since the interest is in having disclosure, it is appropriate not to confine it to the artificial creation of a public limited company as opposed to the artificial creation of a private company.

I am concerned and to some extent share some of Senator Hogan's concern — this is something we want to tease out — about the implications and in order to pinpoint my concern it is necessary to refer to further parts of this section. If a director or secretary does not disclose the shareholdings of themselves or their family, they would be guilty of an offence. If we accept a further amendment the Minister is proposing, there is no question of getting the consent of the DPP for a prosecution. Also the person has to do it within the proper period. When we come to the section we will discuss it. We have to realise, if we are requiring disclosure right across the board of all shareholding in all companies, we will have to be terribly careful, first of all that people know they may be becoming liable for a criminal offence unless they do it and secondly, that there is a very significant publication before the section is brought into effect of what would be required. It then would be a full requirement right across the board. I would welcome the Minister's response on that. I support the amendment in principle but would like to have further clarification on those points.

I understand Senator Hogan's worry but it is not going to be a real problem. If you hold shares in a limited company which is doing some local community work, it will come under this in the ordinary course. All it means is that the fact that you hold those shares is to be made known to the company. You must tell the company that you hold those shares. You cannot hold them privately. You could argue almost the other way that, in community efforts, it is even more important that there are no mysterious shareholders, that the actual holder of the shares is known to the public — all the more reason to make sure that the actual owner of the shares is known to the company so that they know who they are dealing with. From a community point of view, I cannot see that it could become a real problem. There is the other general point, too, that the public have a right to know in a general sense whom they are dealing with or the structures they are dealing with. I understand the Deputy's worry but I do not think it is as serious as he may feel.

Senator or Robinson is probably referring to the fact that just five days is to an extent a short time to get your act together in the face of perhaps a criminal offence. Section 51 (1) in the last phrase provides that five days from when you become aware of the fact you need to notify.

Are you not supposed to know the law?

I would be concerned if it were five days from a certain event because that is a short time, but it is five days from when you become aware that you may have an interest or have an interest. There is no real excuse for delaying beyond that time once you are aware that you may have an interest.

While I appreciate the comments the Minister has made, he has not dispelled my anxiety about the deletion of the lines involved. Rather than push it to a vote — I would not dream of doing that at this stage — I will indicate to the House that if I am still concerned about it on Report Stage, I will put down an amendent. I want more time to reflect on what the Minister has told me.

Amendment agreed to.
Government amendment No. 43:
In page 48, line 27, to delete "public limited".
Amendment agreed to.
Government amendment No. 44:
In page 49, lines 16 and 17, to delete "subsections (1) and" and substitute "subsection".

This is largely a technical amendment, the purpose of which is to remove an unnecessary duplication of subsections (1) and (6) of section 49.

I still have not quite understood why subsection (1) has been dropped. Perhaps the Minister could clarify this.

Subsection (1) requires a person who is a director or secretary at the time of commencement of this section to notify the company of the existence and extent of his holdings in shares or debentures of the company at that precise time. Subsection (6) provides at present that in the case of such a person, subsection (1) shall not require the notification by him of the occurrence of an event before the subsection comes into operation. Effectively the same thing is being said twice in different subsections of the same section. The reference to subsection (1) in subsection (6) is, therefore, in my view, unnecessary and perhaps misleading and should, therefore, be taken out. That is what we are trying to do.

Amendment agreed to.

Amendments Nos. 45, 55, 83 and 88 are related and may be discussed together.

Government amendment No. 45:
In page 49, lines 23 to 26, to delete "or who, in purported fulfilment of an obligation to which he is so subject, makes to a company a statement which he knows to be false or recklessly makes to a company a statement which is false,".

The reason for this and the other three related amendments Nos. 55, 83 and 88 is that the offence involved, making false statements and so on, is already provided for in a general way in section 186 (1) of the Bill. That section deals with the wilful or reckless making of false statements for any purpose of the Companies Act including, of course, this Bill. It will, therefore, obviously apply also in relation to section 49 of the Bill. The inclusion of these words in section 49 (7) is, therefore, unnecessary and this amendment will remove those words. Similar situations arise in the case of section 56 (6), section 71 (7) (b) and section 77 (3) and there are related amendments to rectify the position in each of these cases also.

Amendment agreed to.

Acting Chairman

Amendments Nos. 46, 61 and 84 are similar and may be discussed together.

Government amendment No. 46:
In page 49, to delete lines 31 to 33.

Section 49 (9) means that before the Minister can take summary proceedings for an offence under the section he will have to get the consent of the DPP. The purpose of the amendment is to remove this requirement which seems to be an unnecessary complication in view of the type of offences we are dealing with in this Bill generally. In addition, the requirement to obtain the consent of the DPP before a prosecution can be taken would slow down the prosecution process and thus adversely affect the efficient operation of the Act.

Under section 184 of the Bill the Minister is empowered to prosecute summarily for an offence under the Bill. The effect of subsection (9) as it now stands would be to require the Minister to get the consent of the DPP before proceeding with the prosecution. The situations in existing legislation where the consent of the DPP is required are extremely rare and, following further consideration of this requirement, it is perhaps now unnecessary and should be removed. A similar situation arises in a number of sections in Part IV of the Bill and I propose in similar amendments to delete these provisions also. The provisions involved are contained in sections 57 (4) and 71 (9), amendments Nos. 61 and 84 respectively.

While I appreciate the fact that the Minister is trying to bring about a more efficient working procedure in order to enable the taking of a case, I am somewhat concerned that the sole discretion on proceedings should be left in the hands of a Minister of the day. Perhaps the Minister would like to comment on whether it would be important from his or any Minister's point of view to have an independent procedure laid down by which the Director of Public Prosecutions would have discretion in bringing proceedings rather than leaving it to political input in the form of a Minister for Industry and Commerce, whoever that would be.

Presumably when subsection (9) was put into the Bill when it was drafted and considered on Second Stage, it was felt that it would be appropriate to have this kind of check. The Minister said he does not feel it appropriate to continue it in this and the other relevant sections. He points out that the Bill itself authorises either the Minister or the DPP to bring summary proceedings for offences under this section. It relates to the issue I raised that we may come back to on the section itself, that we are extending disclosure right across the board to all companies. Anybody who is a shareholder, or a secretary, or their families, must disclose. We are saying it is a criminal offence if you do not do it within five days of when you know you have the interest in the company. How does the Minister envisage it might come to the attention either of the Minister or the DPP that it would be appropriate to prosecute for an offence under this section in relation to disclosure of private companies? It would be useful if we had some idea of how in practice this is likely to operate.

On Senator Hogan's point, the DPP retains under the Prosecution of Offences Act, 1974, the general right to prosecute. That independence is still there if the DPP feels there is something under the Act which he should prosecute on. There is general protection there.

Could he initiate it?

He could initiate it in that context. If he felt independently that under the Prosecution of Offences Act, 1974, there was something he should prosecute, the DPP could investigate it.

We could do it in this Bill too.

In regard to Senator Robinson's point, all I can say is that it has come to the attention of the Minister in the same way as other items under the existing companies legislation would. There is no large inspectorate roaming the country trawling for problems like this. It comes to attention by complaints and by general observation. The Senator is correct. There is no police force as such trawling for this kind of information but one would imagine that if there was a serious difficulty a complaint would be made.

For example, after this section comes into operation, if a company was involved in litigation and a motion for discovery was made and, on discovery, it was clear that there was not disclosure of the interests of directors and secretaries, is that a matter which should be referred to the DPP, for example, by the court, or a matter that somebody in the course of litigation could record or have referred to the DPP?

Looking at section 19 of the Bill, for example, the power of the Minister to require production of documents, the Minister has quite substantial powers in that area to seek information. In any case, where he is aware of difficulties he would certainly use section 19 to require production of documents and so on. Arising out of that, he could initiate his own prosecution or, indeed, refer it to the DPP.

Amendment agreed to.
Question proposed: "That section 49, as amended, stand part of the Bill."

On the section because it is possible to look at it in a broader context, I just want to come back to the point I made about the proper period which is, as the Minister says, five days from when the person is aware he has an interest. When the section is brought into effect, anybody holding shares will be aware of it as of then and has five days in which to make that disclosure to the company, and that is every company in the State. It is a very far-reaching proposal and I am concerned mainly that there is adequate public information and even education about the implications of it so that those who should be making disclosure to their companies are doing so. Given again that it will be required in all circumstances, is it intended to have guidelines issued to companies from the Department as to how this is to be implemented, with standard forms, procedures and that kind of thing? Is the Minister going to do that, given that this now applies right across the board?

I see the difficulty and we are going to have a close look at it. I see the difficulty of "supposed to be aware" until the Bill comes into effect because that is the law and you have to be aware of it. If you then have only five days for every company I can see a difficulty. We will have a look to see whether we can arrange transitional arrangements and maybe come back to the House on this. We could do information campaigns and items like that but we would nearly need to be into that now if you were going to start the Bill. We will see whether we can work out some transitional arrangements because they will probably be necessary.

How did the Minister arrive at five days as an appropriate time? Does he consider that may not be adequate time in order to have disclosure of shares to the company? Perhaps that would help to get over the difficulty. I realise that, no matter how often you tell them or how much information you give, a number of people will fail to see that they should comply with the law and in the five days tell their company of the amount of shares they have. I would like the Ministers comments on how he arrived at that figure of five days. Perhaps it could be extended. I am open to what he has to say on it.

Back in section 4 we do not count Saturdays and Sundays so it could not affect the seven days if, like me, you work seven days a week. The figure appears in similar provisions in other countries, certainly in the UK. I regard it as a reasonable time after you become aware that you may have an interest. We could be here arguing for weeks that it should be extended but it seems to us to be a reasonable time after you have actually become aware in which to sit down and make the notification.

Question put and agreed to.

Acting Chairman

Amendments Nos. 47 and 73 are similar and may be discussed together.

Government amendment No. 47:
In page 50, line 47, to delete "corporation" and substitute "body corporate".

These amendments are purely formal drafting amendments. Basically all we are proposing is that in an Irish company law context, the term "body corporate" would be a more normal term than "corporation". That is the only reason for this.

Amendment agreed to.
Government amendment No. 48:
In page 51, line 8, to delete "So long as" and substitute "If, and so long as,".

Looking at subsection (13) as currently drafted, we think it would be capable of two very different interpretations. This has been confirmed by one or two of the submissions which we received so far. The first interpretation — this is the one we would want it to have — is that, if a director gives a life interest in his shares to a third party, so long as that life interest exists, in other words, as long as the third party lives but only for that time, the director's interests can be disregarded for the purpose of notification.

However, the other possible interpretation is that, when the director gives a life interest to a third party, on a strict reading of the subsection the mere fact of his having given such a life interest to somebody else would mean that the director's interest could be disregarded for all time, even after the third party died, and the interest reverted to the director. We want to be absolutely sure that the wording of this subsection would not create a loophole for directors to get around their obligations in this regard. The purpose of the amendment, therefore, is to try to make it clear that "so long as" means "for the time during which" and does not simply mean "provided that". It is an attempt to clarify what we are getting at.

Amendment agreed to.

Acting Chairman

Amendments Nos. 49 and 71 are related and may be discussed together.

Government amendment No. 49:
In page 51, to delete subsection (15), lines 14 to 17, and substitute the following subsection:
"(15) There shall be disregarded an interest of a person subsisting by virtue of—
(a) his holding units in—
(i) a registered unit trust scheme within the meaning of section 3 of the Unit Trusts Act, 1972;
(ii) a unit trust to which section 31 of the Capital Gains Tax Act, 1975, as amended by section 34 of the Finance Act, 1977, relates;
(b) a scheme made under section 46 of the Charities Act, 1961.".

Basically this is merely a drafting amendment. Its purpose is to correct incorrect references in the present draft of the Bill. Similar problems arise in the case of the parallel provisions in Chapter 3, section 70 (1) (b) and we have put down amendment No. 71 to deal with the problem there also. I do not know whether Senators want a background to that but that is the general idea of it. If they do, I will certainly expand on it.

I would be grateful if the Minister would give some background to this amendment.

We do not have in Irish law the concept of an authorised unit trust scheme. Section 50 (13) is based on UK type legislation. The term used in our Unit Trusts Act, 1972 is "registered unit trust scheme." Paragraph (a) (i) of the amendment would rectify that. The second problem, however, is that there is at least one other unit trust in Ireland which, while not registered, has the same characteristics as a registered unit trust For example, unit holders are the beneficial owners of interests in the trust's investments. It is given the same treatment under the Capital Gains Tax Act, and so on, for example. It seems reasonable to extend the exemption in this paragraph to unit holders under such an arrangement. The formula of words we propose to use in paragraph (a) (ii) of the amendment has been used previously in regulation 45 of the European Communities Life Assurance Accounts Statements and Valuation Regulations, 1986, Statutory Instrument 437, 1986. The third problem with the paragraph as drafted is a minor one. The reference to the Charities Act, 1961, should be to a scheme made under section 46 of that Act and not to section 29, so we will have to correct it.

I welcome the Minister's information regarding the matter and I am glad he is introducing the amendment. I was concerned that there could be confusion with the life assurance companies in particular, the unit trusts and investments made through the trusts. I am glad he has cleared that matter because it could have caused tremendous difficulties in other legislation going through this House at present.

For further clarification arising out of the Minister's reply on this amendment as I have not got the Charities Act with me, was it a mistake in the original Bill to have a scheme under section 29? It is being replaced by a scheme under section 46. Is there any significance in that?

No, it is straightforwardly the wrong reference.

Amendment agreed to.
Question proposed: "That section 50, as amended, stand part of the Bill."

The section provides for a very substantial extension of what would constitute an interest requiring the disclosure under section 49. The thrust of it is really to catch any type of controlling influence or power to direct or whatever, and this reinforces the point that might be made. It is not just shareholding we are talking about. It is any broader or more subtle and indirect interest as very extensively defined in section 50. This further supports the need either for the kind of transitional period the Minister is contemplating, or a very significant exercise in education of the entire population because a very considerable number would have interest in companies as defined here who might not have regarded themselves as being in that position. It is necessary to be aware of this difficulty.

Question put and agreed to.

Acting Chairman

Amendment Nos. 50 and 51 are related and may be discussed together.

Government amendment No. 50:
In page 51, lines 39 and 40, to delete "and of the fact that its occurrence gives rise to the obligation".

The purpose of these two related amendments is to rectify a problem which has been pointed out to us in relation to subsection (2) of this section. This subsection is saying at present that, if you acquire an interest and you know that the acquisition gives rise to a legal obligation to notify the company, you must notify within five days. The second clause in the subsection is saying that, if you do not know you have acquired an interest at the time you have acquired it, you must make the notification within five days of the date on which you first knew you had a legal obligation to do so.

The problem with this is that it would make the provision very difficult to operate as it falls into the trap of creating a legal obligation on a person only if he or she knows that he or she has such an obligation, in other words, a contradiction of the principle that ignorance of the law is no excuse, as it where. The two related amendments here rectify this by aligning the drafting of subsection (2) with that of subsection (1). In other words, the time period for notification of the occurence of a notifiable event under subsection (2) should run from the time the person becomes aware that the event itself has occurred and not when he becomes aware that the occurrence of the event gives rise to a legal obligation.

The Minister's explanation is clear in the context of what we have been talking about. It refers back to the proper period being very strictly five days, or maybe seven if you include Saturday and Sunday, of when the event has occurred that entitles the person to the interest and the person is then required, as the Minister has properly emphasised, to know the law and cannot plead ignorance of the law in that.

I do not want to repeat myself but I emphasise that it would appear that some amendment to the operation of section 51 would require to be contemplated on Report Stage in order to ensure that we are not imposing unfair standards too suddenly. I am all in favour of the standards but I think they are potentially being imposed too suddenly to be realistic.

I find it difficult to believe that people could be ignorant of the fact that they have had shares in their name but I suppose it could arise.

Not just shares.

Shares or interest. Such ignorance might occur occasionally but it would be very rare. The fact that we are bringing forward an amendment to conform with the event having taken place is welcome. As the Minister says, ignorance of the law is no excuse, but people would choose to be ignorant if it suited them on various occasions particularly in company legislation. I am glad the Minister has clarified that matter.

For example, they could be left shares in a will and the clock should start ticking from the time they are aware of that. The clocks start ticking when the event happens.

A distant relative might be involved whom one might not know about.

Amendment agreed to.

Acting Chairman

Amendment No. 51 has already been discussed with amendment No. 50.

Government amendment No. 51:
In page 51, lines 44 and 45, to delete "the fact that the occurrence of the event gives rise to the obligation" and substitute "the occurrence of the event".
Amendment agreed to.
Question proposed: "That section 51, as amended, stand part of the Bill."

I am not clear what the obligation of disclosure will be. Must there be disclosure of the event that gave rise to it as well as the interest? How is that to operate?

You just notify the interest.

The requirement flows from when the event is known to the person.

You are aware of it.

Yes, but you do not have to say, to take the Minister's example: "My interest came under a will from my grandfather which came to my notice on the blank day of blank."

I understand the requirement is to notify the interest. I do not see a general requirement to notify how that came about. It is to notify that you now have an interest.

It is to notify the occurrence of an event under subsection (2).

Yes. Section 49 (2) makes provision to "notify the company in writing of the occurrence, ... of any of the following events", specified events like "entering into by him of a contract to sell... shares "or" any event in consequence of whose occurrence he becomes, or ceases to be interested in shares..." I do not know if that clarifies it. If it does not we will have a look at it.

A certain confusion might arise between the occurence of the event and the disclosure of the interest. That is not addressed tightly enough in this amendment.

There is no obligation to notify what brought about the event. Just the fact that the event has happened must be notified. The result as it were, must be notified not leading up to the result.

These may not be real difficulties on the ground if standard forms or guidelines are available, but without them people could be very unsure of what their obligation was. This may be inevitable because they are complex provisions. This makes it necessary to have clear guidelines and, if possible, sample forms, or indications of how the obligations would be satisfied.

You have to state the number or amount and class of shares or debentures involved. That is specifically what you have to notify.

Question put and agreed to.
Section 52 agreed to.
Government amendment No. 52:
In page 52, before section 53, to insert a new section as follows:
53.—(1) Where a person autharises any other person (‘the agent') to acquire or dispose of, on his behalf, interests in shares in, or debentures of, a company, he shall secure that the agent notifies him immediately of acquisitions or disposals of interest in such shares or debentures effected by the agent which will or may give rise to any obligation on his part to make a notification under this Chapter with respect to his interest in those shares or debentures.
(2) An obligation to make any notification imposed on any person by this Chapter shall be treated as not being fulfilled unless the notice by means of which it purports to be fulfilled identifies him and gives his address.
(3) Where a person fails to fulfil, within the proper period, an obligation to which he is subject by virtue of section 49, no right or interest of any kind whatsoever in respect of the shares or debentures concerned shall be enforceable by him, whether directly or indirectly, by action or legal proceeding.
(4) Any person in default may apply to the court for relief against the disability imposed by subsection (3) and the court on being satisfied that the default was accidental, or due to inadvertence, or some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may grant such relief either generally, or as respects any particular right or interest on such terms and conditions as it sees fit.
(5) The court may not grant relief if it appears that the default has arisen as a result of any deliberate act or omission on the part of the applicant.
(6) Subsection (3) shall not apply to an obligation relating to a person ceasing to be interested in shares in, or debentures of, a company.
(7) A person who fails without reasonable excuse to comply with subsection (1) shall be guilty of an offence.

This amendment, like several others we are proposing today, is designed as a kind of a tidying up provision in relation to the provisions of Part IV of the Bill generally. For example, the various provisions in section 71 —"Other provisions relating to notification"— are expressed to relate both to Chapter 2 and Chapter 3 at present. However, we think it might be a better approach if, as far as possible, each of the chapters in this Part could be self-contained with the minimum of cross-referencing. That is what this amendment amounts to.

The formula we are using in subsection (1) of the new section already appears in section 71 in relation to Chapters 2 and 3. Subsection (1) of the amendment would simply repeat the terms of section 71 (1) in the context of Chapter 2. We take out the reference to Chapter 2 in section 71 (1). The same applies to subsections (2) and (3) of the new section. We will be incorporating in Chapter 2 the terms of section 71 (2) and section 71 (3) (a) in so far as they relate to obligations under Chapter 2. Exactly the same logic applies to subsections (4) to (7) of the new section. These currently appear as subsections (4), (5), (6) and (7) (d), respectively, of section 71. The amendment will simply copy these provisions into the new section for the purpose of Chapter 2.

Amendment agreed to.
Question proposed: "That section 53 stand part of the Bill."

In relation to the register which must be kept by all companies as is provided in this section, I would welcome some indication from the Minister as to the extent to which there will be either specific guidelines or standard forms for companies in relation to the disclosure of interest as defined in sections 49 and 51 under this Part of the Act.

What will probably happen is that many accountancy firms, the CII and many interest groups will hold seminars and conferences and the Department will make every effort, within their resources, to make sure that all the professional people involved in such work are notified. We will take on board a general requirement to make sure that those who need to know actually know about it.

Question put and agreed to.
Section 54 agreed to.

Acting Chairman

Amendments Nos. 53 and 54 are related and may be discussed together.

Government amendment No. 53:
In page 55, between lines 16 and 17, to insert the following new subsection:
"(4) This section applies to the secretary of a company as it applies to a director of that company.".

The obligation in section 49 to notify interests in shares and debentures applies to directors and secretaries of a company. Therefore, any consequent obligations imposed under the rest of Chapter 2 should apply as much to company secretaries as to company directors. However, section 55 as currently drafted, applies to directors only and the purpose of this amendment is to extend it to apply to company secretaries also. The related amendment No. 54 will make the same kind of straightforward amendment to section 56 (2).

For the purpose of clarification, does section 55 (1) now mean that the directors' report, or the secretary's report, or the notes of the company's accounts in respect of a financial year shall state ...... or is it that the director's report or the notes of the company shall in relation to the director or secretary of a company state...? I am not sure which it means.

The fact that the section speaks of the statutory directors' report would not hinder us from making the amendments since, first, the directors' report under the Companies Act does not confine itself merely to the activities of the directors but is intended as a review of the activities of the company over the financial year and secondly, there is an option in this section whereby the information required can be disclosed either in the directors' report or in the notes to the company's account. Does that answer the question?

I am not sure at this stage and I am not even clear on my question. Section 55 (1) uses the word "director" in two senses. This amendment adds a subsection (4) to the section which says: This section applies to the secretary of a company as it applies to a director of that company". In section 55 (1) we seem to be using the word "director" in two senses. Section 55 (1) says: "The directors' report or the notes to the company's accounts in respect of a financial year shall, as respects each person who, at the end of the year, was a director of the company, state...". What I want to know is are we saying " the end of the year was a director or secretary of the company..." and, if so, would it be perhaps clearer to make the amendment in that form? Perhaps the Minister might consider that on Report Stage. I would like to clarify whether we want to say that: "The directors' report and secretary's report or the notes to the company's...".

There is no secretary's report as such. It is the report of the directors of the company. As of now, the directors of the company, in the directors' report, must give the information. We are now trying to make sure that the information about the secretary is also given in the director's report. If there is a drafting difficulty here we will certainly have another look at it but what we are clearly trying to do is to make sure that the holding of the secretary is laid out in the directors' report. There is no such thing as a secretary's report.

The "directors' report" is defined in subsection (3). What I am concerned about is whether the effect of this amendment is to include exactly the same provisions in relation to the secretary of the company as what must be stated in relation to the director and, if so, it could be done by saying "was the director or secretary of the company".

Yes, it could be done that way. We will certainly have a look at that. What we are suggesting we put in here is simply that this section applies to the secretary of a company as it applies to the director of that company. We will certainly have a look at whether other items need to be amended in view of what the Senator has said. Our intention is quite clear; we want to make sure that the information about the secretary is also included in the report of the Directors. We will have a look at that to see if we can improve it and we will certainly come back on it.

I noticed that in the disclosure of interest in the directors' report the apostrophe is after the "s" rather than before it. Does that mean that where there are a number of directors they are taken cumulatively in their interest in the directors' report, or is it on an individual basis?

It is the annual report of the directors of the board of the company. It is the board report in that sense and obviously it does not apply to individual directors.

Amendment agreed to.
Question proposed: "That section 55, as amended, stand part of the Bill."

Given that an amendment has been made to section 49 to broaden its provisions to all companies and not just public limited companies, could the Minister clarify — and this is purely for information — what companies must report for the purposes of section 158 (1)? Is that provision for all companies or just for public companies? In other words, will all companies now have to have a directors' report disclosing to the Companies Registration Office the interests of directors and secretaries of the company?

It applies to both public and private companies.

I have a reservation, as I expressed on section 49, in relation to that matter. I will consider the situation before Report Stage and I will give notice to the House on that matter.

Will the directors' report which will be attached to the balance sheet of a company be available in the Companies Registraton Office on a company search and will it now disclose in relation to every company the interest in the company of directors and secretaries?

The Fourth Directive is raising its head here in that the companies under a certain turnover limit will be exempt from lodging their accounts or disclosing them in that way. Obviously the directors will still have to include the information in the register and in the directors' report but there is an exemption for certain companies under the Fourth Directive from lodging the directors' report.

Section 55 (3) as it stands at present says: For the purposes of this section "the directors' report" means the report by the directors of a company which, by section 158 (1) of the Principal Act, is required to be attached to every balance sheet of the company. Is the Minister saying that does not, in fact, mean every company?

Yes, the 1986 Act exempts certain companies so it applies to all the companies except those companies. They must still lodge the directors' report but under the Fourth Directive they are exempt from giving a lot of the information that is to be given on those companies. Obviously because of that this information would not be lodged. The Senator is correct in saying that a range of companies are exempt under the Fourth Directive which is under the 1986 Act.

I have not followed this and perhaps it could be further clarified on Report Stage. Even if companies, by virtue of the Fourth Directive, are below a certain size and do not have to file detailed balance sheets with the Companies Registration Office, do they have to file a directors' report and if they do, presumably they must then comply with the provisions of section 55 and at least file this information. Is that correct?

The companies who are exempt under the Fourth Directive do not have to lodge with the Companies Registration Office their directors' report and, therefore, this information would not be there. They have to lodge abridged balance sheets and certain selected pieces of information once they are under the threshold level for the Fourth Directive. The Senator is correct to tease this out. They do not have to lodge the directors' report but they have to lodge instead selected pieces of information. There is a range of companies who are exempt from this section.

A significant distinction is being drawn between the general requirement under section 49 which applies to companies with no reserve where there is an obligation on the director or secretary to notify their interests to the company and the provisions of section 55 which, because of subsection (3), apply only to those companies who have an existing obligation and do not benefit from the exemption under the relevant directive. Therefore, in those circumstances those companies will be required to make disclosures to the Companies Registration Office of the interests of their directors and secretaries. If that is the position — and I do not mean this in any rude sense — is it a conscious policy decision that that would be the case? In other words, now that the Minister has gone for fuller disclosure in section 49 is there a certain logic in pursuing this and perhaps having a different reference mechanism to the directors' report under section 158 since that excludes certain companies?

There is a certain parallel between the Fourth Directive and what we are doing here. That is one of our concerns. That was a calculated piece of work and we are trying to stay somewhat parallel to it. The Senator is correct that all companies must get the information and put it on a register which is available. There are companies who are exempt from going the other step of lodging with the Companies Registration Office the directors' interests and so on in the directors' report. They are exempt from that general requirement under the Fourth Directive and the 1986 Act.

There is a certain logic in trying to tidy up the notification business and making sure that even if one does not have to notify it to the Companies Registration Office, that the company are entitled to be fully aware of all of their shareholdings and have a register of that. The people dealing with the company are entitled to have that information neatly compiled. There is a certain logic in it. Perhaps it does not go as far as one would like it to go but the Fourth Directive is a sensible piece of legislation and is one we like to stay parallel to.

I confess that I do not follow the logic of the Fourth Directive. I know in general terms what the requirement of the Fourth Directive are. They are an approximation of the Community level of disclosure of accounts of companies in trying to ensure that certain standards in that regard would be maintained in each member state. They have no bearing on what the Oireachtas decides is proper disclosure for the purposes of the Companies Act. I would have thought we are completely free in relation to disclosure of positions. What is in the Fourth Directive, if I can put it that way? The only relevance of the Fourth Directive is the trigger that it is being used in subsection (3) — the reference to the special definition of the directors' report. If we did not have a special definition of the directors' report linking it into section 158 of the Principal Act then it could mean that those companies who must file the directors' report by virtue of section 158 (1) and those companies who file more limited information because they benefit from the Fourth Directive must also include as part of that limited information disclosure of the interests of their directors and secretaries. Is that a policy opinion open to us?

Since that is a policy option open to us, if the Minister is in favour of disclosure and broadening the disclosure in section 49, which we have just dealt with, what is the policy difference in not having disclosure here of the directors and secretaries interests?

There is a general feeling, which we interpret to be abroad, which says we do not want to overburden some small companies. That was the thinking behind the Fourth Directive, which we backed up with domestic legislation in 1986. The intention was not to nail all small companies to the wall with a range of disclosure requirements. That is the simple thinking behind it.

This represents substantial progress. As times goes on, it can be extended if it is thought necessary to do so. Right now, we thought it would be smarter to run parallel to the Fourth Directive — which is the 1986 Act and which we debated — and exempt those companies from the requirement to lodge the directors' report because that does not happen under the Fourth Directive. It is a policy decision generally not to get too heavily on the backs of small companies. That is probably the general thinking behind it.

As to the nature of the budget, the earlier sections in relation to maintaining a register and the provisions which are to be included in the register in sections 53 and 54 require all companies, including even the smallest private companies, to have all this information to hand. It does not seem a very significant additional burden simply to take the part which relates to directors and the secretary of the company and hive it off with the end of year report to the Companies Registration Office. I see a very big issue there because the disclosure in relation to the private companies is in-house: it is disclosure by directors, secretaries and their families to their company, whereas disclosure in section 55 will make available in the Companies Registration Office the interests held by directors and secretaries of companies. The Minister seems to have come half way on disclosure — which he has told us is something he wishes to achieve in the public interest — and then stopped. I do not think it is a realistic reason for stopping to say that it would be a burden on companies because, effectively, we have imposed that burden. All they have to do is take a bit of it and put it into the Companies Registration Office.

I understand the Senator's point. We are trying to have a certain neatness about what a small company has to notify to the Companies Registration Office and that is enshrined at present in the Fourth Directive and the 1986 Act. There is a certain neatness about what they have to do there and we are trying to stay parallel to that, literally for the sake of being neat and consistent. If the Senator's concern is that the public would need to know, that is provided for because the small companies will have to keep a register of the directors and secretaries interest and so on. That register will be available to the public under section 54 (5) which states:

The said register shall—

(a) if the company's register of members is kept at its registered office, be kept there;

and shall during business hours (subject to such reasonable restriction as the company in general meeting may impose, so that not less than two hours in each day be allowed for inspection) be open to the inspection of any member of the company without charge and of any other person on payment of 30p or such less sum as the company may prescribe for each inspection.

The information is available to the public without flooding the Companies Registration Office with all that additional information. It may need to keep parallel to the Fourth Directive. We are not trying to hide disclosure; it is available in the register.

If every company, including every private company, must make its register available to its members and the public, for a 30p charge, so that it can be inspected and people can see what the interests of the directors, secretaries and members of the family are, what is the purpose of having this further disclosure in the Companies Registration Office? It may be that that is a very obvious question but what is the purpose of having this additional disclosure in the Companies Registration Office for certain companies who do not get the benefit of the Fourth Directive?

I understand that point also. The bulk of people will go the route of paying 30p and having a look at it but for the larger companies we felt that it might be better to have a more formal arrangement where that information would be more formally available centrally. The cut-off point became, very much in our mind, one of administration and it seemed to be a neat cut-off point with the Fourth Directive. There is some duplication there.

To pursue the effect of the disclosure — and strictly speaking I am going back to the point the Minister made earlier about access to the register under section 54 — is this going to result in its being possible for any member of the public, journalist, or interested community group, to ascertain from the company who holds any interests in the company and in what proportion they hold that interest? The reason I ask this is that there has been considerable controversy in other countries about this. I saw a television programme, and other Members of the House might have seen it also, about the buying of land in Scotland. Large chunks of the highlands in Scotland are being bought by companies and nobody knows who has purchased them. Are we now going to have full disclosure so that you can go in to the Companies Registration Office and pay 30p and know at the end of it who holds the shares in every company in the State?

For the sake of the record and to be clear on the requirement under section 54 to pay 30p, we are talking only about directors and secretaries. You would be entitled to know what interest any director or secretary of a company holds. If you move away from that, you are into a different area. I want to be clear about that because I do not want to give the impression that you can pay your 30p and get full information. That is not the situation.

I think I am clear enough on this. This will be my last intervention on this section. If you pay 30p you can go to any company and ascertain the interests of the directors, secretaries or their families. Equally, certain companies who do not get the benefit of the Fourth Directive will have to lodge this information in the Companies Registration Office.

Yes, that is precisely the situation.

Is that because they are filing directors' reports anyway and this is just going to be further included in it, or did I understand the Minister to envisage that in due course there may be a requirement for all companies to do it?

The companies who are not included in the Fourth Directive general exemption have to file a directors' report with the Companies Registration Office and that will include the details of the holdings.

To give the Minister a rest, I will go in a different direction from that of my colleague, Senator Robinson. I made comments under section 49 about the notification of shares, particularly for small companies the Minister has come to the aid of under the Fourth Directive. The Fourth Directive should be brought into vogue in relation to the notification of shares. The Minister's thinking should be brought more into line under section 49. I am concerned that there would be an undue disclosure of shares and interest brought to bear on small investors or people with small shareholdings in community enterprises. I am extremely concerned about this and I hope the Minister and his officials will look at it and guarantee, as far as possible, that investors who make a contribution to shares in a company in order to create local employment will not be affected unduly. That is my problem. I am probably away from the PLCs, but at local community level I am concerned about the disclosure of interests and the notification of shares and how that could reduce the amount of investment and money we can churn up to create local employment.

I will think about what the Senator has been saying between now and when I come back again. If I thought this would damage local entrepreneurs or local enterprise I would not be here with the Bill in this form. I am happy that local enterprise and business people who want to go along the road of limited liability will find that this Bill will give them all the protection they need. There are rescue clauses in other parts of the Bill which will help those people, and it is a very small number of people who are not prepared to stand behind the ventures in which they are involved. There is a small number of people in that category and I am not sure whether one would want to——

I do not want to pursue the topic ad nauseam but there are public servants or civil servants who want to become nominal directors of a local enterprise. Because of the inherent dangers under the Companies Act they might feel they should not take any personal guarantees in relation to setting up a new company in their local area. Those are the precise fears any person who decides to bring about the creation of much needed employment in a voluntary capacity would have in relation to the notification of shares and the disclosure of interests. The fears generated by the documentation it would be necessary to give to the Companies Registration Office might drive people away from investment rather than the opposite.

I understand that worry. In the Department of Industry and Commerce the last thing we would want to do is to dampen any business spirit. Quite the contrary; our job is to promote and develop it. We are drawing a distinction between the people who are directors and those who are not in a private company. If you are a director, your shareholding is in the register and the information is available in that way to the public. If you are not a director, that type of disclosure is not there, but a person could go to court to get it. If you had an interest in a company, you are not a director but you own a large slice of the shares, a person could go to court and get a disclosure order to find out who owns those shares. Only a person with a financial interest can do that, and not just anybody. They would have to have a financial interest and the court would have to be satisfied that the person with the financial interest had a legitimate reason for getting that information.

If the court is satisfied that there is a person with a financial interest who needs that information in all fairness and equity he should have it because it is not fair to be dealing with a company in which the individual can hide completely in the face of somebody with a genuine financial interest.

It is opening it up, but we cannot dodge this. We cannot have it both ways. We cannot increase disclosure and then do it in such a way as not to give out any names. If we are going to increase disclosures that is what it ultimately means. We are trying to build in some protection. I have a strong personal view that we should make sure that we do not damage any flock of business people or entrepreneurs who are growing up, and that they are not discouraged from going into business and creating some wealth for the country. This Bill seeks to get a balance between weeding out the cowboys, on the one hand, and, on the other hand, making sure we do not in any way dampen the entrepreneurial spirit. We may have found that balance and with the help of the Seanad and the Dáil we will get this right before we finish.

On the Minister's emphasis that we are only talking about directors and secretaries of companies in relation to disclosure, whether it is the obligation on the company to make their books available with the directors and secretaries interests disclosed on payment of 30p to any outsider, in the next section we are coming to, it is clear that we are not just talking about directors and secretaries. We are also talking about their spouses and their children. I am anxious to be fully clear on what the section means. I may have a different emphasis from my colleague on this side of the House but it is important that whatever conclusion we draw we are clear on it. In the case of private companies where we are covering directors, secretaries, spouses and minor children, we are covering a fair amount of a fair number of private companies. We are probably getting a fairly full disclosure of private companies for 30p if we are getting all the interests of directors, secretaries, spouses and minor children.

We are not getting information on the shareholder who is not a director. In the case of minor children it is attributed back to a director. The names of all the minor children would not be necessary but the holding would be attributed to the main director. That main director would then be on the list. It covers a fair share of Irish business. Where you have a shareholding in a company but are not a director, there is no requirement unless someone takes you to court to drag that information out of you.

The companies run as family businesses where the shares are kept in the family would be making what in fact is a full and potentially public disclosure because a person can go in and as of right for the payment of 30p look at the register and determine the shareholdings. It would be invidious to name names, but there are significant family companies where people may not be aware of which member of the family holds what interest and they would then be in a position to clarify that by going in and seeing how much he or she holds or what a person holds by virtue of the shareholding of minor children.

I am anxious that we should be aware of what the provision of this section of the Bill means because, in family companies, it would be an exception rather than normal to have shares held by a non-member of the family as a non-director. If they are held by a non-member of the family it is likely that person would be a director and that would be known, but to have shares held by somebody who was neither a spouse, a child nor a director would be somewhat unusual for private companies. I do not claim to be an expert in it but if you have outsiders in, you normally have them in as a director and then they would be caught by the disclosure provisions. As I am beginning to understand the thrust of the provisions, it seems that we are providing, because of the amendment made to section 49, to extend it to all companies for full disclosure of family companies in Ireland. It is better if we understand the implications of that.

Is that not Senator Hogan's worry?

I think it is important to be aware of it.

The 1963 Act has a similar arrangement where the broader family were drawn in in terms of aggregating the holding of a director. This strengthens it. The Senator is probably worried about family rows where some members of the family do not know what other members of the family hold. I doubt that that is a real problem in family businesses today. Most of the people involved in a company round the table would know——

That would not be my concern. Senator Hogan has more of a concern than I have. All I am doing is noting the extent of the disclosure and the extent of access to the information. Take a journalist who is interested in doing some sort of a survey on family companies in Ireland, he has all the information——

All the journalist is going to find out is that the directors of a certain company hold so many shares. He is starting out with the information that they are directors. It is going to be on the head bill for a start and it is in the Companies Registration Office. They know the directors. All the investigative reporting is going to dig up is that these directors also happen to be shareholders and hold so many shares. By taking that from 100 you can find out that somebody outside the company owns some shares. If you want to find that out you will have to go to court and the court will take into account whether you are entitled to that information. Yes, it is radical, but it is not as dangerously radical as you might think it is.

I have not passed any judgment on it. I think it was Senator Hogan.

It is different, but if people are known to be directors of a company they are on the line. The additional information that will be available is what percentage of the company you actually hold. I do not know if it makes much difference to an outsider whether you hold 44 per cent, 22 per cent, or whatever. If they are dealing with you, and you are a director of that company, they see you as representing the company and want to talk to you. What actual shareholding you hold, or how it is spread between your family, is not unusual additional information of such a nature that would be as widespread as you might worry about.

I have been listening with interest to these technical arguments. The main thrust of the Bill is to eliminate fly-by-night operators and as Senator Hogan has said, we do not want to inhibit legitimate investors. I appreciate that we have to try to achieve a balance in this Bill.

With regard to disclosure between public and private companies, I understand there are about 96,000 companies of which 93,000 are private companies. I do not know how many enjoy the provisions of the Fourth Directive, and the yardstick as to what qualifies you to come in under the Fourth Directive. Any company who request credit should disclose who the shareholders are. In these days of difficult trading one of the biggest problems companies have is to collect the money they are legitimately owed. If you are pursuing somebody who owes you a substantial sum of money, the more that is disclosed the better for those trading legitimately.

It is difficult to achieve a balance because you have an investment capital incentive whereby people may want to invest in companies and may not want their name known as to which company they are involved with for whatever reasons. As a small legitimate businessman, the more disclosures and the more information you can get about companies to whom you extend credit, the better. As I said earlier, we are trying to eliminate the fly-by-night operators. I appreciate the arguments that are being made on both sides. I appreciate that we are trying to achieve a balance in the Bill. As the Minister said earlier, eventually we will tease it out and, hopefully, when it eventually goes through both Houses of the Oireachtas, we will achieve this balance.

In case there is any question of there being any difference between us on the merits of disclosure, I very strongly favour it but I would be concerned if we did not fully examine the implications of what I believe is a significant change made to section 49, the extension of the disclosure of interests across the board to all companies, in other words, the removal of the reserve to public companies. I said I support it but it is very important that we consider carefully what the implications are for the rest of this section and particularly the sections which have not been amended. It would be undesirable, for example, if we somehow unintentionally provided for fuller disclosure of family businesses than any other concern. We could legitimately ask ourselves: are we doing that and is that desirable?

I thank Senator Robinson for the analytical way in which she has teased out these arguments. She has expressed my concerns very well, even though she might not agree with most of them. On section 49 and on this section I have made my views clear. I am concerned about the disclosure particularly in regard to small companies.

The family business is the area in which most of our employment creation will take place in the years ahead. If in any way we prevent entrepreneurs in a family business from investing their money in employment or in business, we are doing a bad day's work for local communities in particular. I have no hang-ups at all about PLCs disclosing their interests, or disclosing their shares, or who are involved in them. I am extremely concerned for the people, who, for whatever reason, are in a silent partner capacity, in small businesses. As Senator Robinson has pointed out, there are cases before the courts at present where there might be an interest to know who owns what and how many shares they own in that company.

We have not examined the serious consequences and radical nature of the Bill which the Minister has admitted.

I think there will have to be exemptions under section 49 for family companies introduced on Report Stage. I would like to discuss how that will come about. Public disclosure of these shares and shareholdings and the way they can be so easily got at by various individuals for whatever reasons may not always be in the best interest of the company, or the best interest of the creditors. We will have to tease this out more on Report Stage. I would not be happy at the way the thing is moving in the direction of creating employment at the moment.

Progress reported; Committee to sit again.