Amendments Nos. 1 to 3, inclusive, are related and may be discussed together.
Building Societies (Amendment) Bill 2006: Committee and Remaining Stages.
Sections 1 to 20, inclusive, agreed to.
SECTION 21.
I move amendment No. 1:
In page 12, between lines 9 and 10, to insert the following:
"(a) by substituting the following for subsection (2):
"(2) In order to convert into a company, a society must—
(a) approve a conversion scheme by a conversion resolution pursuant to section 71,
(b) obtain the confirmation of the Central Bank to the conversion scheme under section 104,
(c) obtain an order from a court under section A101A, and
(d) have the society registered as a company under the Companies Acts in accordance with the provisions of this Part and any regulations made thereunder.”.”.
I am disappointed the Government is pushing the Bill through all Stages today. I understand amendments were tabled in the Dáil yesterday but the Bill was guillotined, which was disappointing. Bills such as this, although we are in agreement on them, should be debated thoroughly. Rushed legislation results in bad Acts in the long run. We should consider this matter further. We had plenty of time to do so in that it was originally proposed to sit five days this week. I was not made aware Friday's business was to be condensed into today's business until the Order of Business today.
The Bill is being rushed in the mistaken belief that it is simply a tidying-up Bill. While I support the Bill in principle, it must be amended. Amendment No. 1 proposes to make a court order necessary for a building society to become a plc, which is important. Amendment No. 2 details the powers and duties of the courts in making the order and shows who has authority in this area, namely, the Minister for Finance, the Minister for the Environment, Heritage and Local Government and any person, including an employee of the society, who alleges that he or she would be adversely affected by the carrying out of the conversion.
One matter overlooked by the Minister is the position of retired employees of building societies. Does the Bill provide for such staff? If they hold shares in the building society, I hope they will not be hard done by. In the past a number of hospital sweepstakes staff were hard done by in the legislation doing away with the sweepstakes. I hope nobody who has given years of service will be left without compensation, which is an issue the Minister should address.
Amendment No. 3 seeks to appoint an independent actuary to audit the building societies' liabilities. It is important to investigate a society seeking conversion into a company and to report to it on any issues arising from such an investigation.
The three amendments are important. I am interested to hear the Minister's view and hope he can accept the amendments. To sum up, amendment No. 1 proposes to make a court order necessary for a building society to become a plc, amendment No. 2 details the powers and duties of the courts in making the order and amendment No. 3 seeks to appoint an independent actuary to audit the building societies' liabilities. This makes sense and should be taken on board.
With regard to a compensation fund for those who have been hard done by in the past we should look after staff. I hope nobody will be treated in a slipshod manner. I await the Minister's response.
The Minister stated in his speech that there are a number of safeguards in how the process operates, particularly with regard to the membership. Approval must be sought from the Central Bank initially, which will obviously examine the case rigorously. It must then be brought back to the membership and voted on before being subjected to further scrutiny by the Financial Regulator. Irrespective of what steps are taken to protect the members of the society, the Bill puts that process in place.
As the Minister stated, it is the choice of the membership. Four options are available to all societies. The measures in the Bill are adequate.
Minister of State at the Department of the Environment, Heritage and Local Government (Mr. N. Ahern)
The amendments are not necessary and do not add to the Bill. The Bill provides additional options for building societies to demutualise. It has been drafted in a way that ensures there is a transparent framework for conversions under the 1989 Act, which is being maintained. Appropriate controls are in place and the rigorous framework for conversions already exists. It is not necessary to involve any other independent actuary, independent expert or court, as the Senator suggests.
We have had two conversions under the 1989 Act and this amendment does not change the basic framework. The legislation already has a series of controls as regards the demutualisation process. As I said earlier, the conversion process involves the preparation of the statutory conversion scheme by the society, on which the Central Bank must be consulted. In a way that is to bring in an outside body. Then the law provides that a statement must be issued to members outlining the proposals. People have the right to inspect that, the members approve it and, if required, an appeal can be made to the Central Bank later. There are many people involved in the set up.
Senator Bannon asked about staff and whether they would get shares. Those matters are not covered in the legislation which is separate from the conversion scheme. The legislation says that if a building society is being demutualised, a conversion scheme must be drawn up, checked with the Central Bank and eventually put to the members. The details, as regards who might get what, the entitlements of any saver or mortgage holder, director or staff member, will be in the conversion scheme. Previous conversions have included provisions as regards free shares for employees and indeed share options for senior management. However, the Bill requires that any directors' interests in the acquisition be specified in the statement that issues to members and this will ensure transparency.
Basically, the conversion scheme, as put to members, lays down what any saver, mortgage holder or staff member might get. That is where this is done. It is not done in the legislation. There is the precedent of what happened in previous times. Based on the good aspects of that, I would hope that the benefits that might be given to staff will be continued in line with such precedent. However, we do not lay down what those benefits should be in this framework legislation.
The Central Bank is completely independent, so there is no need to be setting up any other agency layer to look at the matter. Those are the basic points I wanted to make to the Senator.
I am not sure on the last point made by the Minister of State. Is he taking the amendments on board?
No, I said at the start that I was not.
I am disappointed because the amendments are straightforward. As I said, the first one is a very necessary amendment. It makes it a requirement for a court order to be issued before a building society can become a public limited company. That is it in a nutshell. To improve the legislation it is important that this should be included in the Bill.
As regards the second amendment, it is important that we detail the powers and duties of the court in making the order. It is only right that this should be done. It will definitely improve the legislation and it is something the Minister of State should consider taking on board.
I had tabled approximately 131 amendments to the Planning and Development (Strategic Infrastructure) Bill which came before the House earlier today. A good number of them were not taken in this House although, as Senator Brady is aware, one was taken. When the Bill came back from the Dáil today we discovered that 45 of the amendments we put forward in this House three weeks ago had been accepted. The Bill had to be returned to this House on that basis.
These amendments are worthy of consideration. I believe that rushed legislation is bad legislation. If the Minister of State had tonight, tomorrow or the weekend to think about this, I believe he would be taking the amendments on board. I again plead with him to consider accepting the amendments as they would very much improve the legislation.
I am sorry to disappoint the Senator. We have considered them. Everything is worthy of consideration, but it is not intended to accept them. We do not believe they add anything to the Bill. I have outlined the process that exists. It may well be that this is how they do it in other countries. I do not mind looking at how it is done in other countries, but it does not mean we have to imitate them or slavishly follow their example. We have our own controls and processes, which are clearly laid down. It is not just done overnight because the directors bring a proposal before an annual general meeting. It is a slow process, involving the Central Bank, members vote on it and there is ample time to consider it. Ultimately, if people are not happy they can go to the High Court.
However, it would not be appropriate to give the courts the function of approving a conversion scheme. That function rests with the Central Bank, which has the expertise and the standing. No justification has been made to transfer this function. It might even be in conflict with the jurisdiction of the High Court to deal with petitions of members. Ultimately, if members are not happy their last court of appeal is the High Court, under section 105 of the 1989 Act for cancellation of a conversion scheme. It would be somewhat strange to go the court for approval on the first day and then members might ultimately opt to back to the High Court as their last court of appeal. The court might have a conflict of interest, in the event, as some people might want to ensure it stood by its original decision.
It is a financial matter. The Central Bank is involved early on, then the members. If the members are not happy, the High Court is the final appeal forum if they wish to go there to have the conversion scheme cancelled. We have considered the issues, but we do not believe they add anything to the Bill.
Amendment put.
The Committee divided: Tá, 11; Níl, 25.
Tá
- Bannon, James.
- Bradford, Paul.
- Browne, Fergal.
- Coghlan, Paul.
- Coonan, Noel.
- Cummins, Maurice.
- Feighan, Frank.
- Hayes, Brian.
- Phelan, John.
- Ryan, Brendan.
- Terry, Sheila.
Níl
- Brady, Cyprian.
- Brennan, Michael.
- Callanan, Peter.
- Dardis, John.
- Dooley, Timmy.
- Fitzgerald, Liam.
- Glynn, Camillus.
- Kenneally, Brendan.
- Kett, Tony.
- Kitt, Michael P.
- Leyden, Terry.
- Lydon, Donal J.
- Mansergh, Martin.
- Minihan, John.
- Moylan, Pat.
- Ó Murchú, Labhrás.
- O’Rourke, Mary.
- O’Toole, Joe.
- Ormonde, Ann.
- Phelan, Kieran.
- Ross, Shane.
- Scanlon, Eamon.
- Walsh, Jim.
- Walsh, Kate.
- White, Mary M.
Tellers: Tá, Senators Bannon and Cummins; Níl, Senators Minihan and Moylan.
Amendment declared lost.
Section 21 agreed to.
NEW SECTIONS.
I move amendment No. 2:
In page 12, before section 22, to insert the following new section:
"22. The Principal Act is amended by inserting the following after section 101:
"A101A.—(1) An application may be made to the High Court for an order sanctioning the conversion into a company of a society.
(2) In any application under this section, the following shall have right of audience:
(a) the Minister for Finance;
(b) the Minister for the Environment, Heritage and Local Government; and
(c) any person (including an employee of the society) who alleges that he or she would be adversely affected by the carrying out of the conversion.”.”.
Amendment put and declared lost.
I move amendment No. 3:
In page 12, before section 22, to insert the following new section:
22.—The Principal Act is amended by inserting the following after section 101:
A101B.—
(1) Before the court may make an order under section A101A, the court must be satisfied that all the society's assets and liabilities are in order.
(2) In ascertaining its duty under subsection (1), the court making the order may appoint an independent actuary or other person who is deemed by the court to be sufficiently qualified for the purpose—
(a) to investigate the society seeking conversion into a company, and
(b) to report to it on any issues arising from such investigation.”.”.
Amendment put and declared lost.
I move amendment No. 4:
In page 12, before section 22, to insert the following new section:
"22.—The Principal Act is amended by inserting the following after section 101:
"A101C. —Before the court may make an order under section A101A, it shall satisfy itself that the society has established a Board of Directors comprising no less than—
(a) two executive directors, and
(b) 7 non-executive directors, one of whom shall be a chairman.”.”.
Building societies can no longer be allowed to be run as one-man shows, as was pointed out earlier. This was the case with Irish Nationwide. Proper corporate governance must be included in this Bill, as several Members today emphasised. This amendment proposes that there be a minimum of nine directors, no more than two of whom can be executive directors.
The windfalls or good fortune of demutualisation will amount to approximately €1.5 billion. This cannot be distributed according to the whim of one individual. Good corporate governance guidelines are necessary. That is why I tabled this amendment which I hope the Minister of State will take on board.
I cannot accept the amendment. It is not appropriate because section 48 of the 1989 Act provides that a building society shall have at least three directors and this is in line with other credit institutions which should have at least two directors. In company law the requirement is also for a minimum of two.
The Bill is intended to address a range of issues based largely on the recommendations of the building society review group relating to the powers of building societies and their options for conversion. It is not intended to deal with matters relating to internal governance of building societies.
This has been the law since 1989 and it has worked well. The building societies, including those that converted to public companies have developed and progressed fairly well. The number of directors is in line with that in other financial institutions outside the building society structure. This works well so why change it or increase the number? The Senator's proposal would exceed the norm for any other similar institutions.
The financial services ombudsman has found that the early repayment penalties imposed by Irish Nationwide were invalid and illegal but Irish Nationwide has made no provision to compensate borrowers affected by this. The amendment would counteract this problem, which is important. It is a sensible proposal and should be taken on board.
Amendment put.
The Committee divided: Tá, 12; Níl, 27.
Tá
- Bannon, James.
- Bradford, Paul.
- Browne, Fergal.
- Coghlan, Paul.
- Coonan, Noel.
- Cummins, Maurice.
- Feighan, Frank.
- Hayes, Brian.
- O’Toole, Joe.
- Phelan, John.
- Ryan, Brendan.
- Terry, Sheila.
Níl
- Brady, Cyprian.
- Brennan, Michael.
- Callanan, Peter.
- Dardis, John.
- Dooley, Timmy.
- Feeney, Geraldine.
- Fitzgerald, Liam.
- Glynn, Camillus.
- Kenneally, Brendan.
- Kett, Tony.
- Kitt, Michael P.
- Leyden, Terry.
- Lydon, Donal J.
- Mansergh, Martin.
- Minihan, John.
- Mooney, Paschal C.
- Moylan, Pat.
- Ó Murchú, Labhrás.
- O’Rourke, Mary.
- Ormonde, Ann.
- Phelan, Kieran.
- Ross, Shane.
- Scanlon, Eamon.
- Walsh, Jim.
- Walsh, Kate.
- White, Mary M.
- Wilson, Diarmuid.
Tellers: Tá, Senators Bannon and Cummins; Níl, Senators Minihan and Moylan.
Amendment declared lost.
Section 22 agreed to.
Sections 23 to 28, inclusive, agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."
I thank the Minister of State, Deputy Noel Ahern, for attending the Seanad this evening. He sat through the entire two and a half hours devoted to the Bill. The Fine Gael Party supports the Bill in principle but it is regrettable my important amendments were not taken on board. Hopefully, the Government will not live to regret that.
I thank the Minister of State for his work on this Bill. It was well debated both in the Dáil and the Seanad. I hope it will prove to be good legislation.
Minister of State at the Department of the Environment, Heritage and Local Government (Mr. N. Ahern)
I thank Senators for their co-operation in ensuring the Bill was passed this evening. In an ideal world, we might like more time. I record my appreciation for the work done in the Department. While it may be thought of as a small Bill, tortuous work has been done behind the scenes to get agreement between the different sides.
Question put and agreed to.
When is it proposed to sit again?
At 2.30 p.m. on Wednesday, 27 September 2006.