Seanad Éireann debate -
Wednesday, 20 May 2009

Vol. 195 No. 10

Companies (Amendment) Bill 2009: Committee Stage.

Section 1 agreed to.

SECTION 2.

Senator Ciaran Cannon

I move amendment No. 1:

In page 4, between lines 11 and 12, to insert the following:

"(5B) Failure to comply with subsection (5A) is an offence and a company shall be liable to a fine not exceeding €10,000.".

As I pointed out the last time I had an opportunity to make a contribution on this Bill, Fine Gael welcomes the legislation and supports it in principle, but we feel a number of amendments are necessary, of which this is one. Section 194 of the Companies Act 1963 requires that directors disclose to their boards any conflicts of interest in respect of contracts or proposed contracts and that a book of these declarations be kept by the company. The Bill proposes to amend the 1963 Act by providing that the Office of the Director of Corporate Enforcement should have the power to ask for this book and by making it an offence not to present the book when asked for. The penalty in the 1963 Act for refusing to present the book is £100, which we suggest is far too small and does not act as a deterrent. We suggest this be increased to €10,000.

Tánaiste and Minister for Enterprise, Trade and Employment (Deputy Mary Coughlan)

What the Senators are proposing is an addition to the proposed subsection (5A) of section 194 of the Companies Act 1963. The amendment creates an offence the fine for which is €10,000. I appreciate where they are coming from and their enthusiasm for sending a message. However, as it stands the fine is €1,900. It used to be £100, but that was a long time ago. It has been increased accordingly. There will be reforms in the consolidation Bill, major legislation that is coming in, although Senator O'Toole will go through me for a shortcut when I say that.

Senator Joe O’Toole

Absolutely, I do not want to hear about what is coming next year.

Deputy Mary Coughlan

It will be a major Bill and applying a fine at that level now would have an enormous effect on the consolidation legislation. I appreciate the desire for a clear signal but the ODCE can go to court so it would be overdoing it to increase the fine to €10,000 at this time. Having said that, we are giving the ODCE access to the books for the first time. I appreciate the Senator's aims but it is not appropriate to have a €10,000 fine at present.

Senator Liam Twomey

The Minister says she has a problem with fines up to €10,000 if the Office of the Director of Corporate Enforcement deems an offence serious enough but we fine fishermen far in excess of that for landing a few small fish.

Senator Joe O’Toole

I am disappointed. The Government wonders why it gets bad publicity but this is a classic example. This simple amendment shows authority and commitment. When people criticise the Government for not putting laws in place, this is what they mean. The Minister said she intends to deal with this issue in the consolidation Bill next year and no one disagrees with that. The Minister has not told us, however, the problem with putting this arrangement in place now. The Director of Corporate Enforcement is investigating issues full time, waiting six months to put a system in place does not help.

Where is the problem with putting this in place now? Every attempt should be made to support the work of the Office of the Director of Corporate Enforcement. I cannot understand how the Government gets itself into these binds or why it does not recognise that Fine Gael has put forward a good idea that will show people what we are about and that we will not stand for any delay to the work of the ODCE.

The first thing that happens when a request comes from the Office of the Director of Corporate Enforcement to a company is that a phone call is made to the company's lawyers. The company's lawyers will be of the view that it should give nothing away until absolutely necessary. They will then slow down the process. I spoke to someone who told me about six different communications with the legal team of an institution over a simple list of decisions taken. Lawyers probably made at least €10,000 while the official body established by the Minister could not get the information. This happens all the time. It is a smaller version of what the developers are talking about with NAMA — they will take it to court.

We are behind the eight ball every time. It would cost the Department nothing to put this in place and it would at least allow the Minister to say that while the legislation will be consolidated, she put in place a positive idea from the Opposition. How can that hurt? Surely that must be positive and is the sort of thing we should be doing. When the Taoiseach, the Minister for Finance and the Minister get together to look at these things, surely this is what is wanted.

Fine Gael is not trying to score political points here, it is a sensible approach to legislation that will reflect discussion in this and the other House and in the newspapers about how we do our business. I appeal to the Minister to accept this amendment in the spirit it is offered to let ordinary people see we are thinking of them.

Senator Ciaran Cannon

I am concerned that every amendment proposed by us and Senator O'Toole will be fobbed off with the suggestion that it will be covered when the consolidation legislation is introduced. This is an opportunity to send out a strong signal. It gives discretion to a court to apply a fine of up to €10,000, it need not be the entire €10,000. The Minister should take this on board and send out the right signal. There are constant calls for co-operation from the Opposition. This is such an occasion and the Minister should reciprocate.

Deputy Mary Coughlan

The court can compel. If I was to accept the amendment, this section would contain provision for a fine of up to €10,000 while the next would allow for a fine of €1,900. We would have different amounts in different parts of the Companies Act. We would end up picking and choosing which fine would be €1,900 and which would be €10,000. On that basis I would prefer to wait for the consolidation legislation.

I am not here to take away from the strong message that is coming from this House and the Dáil that the legislation should be so robust that the Director of Corporate Enforcement will have the legislative power to deal with the issues that exist. That is what we want. We want to send a clear signal that if people do not co-operate with the director, the full rigours of the law will be used.

That must be balanced with the argument that we have so many good companies here because it is easy to set up, we support companies quickly and we do not have the same bureaucracy as other European companies. My Portuguese counterpart indicated that it is possible to set up a company there and be at work within 24 hours but that is too quick. When the Director of Corporate Enforcement insists he should have access, it should be given. The legislative measures are such that he can revert to the courts if needs be. In the new legislation, I would prefer not to have subsections coming in willy-nilly that do not give an overarching view of where we want our company law to be.

I am not nit-picking or saying I am not prepared to listen to what the Opposition has to say. Anyone who knows me knows I accept different perspectives. On this occasion, I feel that if €10,000 is predetermined in this section, I would have to reconsider all of the other fines in the companies legislation, which is what I will do in the consolidation Bill, which is why I prefer to wait.

Senator Joe O’Toole

I understand that but I sat in this seat in 1990 when the original legislation was passed. We had many discussions on this issue and on the importance of having a consolidated Bill. Then we went away for the summer holidays with our buckets and spades and suddenly the beef industry fell apart. The then Government needed to act urgently to deal with that and both Houses reconvened to pass one or two parts of that legislation — I cannot recall which it was but the Minister's adviser will be able to tell her. I can quote the Minister chapter and verse on when we have enacted parts of legislation on a number of occasions.

The answer to the Minister's first point is that we want a clear message to be given. I advise her that I am not a member of the Opposition, I am one of the Independent Members. I am as likely to vote for the Government, as Fine Gael will know, on any issue as it arises. I consider the issues and deal with them as I find them.

This provision does not amount to additional regulation. It is a red herring to suggest it does and I would like the Minister to acknowledge that point. The regulation is in place. This provision simply deals with the level of fine for not complying with the regulation. That is all we are talking about in this instance.

In terms of the difficulty of having one figure for one and no figure for another, we will do a deal with the Minister, if she accepts this amendment, all the others can be introduced on Report Stage. It is very simple, we can introduce them all next week. There is no difficulty about doing that. That is the way we should approach this issue at this stage. There is no doubt we can deal with issues on Report Stage.

The Minister will not have heard what I said here this morning or yesterday morning. All of us as public representatives should be dealing with these types of issues, whether they relate to the National Asset Management Agency, the Director of Corporate Enforcement or directors' compliance statements, in a co-ordinated and co-operative manner to move matters forward. I want us to examine each such issue and consider how we can strengthen the legislation underpinning it. The Minister will get no marks for citing St. Augustine's line in response, namely, that a proposal might be a good idea but it will not be acted on yet, it will be done next year when all the other matters are being dealt with. I guarantee that we will not have the consolidated Bill before next summer. It is too big to be ready by then, although I agree with the Minister it is needed. I will cite a minor example that illustrates the need for it.

When I checked which director is referred to in the section, whether it was the Director of Corporate Enforcement, the Director of Public Prosecutions or both of them, I could not find the definition in the 2003 Act, to which the section refers, or in the 1990 Act. I know the definition is included in the legislation and I am not suggesting it is not. I accept the need for a consolidated Bill and I accept the need for this Bill. There is a $64 question in this respect. This legislation is being introduced now because the Minister thought it was important. There is nothing in it that could not be deferred until the introduction of a consolidated Bill, except the Minister prioritised this Bill, rightly, but it is all part of what will have to be dealt with again in the new Bill next year. This will have to be encompassed into the new companies legislation. In this legislation the Minister is changing the 1990 Act, the 2003 Act and the various other Acts. This will have to be done again next spring. If that is the case, what is the difficulty about accepting the amendment proposed by Senator Cannon? That is the reality. The Minister's arguments do not hold water. I promise her I am saying this for her own good.

Deputy Mary Coughlan

Are you?

Senator Joe O’Toole

There are Brownie points to be won by the Minister in doing this. She is getting enough hassle knocking on doors around the country. She should put something on the credit side, namely, that we will not stand for nonsense. If I was arguing against the Minister on a doorstep and there was a proposal before her to deal with bankers and other people who will not supply information by imposing a €10,000 fine on them, and if she started to explain that the Government will do that next year, I would say to her, let us do this, this is a good decision and it should be implemented now. It is one decision and then this would be done.

Senator Liam Twomey

Some of the Minister's comments reinforce the need for this measure. She said it is easy to set up a company in Ireland. That is beneficial for people who are engaged in business. The majority of the companies that have been set up operate legitimately and simply want to get on with doing their work within the business community. However, where there are a few rogue companies, it is important provision is made for putting in place fines to address the nature of the offence. The Minister should take on board this amendment.

I was not joking when I made an earlier comment about fishing. If a fisherman catches a few extra fish or some species that is over the quota, he or she could easily be fined up to €10,000. The Minister is well aware that the Government passed legislation to imprison fishermen for such an offence, yet she is making an excuse to allow rogue companies not to be fined on the basis that she will do something about it next year. That is ridiculous.

Deputy Mary Coughlan

I heard Senator O'Toole talk about getting his buckets and spades, but if I recall correctly he got off of a very nice boat on the Shannon and no buckets and spades were needed there.

Senator Joe O’Toole

I did not have it at the time so I was stuck with the buckets and spades.

Deputy Mary Coughlan

Account needs to be taken of the all-encompassing legislation in this respect. Section 194 of the principal Act provides that it is the duty of a director to disclose his interests in contracts made by the company. If I was to accept this amendment, we would have subsections (5A) and (5B). This provides that if a company fails to comply with a subsection, the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine not exceeding €1,904.61, and if any inspection of production required thereunder is refused, the court may, by order, compel an immediate inspection or production. To that would be added the proposed subsection (5B), which provides that "Failure to comply with subsection (5A) is an offence and a company shall be liable to a fine not exceeding €10,000." The next section, section 6, provides that any director who fails to comply with this section shall be guilty of an offence and liable to a fine not exceeding €1,904.61. This would mean that failure by a company to comply would carry a fine of €1,900, failure to comply with the same provision would carry a fine of €10,000 and failure to comply with it again would carry a fine of €1,900. It is the same offence, but acceptance of this amendment would mean it would carry two fines, one of €1,900 and one of €10,000. If I was to accept the amendment, I would be talking against myself on two occasions, as it were. Two fines would apply for the same crime. It is on that basis this amendment proposed by Fine Gael cannot be accepted. In this legislation the principal Act is being amended by inserting the subsection as set out in the section. Fine Gael is seeking an amendment of the section that provides for the amendment of the principal Act, which provides for a fine of €1,900 for one part of the provision, in terms of proposing a fine of €10,000 for the same part of the provision. On that basis, I am not in a position to accept the amendment.

Senator Liam Twomey

I am confused. The Minister has given two fines for the same crime.

Deputy Mary Coughlan

Yes. The Companies Act is in place. This section amends section 194 of the principal Act by inserting a new subsection after subsection (5), namely subsection (5A), which is set out in the section. It provides that "A company shall, if required by the Director, produce to the Director for inspection the book kept by it in accordance with subsection (5)(a) [which refers to the principal Act] and shall give the Director such facilities for inspecting and taking copies of the contents of the book as the Director may require.”

The Deputy's amendment would involve a further amendment of that section of the principal Act, creating a further subsection. If one reads the entire section, it provides that any director who fails to comply with the section shall be guilty of an offence liable to a fine not exceeding €1,904. Taking account of the principal Act, if I was to accept what the Fine Gael amendment proposes, we would have two fines for the same crime. That is the issue. We are amending the principal Act, which refers specifically to a fine of €1,900. The problem is the Deputy would need the book I have to check through all this legislation.

Senator Liam Twomey

I am trying to work out whether we have two fines for the same crime or two different crimes.

Deputy Mary Coughlan

Two fines for the same crime.

Senator Joe O’Toole

The point at issue is clear. We should be increasing the fines in regard to these issues. If this is not the correct way to do it, we should be doing it the right way.

We listened to the contributions on Second Stage. Senator Callely spoke about various problems with laws and asked if this legislation could provide for this, that or the other. I will call for a vote on every section. I want Members on the Government side to walk through the lobbies in respect of the sections of this Bill so that the next time I have to listen to them give out about the non-compliance of bankers and company directors, I will be able to say they had an opportunity to do something about that. When other legislation was debated in this House, we were too soft on these issues. It will not make a great deal of difference to the Tánaiste, but for those of us who are working on making this have more impact and to give a message to people, this is important. The Tánaiste has made up her mind.

Deputy Mary Coughlan

It is inappropriate to say I or any Member of this House does not want to give a clear message. I want to do it as much as the Members here. That is why I introduced this legislation. We will have the "blacks" with everything written down and I am prepared to accept exactly what everybody is saying. I can give an undertaking to the House that we need to examine the fines and ensure the penalty reflects the crime, which Senator Twomey talked about. It is my intention to increase fines. My preferred option is to do it within the new, consolidated legislation. It might take away from the fact that the legislation coming very quickly is very complex and difficult. I appreciate what Fine Gael Members are trying to say, that we want to give a very clear, strong signal. I am prepared to give that strong signal.

Senator Ciaran Cannon

But not now.

Deputy Mary Coughlan

It cannot be done now. I could not accept the amendment as it is written because from a parliamentary drafting perspective it would be contradictory to what we are trying to do. I undertake to increase fines in the context of the new legislation.

Senator Ciaran Cannon

By her own admission the Tánaiste is highlighting the urgency of this legislation. It is urgent because it serves to give the Director of Corporate Enforcement the powers he needs to police rogue directors and to engender real confidence in the public that we are tackling this issue head on. Is there any mechanism whereby within this legislation we can uniformly apply that new fine across all sections for ease of application and, as Senators O'Toole and Twomey said, to send out a strong, clear and unequivocal signal to the public that we are taking this issue seriously? This is urgent legislation. If it were not, we would not be here but would wait for it to come in a year's time. The urgency attaching to this legislation requires that the penalties it provides for are appropriate and serve as a sufficient deterrent to stamp out the kind of activity we have seen in recent years.

Deputy Mary Coughlan

Four hundred sections of company law have offences attached to them, so we would have to go through 400 sections of Companies Acts to do this. I do not have the wherewithal to go through 400 sections of legislation. It would delay my taking this legislation any further, which none of the Senators wants to happen. I will undertake to increase the fines. We will have a further discussion on Report Stage but I am not in a position to accept the proposal now.

Amendment put.

The Committee divided: Tá, 14; Níl, 22.

Tá

• Bradford, Paul.
• Buttimer, Jerry.
• Cannon, Ciaran.
• Coghlan, Paul.
• Cummins, Maurice.
• Fitzgerald, Frances.
• Hannigan, Dominic.
• McCarthy, Michael.
• McFadden, Nicky.
• Mullen, Rónán.
• Norris, David.
• O’Toole, Joe.
• Ross, Shane.
• Twomey, Liam.

Níl

• Brady, Martin.
• Butler, Larry.
• Callely, Ivor.
• Carty, John.
• Cassidy, Donie.
• Corrigan, Maria.
• Daly, Mark.
• Ellis, John.
• Feeney, Geraldine.
• Glynn, Camillus.
• Leyden, Terry.
• MacSharry, Marc.
• McDonald, Lisa.
• Ó Domhnaill, Brian.
• Ó Murchú, Labhrás.
• O’Brien, Francis.
• O’Donovan, Denis.
• Ormonde, Ann.
• Phelan, Kieran.
• Quinn, Feargal.
• Walsh, Jim.
• White, Mary M.

Tellers: Tá, Senators Maurice Cummins and Joe O’Toole; Níl, Senators Camillus Glynn and Kieran Phelan.

Amendment declared lost.

Question proposed: "That section 2 stand part of the Bill."

Senator David Norris

I apologise to the Minister for this small intervention but I was at the Oireachtas Joint Committee on Foreign Affairs and heard the vote. In regard to the section and the vote we just had, will the Minister outline why, for example, none of the principals in the present rather awkward financial situation has been addressed under the existing legislation dealing with reckless trading? I would have thought it perfectly obvious that directors of companies would be addressed. I have been a director of several companies.

The country is going down the Swanee but, as far as I can see, nobody has been prosecuted for reckless trading. Surely the Government should make some statement as to why, when the welfare of the country is being prejudiced, none of the principals involved has been approached over the question of reckless trading. I would have thought it would have been an obvious thing to do.

Deputy Mary Coughlan

The section relates to the role of company directors. Reckless trading has its own parameters and determinations. As I indicated, the reason I have introduced this legislation is to supplement some of the existing legislative powers of the Office of the Director of Corporate Enforcement. I asked the Director of Corporate Enforcement whether the legislation was robust enough and he said it was and that there was more than adequate provision. However, on the basis of his current experience, his view was that additional legislative measures needed to be introduced.

As the Senator knows, reckless trading has its own configurations. I do not want to damage, in any way, ongoing investigative work which has not been brought to completion, nor, I am sure, does anybody in this House. No one in either House wants to say anything that would disadvantage or take from the independent work being carried out by the Director of Corporate Enforcement.

Senator David Norris

I thank the Minister for her response because I somewhat jumped the situation. I will have to go back to the Oireachtas Joint Committee on Foreign Affairs but I would like to signal to the Government that many people would be concerned. I was director, chairman and chief executive of two small companies and I was very conscious that if one behaved in a certain way, one would be in danger of prosecution for reckless trading, although not in any sinister way. I signal to the Government that people are watching to see if directors can get away without being prosecuted for reckless trading. This is fairly clear and I do not think it requires very long drawn out investigation to do people for reckless trading as that kind of thing becomes clear fairly quickly. I thank the Minister for her answer and I will read the record of the House carefully to see if anything further emerges. I indicated I would be speaking at the Joint Committee on Foreign Affairs and I ask to be excused.

Question put and agreed to.

Section 3 agreed to.

SECTION 4.

An Cathaoirleach

Amendments Nos. 2 to 9, inclusive, are cognate and may be discussed together by agreement.

Senator Ciaran Cannon

I move amendment No. 2:

In page 4, lines 20 and 21, to delete "books or documents" and substitute "classes of documents".

As the Cathaoirleach has pointed out, all these amendments seek to achieve the same outcome, that being to formalise and to clarify an existing power available to the director by providing that the director shall specify the books or documents to be produced where and when. The precise reference to books or documents as opposed to classes of documents — as suggested by Fine Gael — may hinder the director in that the person to whom a direction is made may require the director to identify a particular book or document as distinct from just identifying a class or a type of document. Leaving the director open to such a challenge carries some risk in our view and most certainly lessens his powers of seizure.

Deputy Mary Coughlan

I am very interested in the explanation because I was trying to understand where the Senator was coming from. Under the companies legislation as it stands, the definitions and their interpretations compose quite a suite. The definition states, "Books and documents and books or documents include accounts, deeds, writings and records made in any other manner". It is covered within the definitions and that is the interpretation of the definition. I wonder why the Senator is of the view that we need to introduce classes of documents because the interpretation of a class would actually be a subsection so therefore it is encompassed within the existing interpretation and the definition. The view would be that it would not in any way hinder the capacity of the director.

Senator Joe O’Toole

The Minister is absolutely correct in the point she makes about the broadness of the interpretation. I have been on the receiving end of this issue where lawyers just read exactly what the Minister has read out and which is certainly broad enough. However, there is a suggestion there that the director has to know what he is looking for, if the Minister understands me. The reference to classes of document means any document which relates to rather than having to ask for a particular one. This is the intention of this amendment. I agree with the Minister's interpretation or explanation of the term "books and documents" in the legislation as it stands and that it is perfectly broad enough and I recall that being broadened out.

I will give the Minister an example. The lawyers will just look at it and say, "What book has he asked for?", or "How did he describe the book?" or "Can you describe the book?", "Is it a particular book or is it any book?". If he fails to describe it in a way that can clearly identify it then one could argue it does not have to be presented. I think it allows the director to do his job more effectively. I agree with the Minister's view that it is not about broadening it but rather what it is called.

What does the director write to the company? What does he put in the body of the letter? This is the significant issue. I may not have convinced the Minister the last time but every letter like this is perused, examined and dealt with by the lawyers. This is not a letter to the directors who deal with it and reply to it; that is not what happens. It goes straight to the lawyers so the director is actually talking to Arthur Cox or McCann FitzGerald or Matheson Ormsby Prentice and that is where it is dealt with and their view will be only to give what one must give which does not meet the spirit of the legislation. In that sense this is a helpful amendment.

Deputy Mary Coughlan

All the amendments and the entire Bill have been proofed by the Director of Corporate Enforcement and he has indicated to me that the phrase, "books or documents" is more than adequate to deal with his needs. Section 19(1) of the Companies Act 1990 states:

The Minister may, subject to subsection (2), give directions to any body requiring the body, . . . at such time and place as may be specified in the directions, to produce such books or documents as may be so specified...

This means the director can and may — not shall — make direction to any body as to what he wants to access. By saying it is just books or documents and given the interpretation in place and given the powers he has under section 19, his view is that he has more than adequate recourse within the law to get anything that is necessary and that "classes of books and documents" are a subsection of "books and documents". I would be assured on the basis of what the director has said to me and to the officials, that he has adequate recourse to get whatever is needed and he can make direction as well under section 19 and this will be augmented by this amending Bill. I hope this will reassure the House that in the view of the director he is not curtailed in any way in gaining access to the information.

Senator Ciaran Cannon

If the Minister is content the definition of "books and documents" does not in any way impede or hinder the director in carrying out his work and if the director and his office have looked at this legislation and he shares that opinion then we are content to withdraw those amendments.

Amendment, by leave, withdrawn.

Amendments Nos. 3 to 9, inclusive, not moved.

Question proposed: "That section 4 stand part of the Bill."

Senator Joe O’Toole

On a point of clarification, these additional powers which the Minister has given to the Director of Corporate Enforcement, are general powers and not just to do with loans. Do I take it they just extend his powers for any of his work?

Deputy Mary Coughlan

Yes.

Senator Joe O’Toole

I thank the Minister.

Question put and agreed to.

SECTION 5.

Senator Ciaran Cannon

I move amendment No. 10:

In page 5, to delete lines 19 to 38.

The Minister accused me of being somewhat exuberant earlier in my pursuit of——

Deputy Mary Coughlan

Is it my turn now?

Senator Ciaran Cannon

——wayward company directors. We are trying to strike a balance here between giving the director the powers he requires to do his job properly and ensuring we do not unnecessarily obstruct the entrepreneurial effort of thousands of Irish business people and that is exactly how the second part of that balance is being struck with this amendment.

The proposed extended power of seizure at section 2(a) affords the director or his staff a very broad power to seize documents. The suggested power would allow an officer to form a view that a filing cabinet, for example, might contain material covered by the warrant and he would be empowered by this legislation to take that whole filing cabinet away to his office and to read every single item in it at his leisure and come to a decision at some point as to whether the material was incriminating in any way.

Apart entirely from the acceptability of seizing such uncertain documents, it seems the object of this subsection is to facilitate a fairly leisurely review. Any execution of a warrant should be resourced, comprehensive and exact. The officer should be able to come to a view on the spot, even if the execution of the warrant takes some days, but the notion of the director or his or her staff "taking homework home with them" is suggestive of procrastination and even idleness. The only limitation on the power conferred under section 2A obliges the officer to carry out the determination or separation of documents as soon as is reasonably practicable. Given what we know to be the extremely sluggish approach of law enforcement or regulatory authorities in Ireland and the amount of documentation that might lawfully be seized under this extended power of seizure, the effect of this section would be possibly to paralyse completely the company in respect of which the material was seized.

The Director of Corporate Enforcement and his or her staff, I argue, have little or no experience of running a company or business. Every company in this particularly difficult environment needs to have the flexibility to adapt its market forces and be able to move very quickly. To have a considerable proportion of a company's documentation taken away on the pretence that perhaps one or two pages might be incriminating we believe to be somewhat too punitive. We ask that this whole section be re-examined for the Bill to be more efficient, while allowing that the director needs adequate powers of seizure. However, it needs to be less cumbersome, with fewer opportunities for the long deliberations that are commonplace in these types of investigations. I look forward to the Minister's response.

Senator Joe O’Toole

I prefer Fine Gael when it is in a more exuberant mood.

I do not see myself as a Member of the Opposition, but take each issue as I find it. In this case I find myself very firmly on the side of the Government. Whereas I take the point Senator Cannon made as regards the importance of them, I certainly do not want people prohibited from diligently doing their work. Nonetheless, the words "reasonably practicable" are there, as are the courts, and nothing here prevents a person having access to them while the Director of Corporate Enforcement is dealing with them.

More often than not, as Senator Norris has pointed out, the Director of Corporate Enforcement suffers from allegations about not moving in at all, not having sufficient powers or failing to move matters onwards. I believe this is reasonable and reflects what people want. However, if it turned out that in its application, some type of obstacle or block was to appear as regards companies continuing to trade or advance their business, that would be a serious issue. Certainly, a point has been raised in that regard and perhaps there might be some method for reviewing that. My view is that the present Director of Corporate Enforcement is absolutely diligent about his responsibilities and would share a very strong concern as regards the importance of companies being able to continue trading and do their business. There is no question or doubt in my mind whatever about that. I have full confidence in him, but I agree with Senator Cannon to the effect that this cannot be dealt with on the basis of the current director's modus operandi and one does not know how any future director might do his or her business. The additional power being given to the director is important and I support that section as it stands. However, I should like to be reassured that the issues raised by Senator Cannon would not arise.

Senator Feargal Quinn

I have listened very carefully to Senators Cannon and O'Toole. It seems that Senator Cannon has a point: if the Director of Corporate Enforcement is seeking a particular document, which is in a filing cabinet, it would appear on the basis of this that he or she has the right take away the whole filing cabinet. I know there are protections in place and I am not sure what the answer is, but it appears to place restraints on a company's ability to continue trading on that basis. I take the point that both Senators have made, that we are not talking about the present director. We are putting in place legislation that I hope will last and which is for the protection of the clients of the particular company. I want to hear from the Tánaiste as regards this, because I should like my mind to be put at rest as I am concerned over it.

Deputy Mary Coughlan

Perhaps it might be helpful to explain the entire purpose of the proposed subsection 2A. The Director of Corporate Enforcement or an officer authorised by him or her may, when conducting a search under a warrant, find something which he or she believes contains material information. However, it may prove impractical to form a decision on the spot as to whether it can be seized under the warrant. Therefore, the Bill allows him or her to take control of that material and remove it to another place where he or she will make a determination about its relevance to the matters being investigated.

This type of situation would typically arise where the volume of the material on a premises is enormous. Likewise, vast amounts of information may be stored on a computer and an examination of this, to determine its relevance, could necessarily take some time. This might be best undertaken away from the premises of the company under investigation. I am satisfied this provision is an important element of the strengthening of the ODCE's power of search and seizure. I consider it to be a reasonable and proportionate provision. I am aware that fears have been expressed that the extended powers could, in extreme cases, impair the operation of a company whose premises are being searched, for example, where key information is seized by the ODCE. However, I point out that the powers being given to the ODCE are not unfettered. There are appropriate balancing provisions and protections for parties whose records are seized, both in the Bill and within the existing legislation, for example, section 20 as amended and sections 21 and 23, as amended. The ODCE must make provision to allow reasonable access — I believe that is the issue Senator Cannon has raised — by a company to its records during that period of examination. Privileged material is also protected, and where confidential information is seized, the ODCE must maintain that confidentiality.

I am satisfied that every effort is being made to ensure the provision will not threaten the ability of a company to operate, and on that basis, I should like to assure the House that the concerns, although doubtless real, should not be such as to lead Members to believe the powers of the ODCE are unfettered. We have safeguards in place to ensure a company, during an investigation, may continue to trade and have access to relevant information.

Senator Ciaran Cannon

I thank the Minister for her response. The amendment we are tabling places an onus on the Director of Corporate Enforcement and his or her staff to be exact and definite in establishing what types of documents they need to remove from a company's premises. They have powers of separation under which they may enter a premises and deem which documents are pertinent to the case they are making. I cannot understand why that separation mechanism may not occur on the premises and why documents need to be taken away.

Could the Minister confirm whether, when such documents are removed, there is any finite time limit imposed on the director within which to return them to the owner, thus allowing a company, perhaps, to restart trading? Matters are overweighted in favour of the director rather than those thousands of companies which operate every day on a legitimate basis.

Deputy Mary Coughlan

The director will be able to make a determination in normal circumstances.

Senator Ciaran Cannon

On the premises.

Deputy Mary Coughlan

That is correct. Naturally, where there are enormous amounts of information, it might be considered best to take the information away. If a person is in a trading situation the last thing he or she wants to see on the premises is the staff of the ODCE for three or four months, when it might, in fact, be best to have that information off site. In normal circumstances the director will make his or her determination. In a situation, however, where vast amounts of material need to be reviewed, then information would be taken off site, but only in those circumstances. I have been around a long time and I know that one person's determination of what "as soon as practicable" means will vary from another's. One person will see it as being instant and someone else will take it to mean somewhat longer. I appreciate the Cathaoirleach has a further amendment to deal with, on time limits, but it should be emphasised we do not want to tie someone's hands to the extent he or she has to access the courts, which could mean, in effect, going back through the entire process and stalling an investigation. At the same time, one does not want to see people stopped from trading normally.

It is important to achieve balance. This is as balanced as can be, given that the section deals with situations in which one does not know what one might meet. An examination could be very short with a prompt determination. On the other hand, there could be a huge investigation. We want to ensure that any investigation that takes place is right and for everyone's benefit. It must protect the reputation of the Director of Corporate Enforcement and for the benefit of a person being investigated there must be fair procedures.

On that basis, I am convinced the legislation to amend section 20 of the 1990 Act is more than adequate.

Senator Joe O’Toole

In an attempt to be helpful to Senator Cannon, I ask the Minister to clarify the following point. If a company felt it was being unfairly dealt with and that what was happening was not practicable, what recourse would be available to it? It is my understanding that the company could seek a mandamus injunction requiring the Director of Corporate Enforcement to return the documentation. In that case, the director would have to show cause that he was acting in a reasonable and practicable manner. If a company was unhappy, it could seek a mandamus injunction in the courts. The director would then be required to show he was acting reasonably and practicably. Would a company have that recourse, in the extreme?

Deputy Mary Coughlan

That is correct. In an extreme case the matter would be referred back to the courts.

Amendment, by leave, withdrawn.

Senator Ciaran Cannon

I move amendment No. 11:

In page 6, after line 47, to insert the following:

"(vii) the constitutional rights of the company or the holder of the information,

and

(viii) the rights of any person, who is the subject of the information, under the Data Protection Acts 1988 to 2003.".

This amendment attempts to award some protection to company directors, to the entity that is the company itself and to any person whose personal information might be contained in company records. It seeks to protect the rights of a company or a holder of information so that these rights are not abused during the document seizure process. Subparagraph (viii) seeks to protect the rights of any person who is the subject of the information being seized.

Is there sufficient protection in the Bill for the company and for people whose data may be stored within company records?

Deputy Mary Coughlan

I am glad to hear Senator Cannon explain the reasoning behind this amendment. Subsection (vii) of the amendment relates to constitutional rights. The director is obliged at all times to operate within constitutional norms. Proceedings permitted by Acts of the Oireachtas are to be conducted within the principles of constitutional justice and any departure from these principles would be restrained and corrected by the courts.

The constitutional rights of a person who is the subject of the relevant information are safeguarded, as always. On that basis, it would not be appropriate to make specific provision for constitutional rights in this case. Anyone who is given powers such as those granted by this legislation must operate within constitutional norms.

Senator Joe O’Toole

I would like to hear the basis of Senator Cannon's amendment. I am always reluctant to make references to the Constitution in legislation. All legislation must be constitutional. Was a particular issue in this regard brought to Senator Cannon's notice? I have spoken on this issue several times in the House. If one makes reference to constitutional rights in legislation one must do so in all legislation. It is assumed the law of the land must be constitutional. The constitutionality of legislation can be tested in the Supreme Court.

Does Senator Cannon know of some side issue relating to constitutionality? If there is a worry in this regard the Bill should be tested and tried. Is there a question of constitutionality in an earlier part of section 5? If so, we should hear about it. I have reservations about making reference to constitutional rights without setting the reference in a broader context.

Senator Ciaran Cannon

Subparagraph (viii) of the amendment holds more importance for me. In the event that personal data are stored within company records, the Data Protection Acts should take precedence over this legislation. That is the most important provision of the amendment. I would like clarification on that.

Deputy Mary Coughlan

Senator Cannon is concerned about the possibility of inadvertent conflict between this legislation and the Data Protection Acts. I believe data protection legislation should not prevent access to information that is expressly provided for within the Companies Acts.

I will have this matter examined and I will bring it back on Report Stage.

Senator Ciaran Cannon

I thank the Minister.

Deputy Mary Coughlan

That is me being nice. I told the Senator I could be.

Senator Ciaran Cannon

I never said the Minister was not nice.

An Cathaoirleach

That is what we like to see in this House.

Amendment, by leave, withdrawn.

An Cathaoirleach

Amendments Nos. 12 and 13 are related and may be discussed together, with the agreement of the House. Is that agreed? Agreed.

Senator Ciaran Cannon

I move amendment No. 12:

In page 8, to delete lines 3 to 20 and substitute the following:

"(2F) Where an extended power of seizure is exercised, it shall be the duty of the officer—

(a) to carry out the determination or separation concerned as soon as practicable after its exercise, and in any event, within 3 months or such further period as is permitted by the Court, and

(b) as respect anything seized in exercise of the power found not to be material information or, as the case may be, anything separated from another thing in exercise of the power that is not material information, to return, as soon as practicable after that finding or separation, and in any event, within 7 days after the finding or separation, or such further period as is permitted by the Court, the thing to its owner or the person appearing to the officer to be lawfully entitled to the custody or possession of it.

(2G) Where an extended power of seizure is exercised and pending the determination or separation referred to in subsection (2F), the Court may give such directions concerning that which has been seized as the Court considers appropriate including, without prejudice to the generality of the foregoing, directions as to—

(a) the determination or separation, prior to the 3 month period referred to at subsection (2F), of all or part of that which has been seized,

(b) the return, prior to determination or separation, of all or part of that which has been seized, upon such terms as seem appropriate to the Court.".

The phrase "as far as is reasonably practicable" is dotted throughout legislation. There are as many interpretations of it as there are instances of it. I have serious concerns that the power granted in section 5 is weighted too much in favour of the Director of Corporate Enforcement. Most regulatory and law enforcement authorities have taken an extremely sluggish approach. The Minister said a company could be shut down for months on end if a significant amount of information needed to be seized. The effect of the foregoing sections would be to paralyse a company from which material was seized.

In most instances it should be possible for an officer to carry out an inspection and separation on a company's premises. The purpose of this amendment is to protect the legitimate rights of a company. There should be a requirement that the determination or separation referred to in subsection (2F) of the 1990 Act be carried out on the spot or, if that is not possible, within a fixed period. I suggest two to three months.

In most instances, that would be more than enough time to carry out the separation of documents and to return those documents not pertinent to the investigation. Once the separation of documents has been carried out one can begin indepth examination of the pertinent documents.

In addition to these requirements, there ought to be power to apply to the High Court for the immediate return of documentation in appropriate circumstances. Senator O'Toole mentioned earlier that this is already possible. Can the Minister confirm that this is the case and that application to the High Court would not be an onerous procedure for company directors?

The Minister spoke of the need to strike a balance. In this instance, the balance is weighted too much in favour of the Director of Corporate Enforcement. A period "as far as reasonably practicable" could stretch for months if not years. Allowing the director power to, effectively, shut down a company places too onerous a burden on company directors who, in the main, act in very good faith at all times.

Senator Larry Butler

Could the Minister place a timeframe on this provision? Senator Cannon's approach is reasonable. This provision could cause great difficulties for companies. A timeframe would help.

Senator Feargal Quinn

As I remarked on Second Stage, the concern of everyone is to ensure and enable business to operate and I realise the Tánaiste's heart is behind that concern. I cannot improve on the words of Senator Cannon. There is great doubt about the phrase "as soon as practicable" and it seems rather vague. I realise it is dotted throughout legislation but it is essential we have some control on a future director. The present situation is not in question but we wish to ensure Ireland is an attractive place to open, encourage and operate business. There is a danger if we put in place constraints which at some point in future could stifle the ability of a given company to operate. This may occur for very valid reasons but also perhaps for reasons not so valid and on that basis there should be some time constraint. The time constraints included in Senator Cannon's amendment are worthy of consideration.

Senator Joe O’Toole

It is worth teasing out the matter. I refer to the recent Northern Bank money laundering case. It took a team of 26 gardaí several months to examine one series of documents on computer and on file. They had to go through every document and that was outlined in the court.

One side of the argument is related to the length of time it takes to go through computerised information because one must check what is on the hard disk and so forth. On the other hand, if someone needed to search a drawer in a filing cabinet and the Office of the Director of Corporate Enforcement was examining the matter one week, one month or one year later then one would recognise that such a situation is hardly practicable. The legislation must cover such extreme instances. The only way to do this is a form of words which requires judgment and the only judgment that covers the two areas is the phrase "reasonably practicable". In my time here I have been unable to come up with any other phrase.

Let us consider the upside and down side. The down side is that one person's "reasonably practicable" is another's utter dismay. Therefore, one must find someone to mediate and to make a call on it. Unless the Minister establishes some in-between, mediation, arbitration or determination process, the normal way of dealing with an interpretation of the law is to go to the courts. That would take the form of either a judicial review or mandamus injunction to establish if one is being reasonably practicable. The arguments put by Senators Cannon, Butler and others are spot on and no one could argue with them. However, one must cover both ends of the spectrum.

Let us remember the scene outside the bank on St. Stephen's Green two months ago. The Garda carted out truckloads of material. I do not know how long would be considered reasonably practicable to deal with all that documentation and associated material on computers. However, let us park that for one moment. Let us suppose there is a court case in which the whole world is watching to see what we are doing about the people who wrecked the country and so on — we know the speeches. How would Joe Duffy deal with the matter on "Liveline" if it turned out we passed legislation which required the Director of Corporate Enforcement to fill up the trucks again and cart everything back to St. Stephen's Green two weeks later, despite the fact he did not trawl through all the material? We would all appear pretty stupid. These are the two extremes and there is no answer to the matter because the arguments put by my colleagues are absolutely clear and true. This is an old story and if people do not work within the spirit of the act then one must go to court. That applies either to the person who owns documents or the person who seizes documents, namely, the Director of Corporate Enforcement. There is no other way to deal with this unless one creates something such as a Labour Court style body for high finance.

Deputy Mary Coughlan

We will have none of them.

Senator Joe O’Toole

From experience, I do not believe that would quicken matters in any way. I would be very open to a change if change were necessary to get the right balance. However, to get the right balance one must go to the middle and the only middle ground I can see is the phrase "reasonably practicable". If there is another form of words which could deal with both ends of the argument we should examine it. I seek the right balance and I fully agree with the arguments made by my colleagues. If someone is playing the old soldier and using the legislation to block people from doing their daily work then that is not what we have in mind. It is not the intention of the legislation and should not be allowed. On the other hand if people try to hide material because of the legislation and because they know there is a time limit before which they could be checked then it does not meet our cause either. The only way is for people to act reasonably in the spirit of the law and the only way to judge that, generally speaking, is in the courts. There are other ways but lawyers would never allow us to do so.

Deputy Mary Coughlan

I thanks the Senators for their contributions. The amendments I propose in the legislation would allow for the imposition of any necessary timeline restrictions through regulating making powers being presented to the Minister. That is contained in section 5(2G). The overall thrust and the content of section 20 of the Companies Acts 1990 through to section 5 of this Bill also contains measures to allow for the involvement of the court. Therefore, I cannot accept the amendment as I wish to continue to have access to the court as part of the legislation. That being said there has been a reasonable thrust to the entire discussion to the effect that "practicable" is something that could be finite or otherwise. On that basis I call for consideration to be given for me to reflect on this and I will revert on Report Stage on the basis of the timeframe.

Senator Ciaran Cannon

I thank the Minister for her offer of reflection and we look forward to the result of her deliberations.

Amendment, by leave, withdrawn.

Amendment No. 13 not moved.

Section 5 agreed to.

SECTION 6.

Government amendment No. 14:

In page 9, to delete lines 28 to 30, and substitute the following:

"shall (unless the person has, within the period subsequently mentioned in this subsection, been served with notice of an application under subsection (1D) in relation to the matter concerned) apply to the court for a determination as to whether the information is privileged legal material and an application under this subsection shall be made within 7 days after the disclosure or the taking of possession.".

Deputy Mary Coughlan

This proposed amendment seeks to avoid unnecessary duplication that could be caused by two applications being made to the court arising out of the same circumstances. As currently worded, the Bill provided that the ODCE, Office of the Director of Corporate Enforcement, or court appointed investigator must apply to court for a determination on whether material seized was professionally privileged. The company under investigation or a person from whom books and documents have been taken may, if they wish, apply. The amendment to the Bill provides that where the ODCE or court appointed investigator is aware that the company or person has already made a relevant application to court there is no need to file a separate application.

Senator Joe O’Toole

This is very sensible and we should support it. This is an example of where the pendulum shifts to require the Director of Corporate Enforcement to go to court. This balance is present in the Bill, which I am sure he finds something of a pain at times. However, we have inserted this protection and it is quite correct to do so.

Amendment agreed to.

Section 6, as amended, agreed to.

SECTION 7.

Question proposed: "That section 7 stand part of the Bill."

Senator Ciaran Cannon

We are about trying to strike a balance. We oppose the section and believe it would act as a major disincentive for people to get involved in entrepreneurial effort and a major disincentive for people to become directors of companies. The section, which amends section 40 of the Companies Act 1990, would appear to provide for directors to be held or deemed to have committed criminal offences regardless of whether they knew or had the belief that unauthorised transactions were being entered into. We have serious reservations about whether it is possible to impose guilt by association. Is that fair or rational? My wife and I are co-directors of a small company in Galway and I hope that neither my wife nor I would carry out any actions that would bring the company into disrepute.

Deputy Mary Coughlan

I would expect not.

Senator Ciaran Cannon

However, if I were a director of a company with some 20 or 30 other co-directors, to hold me personally responsible for every action of every other director would place an unnecessary, unfair and unjust burden on me as a director. If that provision was in place and this section of the legislation was enacted, I would seriously question whether anybody would take the risk of being guilty by association. The Minister has been co-operative and helpful and has agreed to re-examine certain sections of the legislation. I hope she takes the same approach in this case and comes up with a form of words that will allay our concerns on this matter.

Senator Feargal Quinn

I understand the reason for this being included in the Bill and the reason the legislation attempts to cover the matter, because any director on a board who does not bother reading the papers, does not accept responsibility nor bother attending to his or her duty should be found guilty. On the other hand, many companies are not simple companies. I recall my experience as chairman of An Post, which had 15 board members and which received vast amounts of information. I wonder should any of the 15 board members who missed out on something that was incorrect or wrong be held guilty of a criminal offence. Of course they should have examined every document and covered everything, but it would be far too onerous to infer a criminal offence for every one of those directors. I am not sure what the solution is, because we do not want to relieve directors of having that responsibility.

Senator Cannon has put it correctly. There is an onus on us to ensure Ireland is an attractive place to do business and that it attracts entrepreneurs. We recognise the need for people with ability to join boards and accept responsibility as directors, but that should not be such an onus that it places a threat over them if they make even one slip-up by not covering something. I remember similar legislation to this previously and have thought about the situation in my former company of which I was director for many years. If something went wrong, were all my other colleagues held responsible? If I was the chief executive, I was certainly responsible, because an executive director must accept responsibility. However, that is not necessarily true for non-executive directors, although they have a responsibility to check everything that takes place.

I believe large numbers of people would refuse to take on the responsibility of being directors or to be part of an operation if they felt they would be found guilty of a criminal offence in the case of failing in their responsibility. I understand the need for the legislation in the case of executive directors, but it is too onerous to make it a criminal offence for every director.

Senator Joe O’Toole

These issues change with the public mood. The provenance of this legislation is simple. As Tánaiste and Minister for Enterprise, Trade and Employment, the Minister's predecessor would deal with this issue very quickly. When she was in front of the Committee of Public Accounts in 2002 discussing the issue of offshore accounts, she said we would never again have to listen to the argument that people did not know about something. This was reiterated throughout her speech and that was the reason the 2003 Bill was published, namely to deal with the "We didn't know" issue.

We do not want people to be thrown into jail for something of which they are not guilty or something about which they could have no knowledge. We must be reasonable and decide whether they should or could have known about it. We could not possibly find somebody guilty of something they could not have known about. When the 2003 legislation was passing through the House, a colleague who was in the House then but who is not here any more — a director of Independent News and Media — asked how he as a director could be held responsible for something that went on in the back offices of the South African part of the company. That is not what is implied here, but all these things tie in together.

When we come to the amendment I have proposed, I will remind the Minister about what she said about the Director of Corporate Enforcement. I will also remind her it is about materiality. Did people have the structures in place to ensure compliance? Perhaps the Minister will tell us about the contravention of section 31 in her response and how it might arise. Perhaps she will tell us the kind of decisions that would need to be taken before we get into it.

My colleagues keep talking about this being a country where we must make it easier to do business. I support that idea. I have spent months in Government Buildings over the years negotiating national agreements to ensure this. It is, for example, about finding balance between the Virgin Islands and France. It is trying to find the in-between position where people act reasonably and responsibly and within the law. I do not want to overstate the situation, but over the weekend I listened to discussion about Burma and how it deals with people who cannot meet their liabilities or who act in contravention of financial regulation etc. They are dealt with quite summarily.

I do not want to go into a history lesson, but it is important to recognise how we got to this position. All these things operate on the basis of trust and confidence. Before we had companies' legislation, people shook hands on their agreements. Documents were not signed in the stock market until recent decades, because the day one defaulted was the day one went out of business and nobody would deal with one anymore. From where did this practice come? It came from the middle ages and the question of how to deal with finance, beginning in places like Genoa and Barcelona where trading between nations began. The people in these areas often relied on the Jewish community with regard to how business was conducted, because the Jewish community was allowed to deal with money when Christians were not. Under the Christian code of conduct at the time usury was not allowed. However, I assure Members that Christians found ways around that.

The issue then was that if people could not meet their liabilities, it was a capital offence and they were hanged outside the door of their business. That kind of uncivilised behaviour is not acceptable at any level now, but it is important to remember that was how they dealt with the issue. How do we deal with it? We dealt with it by saying that people must be able to do business. They must be able to take reasonable risks in trade and to operate in an unencumbered way. Therefore, we introduced the concept of limited liability. I asked the Minister about this on Second Stage. Limited liability is a gift the Minister hands out to entrepreneurs, business people and others. It is a gift, a privilege and a function of democracy. It is something we give out and value and must be acted upon in a responsible way.

What we need to do with this legislation is find balance. How does somebody come to contravene section 31? Is it reasonable to say the structure should be in place so an officer of a company would have to know about something? That is the question. If an officer of the company could set up a structure in such a way that he or she was not required to be told, informed, made aware of or sign off on something, but then could claim two months later that he or she did not know about it, we are making fools of ourselves. This is what we must examine in order to move things forward. It has all to do with the structures, compliance, being reasonable and acting within the spirit of the legislation.

We must bear in mind at all times what Senators Quinn and Cannon have said about not burdening people unnecessarily. In doing that, we also want to ensure they have put in place the structures within their companies that will ensure nobody loses out. I do not want to mention particular issues, but that is what happened recently. I thought I would never hear it again, but we heard it last month. Here in the House people were asking if other directors knew about loans. People were saying: "Your man was chief executive and a director and then became chairman, so he had to know". We were back wondering who knew and how they knew. We all know they should have known. Therefore, the structures should be in place to ensure that if somebody breaches section 31, he or she can only do that by breaching the controls within the company. If somebody does that, it is fraud. That is a different issue altogether and somebody else cannot be held responsible for it. This issue goes to the core of what we are talking about.

Deputy Mary Coughlan

I was wondering which horse the Senator was on as he was finishing.

Senator Joe O’Toole

I was waiting for someone to give me an answer on section 31.

Deputy Mary Coughlan

The purpose of the——

Senator Joe O’Toole

I am a complex person.

Deputy Mary Coughlan

I gathered that. They think women are complex, but men are worse. Perhaps Independent Senators are the worst of all.

An Leas-Chathaoirleach

Agreed.

Deputy Mary Coughlan

The purpose of section 7 of this Bill is to replace section 40 of the Companies Act 1990, which sets out the penalty for breaching the statutory prohibition on the making of loans by companies to the directors. To prove that an offence has been committed under the existing section 40, it is currently necessary to prove beyond reasonable doubt that the accused knew, or had a reasonable ground for believing, that the company was in breach of the requirements of section 31 of the 1990 Act. In effect, it is necessary to prove there was a wilful default. In other words, ignorance of the law can be used as a defence. The existing requirement on the prosecution to affirmatively prove the accused's knowledge of the law is unduly onerous, particularly when compared to many other offence provisions found elsewhere in the Companies Acts.

The proposed new provision will provide that if a company enters into a transaction or arrangement that contravenes section 31 of the 1990 Act, every officer of the company who is "in default" will be guilty of an offence. Section 383 of the Companies Act 1963 sets out the meaning of an "officer who is in default". It provides that an officer is "in default" if he or she authorises a default mentioned in the provision in question or, in breach of his or her duty as an officer, permits such a default to occur. Section 383 of the 1963 Act further provides that an officer is presumed to have permitted a default by his or company unless he or she can establish that he or she took all reasonable steps to prevent the occurrence of the event in question or, by reason of circumstances beyond his or her control, was unable to do so. In essence, the amended version of the 1990 Act will bring this offence into line with numerous similar offences in the Companies Acts. It will also set out a mechanism whereby an accused officer can defend his or her actions in appropriate circumstances. I am satisfied the approach being proposed is appropriate. Accordingly, I do not feel I can accept the deletion of this section.

Senator Joe O’Toole

I accept what the Tánaiste has said. It matches my understanding of the position. It might help Senator Cannon if a comma were included after the word "company" in the proposed new section 40 of the 1990 Act. Although the word "who" cannot refer to a company, the manner in which the proposed section is worded almost suggests the company is being referred to. The Tánaiste has made it clear the reference is to any officer who is clearly in default. There will be a quite high burden of proof on the prosecution to prove that is the case. I am comfortable with what is being proposed. Somebody might rely on an old interpretation of the word "who" to claim it refers to the company and, therefore, every officer of the company. It is a small point. The Tánaiste has clarified the matter on the record of the House.

Senator Ciaran Cannon

That is exactly the point. I ask the Tánaiste to assure the House that there is no possibility, under this legislation, of a director of a company who has no knowledge of the carrying out of an illegal act being implicated in the commission of that act. That is the issue. As far as I am concerned, the current wording of this provision — "if a company enters into a transaction or arrangement that contravenes section 31, every officer of the company who is in default shall be guilty of an offence" — reads as if one is trying to remove a tumour with a machete rather than with a scalpel and some surgical skill. It seems to be far too much of a burden. Can the Tánaiste give me some reassurance in this regard? I tabled an amendment to try to protect executive and non-executive directors of a company. The Bill does not even draw a distinction between the two categories. If people are not involved in any way in the commission of an illegal offence, it should not be implied or assumed they are guilty. If the Tánaiste can assure the House this section of the Bill does not provide for such an implication or assumption, I will be quite happy to support it.

Deputy Mary Coughlan

I appreciate these issues are complex and complicated. I do not want to create a set of circumstances in which nobody wants to be a director of a company. We do not want that either. If a person is a director or an officer of a company, it is important he or she should be aware of the law as it stands. I hope we will be able to offer some further guidance when the consolidation Bill in this area is introduced.

Senator Joe O’Toole

Is there a date for that Bill?

Deputy Mary Coughlan

When it has been completed, I will give the Senator the first copy of it.

Senator Joe O’Toole

Will I have retired at that stage?

Deputy Mary Coughlan

The Senator is waiting with bated breath for the Bill. We are removing the criminal penalty aspect of section 31 of the 1990 Act, which prohibits the making of loans to directors and connected persons. We are trying to strike a balance with the issue of personal concern that was expressed by the Senator on the basis of his experience. It will be a matter for the director to make a determination. The court will make the final decision. Of course it will be open to each person to prove that he or she was not involved in something untoward in any way. I have tried to assure Members that a balance is being struck. We will not punish people who are not guilty or associated with wrong-doing. We are trying to do two things. We are trying to ensure people cannot use the excuse that they did not know — that they were ignorant of the law. At the same time, we are trying to——

Senator Ciaran Cannon

I agree with what the Tánaiste has said about ignorance of the law, but ignorance of the facts surrounding a criminal act is a much different proposition.

Deputy Mary Coughlan

We need to go back to section 383 of the Companies Act 1963, which sets out the meaning of an "officer who is in default". If Joe Soap were to read this section of the Bill, he might think it covers everybody. The most important part of it is the term "who is in default".

Senator Ciaran Cannon

It is the company that is in default.

Deputy Mary Coughlan

The meaning of the term "in default" in this section is set out in section 383 of the 1963 Act, which states:

For the purpose of any provision in this Act which provides that an officer of a company who is in default shall be liable to a fine or penalty, "officer who is in default" means any officer of the company who knowingly and wilfully authorises or permits the default, refusal or contravention mentioned in the provision.

Under that Act, an officer who is in default shall be liable to a fine or penalty. There is a clear determination. For the purposes of the section before the House, an officer shall be presumed to have permitted a default by the company unless he or she can establish that he or she took all reasonable steps to prevent it or that it took place by reason of circumstances beyond his or her control. When we introduce the consolidation Bill, we will make sure all references are to "he or she". It is the duty of each director and the secretary of the company to ensure the requirements of the Companies Acts are complied with by the company. I assure the House that section 383 of the 1963 Act allows an officer to claim that a default took place by reason of circumstances beyond his or her control. That assurance can be given to an officer of a company. One has to get the balance right. One cannot allow lack of knowledge to be cited, mar dhea, as a reason. At the same time, one must bear in mind that those involved in smaller companies, such as family companies, do not necessarily deal with these matters on a day-to-day basis. I reiterate that people involved in companies should familiarise themselves with the law, even if they are not working within an individual company on a day-to-day basis. We need to emphasise to people that they should be aware of their responsibilities.

Senator Joe O’Toole

That does not always happen, unfortunately.

Deputy Mary Coughlan

I know, but it is something we should consider.

Senator Joe O’Toole

Three cases of this nature were reported in one of yesterday's newspapers. In one case, four different family members were included in an action. When I read about the case, I wondered whether each of the four people in question knew what they were getting themselves into. That is part of the problem in many cases. The points made by the Tánaiste seem reasonable. I do not think she will be able to make the same argument in response to the next amendment proposed by Fine Gael, which is amendment No. 16. I think a stronger case will be made on that amendment.

Senator Ciaran Cannon

On the basis of the Tánaiste's assurance that nobody can be found guilty by association or implication, I will agree to this section.

Question put and agreed to.

SECTION 8.

Government amendment No. 15:

In page 10, line 38, after "made" to insert ", issued, granted or otherwise created".

Deputy Mary Coughlan

Section 8(1)(b) of this Bill, which proposes the insertion of a new section 41(10) into the Companies Act 1990, acknowledges the existing legal powers of the Financial Regulator to make appropriate changes to its rules and other instruments in order to ensure the effective regulation of licensed banks. I understand the regulator is proposing to amend the conditions it attaches to its banking licence to require increased disclosure in the annual accounts of banks of the giving of loans to directors and other connected people. The amendment that I propose in the Bill as initiated clarified that any company law disclosure requirement imposed on companies that are licensed banks did not override the independent rule-making powers of the Financial Regulator. The verb I used in the Bill referred to rules, etc. that are made under the Central Bank Acts. The proposed new wording widens this to cover all rules, etc. made, issued, granted or otherwise created. My intention in this proposed amendment to the Bill is to widen the provision so that there is no doubt that it includes all relevant actions that the regulator can avail of under its own legislative powers.

Amendment put and agreed to.

Senator Ciaran Cannon

I move amendment No. 16:

In page 11, to delete lines 3 to 6.

This leads us back up the same path. I do not know what our discussion over the past 15 or 20 minutes has achieved. It is there in black and white: "Where a company makes default in complying with this section, the company and every person who at the time of that default is a director of the company shall be guilty of an offence." I would add that this applies to someone who may or may not have known about the default. Where is the protection afforded to a director who has no knowledge whatsoever of a criminal act taking place and is suddenly made guilty of a criminal offence? That is a more worrying development than the one we have just discussed. It is a major disincentive for people to become company directors. There is no way out for any director. The Bill does not qualify the statement that "every person who at the time of that default is a director of the company shall be guilty of an offence". I look forward to hearing the Tánaiste's response to this amendment.

Senator Joe O’Toole

Senator Cannon has a very strong point on this issue. Maybe there is something in the Bill that we do not understand. It seems, however, that what Senator Cannon feared in respect of the earlier amendment could happen under this provision, namely, that a company could be in default and a director who acted honourably and correctly but was kept in the dark would be guilty of an offence. There seems to be a lack of equity in that, unless some previous Act that we do not understand covers it.

I can see a situation arising in which a company is in default, not because the director failed in his or her duty but because of decisions taken at a remove from the director and the first the director knows about it is that he or she has broken the law. Unless there is some context for this that we do not understand I would be very worried because it is a disincentive to a company director.

Senator Jim Walsh

We need to take a coherent approach to imposing regulations on directors. I fully support every measure that improves corporate governance but we should stand back from anything that makes people disinclined to get involved, or is a disincentive to becoming involved. People should be made accountable for gross negligence or wilful default. These are public service measures being imposed on the private sector but there are examples of serious negligence, for example in the hepatitis C case, for which public servants were not held accountable. We cannot have one approach or ethos for the public service and an entirely different approach for the private sector.

We have moved in recent years to facilitate people in small companies by removing some of the bureaucracy and costs. Small companies should be the engine of our enterprise and job creation. They now have reasonably significant thresholds before being required to submit audited accounts. While that is a good move it means that people do not have access to the professional advice of auditors which they might have in a full audit. I am concerned that if we heap more obligations on companies we will create a situation in which people may unwittingly be in default. I do not know how the Minister can deal with that but it needs to be examined.

I am in favour of keeping the Bill as simple as possible but with impositions for serious negligence or wilful default. People must have the scope to run and operate their companies efficiently and effectively and there is an increasing trend for small family companies to engage outside, independent, non-executive directors. That is a good measure which helps companies because the directors might be people with expertise that the owners or proprietors do not have. We need to make sure that non-executive directors cannot be unjustly held to account for issues of which they were totally unaware. There have been some high profile cases of that happening recently in the banks.

I agree with the thrust of what the Minister is doing but this is a complex area and we need to consider how to do it without affecting the overall objective of increasing the number of private companies and the interest from, and participation of, executive and non-executive directors in a progressive way.

Senator Feargal Quinn

The Minister explained very well why she is not accepting amendment No. 7 but the paragraph this amendment seeks to delete is very blunt: "Where a company makes default in complying with this section, the company and every person who at the time of that default is a director of the company shall be guilty of an offence." I do not know whether the explanation the Minister gave in respect of amendment No. 7 will apply to this amendment but Senator Walsh has touched on the important point that we need to encourage non-executive directors into family businesses. I know of one successful family business that wanted to bring in a non-executive director. The man was ready to join until he read through the requirements, before this Bill was introduced, and decided that because he had a family to look after he could not take a chance that he might be found guilty if the company was in default. To the best of my knowledge that company still comprises only family members.

Part of what we are attempting to do here is to encourage governance from outside the family in family businesses. I imagine that the Minister will say that exactly the same points apply in this case as applied in respect of amendment No. 7, but this is so blunt I would find it difficult to defend it.

Deputy Mary Coughlan

On the overall issue raised by Senator Walsh, we are striving to reduce the regulatory burden and have set down a 25% reduction in the regulatory burden on businesses. I want to achieve this and will make some further pronouncements on it fairly soon. We all would like to see simplification in life. That work will continue on the Consolidation Bill because entrepreneurs are unusual people who have great ideas but whose idea of compliance might be that they pay their taxes and that is the limit to it. Businesses are frustrated and feel that these matters are an annoyance but it is important that we continue to invest in educating people. The Director of Corporate Enforcement holds seminars and the Company Registration Office does this kind of work. We as politicians need to reiterate this when it comes to the question of compliance. We are striving towards consolidation and simplification, and reducing the burden on small family businesses because they are the bread and butter of much of our society, particularly in rural areas, but we do not want to deter people from continuing in business and using their acumen. By necessity, even constitutional rights remain within the framework of all the legislation.

Acting Chairman (Senator Kieran Phelan)

As it is 5 p.m.——

Deputy Mary Coughlan

Am I going to turn into a pumpkin or something?

Acting Chairman

——I ask the Senators to report progress.

Deputy Mary Coughlan

Is it possible for me to have 30 seconds in which to conclude?

Acting Chairman

Is that agreed? Agreed.

Deputy Mary Coughlan

The purpose of my amendment is to insert a specific offence for the failure to comply with any of the requirements of section 41 of the 1990 Act, which is the requirement that companies disclose in their accounts the existence of loans or substantial contracts etc., with directors and others. There is no offence.

Senator Joe O’Toole

What about a loan made to director A that is hidden from directors B and C?

Deputy Mary Coughlan

There is no offence. The Senator should allow me to make my next point.

There is a separate existing requirement obliging companies to prepare annual accounts, namely, section 148 of the Companies Act 1963. By extension, the failure to comply with the requirements of section 41 of the Companies Act 1990 would amount to a breach of section 148. It could prove problematic to prosecute a company for failing to disclose such loans in accounts on that basis. The insertion of the new subsection (11) will remove this doubt. It should be noted that the Bill provides in subsection (12) that it shall be a defence in the proceedings for a defendant to show he or she took all reasonable steps to secure compliance by the company with the requirements of the new subsection (11). On that basis, I am satisfied my proposed amendment should be made.

Senator Joe O’Toole

There is an inherent contradiction regarding the stipulations on guilt.

Progress reported; Committee to sit again.