Companies Bill 2012: Committee Stage

I welcome the Minister of State to deal with this neat and compact Bill.

Section 1 agreed to.
SECTION 2

Amendments Nos. 127, 128 and 180 are related to amendment No. 1 and they will all be discussed together.

I move amendment No. 1:

In page 63, between lines 24 and 25, to insert the following:

" "accountant" means an individual that stands approved as an accountant with the Irish Auditing and Accounting Supervisory Authority (IAASA);".

As the Leas-Chathaoirleach said, this is a small Bill. There used to be an advertisement on television which used the tag, "It is a short name but quare stuff". This is certainly quare stuff.

The amendment is intended to ensure the Bill clarifies the definition of "accountant" once and for all to provide better protection for the customer, both businesses and individuals.

The fact is we do not currently have legislation regulating the term "accountant", and the amendment aims to rectify this. I also have a later associated amendment which proposes to impose fines on people who misrepresent themselves as accountants.

There are a number of problems in this area, including the fact there are a number of accountants who have been expelled from professional bodies but who are still offering their services to the public. That is not correct and I do not believe we knew it was happening. While there are strict standards within accountancy bodies, such as codes of practice, they are in essence voluntary. We then have those operating outside of the system, and even someone with a criminal conviction can set up a business and offer his or her accountancy services to the public without the public knowing. This is not a proper situation and Ireland is unlike many other EU member states which give much-needed protection.

What I am calling for from the Minister of State is some form of mandatory regulation within the Bill to cover the term "accountant" in order to provide better protection for the customer. Specifically, I strongly believe the term "accountant" should only be allowed to be used by those accountancy professionals who are supervised or authorised by the Irish Auditing and Accounting Supervisory Authority. This makes perfect sense. The amendment would merely ensure that an accountant is someone who is properly accredited, nothing more, nothing less.

I should emphasise there would be no cost involved due to this measure. It would simply give more protection to businesses and individuals against fraud, deception and poor performance. From speaking to businesses on a regular basis up and down the country, I am well aware how some of them have suffered in part due to not getting a properly accredited person. This is particularly important for smaller businesses, which may not have the funds to employ an accountant and must hire an external professional.

This is something we should all welcome. I urge the Minister to accept the amendment and my later amendment, which I will discuss later. It aims to curtail people who misrepresent themselves and who could do damage to their customers on that basis. The Leas-Chathaoirleach mentioned two other amendments.

There are three. Amendments Nos. 127, 128 and 180 are related and we will discuss them together.

I did not know we were discussing them at this stage but I would be delighted to do so. Do I speak only once on the amendments?

No. As it is Committee Stage, you can come back in when the Minister of State has responded. It is only on Report Stage that you are curtailed.

In that case, I will let the Minister respond.

I do not support the amendment. The primary objective of the Companies Bill is to be business-friendly and to reduce red tape or unnecessary regulation where possible. Supporting this amendment would result in the introduction of an onerous regulation which would disproportionately affect business and will fail to adequately address the cardinal problem which the accountancy bodies allude to. New regulations should only be introduced where there is clear evidence of market failure or very damaging consumer harm. That has not been established factually as being the position here.

We must bear in mind that it is also possible that new layers of regulation could also stultify further growth and innovation. When the matter was reviewed by the Department at the time of drafting, the conclusion was there was no case for introducing a system of regulation for the profession generally. On the contrary, it was felt that introducing such a system would put at risk the flexibility of the profession and its ability to respond to client needs, be it in traditional areas such as tax advice or management accounts, or in emerging fields such as succession planning.

Regulation could also stultify further growth and innovation. Having examined the issue from the standpoint of the principles of better regulation, the Competition Authority concluded there was no public interest case requiring legal protection of the term "accountant". That is the Government position.

I am disappointed because I have spoken to many accountancy bodies and almost all support this as they believe there is a real problem. This is the ideal opportunity to solve the problem and I urge the Minister of State to rethink before Report Stage as I believe it is worthy of consideration. I believe the words I have used are correct but I had some problems with the term "turf accountant" and was not sure how it would be dealt with. Some customers are concerned about this matter and have experienced difficulties in the past.

For the record of this House, we note the concerns expressed by accountancy bodies. The Minister for Jobs, Enterprise and Innovation, Deputy Bruton, has agreed to undertake an assessment of the issues by consulting with key stakeholders such as the professional bodies mentioned by Senator Quinn, consumer representatives, small business representatives, regulators, the Revenue Commissioners, the Companies Registration Office and other official bodies with an interest. It is not as if we are ignoring issues, it is merely the case that for the purposes of this Bill we do not support the amendment. This is not to say that there is not an ongoing consultation process with the very bodies Senator Quinn mentioned.

I thank the Minister of State but it seems a shame to me that it took around 11 years to construct this Bill yet the intention is to leave things that have not been dealt with until later. I will not push the issue but I ask that a stronger term be used.

I will now address amendment No. 127 which applies to section 879 of the principal Act and states "A person commits an offence if they make any misrepresentation whether oral or otherwise as to their status as an accountant unless they stand approved as an accountant with the Irish Auditing and Accounting Supervisory Authority, IAASA". This is very similar to the original amendment.

Amendment No. 128 relates to section 880 of the principal Act and states:

"A person guilty of an offence under section 879 is liable to a fine.-

(a) on summary conviction to a Class A fine, or

(b) on conviction on indictment to a fine not exceeding €50,000 or imprisonment for a term not exceeding 3 months or to both.”.

It sounds as though the Minister of State will not accept these amendments at this Stage but I feel it is important to give these matters serious consideration. I believe the Companies Bill should not become law while the Government says it intends to address its flaws only after enactment. I hope the Minister of State will do something about this.

When discussing amendment No. 1, I explained how harmful it can be to individuals and businesses when a person misrepresents himself or herself as an accountant so these amendments aim to provide a concrete disincentive to persons who present themselves to the public, without accreditation, as offering so-called accountancy services. After all the years that went into the production of this formidable and worthy Bill that deserves our support it would be a shame to leave something out on the basis that the Minister will examine it later. I urge the Minister of State to consider these amendments, if not today then before Report Stage.

Is Senator Quinn addressing amendment No. 128 also?

Yes, I will come to it in a moment.

I will take the sections together.

I have previously advocated the view that it is within the remit of the accountancy profession to engage in an awareness campaign informing the public of the advantages of engaging the services of only fully qualified and properly regulated accountants. Similar public awareness campaigns have been run, for instance, in relation to electrical contractors, and they have proven successful.

It is worth restating that the primary objective of the Companies Bill is to ensure that Ireland has a company law code that will enhance its international competitiveness, help improve ordinary business and make it easier for companies throughout the country to establish and operate.

On a technical drafting matter, this amendment would be ineffective, as it would impact on others - for example, as the Senator has mentioned, those practising as accounting technicians or as turf accountants. It also fails to cover all details which would be required in terms of qualifications, standards and so on. For those reasons, it would not be appropriate to support the amendment. The accountancy profession is in general adaptable and agile, and is able to respond to new market opportunities and directions. That is to a great extent because it is not tied down by layers of regulation. There are detailed statutory provisions relating to auditing and, to a lesser extent, insolvency practice. The Competition Authority holds the view that this is the way things should stay. Additionally, my Department is committed to reducing the level of Government-imposed red tape on business. To this end, significant progress has been made by my Department in reducing administrative burdens by 25% in areas including company law. If this amendment is supported without proper consideration being given to its impact, it could have an adverse consequence for business by creating an additional layer of regulation and, in doing so, would fail to advance consumer protection. For those reasons, we do not support the amendment.

I thank the Minister for his words, but the accountancy bodies remain concerned. They are particularly unhappy at the fact that somebody who has been expelled from the accountancy bodies for "misbehaviour" and has been found to be a criminal will now be able to go back into the profession and continue to act as an accountant. That is a dangerous situation. I do not like it being left to persist any longer. The Companies Bill gives us an ideal opportunity to get it resolved. I am sorry to see the amendment being put on the long finger. I urge the Minister to resolve this matter in this Bill rather than leave it to a later Bill.

Amendment No. 180 relates to section 1430 and is about restricting the number of partners in a partnership to 20. It is on a similar theme to that of the previous amendment. In particular, there is a problem with subsection (1)(c), which aims to give some relief to accountancy firms constituted as partnerships. However, this relief will be ineffective, as the Bill refers only to "statutory auditor". In the modern day, individuals in accountancy firms cover a wide range of areas and many of them have on board what I call "non-audit specialists" - for instance, taxation or financial analysts. A partnership will often cover people who do not have an audit background or who do not hold a professional accountancy qualification. With the Bill as it stands, some accountancy firms may not be able to avail of the relief on offer in section 1430, which may be seen as unfair. We should aim at a level playing field.

Some accountancy firms may even have to engage in more red tape and bureaucracy to get their affairs in order at great administrative cost for no concrete benefit. It is a clear case of "less is more", and that is why I propose to delete the part of the Bill that stipulates all partners should be limited to a partnership of 20. It is worthy of consideration.

The section is partly new and derives from a wide range of statutory provisions, including section 376 of the Companies Act 1963 and section 13(1) and 13(2) of the Companies (Amendment) Act 1982 and various statutory instruments. Provisions in secondary legislation relating to thoroughbred horse breeding and providers of investment in loan finance have been brought into primary legislation. I do not know if the Senator refers specifically to that industry. Provision is made for the Minister to make further exceptions to the 20-partner limit by order in consultation with the Company Law Review Group, CLRG. Exceptions are made in respect of limited partnerships and investment limited partnerships. I am not sure if that fully addresses the point and perhaps I am missing a trick in terms of the Senator's argument.

The Senator has the right to discuss it further now or on Report Stage.

I will raise it again on Report Stage.

It is existing law and as the Minister has the power to change it for individual cases, flexibility is built in.

Forgive me for setting the debate back.

I fully understand. As a student, I used to dread the Companies Act 1963. Thank God I am not studying this.

We are on the right side of it.

Government amendment No. 2:

In page 67, line 34, to delete “and” and substitute the following:

“(f) the Companies (Miscellaneous Provisions) Act 2013; and”.

Amendment, by leave, withdrawn.

The purpose of the amendment is to incorporate the Companies (Miscellaneous Provisions) Act 2013 in the definition of prior Companies Acts in the Bill. All provisions of this Act will be carried over into the Companies Bill 2012.

Amendment agreed to.
Government amendment No. 3:
In page 69, to delete lines 31 to 39 and substitute the following:
“(8) In this Act a reference to a company having a sole director is a reference to its having, for the time being and for whatever reason, a single director (and this applies notwithstanding a stipulation in the constitution that there be 2 directors, or a greater number).”.
The purpose of the amendment is to include a clear definition of a sole director company or a company with a sole director. The aim is to ensure that if, for example, an unforeseen eventuality results in a company having just one director, the company will be entitled to be considered as a sole director company.
Amendment agreed to.
Section 2, as amended, agreed to.
Sections 3 and 4 agreed to.
SECTION 5
Question proposed: "That section 5 stand part of the Bill."

I am considering introducing an amendment to section 5 on Report Stage to reference any provision of a former enactment in subsection (3), and the purpose would be to further clarify the section rather than make any substantive change.

Question put and agreed to.

Sections 6 to 14, inclusive, agreed to.
SECTION 15
Question proposed: "That section 15 stand part of the Bill."

I wish to raise a brief point on the section even though there are no amendments tabled to it.

The Senator is quite entitled to do so.

I thank the Leas-Chathaoirleach. I raised this point about the transition period and specific issues about it on Second Stage. I welcome the Minister of State to the House and thank him for responding in his Second Stage speech to some of the comments I made. Since Second Stage I have received correspondence from Mr. Brian Walker, who I know has been in touch with many of us to helpfully give us some thoughts on his experience. He is a barrister and has been travelling around the country presenting seminars on the Bill and has met many accountants. He has a question following on from what I said on Second Stage about the transition period and in particular about the commencement date. Clearly, the transition period in section 15 means the period expiring 18 months after the commencement of this section. I realise that section 1 deals with the commencement but can the Minister of State clarify if a commencement date has been set? The Companies Office, according to Mr. Walker, appears to be gearing up for a commencement date of 1 January 2015 but I am not sure if that has been agreed or confirmed anywhere.

The reason that is important is that while most practitioners agree the 18-month transitional period is ample and sufficient to allow companies avail of the transition period, they are anxious that many aspects of the Bill would come into force sooner rather than later. Section 16 allows for the extension of the transition period and there is some concern about uncertainty about the actual time period. That is a particular issue.

The other issue of interest is that Mr. Walker points out that there may not be a substantial number of companies making the application to convert over to the new limited company since they may take the view that if it is going to happen automatically at the end of the transition period, it may be simpler to allow the default to occur. Those are some of the issues I raised about the transition and the practical impact of it and I thought it would be worth raising them again under this section.

Does the Minister of State wish to respond?

I note the Senator's points. There is general agreement that the 18-month period was the best period. We will aim to have a specific date as soon as possible, which I appreciate does not give the Senator too much comfort. There is a recognition of the need to aim for a specific date as soon as possible and we are very cognisant of that.

Question put and agreed to.
Sections 16 to 18, inclusive, agreed to.
SECTION 19

Amendment No. 4 is a Government amendment, amendments Nos. 4, 5, 134, 135, 142, 143, 152, 153, 159, 160, 176 and 177 are related and may be discussed together by agreement. Is that agreed? Agreed.

Government amendment No. 4:
In page 78, between lines 5 and 6, to insert the following:
"(c) that the liability of its members is limited;".

The purpose of these amendments is to ensure consistency with the model constitutions. For example, the model constitution of Schedule 1 contains a clause to the effect that the liability of its members is limited and the amendment ensures that both the section and Schedule 1 are uniform. The other amendments grouped under this section aim to achieve the same result with regard to the section and Schedule reflecting one another.

Amendment agreed to.
Government amendment No. 5:
In page 78, between lines 23 and 24, to insert the following:
"(3) Where, subsequent to its registration, an amendment of the constitution is made affecting the matter of share capital, or another matter, referred to in subsection (1), that subsection shall be read as requiring the constitution to state the matter as it stands in consequence of that amendment.".
Amendment agreed to.
Section 19, as amended, agreed to.
Sections 20 to 26, inclusive, agreed to.
SECTION 27
Government amendment No. 6:
In page 83, between lines 4 and 5, to insert the following:
"(3) Subsection (1) as it relates to the use of the word "limited", or any abbreviation of that word, shall not apply to a society registered under the Industrial and Provident Societies Acts 1893 to 1978.".

The purpose of this amendment is to provide an exception from the prohibition that neither a body that is not a company nor an individual shall carry on any trade, profession or business under a name which includes as its last part the word "limited" or the words "company limited by shares" for industrial and provident societies, as initiated.

Only volume 1 companies are permitted to end their name with "Limited". This amendment is necessary to provide for the approximately 900 industrial and provident societies in existence which have the word "Limited" in their name. I am also considering introducing an amendment on Report Stage to provide that the provisions of this section will not apply to an external company.

Amendment agreed to.
Section 27, as amended, agreed to.
Sections 28 to 31, inclusive, agreed to.
SECTION 32

Government amendments Nos. 7, 17, 23, 42, 45, 47, 49, 53, 60, 62, 65, 68, 69, 95, 96, 98, 99, 101, 106, 109, 110, 115 to 117, inclusive, 121, 126, 132, 158, 165, 170, 171, 173 and 174 are drafting amendments and may be discussed together by agreement. Is that agreed? Agreed.

Government amendment No. 7:
In page 86, line 2, to delete "company" where it firstly occurs and substitute "company,".

These amendments are typographical in nature and do not have a substantive impact on the Bill.

Government amendment No. 8:

In page 86, line 27 to delete "therein" and substitute the following:

"therein;

(i) any copy of a winding up order in respect of the company;

(j) any copy of an order for the dissolution of the company on a winding up;

(k) any return by the liquidator of the final meeting of the company on a winding up;

(l) any notice of the appointment of a liquidator in a voluntary winding up of the company.".

Amendment agreed to.
Section 32, as amended, agreed to.
SECTION 33

The purpose of this amendment is to incorporate the provisions of regulation 4 of SI No. 163/1973 - that is, European Communities (Companies) Regulations 1973 - into the Bill and to impose a publication notification requirement in respect of the few items listed in the amendment. These are: any copy of a winding up order in respect of the company; any copy of an order for the dissolution of the company on a winding up; any return by the liquidator of the final meeting of the company on a winding up; and any notice of the appointment of a liquidator in a voluntary winding up of a company.

This section provides that the registrar shall publish in the CRO Gazette notice of the delivery to or the issue by the Registrar of certain documents and particulars listed. The section requires such a notice to be published within ten days after the date of the relevant delivery or issue.

Amendment agreed to.
Section 33, as amended, agreed to.
Sections 34 to 37, inclusive, agreed to.
SECTION 38

Amendments Nos. 9 and 10 in the name of Senator David Cullinane are related and may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 9:

In page 88, line 34, to delete "privileges." and substitute the following:

"privileges,

in so much as such action does not undermine or take precedence above a person's right and entitlements as provided for in existing legislation or international treaties and agreements to which Ireland has signed up.".

What struck me was the size of the explanatory memorandum. One would almost need an explanatory memorandum just for that. One of the most striking but largely unremarked changes is that section 38 proposes to give a company the same capacity and authority as a human person. The idea behind the change is to remove the danger of ultra vires and the necessity for lengthy object clauses. Our concern is whether the provision of full and unlimited capacity for a company to carry on and undertake any business or activity or to act or enter into any transaction, having the full rights, powers and privileges of a human being, is going too far.

As to amendment No. 10, it is difficult to determine the ultimate use companies and directors could make of the provision in the Bill. In the US, this type of right has resulted in companies claiming a breach of their human rights when they are, for example, required to allow workplace inspections or, in terms of free speech, to abide by advertising rules or laws on unfair labour practices. Could this provision muddy the waters as regards the human rights obligations of those companies to which State services have been outsourced? It would be an unintended consequence, but we would be naive not to anticipate the possibility that companies could attempt to take every advantage of their newfound full and unlimited capacity, rights and privileges and seek to maximise same in their favour.

Like ICTU, Sinn Féin is of the view that this section of the Bill should be referred to the Irish Human Rights Commission, IHRC, for an assessment and recommendation. What is the Minister of State's opinion in this regard?

I propose to respond to the two amendments together. I am not in favour of them. I draw the House's attention to section 38(2), which reads: "Nothing in subsection (1) shall relieve a company from any duty or obligation under any enactment or the general law." This safeguard prevents an argument to the contrary being made. In such circumstances, amendment No. 9 is already provided for in the Bill.

Amendment No. 10 is misconceived in law. It is contrary to the Constitution and the principles of natural justice generally to provide that, in the case of a clash of "rights and privileges", a natural human being's rights and privileges must always take precedence over those of a company. Companies are legal persons and, as such, have a number of rights that must be protected. Therefore, I am not in favour adopting these amendments.

I will avail of this opportunity to clarify that section 38 grants private limited companies the full legal capacity to enter into transactions and undertake business activities. Section 39 provides that a company, should it wish to do so, may authorise a person to bind it, that is, act on behalf of its board of directors. The provision contained in section 38 is new while section 39 is drawn from section 6(3) of the European Communities (Companies) Regulations 1973, although this is not a direct re-enactment. Section 38 is modelled on section 16(1) of the New Zealand Companies Act 1993. The rationale for the innovation in section 38 is to prevent its use in the avoidance of corporate contractual responsibility to the detriment of a particular creditor. Under current law, if a company does something outside the scope of its objects, it has committed an ultra vires act. This means that, if a company has entered into a contract and is subsequently found to have acted outside its powers, that contract will be deemed to have never existed.

This section reflects the reality that 90% of Irish companies are closely held ones, that is, companies in which the shareholders and management often consist of the same people. Thus, in circumstances where the demarcation of management and shareholders is virtually non-existent, the doctrine of ultra vires has little meaning. I am satisfied that section 38 will add certainty to the law and is to be welcomed. As a result of this provision, any contract that a company enters into will be legally binding on that company. Therefore, I am satisfied that the introduction of section 38 does not mean that the company somehow can usurp the human rights of any person or ignore its legal obligations. A company is a legal person that has rights and duties of its own. It is not possible or proper to insert a provision that would undermine these rights.

An bhfuil tú sásta leis an freagra sin?

I thank the Minister of State for his reply in which I think he ruled out any possibility of this section being referred to the Human Rights Commission for consideration as, in his opinion, to do so would not be proper or right. Will he confirm that he has ruled out referral of this section to the Human Rights Commission for assessment and recommendation? I do not propose to press the amendments at this point as I would like to revisit them on Report Stage, in particular amendment No. 10 in the light of the Minister of State's statement that what is proposed would be in contravention of the Constitution. I reserve my right to resubmit the amendments on Report Stage.

In regard to amendment No. 10, suggesting we ought to set out in statute that a person's rights would, regardless of circumstances, always take precedence over a company's rights is misconceived in law. Like human beings, companies have rights which must be protected. For example, a company can enjoy the right of freedom of speech and be afforded a nationality. While I appreciate that this section has been interpreted as somehow strengthening the corporate personality at the expense of human beings, that simply is not the case. It is not appropriate to attempt to introduce a hierarchy between various rights in statute law. It is a matter for the courts to interpret the facts of a particular case and apply the law. It ought to be appreciated that rights are not limited and that it is normal that different rights conflict with one another. It is on that basis that I cannot accept amendment No. 10.

Amendment, by leave, withdrawn.
Question proposed: "That section 38 stand part of the Bill."

Section 38 is innovative in that it does away with the need for the objects clause. That is a hugely important and significant step in reducing paperwork and red tape for the small companies referred to by the Minister of State. The purpose of this provision is to do away with that need and provide capacity for companies not to be hidebound by specific objects and an objects clause.

Question put and agreed to.
Amendment No. 10 not moved.
Section 39 agreed to.
Section 40 agreed to.
SECTION 41
Question proposed: "That section 41 stand part of the Bill."

I am considering introducing an amendment to this section on Report Stage in order to bring it into line with the Powers of Attorney Act 1996 and the Land and Conveyancing Law Reform Act 2009.

Question put and agreed to.
Sections 42 to 49, inclusive, agreed to.
SECTION 50

Amendments Nos. 11 and 12 are related and will be discussed together.

Government amendment No. 11:
In page 94, line 33, to delete "being an agent who has an office in the State and who is" and substitute "being a company formed and registered under this Act, or an existing company, and which is".

The purpose of these amendments is to clarify that where a company is availing of an agent for the purposes of the Companies Registered Office, such an agent must be a company registered in Ireland. This section requires a company to have a registered office within the State to which all communications must be addressed.

Amendment agreed to.
Government amendment No. 12:
In page 94, line 38, to delete "of his or her office" and substitute "of the agent’s registered office".
Amendment agreed to.
Section 50, as amended, agreed to.
Sections 51 to 55, inclusive, agreed to.
SECTION 56
Question proposed: "That section 56 stand part of the Bill."

I am considering introducing an amendment to this section on Report Stage to provide that credit institutions and insurance companies are compulsorily required to register as designated activity companies. This is necessary as these companies cannot under section 18 of the Bill be private companies limited by shares.

Question put and agreed to.
Sections 57 to 62, inclusive, agreed to.
SECTION 63
Government amendment No. 13:
In page 104, between lines 15 and 16, to insert the following:
"(7) If the existing private company had not registered articles and, by reason of section 58, the regulations in Table A are, immediately before the making by the company of an application under subsection (3), deemed to be its articles, then each of the references in the preceding subsections of this section to articles shall be disregarded, but in such a case the application under subsection (3) shall be accompanied by a statement in the prescribed form that the articles of the company comprise those regulations.".

Amendments Nos. 13 and 14 are related and may be discussed together by agreement.

Given the number of sections in this Bill at Committee Stage and the fact that I must stand up and down considerably for them, would anybody be offended if I remain seated? I hope my request is not a breach of protocol.

I have no difficulty with the Minister of State's request and the Members have agreed.

In view of the very warm weather, we would not like to leave him exhausted, particularly with an election to come.

Amendment No. 13 has been grouped with amendment No. 14. The purpose of these amendments is to correct an oversight in relation to companies that re-register as designated activity companies. The amendment will preserve the model of regulation of Table A to the Companies Act 1963, for companies limited by shares. Table A will continue to apply to these companies save to the extent that it is contrary to mandatory provisions in the Bill.

Government amendment No. 14:

In page 104, between lines 28 and 29, to insert the following:

"(9) If, by reason of section 58, an existing private company was, immediately before the making by the company of an application under subsection (3), governed (in whole or in part) by the regulations contained in Table A, then for the purposes of this section and in addition to the other cases where their continuance in force for a particular purpose is provided for by this Chapter, those regulations shall, despite the repeal of the Act of 1963, continue in force and upon the issue of the aforementioned certificate of incorporation the articles of the designated activity company shall be deemed to comprise the whole of those regulations or, as the case may be, to include the parts concerned of those regulations, but—

(a) this is save to the extent that those regulations are inconsistent with a mandatory provision;

(b) those regulations may be altered or added to under and in accordance with the conditions under which the designated activity company’s articles are permitted by Part 16 to be altered or added to; and

(c) references in those regulations to any provision of the prior Companies Acts shall be read as references to the corresponding provision of this Act.

(10) Subject to paragraphs (b) and (c) of that subsection, the regulations referred to in subsection (9) shall be interpreted according to the form in which they existed on the date of repeal of the Act of 1963.”.

Amendment agreed to.
Amendment agreed to.
Section 63, as amended, agreed to.
Sections 64 and 65 agreed to.
SECTION 66
Government amendment No. 15:
In page 108, line 10, to delete “Save to the extent that its constitution provides otherwise, subsection (6)” and substitute “Subsection (6)”.

The purpose of this amendment is to remove the discretion from the private limited company in relation to its duty to require a member, or transferee of shares, to furnish the company with information as to the beneficial ownership of any shares. This subsection (7), like Regulation 7 of Part I of Table A of the Companies Act 1963, provides that a company is not bound by or compelled to recognise the beneficial ownership of its shares even if it has notice of it.

As the Bill stands, subsection 7 goes on to provide that unless its constitution provides otherwise, subsection 6 does not preclude a company from requesting information as to the beneficial ownership of shares when reasonably required.

SECTION 69

Amendment agreed to.
Section 66, as amended, agreed to.
Sections 67 and 68 agreed to.
Question proposed: "That section 69 stand part of the Bill."

I am considering introducing an amendment on Report Stage to deal with previously allotted shares. The Office of the Parliamentary Counsel has indicated that it may need to further refine the wording.

Question put and agreed to.
Sections 70 to 82, inclusive, agreed to.
SECTION 83
Government amendment No. 16:
In page 125, line 9, after "capital" to insert ", other than the share premium account".

Amendments Nos. 16, 19 to 22, inclusive, and 28 are related and may be discussed together by agreement.

The purpose of these amendments is to clarify the position with regard to a resulting credit when there is a reduction in the nominal value of a share.

These amendments bring the provisions into line with existing law. The proposed amendment also satisfies the requirements of the fourth company law directive.

Amendment agreed to.
Section 83, as amended, agreed to.
Sections 84 to 88, inclusive, agreed to.
SECTION 89
Government amendment No. 17:
In page 131, line 15, to delete “section 88” and substitute “section 88,”.
Amendment agreed to.
Section 89, as amended, agreed to.
Sections 90 to 98, inclusive, agreed to.
SECTION 99

Amendments Nos. 18, 114, 144, 188 and 189 are related and may be discussed together. Is that agreed? Agreed.

Government amendment No. 18:
In page 137, lines 33 and 34, to delete “or the seal kept by the company by virtue of section”.

The purpose of these amendments is to re-enact the existing law. It is public companies only, not private companies, that will have an official seal which is a facsimile of the common seal and which has on its facsimile the word "securities" or the Irish language equivalent. This amendment is necessary to revert to the existing law.

Amendment agreed to.

Section 108, as amended, agreed to.

Amendment agreed to.
Section 99, as amended, agreed to.
Sections 100 to 104, inclusive, agreed to.
SECTION 105
Government amendment No. 19:
In page 142, line 40, to delete “undenominated capital” and substitute “share premium account”.
Amendment agreed to.
Government amendment No. 20:
In page 143, line 1, after “company’s” to insert “share premium account or other”.
Section 105, as amended, agreed to.
SECTION 106
Government amendment No. 21:
In page 144, line 36, after “company” to insert “, other than its share premium account”.
Amendment agreed to.
Section 106, as amended, agreed to.
Section 107 agreed to.
SECTION 108
Government amendment No. 22:
In page 145, line 36, after “capital” to insert “, other than the share premium account”.
Amendment agreed to.
Sections 109 to 118, inclusive, agreed to.
SECTION 119
Government amendment No. 23:
In page 153, line 35, to delete “subsection (1)(a)” and substitute “subsection (1)(a),”.
Amendment agreed to.
Section 119, as amended, agreed to.
Section 120 agreed to.
SECTION 121
Question proposed: "That section 121 stand part of the Bill."

I am considering introducing an amendment on Report Stage. The Office of the Parliamentary Counsel has advised that the wording might need to be refined to clarify that "properly prepared" refers to statutory financial statements and not also to the "initial" and "interim" financial statements.

The Minister of State's intentions are noted.

Question put and agreed to.
Section 122 agreed to.
SECTION 123

Amendments Nos. 24 and 25 are related and may be discussed together.

Government amendment No. 24:
In page 157, line 8, after "provision;" to insert "and".

The amendments amend the definition of "distribution" by eliminating as an exception the reduction of the liability of shareholders. The reduction in the liability of shareholders will, therefore, now fall within the definition of a "distribution" and be subject to the normal rules of requiring distributable reserves. This is consistent with section 117(3) which provides that a company shall not apply an unrealised profit in paying up debentures or any amounts unpaid on any of its issued shares.

Amendment agreed to.
Government amendment No. 25:
In page 157, to delete lines 9 to 12.
Amendment agreed to.
Section 123, as amended, agreed to.
Sections 124 and 125 agreed to.
SECTION 126

Amendments Nos. 26 and 27 are related and may be discussed together.

Government amendment No. 26:
In page 159, lines 19 and 20, to delete "arising on a revaluation of all the fixed assets of the company".

The purpose of amendments Nos. 26 and 27 is to include all revaluation reserves in the definition of "relevant sum". This is consistent with EU directives which provide that revaluation reserves may be capitalised. The purpose is to correct an inconsistency in the Bill.

Amendment agreed to.
Government amendment No. 27:
In page 159, to delete lines 24 to 31 and substitute the following:
"dividend and in the same proportions in or towards paying up in full unissued shares of the company of a nominal value equal to the relevant sum capitalised (such shares to be allotted and distributed credited as fully paid up to and amongst such holders and in the proportions as aforementioned).".
Amendment agreed to.
Government amendment No. 28:
In page 160, line 22, after "capital" to insert ", other than the share premium account".
Amendment agreed to.
Section 126, as amended, agreed to.
Sections 127 and 128 agreed to.
SECTION 129

Amendments Nos. 29 and 149 are related and may be discussed together.

Government amendment No. 29:
In page 161, to delete lines 19 and 20 and substitute "secretary has the skills or resources necessary to discharge his or her statutory and other duties.".

The purpose of the amendments is to clarify that a company secretary has the skills or resources necessary to discharge his or her statutory and other duties. As the provision stands, it could be interpreted incorrectly to prevent the outsourcing of legal services. This is not intended.

Amendment agreed to.
Section 129, as amended, agreed to.
Sections 130 to 136, inclusive, agreed to.
SECTION 137

Amendments Nos. 30 to 33, inclusive, are related and may be discussed together.

I move amendment No. 30:

In page 163, line 31, to delete "one, at least," and substitute "a majority".

Amendments Nos. 30 to 33, inclusive, deal with the bond of €25,000 applying in circumstances where no director is resident in Ireland. In these circumstances it would fall back on the State to make the payment from the insolvency fund. The purpose of the amendments is to save the Exchequer money. One of the Government's policy objectives is to ensure employees are protected in every case. Similarly, the Government seeks to limit the State's exposure to potential shortfalls in the context of redundancy or insolvency. Unpaid remuneration in these times of contraction is all too common. We have seen a plethora of employees having to fight very hard to ensure they get what they are entitled to. The amendments seek to ensure workers who have expended their energies, efforts and brain power to make profits for companies or businesses would be protected. I urge the Minister of State to consider them.

I am not in favour of adopting the amendments which propose unduly oppressive conditions on legitimate businesses. The suggestion that a majority of directors be EEA resident might particularly dissuade foreign direct investment companies from doing business in Ireland.

This is bad for Ireland and Irish commerce generally.

Second, section 137, which re-enacts existing law, ensures that companies that do not have at least one director who is resident in an EEA state must put in place a bond in the prescribed form that becomes payable to a person nominated by the registrar or the Revenue Commissioners. The purpose of the bond is to discharge any fine imposed on the company in respect of an offence committed by it and prosecutable by the registrar and-or for the purposes of discharging certain fines and penalties imposed on it by the Taxes Consolidation Act 1997. The moneys can also be used to cover expenses that are reasonably incurred in the collection of said penalties. The bond cannot be used for any other purpose. Therefore, the amendments proposed do not achieve any legitimate policy goal. Their sole effect is to create an arbitrary restriction on non-EEA companies trying to do business in Ireland. It is on that basis that I do not support the amendments.

Is amendment No. 30 being pressed?

Amendment put and declared lost.

I move amendment No. 31:

In page 163, line 34, after "€25,000" to insert "or 4 per cent of turnover or the total wages paid, whichever is the greater".

Amendment put and declared lost.

I move amendment No. 32:

In page 164, line 2, to delete "purpose" where it secondly occurs and substitute "purposes".

Amendment put and declared lost.

I move amendment No. 33:

In page 164, line 6, after "accordingly)" to insert the following:

"or in the case of unpaid remuneration the amount payable under the redundancy and insolvency schemes".

Section 137 agreed to.

Amendment put and declared lost.
Sections 138 and 139 agreed to.
SECTION 140

Amendments Nos. 34 and 35 are cognate and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 34:

In page 166, line 28, after "on" to insert "and managed and controlled".

The aim of this amendment is to provide further protection for employees. I would be interested in hearing the Minister of State's response.

These amendments propose to insert the words "managed and controlled" into this section of the Bill. The objective appears to be to cause all companies registered in Ireland to be tax-resident in Ireland. As Minister of State in the Department of Jobs, Enterprise and Innovation, I am not in a position to consider the full impact or consequences of any change to tax law. Such an exercise is within the functions of the Minister for Finance.

Additionally, the proposed amendments are illegal both under EU and international law. The provisions would fall foul of the EU law on freedom of establishment, which is a core aspect of EU law. Compliance with this is closely monitored by the European Commission. Ireland has recently been required by the Commission to change a provision of Irish law which required that at least one director of an Irish company be resident in Ireland. This provision would go much further, effectively requiring all management activities to occur within the State. This is clearly a hindrance to cross-border trade within the EU and significantly trammels the ability of a company from another EU member state to establish in Ireland.

Furthermore, this proposal would put Ireland in breach of obligations under double taxation agreements with other countries. This is completely unprecedented and would be highly prejudicial to Irish commerce and Ireland's reputation internationally so it is on that basis that I am not in favour of accepting the amendments.

Is amendment No. 34 being pressed?

In light of what the Minister has said, we will not be pressing it.

Section 140 agreed to.

Amendment, by leave, withdrawn.
Amendment No. 35 not moved.
Sections 141 to 147, inclusive, agreed to.
SECTION 148
Government amendment No. 36:
In page 173, to delete line 17 and substitute the following:
“(b) the health of the director is such that he or she can no longer be reasonably regarded as possessing an adequate decision making capacity; or”.

The purpose of the amendment is to delete language which could be interpreted in a discriminatory manner. This refers to the somewhat outdated term “unsound mind”. While the term is legally sound, it does not represent everyday language and understanding of situations where a director is no longer, for medical reasons, capable of fulfilling his or her functions as a company director. The wording proposed is more in line with the wording used in the Employment Equality Act. This section provides that the office of director is vacated if a director becomes bankrupt or disqualified and, unless the constitution provides otherwise, where the director resigns, can no longer be reasonably regarded as possessing an adequate decision making capacity, is restricted, sentenced to a term of imprisonment for an indictable offence, or is absent for six months without permission. This section substantially imports model regulations 91 of Part I of Table A of the First Schedule to the Companies Act 1963. A new requirement that the conviction must give rise to a sentence and to a term of imprisonment - actual or suspended - has been inserted.

I pay tribute to Mr. Jim Breen from Cycle Against Suicide, who brought the issue to our attention. On foot of representations made specifically by him and people close to him, we sought to change the wording and reflect language that is more caring and apt for the society we live in. On the basis of some consciousness-raising, we introduced this amendment. I acknowledge the work of our officials in bringing it forward. It represents a positive change in how we use language about issues such as this.

Amendment agreed to.
Section 148, as amended, agreed to.
SECTION 149

Amendments Nos. 37 and 38 are consequential on amendment No. 39. Amendments Nos. 37 to 39, inclusive, may be discussed together.

Government amendment No. 37:
In page 173, line 30, after “subsection (4)” to insert “and section 150(11)”.

The purpose of these amendments is to grant the Minister powers to make regulations in regard to the non-disclosure of residential addresses on the public register kept by the registrar. In certain limited circumstances, company officers will be granted an exemption from listing their residential address on the public register. Such addresses will be kept separately by the registrar who, in turn, will be granted powers to release such addresses to relevant authorities, for example, the Revenue Commissioners and An Garda Síochána. The purpose of the amendment is to ensure competitiveness as certain company officers may be reluctant to locate in Ireland unless they are, for legitimate reasons, given an exemption in respect of publication of their residential addresses.

Amendment agreed to.
Government amendment No. 38:
In page 174, line 13, after “subsection (6)” to insert “and section 150(11)”.
Amendment agreed to.
Section 149, as amended, agreed to.
SECTION 150
Government amendment No. 39:
In page 177, between lines 8 and 9, to insert the following:
“(11) The Minister may make regulations providing that any requirement of this Act that the usual residential address of an officer of a company appear on the register referred to in section 149(1) or the register kept by the Registrar shall not apply in relation to a particular person who is such an officer if—
(a) in accordance with a procedure provided in the regulations for this purpose, it is determined that the circumstances concerning the personal safety or security of the person warrant the application of the foregoing exemption in respect of him or her; and
(b) such other conditions (if any) as are specified in the regulations for the application of the foregoing exemption are satisfied.
(12) Regulations under subsection (11) may contain such incidental, consequential and supplemental provisions as appear to the Minister to be necessary or expedient, including provision—
(a) so as to secure that there is not otherwise disclosed, by virtue of this Act’s operation, the usual residential address of a person in respect of whom the exemption referred to in that subsection applies; and
(b) limiting the regulations’ application to a usual residential address that, but for the regulations’ operation, would fall to be entered, on a register referred to in that subsection, on or after a date specified in the regulations.”.
Amendment agreed to.
Section 150, as amended, agreed to.
Sections 151 to 180, inclusive, agreed to.
SECTION 181
Government amendment No. 40:
In page 196, to delete lines 6 to 9 and substitute the following:
“(3) Where notice of a meeting is given by posting it by ordinary prepaid post to the registered address of a member, then, for the purposes of any issue as to whether the correct period of notice for that meeting has been given, the giving of the notice shall be deemed to have been effected on the expiration of 24 hours following posting.”.

The purpose of the amendment is to reflect existing law and to provide certainty. As the Bill stands, the words “unless the contrary is proved” could lead to uncertainty and could be interpreted as permitting deemed service of notice to be set aside at a later date, which could cause uncertainty in respect of business conducted at every relevant meeting.

Amendment agreed to.
Section 181, as amended, agreed to.
Sections 182 to 192, inclusive, agreed to.
SECTION 193

Amendments Nos. 41, 43, 44, 138, 139, 148, 155 and 163 are related and may be discussed together.

Government amendment No. 41:
In page 203, lines 16 and 17, to delete “Part or in Parts 1 to 3 or 5 to 14” and substitute “Act”.

The purpose of the amendments is to address any ambiguity as to the part to which these provisions apply. This section concerns unanimous written resolutions and is partially new. Unanimous written resolutions are permitted as the default, that is to say, there is no need for the constitution to allow them. The section implements the recommendations in the first report of the Company Law Review Group with regard to written resolutions and procedures for their execution.

Amendment agreed to.
Government amendment No. 42:
In page 204, line 6, to delete “proceeding” and substitute “proceedings”.
Amendment agreed to.
Section 193, as amended, agreed to.
SECTION 194
Government amendment No. 43:
In page 204, line 28, to delete “Part or Parts 1 to 3 or 5 to 14” and substitute “Act”.
Amendment agreed to.
Government amendment No. 44:
In page 205, line 8, to delete “Part or Parts 1 to 3 or 5 to 14” and substitute “Act”.
Section 194, as amended, agreed to.
SECTION 195
Government amendment No. 45:
In page 206, line 34, to delete “proceeding” and substitute “proceedings”.
Amendment agreed to.
Section 195, as amended, agreed to.
SECTION 196
Government amendment No. 46:
In page 207, line 9, after “member” to insert the following:
“(and this applies notwithstanding a stipulation in the constitution that there be 2 members, or a greater number)”.

The purpose of this amendment is to clarify that there can be a sole member company notwithstanding a stipulation in the constitution that there be two members or a greater number. This will ensure any confusion is avoided.

Amendment agreed to.
Section 196, as amended, agreed to.
Sections 197 to 210, inclusive, agreed to.
SECTION 211
Government amendment No. 47:
In page 217, line 36, after “after” to insert “the”.
Amendment agreed to.
Section 211, as amended, agreed to.
Sections 212 to 217, inclusive, agreed to.
SECTION 218
Government amendment No. 48:
In page 224, line 8, after “Act” to insert “, or of the company’s constitution,”.

The purpose of this amendment is to provide that the subsection relating to the serving of notice on members applies where a provision of the Bill so requires or authorises a notice to be served but also where the Constitution so requires. As the Bill stands, the Constitution would have to be amended to provide for this and this is not intended.

Amendment agreed to.
Government amendment No. 49:
In page 224, line 9, to delete “a company” and substitute “the company”.
Amendment agreed to.
Government amendment No. 50:
In page 224, lines 10 and 11, to delete “of the company”.

The purpose of this amendment is to provide that the subsection relating to the serving of notice on members applies where a provision of the Bill requires or authorises a notice to be served but also where the Constitution so requires. As the Bill stands, the Constitution would have to be amended to provide for this and this is not intended.

Amendment agreed to.
Government amendment No. 51:
In page 225, to delete line 8 and substitute the following:
“despatch,
but this subsection is without prejudice to section 181(3).”.

The purpose of this amendment is to provide a cross-reference to section 181(3) concerning the receipt of notice of general meetings when availing of ordinary post.

Amendment agreed to.
Section 218, as amended, agreed to.
Sections 219 to 224, inclusive, agreed to.
NEW SECTION

I move amendment No. 52:

In page 230, between lines 15 and 16, to insert the following:

“225. The Act of 1990 is amended by inserting the following in Part X:

“205E. (1) In this section—

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in section 8 of the Companies (Amendment) Act 1986;

‘relevant obligations’, in relation to a company, means the company’s obligations under—

(a) the Companies Acts,

(b) tax law, and

(c) any other enactments that provide a legal framework within which the company operates and that may materially affect the company’s financial statements;

‘tax law’ means—

(a) the Customs Acts,

(b) the statutes relating to the duties of excise and to the management of those duties,

(c) the Tax Acts,

(d) the Capital Gains Tax Acts,

(e) the Value-Added Tax Act 1972 and the enactments amending or extending that Act,

(f) the Capital Acquisitions Tax Act 1976 and the enactments amending or extending that Act,

(g) the statutes relating to stamp duty and to the management of that duty, and

(h) any instruments made under an enactment referred to in any of paragraphs (a) to (g) or made under any other enactment and relating to tax.

(2) This section applies to—

(a) a public limited company (whether listed or unlisted), and

(b) a private company limited by shares,

but it does not apply to a company referred to in paragraph (a) or (b) that is of a class exempted under section 48(1)(j) of the Act of 2003 from this section or to a company referred to in paragraph (b) while that company qualifies for an exemption under subsection (9).

(3) The directors of a company to which this section applies shall, as soon as possible after the commencement of this section or after this section becomes applicable to the company, prepare or cause to be prepared a directors’ compliance statement containing the following information concerning the company:

(a) its policies respecting compliance with its relevant obligations;

(b) its internal financial and other procedures for securing compliance with its relevant obligations;

(c) its arrangements for implementing and reviewing the effectiveness of the policies and procedures referred to in paragraphs (a) and (b).

(4) The directors’ compliance statement (including any revisions) must—

(a) be in writing,

(b) be submitted for approval by the board of directors,

(c) at least once in every 3 year period following its approval by the board, be reviewed and, if necessary, revised by the directors, and

(d) be included in the directors' report under section 158 of the Principal Act.

(5) The directors of a company to which this section applies shall also include in their report under section 158 of the Principal Act a statement—

(a) acknowledging that they are responsible for securing the company’s compliance with its relevant obligations,

(b) confirming that the company has internal financial and other procedures in place that are designed to secure compliance with its relevant obligations, and, if this is not the case, specifying the reasons, and

(c) confirming that the directors have reviewed the effectiveness of the procedures referred to in paragraph (b) during the financial year to which the report relates, and, if this is not the case, specifying the reasons.

(6) In addition, the directors of a company to which this section applies shall in the statement required under subsection (5)—

(a) specify whether, based on the procedures referred to in that subsection and their review of those procedures, they are of the opinion that they used all reasonable endeavours to secure the company’s compliance with its relevant obligations in the financial year to which the annual report relates, and

(b) if they are not of that opinion, specify the reasons.

(7) For the purposes of this section, a company’s internal financial and other procedures are considered to be designed to secure compliance with its relevant obligations and to be effective for that purpose if they provide a reasonable assurance of compliance in all material respects with those obligations.

(8) Where the directors of a company to which this section applies fail—

(a) to prepare, or to cause to be prepared, a directors’ compliance statement as required by subsections (3) and (4)(a) to (c),

(b) to include a directors’ compliance statement in the directors’ report as required by subsection (4)(d), or

(c) to comply with subsections (5) and (6), each director to whom the failure is attributable is guilty of an offence.

(9) A private company limited by shares qualifies for an exemption from this section in respect of any financial year of the company if—

(a) its balance sheet total for the year does not exceed—

and

(b) the amount of its turnover for the year does not exceed—

205F.(1) The auditor of a company to which section 205E applies shall undertake an annual review of—

(a) the directors’ compliance statement under subsections (3) and (4) of that section, and

(b) the directors’ statement under subsections (5) and (6) of that section,

to determine whether, in the auditor’s opinion, each statement is fair and reasonable having regard to information obtained by the auditor, or by an affiliate of the auditor within the meaning of section 205D, in the course of and by virtue of having carried out audit work, auditrelated work or non-audit work for the company.

(2) The auditor shall—

(a) include in the auditor’s report appended to the company’s annual accounts a report on, and the conclusions of, the review undertaken under subsection (1), and

(b) where any statement reviewed under subsection (1) is not, in the auditor’s opinion, fair and reasonable—

(3) Where, in the auditor’s opinion, the directors have failed—

(a) to prepare, or to cause to be prepared, a directors’ compliance statement as required by section 205E(3) and (4)(a) to (c),

(b) to include a directors’ compliance statement in the directors’ report as required by section 205E(4)(d), or

(c) to comply with section 205E(5) and (6), the auditor shall report that opinion and the reasons for forming that opinion to the Director of Corporate Enforcement.

(4) Section 194(6) applies, with the necessary modifications, in relation to an auditor’s compliance with an obligation imposed on him by or under this section as it applies in relation to an obligation imposed by or under section 194.

(5) A person who contravenes this section is guilty of an offence.”.”.

For a long time we have talked about red tape, regulation and costs. By its nature, regulation involves extra costs and creates a level of red tape for businesses. No one is arguing that we should get rid of regulations totally, but Irish businesses would be more competitive if they were not required to write health and safety statements or if we were to get rid of all regulations to prevent problems and ensure firms adhered to their responsibilities to their staff, the environment, the community and the Government. However, the point we are trying to make which has been echoed by other organisations, including the Irish Congress of Trade Unions, is that there is a balance to be struck between the responsibilities to the greater community and the responsibilities to make a profit for shareholders. There is a need to strike the balance between these competing ends. The belief that the Bill is a watered-down version of what is required has been stated. According to the ICTU, the majority of its concerns and those of other organisations were ignored. In my experience, we have seldom seen such strong statements from three disparate organisations in critiquing this element of the legislation in terms of the need for regulation. If we are to learn anything from the collapse in recent years, it should be that regulation, when necessary, is valuable, that it saves money in the long term and reduces the cost burden on the State.

The new section proposed is rather large. I seek the opinion of the Minister of State on whether he sees particular problems with it or whether the section could be improved. Perhaps any alteration could be addressed on Report Stage.

This section contains the form of directors compliance statement as recommended by the Company Law Review Group. Having analysed the provisions contained in the 2003 Act, the group determined that such extra duties as set out would do little to increase compliance and merely result in an increase in red tape at considerable cost to Irish businesses. The set-up costs for a business were estimated at €90,000 and the ongoing annual costs at €40,000. A streamlined version of the directors compliance statement proposed by the Company Law Review Group removed the requirement that the statement include a declaration that the company had complied with all other enactments which could affect its financial performance. This was found to be the most burdensome aspect of the statement and also the least relevant since companies were already legally obliged to comply with all Acts of the Oireachtas and their inclusion in the directors compliance statement did not add substantive duties.

A wide majority of the Company Law Review Group, that is, more than 80% of the members, including members representing the Financial Regulator and other public bodies, agreed to a more balanced version of the directors compliance statement. There is a strong European Union impetus towards less unnecessary regulation to make EU businesses more competitive. The amendment would create unjustifiable and disproportionate costs for Irish businesses without adding value in terms of protection. It would disadvantage Ireland competitively as it would move beyond other countries. The directors compliance statement, as it stands, has broad support. For these reasons, it is intended to preserve the directors compliance statement as it stands within the Bill. On this basis, I am not in favour of adopting the amendment.

Amendment put and declared lost.
Section 225 agreed to.
Sections 226 to 249, inclusive, agreed to.
SECTION 250
Government amendment No. 53:
In page 248, line 26, after “to” to insert “in”.
Amendment agreed to.
Section 250, as amended, agreed to.
Sections 251 to 262, inclusive, agreed to.
SECTION 263

Amendments Nos. 54 to 59, inclusive, are related and may be discussed together.

Government amendment No. 54:
In page 258, line 6, to delete “subsection (3)” and substitute “subsection (3) and (5)”.

The purpose of this amendment is to remove the unintended requirement in the Bill for the disclosure of directors' interests in share options granted by parent companies. When a 1% or less share option is granted, it is not required that it be reported to the company.

Amendment agreed to.
Government amendment No. 55:
In page 258, line 11, to delete “subject to subsection (5),”.
Amendment agreed to.
Government amendment No. 56:
In page 258, line 31, to delete “extend to the matters referred to in paragraph (b) of it” and substitute “arise”.
Amendment agreed to.
Government amendment No. 57:
In page 259, line 6, to delete “subsection (8)” and substitute “subsection (8) and (10)”.
Amendment agreed to.
Government amendment No. 58:
In page 259, line 11, to delete “subject to subsection (10),”.
Amendment agreed to.
Government amendment No. 59:
In page 259, line 28, to delete “extend to the matters referred to in paragraph (b) of it” and substitute “arise”.
Amendment agreed to.
Section 263, as amended, agreed to.
Sections 264 agreed to.
SECTION 265
Government amendment No. 60:
In page 260, line 34, to delete “rising” and substitute “rise”.
Amendment agreed to.
Section 265, as amended, agreed to.
Sections 266 to 270, inclusive, agreed to.
SECTION 271
Question proposed: "That section 271 stand part of the Bill."

I am considering introducing an amendment to this section on Report Stage in order to bring it into line with existing law. I am also considering introducing an amendment to Chapter 15 on Report Stage in order to bring the audit exemption criteria in line with Article 52 of Directive 2013/34/EU. The aim of this directive is to simplify the accounting requirements for small companies and improve the clarity and comparability of companies' financial statements within the Union. The new directive takes the small company or group as the starting point and imposes additional requirements on medium-sized companies and groups and even further requirements on large companies and groups, as well as on public interest entities. Essentially, the latter are listed companies, banks and insurance undertakings, whether listed or not, regardless of size. This is described as a "think small first" approach. Directive 2013/34/EU must be transposed into national law by July 2015.

Question put and agreed to.
Sections 272 and 273 agreed to.
SECTION 274

I move amendment No. 61:

In page 266, between lines 37 and 38, to insert the following:

“(d) a certificate of tax compliance,”.

This amendment relates to an issue which arose in the context of a young man with a young family who set up a construction company and subcontracted work to a contractor. Over a period of seven or eight years he allowed the contractor to build up a level of credit on the understanding that the latter was tax compliant. Halfway through the period the young man invested a considerable amount of money in his business before discovering that the contractor had not been tax compliant for six or seven years but was still trading. The young man's business collapsed as a result of the level of exposure that had built up. It is important that we ensure that companies operating in these areas are tax compliant. This amendment provides that companies that are making annual returns must provide certificates of tax compliance as part of that process. It is also designed to ensure that a company may not continue to be registered if it is not fully tax compliant. There is an issue with regard to syncing annual returns with tax returns but it is intended that tax compliance certificates be available for the most recent year. This would be a positive development because it would give confidence to those along the supply chain that there will be no danger of those whom they are dealing with exposing them to future risk.

I have sympathy for the situation of the person to whom the Senator refers but I cannot accept the amendment. What is proposed would not be a logical inclusion in companies' financial statements. Such statements relate to companies' financial performance and not to their tax obligations. Fiscal accounting addresses tax obligations. If the Government were to consider a requirement to oblige businesses to obtain and publish certificates of tax compliance, the appropriate place to do so would be in tax law rather than company law in order that both company and non-company businesses, which also pay taxes, would be contemplated. The introduction of the suggested requirement would be entirely without precedent across the European Union. It is on this basis that I am not in favour of accepting the amendment.

On the basis of what the Minister of State said, I am not going to press the amendment. I will examine the position further and I may, perhaps, consider resubmitting the amendment on Report Stage.

Amendment, by leave, withdrawn.
Section 274 agreed to.
SECTION 275
Government amendment No. 62:
In page 272, line 8, to delete “EEC” where it secondly occurs and substitute “EC”.
Amendment agreed to.
Section 275, as amended, agreed to.
Sections 276 to 281, inclusive, agreed to.
SECTION 282

Amendments Nos. 63 and 64 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 63:

In page 275, to delete lines 23 to 27.

Section 282(2) has the potential to be very confusing for businesses. Senator Reilly referred to red tape and bureaucracy and I am aware that the Minister of State has a campaign to avoid these. The section states: "if those records are not kept by making entries in a bound book [I have never heard that term before] but by some other means, adequate precautions shall be taken for guarding against falsification and facilitating discovery of such falsification, should it occur." This implies that having something written down in a bound book is somehow a protection against fraud. It sounds like a contention a law firm might have put forward 50 or 100 years ago. Bound books are no longer used in this, the age of the computer. I would love to see the introduction of the mandatory recording of activities in the banks by outside agencies in order to protect against another collapse. If we use the software which is now available, we could protect taxpayers against another collapse similar to that involving the former Anglo Irish Bank.

Section 282(2) offers no concrete definition with regard to what might actually constitute the detection and prevention of fraud. This aspect is already adequately covered in section 282(1), which states that adequate accounting records should "correctly record and explain the transactions of the company". The word "adequate" implies no falsification of a company's records. My amendment aims, therefore, to simplify the legislation by deleting section 282(2), which adds nothing in the context of combating falsification but which encourages those who keep bound books - I love that term - to take fewer precautions against falsification. This part of the Bill is quite strange. What is proposed could have unintended and potentially risky consequences for smaller companies in particular because it implies that they can take more risks if they keep bound books. I hope the Minister of State understands where I am coming from and I hope he will accept the amendment because it makes a great deal of sense.

Amendment No. 64 proposes the deletion of section 282(6), which states that "any computer (the “server computer”) that provides services to another computer, being services the provision of which to the latter is necessary so that the accounting records, and the other foregoing information and returns, stored in the latter can be accessed at all times, shall be kept in a place in the State." It is sometimes not feasible for companies with operations in a number of locations across the globe to keep in the State a computer on which accountancy files are stored. There are other technical issues which arise, including the emerging area of cloud computing. The latter is rapidly expanding and allowing data to be accessed from any computer in any location across the globe. That fact may make the requirement contained in the legislation redundant in just a few short years. I wish to strongly emphasise the fact that it is likely that no other country has such a provision. Thus, we are putting ourselves at a disadvantage compared to our competitors, even those across the Border. We are making Ireland less attractive as a place in which to do business, especially to big multinationals. The latter is something we should avoid at all costs. I know the Minister of State and I have similar views on this matter. The purpose of the amendment is to delete the requirement to keep bound books and thus place Ireland on a level playing field with its competitors.

I urge the Minister of State to accept the changes to section 282 which I am proposing. He could not accept earlier amendments in my name but he did indicate that he intended to give further consideration to the matters to which they relate. I am of the view that he should give serious consideration to these amendments and I hope he will accept them.

I shall take the two amendments together, if I may. I am unclear as to why the Senator has proposed the deletion of subsections (2) and (6), particularly as the proposal does not include any replacement texts. I can only surmise that he is opposed to the Bill making provision for alternative methods for the storing and managing of accounting records, rather than the requirement to keep accounting records on a continuous and consistent basis. Perhaps he will clarify the matter.

The purpose of subsections (2) and (6) is, respectively, to ensure that accounting records must be kept on a continuous and consistent basis, and that they must be available for inspection in the State. This stems from existing law, specifically section 202 of the 1990 Companies Act. It ought to be noted that the requirement to keep proper books is not an obligation to act as a passive custodian of books, but rather a positive and continuing obligation to create books and records in a particular form and with specified content. The provision has to be general in some respects because technology may change and one cannot be over-prescriptive at the same time.

Subsection (2) in the Bill is cognisant of the fact that ledgers exist in electronic form and, therefore, requires that such ledgers must also be updated and safeguarded from falsification, in a positive manner. It is important that the Bill reflects the realities of the majority of modern company practices. I am not in favour of deleting existing law from this section, on that basis.

The Companies Bill anticipates that where such records are kept, other than book form, safeguards shall be taken to guard against falsification. Subsection (6), subject to the provisions of subsection (7), ensures that where accounting records, other information and returns are kept on a computer that the computer shall be kept in the State. This is another positive duty that recognises that many modern companies no longer rely on ledgers and paper when maintaining or recording any transactions.

I cannot support a proposal to remove references and safeguards relating to technological innovations from this section. This Bill aims to strike a balance between good regulation and the need to ensure that the operating environment for companies in Ireland is informed by the realities of modern companies. Record management is a crucial aspect for modern companies. The rationale behind these provisions is to ensure that the companies availing of modern technologies shall take certain precautions to ensure that said records are accessible and authentic.

With regard to the second point made about records, we could take a look at that on Report Stage. I also take the point that the Senator made in relation to cloud computing which is something we must have due regard for. Perhaps we could come back to it at a later stage in the proceedings, if that is okay with the Senator.

I thank the Minister of State for his response. It was the term "bound book" that got me because I thought it sounded like something from Dickens or whomever. I was also struck by how cloud computing is so big. This morning I dropped into the Springboard demonstration or launch taking place at Customs House Quay. It was amazing to witness hundreds of attendees meeting organisations and colleges from around Ireland and, very often, they were selling cloud computing. I spoke to one man who had travelled all the way from Waterford to the event because he had got a job but wanted to locate a specific course. Another person asked him what he could do and he promptly demonstrated his cloud computing skills. That person said to him, "I need you immediately, will you start next week?"

That scenario reminded me how strange it would be for us to include a provision stipulating that the information must be kept in a bound book and kept in the State. To the best of my knowledge, this provision does not apply in other countries. We should change the provision in order to make us more competitive. I was happy to hear the Minister of State say that the matter would be given consideration. It is one of the amendments that needs further consideration before we reach the Final Stage. I was pleased to hear that the Minister of State has agreed that he will do so.

Amendment, by leave, withdrawn.
Amendment No. 64 not moved.
Section 282 agreed to.
Sections 283 to 285, inclusive, agreed to.
SECTION 286
Question proposed: "That section 286 stand part of the Bill."

I am considering introducing an amendment to section 286 on Report Stage to provide for a more precise penalty for not maintaining adequate accounting records.

Question put and agreed to.
Sections 287 to 290, inclusive, agreed to.
SECTION 291
Question proposed: "That section 291 stand part of the Bill."

I am considering introducing an amendment to this section on Report Stage. It is considered that further refinement of the wording, regarding the penalty, may be required as it may not be specific enough.

Question put and agreed to.
Sections 292 to 306, inclusive, agreed to.
SECTION 307
Government amendment No. 65:
In page 298, line 36, after “of” to insert “the”.
Amendment agreed to.
Section 307, as amended, agreed to.
Sections 308 to 310, inclusive, agreed to.
SECTION 311
Government amendment No. 66:
In page 305, line 30, to delete "bank" and substitute "institution".

Amendments Nos. 66 and 67 are cognate and may be discussed together by agreement. Is that agreed? Agreed.

The purpose of these amendments is to delete the reference to a "bank" and replace with the word "institution". This will result in a uniformity of language throughout the Bill and is in line with EU law. It is a technical drafting amendment.

Amendment agreed to.
Government amendment No. 67:
In page 306, line 19, to delete “bank” and substitute “institution”.
Amendment agreed to.
Section 311, as amended, agreed to.
Sections 312 to 316, inclusive, agreed to.
SECTION 317
Government amendment No. 68:
In page 313, line 19, to delete “scheme” and substitute “scheme,”.
Amendment agreed to.
Section 317, as amended, agreed to.
Sections 318 to 321, inclusive, agreed to.
SECTION 322
Government amendment No. 69:
In page 317, line 5, to delete “EEC” and substitute “EC”.
Amendment agreed to.
Section 322, as amended, agreed to.
Sections 323 to 334, inclusive, agreed to.
SECTION 335
Government amendment No. 70:
In page 325, line 31, after “that” to insert “2 or more of”.

Amendments Nos. 70, 72 to 80, inclusive, 82, 86 and 87 are cognate and may be discussed together by agreement. Is that agreed? Agreed.

This is a significant amendment and arises as a consequence of the CLRG's recommendation in 2013 that company law be amended to allow companies that meet two of the three criteria relating to balance sheet total turnover and number of employees, to qualify for audit exemption. The intention here is to use the available provisions in EU law to help small companies.

The Bill, as it stands, incorporates section 32(3)(a)(ii) and section 32(3)(a)(iii) of the Companies (Amendment) (No. 2) Act 1999. It provides that a private company limited by shares that meets three specified criteria may be exempted from the general rule that the annual accounts of a company must be audited. The three criteria and their current thresholds are: the annual turnover does not exceed €8.8 million; the balance sheet does not exceed €4.4 million; and the average number of employees does not exceed 50. The current thresholds were set in August 2012 and are given effect in two statutory instruments: the European Union (Accounts) Regulations 2012, SI No. 304 of 2012; and the Companies (Amendment) No. 2 Act 1999 (Section 32) Order 2012, SI No. 308 of 2012. This legislation transposes into Irish law elements of the fourth Council directive on the annual accounts of certain types of companies, which provides that member states may exempt companies from the obligation to conduct an annual audit where they meet at least two of the three criteria. When introducing this provision into Irish law in 1999, the Oireachtas chose to require companies to meet all three. The Bill, as initiated, carried forward the existing legislative provisions on audit exemption and now proposes to extend the scope of the exemption. In this regard, the Bill also provides for the application of the exemption for the first time to companies limited by guarantee. It provides that a company may be either a parent or subsidiary applying the three criteria to the group as a whole and not to individual companies within the group. This also proposes the application of the audit exemption to a dormant company.

Amendment agreed to.
Section 335, as amended, agreed to.
Sections 336 to 342, inclusive, agreed to.
SECTION 343
Government amendment No. 71:
In page 333, line 36, to delete “The court” and substitute the following:
“In respect of an annual return that is to be delivered on or after the commencement of this section, the court”.

This amendment is to clarify the District Court's jurisdiction and that the extension of filing period applications in respect of annual returns is limited to returns that are delivered to the CRO on or after the commencement of this section. This would preclude companies that have already filed annual returns from seeking extensions of time and other misuses of the section, such as seeking refunds of late filing penalties. An application to the District Court can be made only by companies with outstanding returns at the time of the Bill's commencement.

SECTION 358

Amendment agreed to.

Government amendment No. 79:

In page 349, line 22, after “that” to insert “2 or more of”.

Amendment agreed to.
Section 343, as amended, agreed to.
Sections 344 to 357, inclusive, agreed to.
Government amendment No. 72:
In page 346, line 10, after “satisfy” to insert “at least 2 of”.
Amendment agreed to.
Government amendment No. 73:
In page 346, line 16, after “satisfied” to insert “at least 2 of”.
Amendment agreed to.
Government amendment No. 74:
In page 346, line 22, after “satisfy” to insert “at least 2 of”.
Amendment agreed to.
Government amendment No. 75:
In page 346, line 28, after “satisfied” to insert “at least 2 of”.
Amendment agreed to.
Government amendment No. 76:
In page 346, line 40, after “satisfied” to insert “at least 2 of”.
Section 358, as amended, agreed to.
Section 359 agreed to.
SECTION 360
Government amendment No. 77:
In page 348, lines 19 and 20, to delete “one or more of the conditions” and substitute “one or both of the relevant conditions”.
Amendment agreed to.
Section 360, as amended, agreed to.
SECTION 361
Government amendment No. 78:
In page 349, line 18, after “that” to insert “2 or more of”.
Amendment agreed to.
Amendment agreed to.
Section 361, as amended, agreed to.
SECTION 362
Government amendment No. 80:
In page 349, line 39, after “that” to insert “2 or more of”.
Amendment agreed to.

Amendments Nos. 81 and 83 to 85, inclusive, are related and may be discussed together, by agreement.

Government amendment No. 81:
In page 350, line 2, to delete “Schedule.” and substitute “Schedule, or if it is a relevant securitisation company.”.

The purpose of these amendments is to exclude securitisation-type companies from the audit exemption criteria. Securitisation companies are companies that are either registered financial vehicle corporations within the meaning of Article 1.2 of FVC Regulation (EC) No. 24/2009 of the European Central Bank or financial vehicles engaged solely in activities where economic participation is by way of debt or other corresponding instruments which do not provide ownership rights in the financial vehicle as are provided by the sale of units or shares.

Amendment agreed to.

Amendment agreed to.
Government amendment No. 82:
In page 350, line 3, after “that” to insert “2 or more of”.
Amendment agreed to.
Government amendment No. 83:
In page 350, line 8, to delete “Schedule, or” and substitute “Schedule, or if it is a relevant securitisation company, or”.
Amendment agreed to.
Government amendment No. 84:
In page 350, line 13, to delete “Schedule, or” and substitute the following:
“Schedule,
(iv) a relevant securitisation company, or”.
Amendment agreed to.
Government amendment No. 85:
In page 350, between lines 15 and 16, to insert the following:
“(3) In this section “relevant securitisation company” means—
(a) a qualifying company within the meaning of section 110 of the Taxes Consolidation Act 1997; or
(b) a financial vehicle corporation (“FVC”) within the meaning of—
(i) in the period before 1 January 2015, Article 1(1) of Regulation (EC) No. 24/2009 of the European Central Bank of 19 December 2008 concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation transactions; or
(ii) subject to subsection (4), in the period on or after 1 January 2015, Article 1(1) of Regulation (EU) No. 1075/2013 of the European Central Bank of 18 October 2013 concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation transactions (recast).
(4) If a Regulation is made by the European Central Bank concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation
transactions that—
(a) contains a different definition of financial vehicle corporation (“FVC”) from that referred to in subparagraph (ii) of subsection (3)(b), the reference in that provision to that definition shall be read as a reference to the definition contained in the Regulation so made, or
(b) amends the definition so referred to, the reference in that provision to that definition shall be read as a reference to that definition as it stands so amended.”.
Amendment agreed to.
Section 362, as amended, agreed to.
SECTION 363
Government amendment No. 86:
In page 350, line 17, after “that” to insert “2 or more of”.
Section 363, as amended, agreed to.
SECTION 364
Government amendment No. 87:
In page 350, line 38, after “that” to insert “2 or more of”.
Amendment agreed to.
Section 364, as amended, agreed to.
Sections 365 to 407, inclusive, agreed to.
SECTION 408
Government amendment No. 88:
In page 380, to delete line 14 and substitute the following:
“(c) shares, bonds or debt instruments,”.

The purpose of this amendment is to refine the definition of "charge". It is appropriate to have "shares, bonds or debt instruments" contained in a distinct sub-clause.

Amendment agreed to.
Government amendment No. 89:
In page 380, between lines 19 and 20, to insert the following:
“(2) Any exclusion provided in subsection (1) to what is defined in that subsection as constituting a “charge” may be varied by order made by the Minister if the Minister considers that it is necessary or expedient to do so in consequence of any Community act adopted after the commencement of this section relating to financial collateral arrangements.”.

The purpose of this amendment is to provide that the definition of "charge" could be altered by statutory instrument in the future to ensure continued alignment with a financial collateral arrangement under the European Community’s financial collateral arrangements regulations.

Amendment agreed to.
Section 408, as amended, agreed to.
SECTION 409
Government amendment No. 90:
In page 381, line 27, to delete “is created in the State but”.

The purpose of this amendment is to align the Bill with existing legislation. The words "is created in the State" are redundant and do not serve any useful purpose, particularly in light of the fact that subsections 99(3) and 99(5) of the Companies Act 1963 are not repeated here.

Sections 410 and 411 agreed to.

Amendment agreed to.
Section 409, as amended, agreed to.
NEW SECTION

Amendments Nos. 91 to 93, inclusive, are related and are to be discussed together by agreement.

Government amendment No. 91:
In page 382, between lines 18 and 19, to insert the following:
“Priority of charges
412. (1) For the purposes of this section—
(a) “relevant rule of law” means a rule of law that governs the priority of charges created by a company, and for the avoidance of doubt, any enactment governing the priority of such charges is not encompassed by that expression,
(b) the reference in subsection (2) to any priority that one charge, by virtue of a person’s not having notice of a matter, enjoys over another charge or charges shall be deemed to include a reference to any priority that an advance made on foot of a charge, by virtue of a person’s not having notice of a matter, enjoys over a subsequent charge or charges.
(2) On and from the commencement of this section, any relevant rule of law shall stand modified in the manner specified in subsection (3), but not so as to displace any priority, whether before or after that commencement, that one charge, by virtue of a person’s not having notice of a matter, enjoys over another charge or charges.
(3) That modification is that, for the part of the rule that operates by reference to the time of creation of the 2 or more charges concerned, there shall be substituted a part that operates by reference to—
(a) the dates of receipt by the Registrar of the prescribed particulars of the 2 or more charges concerned, or
(b) if the date of receipt by the Registrar of the prescribed particulars of the 2 or more charges is the same, the respective times, on the date concerned, of receipt by the Registrar of those particulars.
(4) References in subsection (3) to the date, or time, of receipt of the prescribed
particulars are references to—
(a) if the procedure under subsection (3) of section 409 is complied with in relation to a particular charge, the date, or time, of receipt by the Registrar of the prescribed particulars, in the prescribed form, of the charge, or
(b) if the procedure under subsection (4) of section 409 is complied with in relation to a particular charge, the date, or time, of receipt by the Registrar of the notice, in the prescribed form and containing the prescribed particulars, in relation to the charge under paragraph (a) of that subsection (4).
(5) Subsections (2) and (3) shall not affect any agreement between persons in whose favour charges have been created in relation to the priority that those charges shall, as between them, have.
(6) Subject to subsection (7), in relation to particulars of a charge received by the
Registrar pursuant to section 409(3) or (4), the following provisions apply so far as those particulars consist of particulars of a negative pledge, any events that crystallise a floating charge or any restrictions on the use of any charged asset (and particulars of any such matter are referred to subsequently in this subsection as “extraneous material”):
(a) the Registrar shall not enter in the register under section 414 particulars of the extraneous material pursuant to that section;
(b) the fact that the Registrar has received the particulars of the extraneous material shall have no legal effect; but nothing in the foregoing affects the validity of the receipt by the Registrar of the other particulars of the charge.
(7) Subsection (6) does not apply to particulars of a negative pledge included in particulars of a floating charge granted by a company to the Central Bank for the purposes of either providing or securing collateral.
(8) In this section “negative pledge” means any agreement entered into by the company concerned and any other person or persons that—
(a) provides that the company shall not, or shall not otherwise than in specified circumstances—
(i) borrow moneys or otherwise obtain credit from any person other than that person or those persons,
(ii) create or permit to subsist any charge, lien or other encumbrance or any pledge over the whole or any part of the property of the company, or
(iii) alienate or otherwise dispose of in any manner any of the property of the company,
or
(b) contains a prohibition, either generally or in specified circumstances, on the doing by the company of one or more things referred to in one, or more than one, provision of paragraph (a).”.

The purpose of these amendments is to provide for a modification of the rules governing priority of charges. "Priority of charges" refers to where two or more successive mortgages are created over the same property.

The current rule of priority is that the first mortgage has priority over the subsequent mortgage, subject to an exception where the second mortgagee gives notice to the first of the creation of the second mortgage, in which case the second mortgage will have priority over amounts secured by the first mortgage advanced after the date of such notice. This is known as the tacking of further advances. As far as charges on land are concerned, the exemption is contained in section 111 of the Land and Conveyancing Law Reform Act 2009 and section 75 of the Registration of Title Act 1964. However, there is no equivalent legislation which governs assets other than land, rather the same result is arrived at under common law.

As the Bill stands, section 412 provides that unless their priority is otherwise governed by another enactment, charges will rank in priority in accordance with their date of registration in the CRO and makes no provision for the tacking of further advances. Accordingly, if the section is enacted in its current form, the position on the tacking of further advances will vary, according to whether the assets charged are land or assets other than land. The holder of a second charge over land will be able to get priority over further advances, whereas the holder of a second charge on other assets will not as there is no legislative provision for it. This would not be a desirable outcome.

The purpose of the further amendments is to bring the chapter in line with the recommendation made in the CLRG's second report to exclude a notice of crystalisation of a floating charge, events giving rise to crystalisation or provisions for dealing with payments of proceeds to be made into a special designated account from the particulars of a charge received by the registrar and entering into the register. Subsection (5) sets out provisions filed in form C1 which should not be taken for filing to cut down on the work of the CRO in preparing the form while retaining the requirement to file details of charges. Negative pledges are excluded under section 412, but notice of crystalisation events, a floating charge, events giving rise to crystalisation or provisions dealing with payments or proceeds to be made into a special designated account should also be excluded. This was recommended in the CLRG's second report.

The section contains various transitional provisions relating to priorities and ensures priority as between charges created just before commencement but not registered until after and charges created just after commencement will be determined according to the rules of sections 412 and 413, not according to existing law.

Amendment agreed to.
Section 412 deleted.
Sections 413 to 418, inclusive, agreed to.
SECTION 419
Government amendment No. 92:
In page 387, line 9, after "commencement" to insert the following:
", and the foregoing reference to the time allowed under those provisions includes the time allowed under those provisions as extended by an order (if such has been made) under section 106 of the Act of 1963".
Amendment agreed to.
Section 419, as amended, agreed to.
NEW SECTION
Government amendment No. 93:
In page 387, between lines 9 and 10, to insert the following:
"Transitional provisions in relation to priorities of charges
420. (1) In this section "charge to which the special transitional case applies" means a charge referred to in the case set out in section 419(2).
(2) Subject to subsection (3), the modification by section 412 of any rule of law there referred to (in this section referred to as the "section 412 rule modification") shall not apply in relation to the issue of the priority of any charge (within the meaning of Part IV of the Act of 1963), created before the commencement of this Part, as against a charge falling within this Part created on or after that commencement.
(3) The section 412 rule modification shall apply in relation to the issue of the priority of a charge to which the special transitional case applies (as against a charge falling within this Part created on or after commencement of that Part) if the first-mentioned charge has not been registered under Part IV of the Act of 1963 before that commencement.
(4) For the purposes of the application of the section 412 rule modification to the issue of priority falling within subsection (3), references in section 412# to the date, or time, of receipt of the prescribed particulars shall, in relation to a charge to which the special transitional case applies, be read as references to the date, or time, of delivery to, or receipt by, the Registrar (under and in compliance with Part IV of the Act of 1963, as continued by section 419) of the matters that are required by that Part to be so delivered or received for the purposes of registering the charge thereunder.
(5) Non-compliance with the requirement in the second sentence of section 102(1) of the Act of 1963 shall be disregarded for the purposes of subsection (4).".
Amendment agreed to.
Section 420 deleted.
Sections 421 to 448, inclusive, agreed to.
SECTION 449
Government amendment No. 94:
In page 406, line 21, after "representing" to insert "at least".

The purpose of the amendment is to clarify that "special majority" means a majority in number representing at least 75% in value of the creditors, class of creditors or members or class of members, as the case may be, will be present and voting in person or by proxy at the scheme meeting. The section defines a number of terms for the purposes of this Part.

Amendment agreed to.
Section 449, as amended, agreed to.
Section 450 agreed to.
SECTION 451
Government amendment No. 95:
In page 408, line 3, to delete "seems" and substitute "sees".
Amendment agreed to.
Section 451, as amended, agreed to.
Sections 452 to 454, inclusive, agreed to.
SECTION 455
Government amendment No. 96:
In page 411, line 2, after "out" to insert "in".
Amendment agreed to.
Section 455, as amended, agreed to.
Sections 456 to 470, inclusive, agreed to.
SECTION 471

Amendments Nos. 97 and 100 are related and may be discussed together.

Government amendment No. 97:
In page 426, to delete lines 13 and 14.

The purpose of the amendments is to remove the obligation to make documents available for physical inspection where documents are available on the website of the company free of charge.

Amendment agreed to.
Section 471, as amended, agreed to.
Sections 472 to 475, inclusive, agreed to.
SECTION 476
Government amendment No. 98:
In page 428, line 35, to delete "is" and substitute "are".
Amendment agreed to.
Section 476, as amended, agreed to.
Sections 477 to 479, inclusive, agreed to.
SECTION 480
Government amendment No. 99:
In page 430, line 21, after "of" where it thirdly occurs to insert "the".

I am considering introducing an amendment on Report Stage to cater for the consequences of a merger on real or immovable property. It may be possible to improve the language of these provisions to increase certainty with respect to the property transactions and thus reduce the paperwork and costs to business associated with a merger.

Amendment agreed to.
Section 480, as amended, agreed to.
Sections 481 to 494, inclusive, agreed to.
SECTION 495
Government amendment No. 100:
In page 443, to delete lines 16 and 17.
Amendment agreed to.
Section 495, as amended, agreed to.
Sections 496 to 498, inclusive, agreed to.
SECTION 499
Government amendment No. 101:
In page 445, line 18, to delete "is" and substitute "are".
Amendment agreed to.
Government amendment No. 102:
In page 445, line 22, to delete "subsection (2)" and substitute "subsection (1)".

The purpose of the amendment is to correct a subsection reference.

Amendment agreed to.
Section 499, as amended, agreed to.
Sections 500 to 525, inclusive, agreed to.
SECTION 526
Government amendment No. 103:
In page 465, line 30, after "him" to insert "or her".

The amendment merely purports to insert a female pronoun into this section.

Amendment agreed to.
Section 526, as amended, agreed to.
Sections 527 to 566, inclusive, agreed to.
SECTION 567

Amendments Nos. 104, 105 and 111 are related and may be discussed by agreement. Is that agreed? Agreed.

I move amendment No. 104:

In page 488, between lines 26 and 27, to insert the following:

"(5) Where a breach of employment law is committed by a body corporate or by a person acting on behalf of a body corporate and is proved to have been so committed with the consent, connivance or approval of, or to have been attributable to any neglect on the part of, a person who, when the breach was committed, was a director, manager, secretary or other similar officer of the body corporate or a person who was purporting to act in any such capacity, that person (as well as the body corporate) shall be liable to be proceeded against as if guilty of the breach committed by the body corporate.".

The first amendment seeks to insert a form of words to increase responsibility. It pretty much does what it says on the tin and holds people to account. This Bill offers us the opportunity to strengthen employee rights and ensure that individuals who have been mistreated have an opportunity to hold these companies to account for reasonable amounts of money in the wind-up process and elsewhere. While an approach to the court would be a very unwieldy and difficult activity for an individual to proceed with, the very fact that employees' rights are written in law would encourage most companies to take these rights more seriously. The law in its own right does serve as a guideline for the proper functioning of society. It would only be necessary to pursue the matter through the courts in a small minority of cases.

In respect of amendment No. 111, I know the total amount payable was already increased in the legislation but in reality, it would be very low and we could increase it. The figure of €40,000 that we provide is an example and is just above the average industrial wage.

I am not in a position to adopt these amendments. The Bill is concerned with company law only. In general terms, company law concerns itself with the fiduciary duties that a director owes to the company alone while recognising that a director ought to "have regard to the interests" of his or her employees. It would be wholly inappropriate to include the proposed provisions in the Bill. Legislation governing employee rights should be considered in the context of employment law. By addressing such a matter in a company Bill, the provision is not providing protection for all employees such as sole traders and those working in partnerships.

Second, employment law already provides for redress in less cumbersome and costly fora than the High Court. Equally important, it must also be borne in mind that company law must balance the rights of all creditors, many of whom are employers in their own right, in winding up situations. I appreciate that the Senator is attempting to achieve laudable goals here but the simple fact is that company law is not the correct vehicle for these ambitions and it is on that basis that we are not in favour of the amendments.

In addition to the general objections previously noted, amendment No. 104 would fail in substance as prosecutions thereunder would be doomed to fail due to the ambiguity of the phrase "breach of employment law". There is no indication as to what is meant by this. No such provisions are workable but only in the context of a specific and appropriate enactment where the transgressions are clearly identified or identifiable. Finally, the amendment proposes that the separate legal personality of the company would be breached for a transgression of civil law rather than criminal law. In all the other circumstances where this phrase is used, for example, in health and safety legislation, it requires a criminal offence.

Amendment No. 105 suggests that a company may be wound up in court where it owes an employee or a group of employees more than €1,500. The Bill sets a limit at €10,000 as it was considered that greater balance and proportionality must be achieved in circumstances where the sanction of wind up is potentially so severe. The section does not distinguish between an employee and any other creditor. In the circumstances, any creditor is entitled to issue a letter demanding payment and if after 21 days, such payment has not been received, the creditor is entitled to petition the High Court. I am sure the Senators present appreciate that petitioning the High Court is not a simple or low-cost exercise. It would have to be questioned whether winding up was really the most effective way to settle a debt for €1,500. It must also be borne in mind that there are provisions in both employment and health and safety law alongside common law remedies that already provide for the type of situation described. For example, the Payment of Wages Act 1991 provides more efficient remedies for employees who have not been paid their wages than an attempt to have the company wound up in the High Court with all of the associated costs.

Is amendment No. 104 being pressed?

In light of what the Minister has said, I will withdraw the amendment.

Amendment, by leave, withdrawn.
Section 567 agreed to.
Sections 568 and 569 agreed to.
Amendment No. 105 not moved.
Section 570 agreed to.
Sections 571 to 579, inclusive, agreed to.
SECTION 580
Government amendment No. 106:
In page 493, line 32, to delete "the" where it firstly occurs.
Amendment agreed to.

Amendments Nos. 107 and 108 are related and may be discussed together by agreement. Is that agreed? Agreed.

Government amendment No. 107:
In page 494, to delete lines 27 to 32 and substitute the following:
"(6) The provisions of this section shall be read and shall operate so that a members' voluntary winding up under this section may be carried on at a time falling before compliance with the requirement of subsection (5) that a copy of the declaration there referred to be delivered to the Registrar; however – should a failure to comply with that requirement occur – that failure then invalidates the carrying on of that activity, but this is without prejudice to the power of validation conferred on the court by subsection (7).
(7) On application to it by any interested party, the court may, in any case where there has been a failure to comply with subsection (5), declare that the carrying on of the members’ voluntary winding up shall be valid for all purposes if the court is satisfied that it would be just and equitable to do so.".

The purpose of this amendment is to clarify the court's discretionary powers in circumstances where a company fails to comply with a requirement to deliver within 14 days after the commencement of the members' voluntary winding up a copy of the declaration to the registrar.

Amendment agreed to.
Section 580, as amended, agreed to.
Sections 581 to 585, inclusive, agreed to.
SECTION 586
Government amendment No. 108:
In page 497, after line 37, to insert the following:
“(4) Where a company has passed a resolution for it to be wound up as a creditors’ voluntary winding up, it shall, within 14 days after the date of the passing of the resolution, give notice of the resolution by advertisement in Iris Oifigiúil.
(5) If default is made in complying with subsection (4), the company concerned and any officer of it who is in default shall be guilty of a category 3 offence.
(6) For the purposes of subsection (5), the liquidator of the company shall be deemed to be an officer of the company.”.
Amendment agreed to.
Section 586, as amended, agreed to.
SECTION 587
Government amendment No. 109:
In page 498, line 37, after “be” to insert “the”.
Amendment agreed to.
Section 587, as amended, agreed to.
Sections 588 to 594, inclusive, agreed to.
SECTION 595
Government amendment No. 110:
In page 504, line 4, after “is” to insert “in”.
Amendment agreed to.
Section 595, as amended, agreed to.
Sections 596 to 620, inclusive, agreed to.
Amendment No. 111 not moved.
Sections 621 and 622 agreed to.
NEW SECTION
Government amendment No. 112:
In page 528, between lines 2 and 3, to insert the following:
“Unclaimed dividends and balances to be paid into a particular account
623. (1) Where a company has been wound up, and is about to be dissolved, the liquidator shall, in such manner as may be prescribed, lodge to such account as is prescribed by the Minister the whole unclaimed dividends admissible to proof and unapplied or undistributable balances.
(2) An application to the court by a person claiming to be entitled to any dividend or payment out of a lodgment made in pursuance of subsection (1), and any payment out of such lodgment in satisfaction of such claim, shall be made in the prescribed manner.
(3) At the expiration of 7 years after the date of any lodgment made in pursuance of subsection (1), the amount of the lodgment remaining unclaimed shall be paid into the Exchequer, but where the court is satisfied that any person claiming is entitled to any dividend or payment out of the moneys paid into the Exchequer, it may order that that dividend or payment be made and the Minister for Finance shall issue such sum as may be necessary to provide for that payment.
(4) Where moneys invested or deposited at interest by a liquidator form part of the amount required to be lodged, pursuant to subsection (1), to the account referred to in that subsection, the liquidator shall realise the investment or withdraw the deposit and shall pay the proceeds into that account.”.

The purpose of this amendment is to ensure that the Minister may prescribe the most cost-effective manner in which the Courts Service can maintain unclaimed dividends and balances.

Amendment agreed to.
Section 623 deleted.
Sections 624 to 632, inclusive, agreed to.
SECTION 633
Government amendment No. 113:
In page 537, to delete lines 9 to 18 and substitute the following:
“(I) having been—
(A) employed in relevant work by a person who at the relevant time fell (or, if this section had been in operation at that time, who would have fallen) within paragraph 1, 2 or 3; or
(B) engaged on his or her own account in relevant work;
or
(II) having practised in an EEA state (not being the State) as a liquidator;
(ii) the person is, in the opinion of the Supervisory Authority, after consultation with the Director, a fit and proper person to act as a liquidator; and
(iii) the person does not fall within paragraph 1, 2, 3 or 4.”.

The amendment is typographical in nature and does not have a substantial impact on the Bill.

Amendment agreed to.
Section 633, as amended, agreed to.
Sections 634 to 643, inclusive, agreed to.
SECTION 644
Government amendment No. 114:
In page 544, line 35, to delete “seal” and substitute “(which seal”.
Amendment agreed to.
Section 644, as amended, agreed to.
Sections 645 to 686, inclusive, agreed to.
Progress reported; Committee to sit again.