Investment Limited Partnerships (Amendment) Bill 2020: Committee Stage (Resumed)

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

I wish to speak briefly on section 7 to ensure I can revisit some issues on Report Stage. I oppose this section because it proposes to extend section 6(4) of the Investment Limited Partnerships Act 1994 in a way that allows for the participation of limited partners in an advisory committee or gives limited partners the right to appoint someone to this position. This creates the new possibility of giving a limited partner the power to take part in the business of an investment partnership in a way that could challenge the distinction between a limited partner and a general partner. The rationale for the extension of this safe harbour should be clarified. It creates the risk that the general partner will be de facto controlled by the limited partner without later engaging their responsibility. I want this on the record so that I can propose some amendments to section 7 on Report Stage.

Question put:
The Committee divided: Tá, 25; Níl, 13.

  • Blaney, Niall.
  • Burke, Paddy.
  • Carrigy, Micheál.
  • Casey, Pat.
  • Cassells, Shane.
  • Conway, Martin.
  • Crowe, Ollie.
  • Cummins, John.
  • Daly, Paul.
  • Davitt, Aidan.
  • Doherty, Regina.
  • Dolan, Aisling.
  • Dooley, Timmy.
  • Gallagher, Robbie.
  • Garvey, Róisín.
  • Kyne, Seán.
  • Martin, Vincent P.
  • McGahon, John.
  • Murphy, Eugene.
  • O'Loughlin, Fiona.
  • O'Reilly, Joe.
  • O'Reilly, Pauline.
  • Seery Kearney, Mary.
  • Ward, Barry.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Black, Frances.
  • Boyhan, Victor.
  • Boylan, Lynn.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Hoey, Annie.
  • Keogan, Sharon.
  • McCallion, Elisha.
  • Moynihan, Rebecca.
  • Ruane, Lynn.
  • Sherlock, Marie.
  • Warfield, Fintan.
Tellers: Tá, Senators Robbie Gallagher and Seán Kyne; Níl, Senators Frances Black and Lynn Ruane.
Question declared carried.
NEW SECTIONS

Amendments Nos. 2 and 3 are related and may be discussed together by agreement.

I move amendment No. 2:

In page 10, between lines 11 and 12, to insert the following:

"Amendment of section 7(4) of Act of 1994

8. Section 7(4) of the Act of 1994 is amended by the insertion of the following paragraph after paragraph (a):

"(aa) the degree to which the investment limited partnership will make a positive contribution to civil, social, economic or cultural life within the State;".".

The Bill is offered as a modernisation of our laws in respect of certain private investment funds, essentially to allow them to join together in a new type of legal personality that allows them to invest together without being held liable for each other's losses at the same time. The Minister has described the legislation as a key part of the Ireland for Finance strategy. He stated, "Ireland's success in attracting top-tier global financial services is set against an increasingly dynamic and competitive backdrop."

We are essentially talking about passing a law to better facilitate the growth of private investment in this country and to allow these investment funds to come together to further seek and achieve greater profitability. This is a key and explicit policy goal for the Government. My amendments propose to set the kinds of conditions we will expect in return. I echo some of the concerns expressed in recent weeks about the Government's legislative priorities. I question why legislation like this is being scheduled and is moving through the Houses when we still await many important legislative commitments made in the programme for Government. It speaks volumes that a law designed to advantage a small number of private investors, operating at an already high level of profitability, is being debated today over other important legislation related to climate change or even the surely more pressing creation of the corporate enforcement authority, all of which are listed on the Government's autumn legislative programme. It also speaks to something more fundamental about the perspectives underlying the Government that, at a time when global solidarity is so needed and the demands on our Parliament so high due to the pandemic, Members are here debating a law to attract more private investment funds to the country, while at the same time nothing is being offered in many other areas in need of reform. This needs to be said and I am disappointed that this is the legislation to which priority is being given.

My amendments relate to the same issue. If, as a State and as a Parliament, we are going to go so far as to change the law simply so private investment funds can consolidate and further pursue profits, we all want to know what these funds will do in return for the favourable legislative environment we are gifting them. At a time when Ireland is drawing much attention internationally for being a centre of international tax avoidance by multinational companies and private equity actors, it seems more than fair to ask what these firms offer in return to the real people living here in our communities, beyond direct employment in the firms themselves. If investment partnerships benefit from the kind of measures contained in the Ireland for Finance strategy and this Bill, they need to be required to pay a social or environmental dividend back to the State in which they operate.

Amendment No. 2 would empower the Central Bank, when considering applications to allow the formation of a new investment limited partnership, to set conditions that would ensure that the new investment fund partnership actually made a positive contribution to civil, social, economic or cultural life within the State. If we as the State are going the distance to facilitate the creation of these new legal vehicles, it seems entirely fair that we would ask such funds to also describe how they will use their investment policies to support the lives of citizens and communities living here. It could be as straightforward as demonstrating they will support local community initiatives and sports clubs. These funds need to show that they are here not just for the favourable investment climate or low tax rates but that they are willing to work to improve the lives of people in Ireland in exchange for the kind of beneficial legal personalities we give them here.

Amendment No. 3 is straightforward. It would give the Central Bank a role in determining the degree to which the investment policies of a new proposed investment partnership would support initiatives that contribute to our efforts to fight climate change. It is ironic that he is no longer a Member of the House, as it was former Senator Michael D'Arcy who actually inspired the tabling of this amendment. He did so on Second Stage, when he commented that: "investors are [significantly] ahead of everyone else ... because, If we destroy the world through climate change, there will be no world economy". Through this amendment, I am proposing that if it is the case that the thinking of investors is so well developed and conscious of their investment policies related to the combating of climate change, let us then make it an explicit legal requirement that they must demonstrate this before giving them this favourable legal investment vehicle. It should be easy for the investors that former Senator D'Arcy was talking about to demonstrate this to an appropriate level to the Central Bank. Consequently, I am proposing that we make it a condition for granting this new form of partnership.

These are two sensible and straightforward amendments relating to the kinds of conditions we will set before we grant these new investment partnerships to groups of private investment funds. It seem fair that if the Government plans to give them a favourable legal environment in which to invest, then they should have to demonstrate how they will use these favourable conditions to the common good of the people and communities who live in Ireland and to assist in our collective challenge to combat the climate and biodiversity crisis.

I hope the Minister of State can accept the amendments.

Senator Gavan is offering, so we will take the Minister of State later.

I will be brief. The Minister of State is welcome. I support these sensible amendments. Our party is disgusted at the fact that Committee Stage is being curtailed, and effectively guillotined, today. Was former Senator D'Arcy not right in what he said about investors being way ahead?

When I asked the Minister of State about something last time, he promised he would have an answer today. Was a lobbying document from the industry submitted to the Minister of State's Department and was there a refusal to release same? I would appreciate an answer.

I welcome the opportunity to address these amendments. Interestingly, this is our third debate on Committee Stage. One Senator complained that we were not giving it enough time and said that we should not conclude it today whereas the previous speaker complained about us giving it too much time and asked whether it was a reflection of Government policy that we were spending so much time on this type of legislation rather than other legislation that people might consider more necessary at this time. I have been given two conflicting views about the time afforded this, our third session on Committee Stage.

I will give a general answer to the question on freedom of information, FOI, requests. Where an FOI request is made in respect of any matter, including this, a decision is made to refuse, grant or part grant that information. If someone is not satisfied with the response, he or she has the option of appealing the decision. Regarding the situation Senator Gavan raised, my understanding is that a decision was made and that the requester has not made an appeal on same. The requester had the option of pursuing the matter but did not take it. That is the end of the request if the requester does not want to pursue the matter by way of appeal. If my understanding is wrong, then I will correct it on Report Stage, but there currently is no live application under the Freedom of Information Act for consideration in respect of this Bill in the Department. One application was made and dealt with and has not been pursued. That is the end of the story. I cannot add anything further beyond outlining the facts of the situation.

While I understand where Senator Ruane is coming from with her amendments, I am not able to accept them because the Bill incorporates much of their spirit and content. I will elaborate. My reasoning has two parts - first, the role of the Central Bank and the EU and, second, the forthcoming EU legislation on sustainable investment.

The Cental Bank is responsible for the authorisation and supervision of investment funds established in Ireland. As such, it is not a matter for the Oireachtas to set out the rules and conditions of any investment fund. That is why we have a Central Bank, which is the regulator. It will approve or not approve the particular proposals put to it. It is not a matter for the Oireachtas to adjudicate on the investment priorities of individual funds except to say that they must operate within the legislative guidelines, the Central Bank's regulatory rules, the EU's rules and any forthcoming EU legislation on sustainable investments. The Central Bank's mandate is to protect the best interests of consumers and supervise regulated funds. It cannot require an investment fund to invest in a certain manner or with a particular objective.

However, I hope that the second part of my reasoning will provide some comfort that there is EU legislation covering investment funds. It focuses on sustainable investment and investment funds with an environmental, social or governance objective. The European social entrepreneurship funds regulation, EuSEF, already provides a regulatory framework for funds with a social investment objective.

That already exists at EU level and we are bound by it. An investment limited partnership may be established under the regulations that would be regulated by the Central Bank of Ireland. Another EU regulation on sustainability disclosures in the financial services sector was recently agreed and it will apply from March of the coming year in regard to any funds established under this legislation.

Overall, the EU legislation provides for a comprehensive package of measures aimed at directing private sector finance towards mitigation of climate change and other environmental threats, which is very important. It will have an impact on investment funds, regardless of whether they label their financial products as green. Under EU regulations, there is already provision in regard to ensuring funds can come under the sustainable development heading and the green environment heading. I do not have to repeat that it is also an opportunity to increase employment here in Ireland by providing this service. All in all, I think the spirit of what the Deputy is talking about is already enshrined in the original legislation and, on that basis, I am not in a position to accept the two amendments.

To clarify, I am completely at one with my colleague in regard to the fact we should not be prioritising this legislation. I have just come from a meeting where we were told that only essential legislation is being dealt with.

The Senator should stick to the amendment.

I am sticking to it but I want to make that point clear. The fact this has been prioritised and rushed through is a disgrace. There have been people outside Debenhams for 180 days. Where is their emergency legislation? Where is their priority? Why is it only big finance that Fianna Fáil and Fine Gael want to facilitate?

At this point, I would like to withdraw my amendments. I want to go away and, between now and Report Stage, consider what the Minister has said in regard to how this legislation covers some of what I put forward in the amendments. I will withdraw with the right to resubmit the same content on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 3:

In page 10, between lines 11 and 12, to insert the following:

Amendment of section 7(4) of Act of 1994

8. Section 7(4) of the Act of 1994 is amended by the insertion of the following paragraph after paragraph (a):

“(aa) the degree to which the investment policies identified under paragraph (a) will support initiatives that contribute to domestic or international efforts to address the climate and biodiversity crises;”.”.

Amendment, by leave, withdrawn.
Sections 8 to 18, inclusive, agreed to.
SECTION 19

I move amendment No. 4:

In page 16, lines 24 to 26, to delete all words from and including “calculated” in line 24 down to and including “made” in line 26.

This amendment removes the language in regard to how a majority of limited partners would be calculated. It again goes to one of the fundamental problems and concerns I have with the Bill, which is that it can effectively represent a reduction in liability for limited partners. At the same time, section 7, on which we divided the House, gives very meaningful powers, including powers in regard to boards, to limited partners while they are protected. Again, they are getting the power but not the responsibility.

Specifically, this amendment proposes that a majority of partners be calculated as a simple majority whereas the Bill proposes that a majority of limited partners will be "calculated by reference to the value of contributions of the limited partners at the time the determination of that majority falls to be made". Effectively there could be one individual who is a limited partner, is protected from liabilities, who, and because he or she has a majority of such section of the shares that sit with limited partners, is calling the shots while avoiding responsibility and culpability. That is a real concern that I have, which is why I would prefer a simple majority of limited partners be calculated rather than a situation whereby the value of contributions determines that. I do not want to have a situation of a silent partner or power behind the power.

While I have not tabled amendments on section 14, which is around the withdrawal and substitution of general partners, I will reserve the right to come back on that question in that section. What we do not want is, for example, a limited partner who remains constant while general partners change. That is my concern on that amendment.

This amendment relates to the manner in which a majority of limited partners shall be calculated by reference to the value of contributions made by them at the time in the investment limited partnership. The structure of the investment limited partnership is not based on one partner, one vote. That is the essence of this Bill. People can invest different amounts into an investment limited partnership, so the essence of this legislation is that the majority should not be calculated based on one partner, one vote, but should be based on their contributions.

If I could draw the analogy, it is a bit like a person who has shares in a company. Every single shareholder does not have an equal vote. It is based on the number of shares that shareholders own in the company. It is not a mutual society like a building society where everybody has one vote. In trying to explain it, I would say that the situation is more akin, although not exactly, to shareholders at a meeting. Some people have more shares than others, and therefore get more votes at an AGM.

The structure of the investment limited partnership is not based on one partner, one vote. It is based on the contribution of partners, as outlined in the partnership agreement, which is clearly stated. When a person agrees to invest in a partnership, he or she knows the agreement being entered into, which is based on the size of his or her contribution. That determines the person's relative position rather than it being a mutual partnership in which every person has one vote. It is based on the person's contribution and is therefore akin to the situation of a company shareholder and the number of shares that person holds in a particular company. On that basis, I cannot accept the amendment.

Amendment put and declared lost.
Section 19 agreed to.
SECTION 20

Amendments Nos. 5 and 6 have been ruled out of order as they are in conflict with the principle of the Bill.

Amendments Nos. 5 and 6 not moved.
Question proposed: "That section 20 stand part of the Bill."

I wish to express my regret that these amendments have been ruled out of order. I reserve the right to move other versions of these amendments. They relate to ensuring that such debts and obligations as people are exempted from do not include their debts and obligations in respect of the staff they employ and indeed in respect of the Revenue Commissioners. I have serious concerns in this regard, so I encourage the Minister of State to come back to the House on Report Stage with clear guidance as to how such crucial obligations can be met.

Questions put and agreed to.
Sections 21 to 26, inclusive, agreed to.
SECTION 27
Question proposed: "That section 27 stand part of the Bill."

This section proposes a new section 27A(5) of the 1994 Act to provide that "A general partner of an investment limited partnership shall provide any member of the Garda Síochána, the Revenue Commissioners, a competent authority or the Criminal Assets Bureau with timely access". Does that mean that any member of the Garda who may be nosey or whatever might decide to see who is on the register?

It is important that the matter is clarified on Report Stage. A similar issue of clarity arises in section 63, concerning which information is shared with which public bodies. I will bring forward the same question when we reach section 63 because we need to have appropriate safeguards to ensure there is no inappropriate sharing of information.

I am assured that permission is required from an inspector, a superintendent, chief superintendent or a higher officer in An Garda Síochána to seek the information the Deputy refers to. No sergeant or similar member of the Garda can seek the information. It must be an officer from inspector level up who seeks it. This measure does not apply to all members of An Garda Síochána.

To be helpful to Senator Higgins regarding who can have access, the soul purpose of the Garda, the Criminal Assets Bureau and those types of organisations getting access to the register of PPS numbers in the Department of Employment Affairs and Social Protection is merely, only and exclusively to validate the PPS number, the date of birth and the identity of the person involved. They have no authority to receive any information that they can share beyond that. They have no authority to share information with any other body. The parent Department holding it is the Department of Employment Affairs and Social Protection. Other people have access to the register to check those specific three details. They also have no access to obtain that information back out and share it again.

I hope we will get a chance to discuss the powers of the specified bodies as they are set out in the Social Welfare Acts.

I thank the Minister of State for his clarification. The Bill should stipulate the area of the Garda concerned because it currently refers to "any member of the Garda Síochána".

The proposed new section 55 of the 1994 Act relates to "Unrestricted access to beneficial ownership information in central register". As the proposed new section 55(1)(a) refers to "a member of the Garda Síochána, not below the rank of inspector, who is engaged in the prevention, detection, investigation or analysis of possible money laundering or terrorist financing", the Bill deals specifically with the issue raised by Senator Burke.

Question put and agreed to.
Sections 28 to 39, inclusive, agreed to.
SECTION 40

Amendments Nos. 7 and 8 are related and may be discussed together by agreement.

I move amendment No. 7:

In page 50, line 39, after "partner" to insert "or limited partner".

These amendments relate to the winding up or liquidation of a partnership. At present, the Bill simply requires that a statutory declaration be made that the general partner had not been notified of any order or resolution to wind up or liquidate, and similarly, that the general partner had not been notified of the appointment of a liquidator or similar person. I am proposing to extend that provision because it is crucial that such a statutory declaration should also be able to confirm that no limited partner has been notified of an intention to liquidate or appoint a liquidator. This proposal reflects my concern that there is real power without responsibility and culpability here. I do not want us to end up with a statutory declaration where, in theory, the general partner can claim it did not know of the appointment of a liquidator even though an active limited partner, possibly a board member, may have been aware of such a situation.

This amendment relates to a statutory declaration that a general partner must make on a migration-out stating that it has not been notified of a resolution or other order to wind up the investment limited partnership. It seeks to add a provision that the general partner is not aware of a notification made to a limited partner of a resolution to wind up the investment limited partnership.

The problem with this proposed amendment is that the role of the limited partner must be distinguished from that of the general partner in this legislation. It is essentially one of the key cornerstones of this legislation that the general partner is the person responsible for the running of the partnership and the limited partner's role is limited and it has no role in the management or decision-making roles of the investment limited partnership.

Section 6 of the 1994 Act prohibits a limited partner from taking part in the conduct of the business, as I have said. In contrast, the general partner's role is to conduct the affairs of the investment limited partnership. The role of the limited partner is, therefore, restricted to that of a passive investor. Consequently, a limited partner cannot have a role with regard to winding up the investment limited partnership. Limited partners are passive investors. To take on such a role would mean that a limited partner is taking on a management role acting as a general partner and this would entail the loss of limited liability. That is the essence of it. Limited partners are passive investors, not participants in the management of the investment limited partnership.

Finally, notification to wind up should be served or made to a general partner. If this is not done, the service would not be considered properly made and would arguably be ineffective vis-à-vis the investment limited partnership. A notice of liquidation served on a limited partner would not be valid in any event.

I recognise that the essence of the Bill is the limiting of liability. That is my concern. I note that this entire section - section 40, in relation to the migration-out - relates to the question of funds moving location as convenient. It relates to that concern we might have of chasing services or products on offer elsewhere. I reserve the right to bring forward similar amendments, and indeed wider amendments looking at the question of the changing of jurisdiction or the migration-out of partnerships, on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 8:

In page 51, line 2, after "partner" to insert "or limited partner".

Amendment, by leave, withdrawn.
Section 40 agreed to.
SECTION 41

I move amendment No. 9:

In page 55, to delete lines 5 to 10.

I am opposing this section. Unfortunately, due to time constraints, I might not be able to have a vótáil. However, I intend to bring forward a large number of amendments to this section on Report Stage.

We will take the amendment first and then deal with the section.

The amendment is to oppose the section. It is effectively about the introduction of the sub-funds and the changes in respect of liability.

Do I have an amendment to this section?

Amendment No. 9. The Senator has indicated her opposition to the section.

Amendment No. 9 is to delete lines 5 to 10 in page 55. There may be an argument to be made in certain circumstances — we need to interrogate these — about not having cross-liability between different sub-funds. An example would be where there is a large number of pension schemes. Regardless of the lack of cross-liability, I am concerned that there is no upward liability. The umbrella fund should be liable for the failure of a sub-fund to deliver. My amendment would leave the lack of cross-liability between sub-funds but remove the excuse for the overall fund not being subject to upward liability. I will be proposing much more specific measures because we see these products at work in Luxembourg and elsewhere. We must learn from the problems and concerns regarding these products.

The amendment seeks to remove one element of the segregated nature of sub-funds. If accepted, it would adversely affect the segregation of liability between the sub-funds that this legislation seeks to establish. It would result in inconsistency between other investment funds' legal structures which are currently available in Ireland and it would expose investors to the risk of cross-contamination of liability between unconnected sub-funds. Each sub-fund will hold a separate pool of assets whereby the liabilities of one sub-fund will be segregated from those of another. What the Senator suggests means that certain sub-funds could be liable for others although they have no direct involvement in them. Segregated liability ring-fences the assets and liabilities of each sub-fund, and the structure is available to all other regulated fund vehicles in the country. This process is in line with the normal process to date.

On the section, I may table a technical amendment on Report Stage to correct typographical error in the printed Bill, which refers to "limited partners".

I reserve the right to reintroduce amendment No. 9 on Report Stage.

Amendment, by leave, withdrawn.
Section 41 agreed to.
Sections 42 to 62, inclusive, agreed to.
SECTION 63

I would like to speak to amendments Nos. 10 to 12, inclusive.

Do you mind if we take them separately, as per the order?

I move amendment No. 10:

In page 84, between lines 28 and 29, to insert the following:

“(10) Where an individual requests to the Registrar information on which specified bodies their data has been shared with by the Registry, the Registrar shall furnish a report on what specified bodies they have shared the individual’s data with, unless—

(a) that person is the subject of an ongoing criminal investigation which it is believed the sharing of such information would compromise, and

(b) upon the conclusion of such a criminal investigation, regardless of outcome, the individual will have the right to be furnished with a report on the sharing of their data by the Registrar.”.

Amendments Nos. 10 to 12, inclusive, relate to the common issue. If we do not get to all of the amendments, I will return to them.

Given that a new register is being established, amendment No. 10 would require that where an individual's data has been shared, the registrar would inform the individual of what specified bodies it had shared the data with. It goes to the points made by Senator Burke earlier but it is specifically around the register.

I am sorry to interrupt Senator Higgins but I must now put the question.

I reserve the right to resubmit amendments in respect of both the register and the role and interpretation of specified bodies. As the Minster of State will be aware, there are concerns with the social welfare legislation, and the narrowing of powers in relation to specified powers. I suggest to the Minister of State that that report - the lobbying document which we have been informed exists and which was not furnished to the media - might be furnished to Members of the Opposition and spokespersons in this House, as that would be useful to our debate on Report Stage.

Question put: "That amendment No. 10 is hereby negatived, in respect of each of the sections undisposed of the section is hereby agreed to, the Title is hereby agreed to and the Bill is accordingly reported to the House without amendment."
The Committee divided: Tá, 24; Níl, 11.

  • Ardagh, Catherine.
  • Blaney, Niall.
  • Burke, Paddy.
  • Byrne, Malcolm.
  • Carrigy, Micheál.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Lisa.
  • Conway, Martin.
  • Crowe, Ollie.
  • Daly, Paul.
  • Davitt, Aidan.
  • Doherty, Regina.
  • Dolan, Aisling.
  • Gallagher, Robbie.
  • Kyne, Seán.
  • McGahon, John.
  • Mullen, Rónán.
  • Murphy, Eugene.
  • O'Loughlin, Fiona.
  • O'Reilly, Joe.
  • Seery Kearney, Mary.
  • Ward, Barry.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Black, Frances.
  • Boylan, Lynn.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Hoey, Annie.
  • McCallion, Elisha.
  • Moynihan, Rebecca.
  • Ruane, Lynn.
  • Sherlock, Marie.
  • Warfield, Fintan.
Tellers: Tá, Senators Robbie Gallagher and Seán Kyne; Níl, Senators Lynn Boylan and Paul Gavan..
Question declared carried.

When is it proposed to take Report Stage?

Is that agreed? Agreed.

Report Stage ordered for Tuesday, 27 October 2020.