Amendments Nos. 25 and 26 are related to amendment No. 23. They may be discussed together.
Company Law Enforcement Bill, 2000: Committee Stage (Resumed).
SECTION 23.
I move amendment No. 23:
In page 15, paragraph (c), line 23, to delete "refuses to" and substitute "refuses or fails within a reasonable time to".
Paragraph (c) of section 23 provides for the replacement of subsections (5) and (6) of section 10 of the Companies Act, 1990, which sets out the powers of court appointed inspectors to require persons to produce books and documents and answer questions as part of the investigation of the affairs of a company. The replacement subsections provide that where a person refuses to comply with a request to produce books or answer questions put by inspectors, the inspectors may certify the refusal to the court which may make any order it thinks fit. Specifically, the court may order that the person to whom the request has been made must comply with the request or, indeed, that the person need not comply with the request.
The existing words of section 23(c) do not go far enough in that failure by an officer or agent of a company to furnish a document to inspectors or to answer a question within a reasonable time of having been requested to do so should entitle the inspectors to interpret this as tantamount to refusal. The inspectors should, accordingly, be able to apply to the court for an order to compel compliance in circumstances where an officer or agent of a company has failed within a reasonable time to comply with the requirement.
The amendments, therefore, replace references in subsections (5) and (6) of section 10 to refusal to comply with requirements of inspectors with references to refusal or failure within a reasonable time to do so. Amendment No. 26 also provides for the inclusion of the words "failed or refused". In the circumstances I propose that the text drafted by the parliamentary counsel be retained.
I have no objection to amendment No. 23. I understand why it is necessary. I accept the Minister's point about amendment No. 26 and I accept the point about the drafting.
Amendment agreed to.
I move amendment No. 24:
In page 15, paragraph (c), line 32, to delete "certify the refusal under their hand" and substitute "make application in that regard in respect of the alleged refusal".
The Minister has explained the purpose of this section. My amendment seeks to delete the phrase "certify the refusal under their hand" and to substitute "make application in that regard in respect of the alleged refusal". I have some reservations about the drafting of the existing section. It seems that refusal under the section is tantamount to an offence. Refusal is seen as an offence and to admit evidence by certificate means that to certify, under this section, is equivalent to making an allegation or a complaint. The courts are the only bodies who have jurisdiction to determine if it is an offence, whereas to certify is essentially to determine it and to give some type of superior evidential value to certification in the circumstances described.
Where a party applies to the court, its application must be afforded reasonable equality with the defence. The applicant, therefore, also cannot submit a certificate which is presumed to have some additional evidential value. If it were otherwise, there are some constitutional questions to be raised based on the Haughey case in Irish Law Reports, 1971. The wording of amendment No. 24, therefore, provides for making application in that regard in respect of the alleged refusal. It is only an alleged refusal at this stage and to presume otherwise is to determine the issue in advance.
This is a drafting amendment of section 23 of the Bill which amends section 10 of the Companies Act, 1990. That section sets out the powers of the court appointed inspectors to require persons to produce books and documents and to answer questions as part of the investigation of the affairs of a company. Subsections (5) and (6) of that section deal with the situation where a person refuses to co-operate with inquiries conducted by court appointed inspectors. Essentially, they provide that the inspectors may certify such refusal to the court and the court may deal with the situation as it sees fit.
This amendment makes no substantive alteration to the effect or intent of the relevant subsection. It refers to the inspectors making application to the court in relation to a person's refusal to co-operate with an investigation. This is not entirely correct as the inspectors are not making application for any particular order of the court, they are merely certifying to the court that a person has refused to provide books or documents or other information and it is for the court to determine how to address that refusal.
The inspectors are officers of the court. The Minister and, subsequent to the new legislation, the director of corporate enforcement will make application to the court for the inspectors to be appointed. After that the inspectors are officers of the court and what they are doing is merely reporting back or giving information to the court. Perhaps that is not fully understood. They are not going to the court for a direction or seeking a particular course of action, they are merely reporting the information to the court. It is then a matter for the court to decide what action to take in relation to that information.
I am still concerned about this. The Tánaiste is probably right that I do not understand the distinction. Are these envisaged as exclusively civil proceedings? Elsewhere the section refers to the alleged offender and the word "offender" connotes criminality. That is one meaning to be attached. We may be involved in criminal proceedings here, as I understand it, and it seems unusual that merely to certify is to presume the outcome. It is not in accordance with normal jurisprudence.
There is no point getting into a philosophical argument. I understand the point Deputy Rabbitte is making about the word "certify" - it has a degree of certainty about it. Maybe we will refer to the Office of the Attorney General rather than engage in a dispute here. This was the subject of discussions with the Attorney General who clearly made the point that the inspectors are officers of the court. They have a requirement to report and give information to the court, whether it is in the form of certifying a refusal or making an application, as the Deputy suggests. Perhaps we could substitute the word "report" for "certify". I do not know if there is a legal distinction there but I will revert back to the matter on Report Stage.
I am anxious for clarification on the point about criminal proceedings. This could, by definition, involve criminal proceedings.
I am advised that it would be contempt of court proceedings, a failure to comply with the request of inspectors who are officers of the court.
Is that civil and criminal?
It is a criminal matter.
The Tánaiste and Minister for Enterprise, Trade and Employment can bring forward further clarification on Report Stage. Will the Deputy withdraw the amendment, with the right to resubmit it on Report Stage?
I accept the Chairman's intervention. We will consider the matter again on Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 25:
In page 15, paragraph (c), line 32, after "refusal" to insert "or failure".
Amendment agreed to.
I move amendment No. 26:
In page 15, paragraph (c), line 35, to delete "alleged offender" and substitute "person alleged to have so failed or refused".
The point of the amendment is the appropriateness of the term "offender".
This amendment was discussed under the grouping of amendments Nos. 23, 25 and 27.
The Chairman was guilty of pulling the wool over my eyes because I addressed the issue of the phrase "or failure". The Tánaiste and Minister for Enterprise, Trade and Employment introduced an amendment in that regard, but we did not address the term "offender". My net point is that the phrase "person alleged to have so failed or refused" would be more appropriate than "offender". It has a criminal connotation and the term "offender" is inappropriate. It would be more appropriate to use the phrase "person alleged to have so failed or refused".
It is a valid point and I will have consultations on it. I may accept the amendment or introduce an appropriate amendment on Report Stage. I take the Deputy's point about the use of the word "offender". As we agreed to discuss the terms "fails to" or "refuses to", it may be better, with regard to legal consistency, to use the same wording. I will have consultations on the matter.
Amendment, by leave, withdrawn.
Section 23, as amended, agreed to.
SECTION 24.
Amendment No. 26a is consequential on amendment No. 26b and both may be discussed together. Is that agreed? Agreed.
I move amendment No. 26a:
In page 16, line 8, after "24.-" to insert "(1)".
The amendments relate to section 24, which amends section 11 of the Companies Act, 1990, concerning reports prepared by inspectors appointed by the court under sections 7 or 8 of that Act to investigate the affairs of a company.
Section 11 provides that copies of such reports may, at the direction of the court, be furnished to certain persons, including members of the company under investigation, any person named in a report and other persons whose financial interests appear to be affected by the matters dealt with in the report. Section 11(4) provides that the court may, in furnishing a copy of a report to any person, direct that a particular part of the report be omitted from the copy so furnished. This is to allow for the withholding of sensitive or otherwise confidential information.
Section 24 of the Bill amends section 11 to extend the list of persons to whom the court, at its own discretion, may furnish a copy of the inspector's report. The extended list includes any of the competent authorities mentioned in section 21 of the 1990 Act or any appropriate authority in relation to the matters mentioned in section 21(1). The amendment, therefore, gives the court the same discretion with regard to the disclosure of the findings of its inspectors as the Minister currently has in relation to information obtained under sections 19 or 20 of the 1990 Act.
In providing for the amendment of section 11 to extend the list of persons to whom the court may furnish a copy of the inspector's report, the Bill fails to also extend the provisions of subsection (4) with regard to the court's discretion to omit particular parts in such a copy. This is an unintended omission which would unnecessarily restrict the court in exercising its power to furnish copies of reports to persons it deemed relevant. The amendments remedy the omission by extending section 11(4) to also cover the proposed new subsection 3(ba).
Amendment agreed to.
I move amendment No. 26b:
In page 16, between lines 18 and 19, to insert the following subsection:
"(2) Section 11(4) of the Act of 1990 is amended by the substitution for 'subsection (3)(a) or (b)' of 'subsection (3)(a), (b) or (ba)'.".
Amendment agreed to.
Section 24, as amended, agreed to.
NEW SECTION.
I move amendment No. 27:
In page 16, before section 25, to insert the following new section:
25.-Section 13 of the Act of 1990 is amended——
(a) by the substitution for 'Minister for Justice' (wherever occurring) of 'relevant Minister',
(b) in subsection (1), by the substitution for '£100,000' of '£250,000', and
(c) by the insertion of the following after subsection (3):
'(3A) In this section "relevant Minister" means-
(a) in case the inspector or inspectors concerned was or were appointed under section 7, the Minister for Justice, Equality and Law Reform, and
(b) in case the inspector or inspectors concerned was or were appointed under section 8, the Minister.'.
This amendment relates to section 25 of the Bill, which amends section 13 of the Companies Act, 1990. Section 13 deals with the expenses of court investigations undertaken pursuant to sections 7 or 8 of the 1990 Act. Section 25 of the Bill, as published, provides for an increase from £100,000 to £250,000 in the amount that an applicant for such an investigation may be required to contribute towards its costs. The amendment is to be retained and a further amendment of section 13 is also proposed.
Amendment No. 27 relates to the question of who should meet the costs of court ordered investigations as they arise. Currently, section 13 of the 1990 Act provides that these costs shall be met in the first instance by the Minister for Justice, Equality and Law Reform. This is on the basis that the investigations are investigations of the court and the Minister for Justice, Equality and Law Reform is responsible for funding the operation of the courts. It is proposed to distinguish between investigations ordered by the court under section 7 and those ordered under section 8.
Section 7 provides for the investigation of a company on the application of members, directors or creditors of the company, or on the application of the company itself. Section 8 provides for the investigation of a company on the application of the Minister for Enterprise, Trade and Employment, although this will change to the director of corporate enforcement upon enactment of the Bill. The Department of Justice, Equality and Law Reform has requested that the costs of section 8 investigations be met not from its Vote, but from the Vote of my Department. This request is grounded on the fact that those costs arise from investigations whose scope is determined largely by the application I present to the court. In future, this will be presented by the director of corporate enforcement.
The administrative arrangements for the establishment of the investigations are all handled by my Department, including the allocation of staff and the arrangement of the necessary Department of Finance sanctions for expenditure. However, as the costs are met from the Vote of the Department of Justice, Equality and Law Reform, that Department is responsible for accounting for the expenditure, including accounting to the Committee of Public Accounts, despite the fact that it has not been responsible for incurring the expenditure. This is an unsatisfactory arrangement which had led to duplication of administrative effort and inappropriate accounting responsibility.
A similar situation would not obtain in the case of an investigation ordered under section 7. In that case, the applicant would be a member, creditor or director of a company and my Department would not be involved in the logistical arrangements for the establishment of the operation of the investigation. These would be the responsibility of the Department of Justice, Equality and Law Reform and it is proposed that the costs of section 7 investigations should continue to be met from the Vote of that Department.
The amendment, therefore, provides for the substitution of references to the "Minister for Justice" in section 13 of the 1990 Act with references to the "relevant Minister", which is defined to mean the Minister for Justice, Equality and Law Reform in the case of investigations ordered under section 7 and the Minister for Enterprise, Trade and Employment in the case of those ordered under section 8. This amendment replaces amendment No. 27 on the first list of amendments circulated on 17 January which provided for the transfer to my Department's Vote of the costs of both section 7 and section 8 investigations. It is now clear that the amendment would have been inappropriate for the reasons I outlined.
Amendment agreed to.
Section 25 deleted.
Section 26 agreed to.
SECTION 27.
I move amendment No. 28:
In page 17, lines 8 to 11, to delete paragraph (c) and substitute the following:
"(c) in subsection (6), by the substitution of the following for paragraphs (a) and (b):
'(a) in the case of an order by the court, the court is satisfied that the relevant facts about the shares have been disclosed to the company or, as the case requires, to the Director, or that it is otherwise equitable to lift the restrictions;
(b) in the case of a direction of the Director, the Director is satisfied that the relevant facts about the shares have been disclosed to him; or
(c) the shares are to be sold and the court or the Director approves the sale.', and".
Paragraph (c) of section 27 of the Bill amends section 16(6)(a) of the Companies Act, 1990, which provides for circumstances in which restrictions on shares or debentures imposed under section 16 may be lifted. Section 16(6) currently requires the Minister or the court, as the case may be, to be satisfied that the relevant facts about the ownership of shares or debentures have been disclosed and that no unfair advantage has accrued to any person by reason of the earlier failure to disclose those facts in order for restriction to be lifted. This is considered an unnecessarily severe test as in many cases it might not be possible to be certain that no person had been disadvantaged by the failure to disclose details relating to the ownership of shares or debentures in a company.
The amendment of section 16(6), contained in section 27 of the Bill, provides for the removal of the test that no unfair advantage has accrued to any person before restrictions on shares or debentures may be lifted and its replacement with the simple requirement that the relevant facts about the shares or debentures have been disclosed. However, the amendment of section 16(6) has implications for certain other sections of the 1990 Act which were not adequately taken into account in the drafting of the Bill. I propose, therefore, a revised wording for section 16(6) which takes account of all the circumstances in which restrictions may be imposed on shares or debentures as well as the circumstances in which such restrictions may be lifted. The existing provisions whereby the court may lift restrictions is retained but the court need only be satisfied that the relevant facts have been disclosed to the company or the director, as the case may be, or that it is otherwise equitable that the restrictions be lifted. In the case of the director, he or she is given discretion to lift restrictions on being satisfied that the relevant facts about the shares or debentures have been disclosed to him or her. The revised text provides for the restatement of the existing provisions in section 16(6)(b) to the effect that restrictions on shares or debentures may be lifted where they are to be sold and the court or the director approves the sale.
Amendment agreed to.
Section 27, as amended, agreed to.
NEW SECTION.
Amendment No. 29. Amendments Nos. 33, 51 and 54 are related and amendment No. 34 is an alternative to amendment No. 33. Amendments Nos. 29, 33, 34, 51 and 54 may be discussed together by agreement.
I move amendment No. 29:
In page 17, before section 28, to insert the following new section:
28.-Section 18 of the Act of 1990 is amended-
(a) by the substitution for 'An answer given by a person' of '(1) An answer given by an individual',
(b) by the deletion of all the words from ', and a statement required' down to, and including 'making it.' and the substitution of 'in any proceedings whatsoever (save proceedings for an offence (other than perjury in respect of such an answer)).', and
(c) by the insertion of the following subsection:
'(2) A statement required by section 224 of the Principal Act may, in any proceedings whatsoever (save proceedings for an offence (other than perjury in respect of any matter contained in the statement)) be used in evidence against any individual making or concurring in making it.'.".
These amendments relate to the use of statements made by persons in compliance with the requirement imposed by virtue of various sections of the Companies Acts. The amendments specify what use can be made of those statements subsequently, that is, to what extent they may be admitted in evidence against the persons making them. Deputy Rabbitte raised this question on Second Stage and he has tabled an amendment in relation to section 28 which provides for the repeal and replacement of section 19 of the Companies Act, 1990. Subsection (6) of that section provides that statements made by persons in compliance with the requirement imposed by section 19 may be used in evidence against them. A commitment was given on Second Stage to look again at this provision and I have since taken the opportunity to look at other similar provisions in the Companies Acts generally.
The question of the admissibility of compulsorily obtained statements was referred to the Supreme Court in the case of a High Court investigation of National Irish Bank under section 8 of the Companies Act, 1990. Members will recall that staff of the bank were concerned that they might incriminate themselves in providing statements to the inspectors and that such incriminating statements might subsequently be used in proceedings against them. The Supreme Court found that section 18 of the Companies Act, 1990, which deals with the question of the admissibility of statements made to inspectors and which is analogous to section 19(6) was capable of a constitutional interpretation and was not, therefore, unconstitutional in itself. The court also found that the question of admissibility of evidence in a criminal trial is a matter for the trial judge and that in general incriminating statements made pursuant to a statutory requirement would not be admitted by a judge on the basis that this would run contrary to the constitutional requirement that a person be tried in due course of law.
The other relevant findings in relation to this question is the European Court of Human Rights finding in the Ernest Saunders case. In that case the court found that the use in a subsequent criminal prosecution of statements made by Mr. Saunders in compliance with the statutory requirement constituted a breach of his human rights.
Having regard to the findings both of the Supreme Court and the European Court of Human Rights and in light of the commitment given on Second Stage, I asked the Attorney General to advise on the appropriate amendments, if any, which should be made to the Companies Acts. The Attorney General has advised accordingly and these amendments are based on his advice. The amendments provide essentially that where an individual is required by a provision of the Companies Acts to make a statement or answer a question, that statement or answer may be used in evidence against the person subsequently in any proceedings, except in respect of proceedings for an offence, that is, criminal proceedings. The only exception to this general prohibition on the use of statements in criminal proceedings against a person is where those proceedings relate to a refusal to make a statement required by law or to the making of a false statement.
The amendments are intended to make it clear that statements made by persons may be admitted in evidence against them in civil proceedings. In the context of the Companies Acts which provide a number of civil remedies in respect of wrongdoing, it is important to clearly provide that statements made by persons may be used in civil proceedings against them, notwithstanding that the statements in question were made pursuant to the statutory requirement. Examples of the situations in which the director of corporate enforcement might seek to have such statements admitted in evidence against a person would be in proceedings for restriction under section 150 of the Companies Act, 1990, or for disqualification under section 160 of that Act.
Similarly, the director might seek a court injunction pursuant to section 371 of the Companies Act, 1963, to compel a person to comply with the requirement of the Acts and, in so doing, the director might wish to support his or her application by reference to statements made by the person concerned pursuant to a statutory requirement. The amendments of the relevant sections confine themselves to the question of the admissibility of statements made by individuals, in other words, natural rather than legal persons. In the case of a legal person, in this case a company, the legislation will be silent on the admissibility or otherwise of compulsorily obtained testimony in proceedings against a company which will be a matter entirely for the judge hearing the case.
I want to summarise the effects of the various amendments under consideration. Amendment No. 29 relates to section 18 of the Companies Act, 1990, which provides for the admissibility in evidence of statements made to inspectors appointed by the courts under section 7 or section 8 of that Act. Section 18 also provides for the admissibility in evidence of statements made by persons in relation to the affairs of a company in connection with its winding up. The amendments provide that such statements may be used in evidence against the persons making them, except in proceedings for an offence. This is consistent with the principle of privilege against self-incrimination.
Amendment No. 33 relates to section 19(6) of the Companies Act, 1990, which provides for the admissibility in evidence of statements made by persons in compliance with the requirement of that section. The amendment provides that such statements may be used in evidence against the persons making them, except in proceedings for an offence.
Amendment No. 51 relates to section 245 of the Companies Act, 1963, which gives the court the power to summarily examine persons in connection with the winding up of a company by the court. Section 245 currently provides that the answers given by a person to the court pursuant to its powers under the section may not be subsequently used in evidence against the person in any proceedings. The amendment provides that such answers may be used against the person in civil proceedings and is consistent with the approach now being adopted in respect of statements made pursuant to the investigative provisions of Part II of the 1990 Act.
Amendment No. 54 is analogous with amendment No. 51. It relates to section 282B of the Companies Act, as inserted by section 46 of the Bill, which gives the court the power to summon and examine persons in connection with the voluntary winding up of a company. Section 282B currently provides that the answers given by a person to the court pursuant to its power under that section may not be subsequently used in evidence against the person in any proceedings. As with amendment No. 51, this amendment provides that such answers may be used against the person in civil proceedings only.
Amendment No. 34 in the name of Deputy Rabbitte proposes the deletion of lines 19 to 21 in page 19 of the Bill. The Government amendment No. 33, as I have indicated, proposes alternative wording and, accordingly, amendment No. 34 is not accepted.
Members may note the difference in the treatment being proposed in respect of statements made pursuant to a statutory requirement in the Companies Act and the treatment of statements made under other legislation, notably in the area of maritime accident or air accident investigations. On Second Stage Deputy Rabbitte pointed to the provisions of the Merchant Shipping (Investigation of Marine Casualties) Act, 2000, in this area. That Act precludes the use of compulsorily obtained statements in any subsequent proceedings, whether criminal or otherwise. It is important to remember, however, that the primary focus and objective of the maritime and air accident investigation is to establish the exact details of how a particular accident occurred with a view to improving safety standards and procedures and not for the purpose of attributing blame or investigating suspected offences.
The Maritime Casualties Act specifically provides that it is not a function of the investigators to attribute blame. The investigative provisions of the Companies Acts, however, are usually invoked in cases of suspected wrongdoing by a company or its officers. Where such wrongdoing is established, there may be civil remedies available to injured parties and the advice of the Attorney General is that it is appropriate that any statements obtained in the investigations are available to being used in subsequent civil proceedings only.
The Minister went to great lengths to explain the amendment. However, I wonder if her wording has complicated matters. She says that a person who is examined under the section shall not be entitled to refuse to answer questions, to co-operate or to make statements on the basis that the evidence forthcoming might be incriminating. She goes on to say that if there is a likelihood of the commission of a criminal offence, such a refusal can be made. It would appear that a person can only refuse the examination in the event of there being a criminal offence. It will still be possible for a person to refuse to answer a question on the basis that those questions, the answers to which the person has in his own knowledge, might incriminate them. Hence, there is no great change. If I am interpreting correctly what the Minister has said, the refusal to answer any question shall not take place in the event of a later civil proceeding. In actual fact, the change of which the Minister is speaking is not taking place.
I share some of the concerns outlined by Deputy Flanagan. In her lengthy explanation of these amendments, the Minister referred to the decision of the European Court of Human Rights in the Saunders case, and also to the National Irish Bank situation. However, it would appear that her attempts, in amendment No. 33, to go some way towards meeting the concerns that Deputy Rabbitte raised on Second Stage do not go far enough. The net effect would still be to whittle away the protection against self-incrimination. Therefore, her amendment does not succeed and that is why it would be correct to press amendment No. 34.
I will read into the record the fact that Deputy Broughan has been nominated by Deputy Rabbitte to move his amendments.
That is correct. Thank you, Chairman.
I think there is a misunderstanding. I accept that the explanatory note I read is unusually long and therefore I apologise if I have confused Deputies. Individuals do not have a right to refuse to give information. They must give information and it is a criminal offence to refuse to do so. They cannot refuse, as Deputy Flanagan seems to suggest, to give information on the grounds that it might incriminate them. I am saying, however, that that information cannot be used to incriminate them. It cannot be used in criminal proceedings, but it could be used in civil proceedings. That is fair and in compliance with the Supreme Court ruling in the NIB case and the European Court's ruling in the Saunders case. I want to make it clear that it is a criminal offence to refuse to give the information, but the information given cannot be used in any circumstances to incriminate somebody. It can never be used in criminal proceedings against an individual, but could be used in civil proceedings.
I know the Minister has been active in her Department in progressing a number of investigations, even without the advantage of the legislation which is before us today. However, where does that leave us when the information has been obtained and, I presume in this case, the director has taken requisite action? Would we then be in the same circumstances as the DIRT inquiry and numerous other inquiries conducted by the Dáil, whereby the fraud squad must operate ab initio, effectively starting again? Is that the full and final import of what the Minister is saying?
Not necessarily if one takes some of the existing section 19 reports that have been completed, for example, on Faxhill Homes. Section 19 is a preliminary investigation but, nonetheless, there was sufficient information on that to allow me to take summary prosecutions which are currently before the courts in relation to officers of that company. The officers of the company were spoken to in connection with the particular investigation, so it is not the case that one always has to reinvent the wheel to initiate either summary prosecutions which can be initiated by the Minister - and, subsequent to the introduction of this legislation, by the director of company law enforcement - or criminal proceedings that can only be initiated by the Director of Public Prosecutions. From here on, the director of company law enforcement can prepare cases for the DPP. We do not always have to reinvent the wheel, but there are other investigative powers that can be used. Essentially, the investigative powers of the Companies Acts are contained in section 19, or a section 8 inquiry can be initiated which, effectively, is a High Court inquiry with all the powers of the court. The latter inquiry has much stronger powers because one can subpoena people to appear and take evidence on oath, including from individuals who are not connected with the company. Section 14 investigations can establish the beneficial ownership of a company.
The purpose of such inquiries is to assemble the facts. Depending on which facts emerge, one is then free to decide what course of action should be taken. In some cases it depends on how one obtains the information. If the information is solely given by officers of the company they cannot incriminate themselves, so one cannot take criminal proceedings against them based on what they said. One may, however, be able to establish the necessary information through other investigative powers or channels. The same applies to tribunals of inquiry. The essential thing is to be able to assemble the information and to have as much power as possible to obtain all the facts. Section 19 is a preliminary inquiry and it is right that we should have that low level of inquiry because not everything requires judicial powers or the costs associated with legal representation.
Thank you very much, Minister. That has been very helpful. We have taken amendments Nos. 29, 33, 34, 51 and 54 together by agreement. In light of Deputy Broughan's earlier clarification, I should draw to his attention that if amendment No. 33 is agreed to, amendment No. 34 cannot be moved.
Amendment agreed to.
Question, "That the new section be there inserted", put and agreed to.
SECTION 28.
I move amendment No. 30:
In page 17, line 34, to delete "1990" and substitute "2000".
This is a technical amendment to update a reference in section 19 of the Companies Act, 1990. The reference is to the Insurance Acts, 1909 to 1990. However, since publication of the Bill, the Insurance Act, 2000, has been signed into law by the President and the correct reference should therefore be to the Insurance Acts 1909 to 2000. The sooner we consolidate or codify our laws the better.
Amendment agreed to.
Amendments Nos. 31 and 39 are related and may be discussed together by agreement.
I move amendment No. 31:
In page 17, to delete lines 37 to 39, and substitute the following:
"or may give directions to an officer of any such body requiring the body, or in the alternative such officer, at such time and place as may be specified in the directions, to produce such books or documents as may be so specified or in the alternative fulfil obligations or an obligation arising under Part V of the Act of 1963 or under Parts III or IV of the Act of 1990.".
The constant failure of companies to comply with the statutory provisions of management and administration of the Companies Acts, including Part V of the Companies Act, 1963, together with Parts III and IV of the Companies Act, 1990, tends to penalise innocent third parties more than members of the companies themselves. As a principle, the dissolution of any company should not impose costs or burdens on these individuals, or difficulties in recovering such costs, or any burden, on third parties who are not officers of the company which has been dissolved. It should also encourage or favour members of companies to allow the dissolution of companies arising from the failure to comply with the provisions of the Companies Acts. Otherwise a wrongdoer is rewarded or ignored at the expense of those innocent third parties, such as past or present employees, third parties with claims against the company or customers, clients or tenants of the dissolved company. The increasing rate of company dissolutions is posing a correspondingly increasing number of difficulties for innocent third parties to have their rights vindicated.
Part V of the Companies Act, 1963, concerns the management and administration of the company. Failure to comply with Part V could detrimentally affect the rights of shareholders, creditors, employers and fellow directors. Generally speaking, members, directors and creditors are entitled to inspect the register of members' interests, transfers and certain other account details. This right is somewhat undermined if these records are not completed.
Parts III and IV of the Companies Act, 1990, introduced provisions to prohibit directors, shadow directors or their families from entering into transactions with a company without disclosing the transactions and without obtaining the permission of the members in many cases. This is an effective remedy. I see no reason, however, that the director of corporate enforcement ought not to have the powers to ensure that these sections of the relevant Companies Acts are enforced, especially in relation to Part IV of the 1990 Act. The sections of these Acts are not being complied with and in view of this, innocent third parties lose out. The director of corporate enforcement should have an entitlement to ensure that these are complied with.
Some of Deputy Naughten's comments refer to amendment No. 109, so perhaps we could deal with that later. These amendments relate to section 28 of the Bill which provides for the repeal and replacement of section 19 of the Companies Act, 1990, relating to an examination of the books and documents of a company in certain specified circumstances. The effects of the amendments are threefold. First, the power to require production of books and documents would be extended to cover officers of the body as well as the body. Second, an additional power to compel persons to comply with certain obligations under the Companies Acts would be provided and, third, the inclusion of a definition of the terms "officer" and "obligation" for the purpose of section 19 of the Act would need to be considered further.
With regard to the application of section 19 powers to officers of a company, the powers under section 19 of the 1990 Act to require production of books and documents is exercisable in respect of the bodies listed in that section. Essentially, all the companies registered or carrying on business in the Sate are included as it is the books and documents of the bodies concerned that may be examined. There is no need to extend the power to require the production of a company's books by officers of the company. Where a company has been required to produce books and documents, section 19(3) provides that any person who appears to be in possession of the books or documents may also be required to produce them. This would include an officer or a body. There is, therefore, no need to provide for an application of section 19 powers to officers or bodies covered by that section, as proposed in amendment No. 31.
With regard to additional powers to compel compliance with certain obligations under the Companies Act, the second aspect of the amendment would be the powers available under the section not only to include the production of books and documents but also to compel companies or their officers to fulfil obligations arising under Part V of the Companies Act, 1963, or Parts III and IV of the Companies Act, 1990. These parts of the relevant enactment relate respectively to the management and administration of the companies, transactions between companies and their directors, and disclosure of interest in shares. They impose a range of obligations, both on companies and their officers, from the requirement to keep registers and accounts to the making of annual returns and the obligations to disclose interest in shares of publicly quoted companies.
This amendment would provide the director of corporate enforcement with the statutory power to compel companies and officers to comply with particular obligations under these sections of the Companies Acts, where the directors consider that they fail to do so. This would constitute a significant extension of the powers available to the director in the enforcement of the Companies Acts. Such an extension is not considered appropriate as it would give the director power to compel persons to take particular actions based entirely on the director's opinion as to the person's obligations to do so. Decisions of the director in that regard would not be subject to any traditional endorsement or approval, as would be normal.
It is important to note that section 371 of the Companies Acts, 1963, provides that the court may compel a person to comply with an obligation under the Companies Acts. Section 89 of the Bill provides for the amendment of section 371 to allow the director of corporate enforcement to apply for an order of the court under that section. This is considered a more appropriate mechanism by which the director could seek to enforce compliance with the Acts, as requested by Deputy Naughten. The director will also have other powers available to him or her in cases where a person appears not to have fulfilled an obligation under the Companies Acts. The director may institute summary proceedings against the person or may choose to impose a fine pursuant to the provisions of section 98 of the Bill. In the latter incidence the person or company liable to pay the fine would, by virtue of Government amendment No. 196, also have to remedy the default in respect of which the fine was imposed. The range of powers available to the director to facilitate the enforcement of the Companies Acts is, therefore, extensive and it is not necessary or appropriate to extend those powers such as that proposed by the amendment.
Amendment No. 39 provides for the insertion of definitions of the terms "officer" and "obligation" for the purpose of section 19 of the 1990 Act. The term "officer" is already defined for the purpose of the Companies Acts in section 2 of the Companies Act, 1963. The proposed definition in amendment No. 39 adds nothing to the definitions in the Acts and it may limit them to cover only those persons who are currently listed as directors or secretaries of companies, whereas section 19 applies to past and present officers. With regard to the definition of the term "obligation", the need for this would only arise if amendment No. 31 was accepted but I have already indicated that I oppose the amendment.
I accept the Minister's points. There appears to be a problem with compliance with the legislation. If I withdraw the amendment will the Minister ask the company law review group to look at this to see if legislative change is required?
I agree with the Deputy there is a problem with enforcement. That is why we are establishing this new regime for the enforcement of company law. The McDowell report showed that in the case of a basic requirement, the filing of annual returns, for 1997 only 13% of the 136,000 registered companies fulfilled it on time. That is indicative of a serious culture and history of non-compliance. It is why we are establishing a new regime of an independent office properly resourced. The resources applied to company law enforcement in my Department amounts to two or three officials who are also engaged in other duties. The new director will have a multi-disciplinary team which will include professional accountants, lawyers, members of the Garda Síochána and so on. I am happy to refer any gaps in the enforcement regime identified by the Deputy to the company law review group. While I favour the minimal amount of regulation and legislation, I strongly favour rigorous enforcement.
Amendment, by leave, withdrawn.
I move amendment No. 32:
In page 18, between lines 25 and 26, to insert the following:
"(j) the body is frustrating, impeding or avoiding the conduct of litigation, arbitration or investigation;
(k) the body is frustrating, impeding or avoiding the enforcement of an award, order, direction, penalty or declaration of a court, arbitrator, tribunal, inspector or a Committee of the Oireachtas;
(l) a present or past employee of the body requires the directions to be fulfilled in order to exercise a right of action, a pension right or a right to payment of earnings; or
(m) a person wishes to exercise a property right involving or connected to the body.".
The purpose of the amendment is to strengthen section 28.
I am advised by my very efficient principal officer that the compliance rate in 1997 was 13% while in 2000 it was 40%. That indicates that the culture is beginning to change. If people believe the law will be enforced, they will comply with it.
This amendment relates to section 28, which provides for the repeal and replacement of section 19 of the Companies Act, 1990, concerning the examination of the books and documents of a company in certain specified circumstances. The effect of the proposed amendment would be to extend the grounds for the exercise of the powers available under section 19. This would involve extending the list of reasons in subsection (2) for which the director of corporate enforcement will be permitted to exercise those powers. The reasons currently specified under the section and replicated in the Bill relate to apparent illegality or wrongdoing on the part of a company in respect of its obligations under the Companies Acts. The amendment proposes that this list be extended to include a range of measures such as those designed to deal with a company impeding litigation, arbitration, investigation or the enforcement of court orders, or that an employee of the company requires to exercise a right of action against it.
These matters are not related to suspected wrongdoing on the part of a company in relation to its obligations under the Companies Acts. I do not believe it is appropriate for the director of corporate enforcement to be given power to have a company's books and documents examined on the basis of these actions by the company. Section 19 powers to examine books and documents are intended to facilitate investigation of apparent or alleged wrongdoing on the part of a company in relation to the requirements of the Companies Acts.
Amendment, by leave, withdrawn.
I move amendment No. 32a:
In page 18, line 30, after "in possession of them" to insert "or to be in possession of other books or documents which may constitute copies of any books or documents of the body".
This amendment relates to section 28 which provides for the repeal and replacement of section 19 of the Companies Act, 1990, concerning the power of the director of corporate enforcement to examine the books and documents of a company. Section 19(3) provides that where the director has the power to require production of books and documents from a body, he or she shall also have power to require their production from any person who appears to be in possession of them. Typically, this would be a director, auditor or employee of the company. However, while a company's books and documents are incomplete, for whatever reason, it may be the case that other individuals possess copies of the missing documentation which may have emanated from or been issued to the company. Strictly speaking, this documentation is not part of the company's books because it may properly belong to other individuals such as the company's customers. However, the correspondence and other papers in question would be likely to constitute a copy of the documentation that is missing from the company's books and would, therefore, be relevant to an examination of its business.
The purpose of this amendment, therefore, is to enable the director to access those papers from third parties in order to build a more complete picture of a company's situation. It would be frustrating for the director to know or suspect that documentation of assistance to a section 19 examination might be available from a particular source and yet not be in a position, due to limitations on his or her powers, to seek to obtain a copy of that documentation.
Amendment agreed to.
I move amendment No. 33:
In page 19, to delete lines 19 to 21 and substitute the following:
"(6) A statement made or an explanation provided by an individual in compliance with a requirement imposed by virtue of this section may be used in evidence against him in any proceedings whatsoever (save proceedings for an offence (other than an offence under subsection (5) or (7))).".
Amendment agreed to.
Amendment No. 34 not moved.
I move amendment No. 35:
In page 19, to delete lines 22 to 26, and substitute the following:
"(7) A person who provides an explanation or makes a statement required under this section which is false or misleading in a material respect, knowing it to be so false or misleading, shall be guilty of an offence.".
Section 28 of the Bill repeals and replaces the existing section 19 of the Companies Act, 1990. This amendment is designed to correct a drafting error in the existing text of subsection (7) of the replacement section 19 relating to references in that subsection to the requirements imposed by section 19. The section should refer to the requirement to provide an explanation or make a statement rather than the requirement to furnish information, as currently drafted. The revised text provides for internal consistency in respect of references to the requirements imposed by section 19.
Amendment agreed to.
Amendments Nos. 37 and 38 are cognate on amendment No. 36 and the three may, therefore, be taken together by agreement.
I move amendment No. 36:
In page 19, line 28, to delete "under this section" and substitute "under subsection (1)".
As stated previously, section 28 repeals and replaces section 19 of the Companies Act, 1990. These amendments are designed to correct relatively minor drafting errors in the existing text of subsections (8), (9) and (10) of the replacement section 19. Minor amendments to these subsections are required to clarify the references they contain to "a direction under this section". The direction in question is a direction under section 19(1) to produce books and documents and this is clarified by amending the references in all three subsections to read "a direction under subsection (1)". The need for this clarification arises from the fact that the court may, under subsection (9) of the replacement section 19, give a direction relating to the expenses of the examination of books and documents and it is necessary to clarify that it is not such a direction that is being referred to in the relevant subsections.
Amendment agreed to.
I move amendment No. 37:
In page 19, line 34, to delete "under this section" and substitute "under subsection (1)".
Amendment agreed to.
I move amendment No. 38:
In page 19, line 45, to delete "under this section" and substitute "under subsection (1)".
Amendment agreed to.
Amendment No. 39 not moved.
Section 28, as amended, agreed to.
Section 29 agreed to.
NEW SECTION.
I move amendment No. 40:
In page 22, before section 30, to insert the following new section:
30.-Section 21 of the Act of 1990 is hereby added to the Third Schedule to the Freedom of Information Act, 1997.".
The first three or so years that the Freedom of Information Act has been in place have been difficult. While certain information has been disclosed which, perhaps, was not of direct relevance or importance to the public, on balance the development of people's ability to follow closely the workings of Government has been an immense boost to our democracy. This amendment seeks to remove the prohibition on the disclosure of the inspector's report in section 21 and to make it subject to the provisions of the Freedom of Information Act.
I understand that in previous discussions on the Bill the Minister was not prepared to support this approach. However, given that Mr. Kevin Murphy and others have urged that the report should be made available, the Labour Party believes it should be subject to the provisions of the Freedom of Information Act. In its responses to proposed legislation, my party has attempted to encourage the widest possible ambit for the Freedom of Information Act because, on balance, it has played an important role in engendering public debate in recent years.
I strongly oppose the amendment. It is not that I am against freedom of information, which, in principle, is good, but it would be like asking the Garda Síochána to publish details of the various investigations in which it is involved. Everyone knows what would be the result of such a request. While Mr. Murphy was quoted in the newspapers as saying that the report should be subject to the provisions of the Freedom of Information Act, I understand he subsequently denied making such remarks. He may have been misquoted. I cannot see how section 19 inquiries, which are preliminary in nature, could possibly be carried out if they were subject to freedom of information legislation.
The amendment proposes the insertion into the Bill of a new section inserting section 21 of the Companies Act, 1990, into the Third Schedule of the Freedom of Information Act. Section 21 of the 1990 Act provides for the security of information obtained compulsorily under section 19 or 20 of that Act. Such information is obtained by using the power to require production of books and documents under section 19 or pursuant to a search warrant issued under section 20. Section 21 provides that such information may not be published or disclosed without the previous consent, in writing, of the body to which it relates except where the disclosure is to the competent authorities listed in the section or for certain specified purposes which are also provided for in that section.
The effect of the amendment would be to make the information obtained compulsorily under sections 19 or 20 of the 1990 Act subject to the provisions of the Freedom of Information Act and thereby subject to public disclosure on foot of a freedom of information request. This proposal was the subject of a lengthy debate when the Companies Amendment) (No 2) Bill, 1999, was in the course of its passage through the House. At that stage the position with regard to reports prepared under section 19 of the 1990 Act was clearly set out. This position has not changed. The Government's position remains that information obtained pursuant to sections 19 or 20 should be subject to strict controls as to its disclosure in order to safeguard the valuable investigative tools that these sections provide.
The fundamental difficulty in including section 21 under the Freedom of Information Act rests with the possibility of information being disclosed to the public. Persons required to co-operate with section 19 examinations may refuse to do so on the grounds that disclosure under freedom of information legislation would be possible. This would form the basis for legal objection to the application of section 19 powers and undermine the basis on which the section has operated in a number of important cases. If that were the consequence, the advantages of a section 19 preliminary investigation, which is conducted on a cost effective basis at present, would have disappeared. I am not prepared to remove a valuable instrument of initial inquiry from our armoury of investigating suspected corporate malpractice.
The same concerns apply in relation to information obtained on foot of a search warrant issued under section 20 of the 1990 Act. It is important to note that section 29, which provides for the repeal and replacement of section 20, has the effect of extending the provisions of that section to include any situation in which the director of corporate enforcement requires to seek a search warrant not only in relation to books and documents whose production has been acquired under section 19. The search warrant provisions of section 20 will be used by the director and, in particular, the gardaí assigned to the office to collect evidence of offences under the Companies Acts. It would be inappropriate if any information collected under a search warrant was capable of being publicly disclosed pursuant to a freedom of information request. The likelihood that such disclosure would prejudice any subsequent investigation or prosecution would be such that the use of the search warrant provision would be severely compromised. Information obtained under a search warrant would normally only be disclosed publicly in the course of the prosecution of an offence to which the information relates.
I apologise for having to attend another meeting. I acknowledge there is some weight in what I heard of the Minister's contribution in terms of damaging the process, which is not the intention of the amendment. Nonetheless, it remains the case, as I am sure the Minister knows, that it was the opinion of the information commissioner——
The Minister clarified that issue at the beginning of her contribution when the Deputy was out of the room on other business. The report in the newspaper is not correct.
I stand corrected if that is the position. I am surprised that those of us who are concerned about such a major matter were not notified of that, if that is the case. I am sure the Minister has checked it. The fact remains, however, that the information secured through this route can still go to a tribunal but not to a parliamentary committee. That was the subject of a heated discussion in the House a couple of years ago on matters which are now the subject of other tribunals. I suppose this touches on amendment No. 44. Information can now be referred to a tribunal but not to a parliamentary committee. The point made at the time was that a tribunal is an instrument of the Dáil and if it can be seized of this information, why is it not the same for the Dáil or, in this case, a parliamentary committee?
The person nominated to move the amendment in the Deputy's absence spoke about a wider availability of the information under the freedom of information legislation.
That is the import of it. This would be the route by which it would come into the public domain. As I understand it, the gravamen of the Minister's case is that it could be harmful if this information was exposed at a certain stage in this way because if it came into the public domain through a parliamentary committee, it would inevitably become the subject of public comment. Perhaps the Minister would revert to the point that if it is good enough for a tribunal of inquiry, which is an instrument of the Dáil, why is it not good enough for the Dáil to know the information.
As regards the information officer, my understanding is that while there was a newspaper reference to the fact that when he refused a freedom of information request or refused to grant an appeal - a section 19 report was refused by my Department - he was quoted as saying that the Freedom of Information Act should apply and that rather than asking him to make the decision an amendment should be made to the Freedom of Information Act. I understand from my officials that was subsequently clarified in the newspaper. I have not had any contact with the information officer about his views on this matter.
That is what I am seeking to do here. The requisite amendment would add this section to the Third Schedule to the Freedom of Information Act.
I accept that but the information officer is being used as a reason this should happen. I understand that although he was quoted as saying this should happen, he was subsequently quoted as saying he was misquoted. However, since I or my officials have not engaged with him, I am going on what appeared in the public press.
As regards the issue generally, as I said at the outset, section 19 is a preliminary inquiry. It is to assemble information to see if we should go beyond that to a more serious and high level inquiry, such as a section 8 inquiry. It is a useful tool because it can be more efficient and it is cost effective and low key. If we were to make that a public document, it is certain that the companies and the people being investigated would engage in litigation. It is three years this month since I sought the High Court's permission to appoint inspectors to National Irish Bank and that report is not yet concluded. The reason it is not concluded is not that the inspectors have not worked thoroughly, effectively and efficiently but because of litigation and individuals, rightly from their point of view, seeking to vindicate their rights and to protect their interests through legal action. It was tied up in legal action for some time. It is a much slower process because the individuals in question know that the report will be a public document. It will go to the court and it will be made public by virtue of being a court document. Once we enter the element of making it available publicly, we take away a useful tool in our investigative powers.
I would like to talk to the Attorney General about this matter, although I have not done so and I apologise for that. I accept it is inconsistent for a Minister and Member of the Parliament to say that we should have more parliamentary inquiries, which I favour because the DIRT inquiry did an excellent, speedy and cost effective job and brought great credit to the political system, and that a report can go to a tribunal. I presume that was provided for traditionally because a tribunal was seen as a safe and secretive forum presided over generally by a judge, although that does not have to be the case. All public tribunals established here have always been presided over by a judge, but the Act does not require that. That gives certain protections, whereas sending it to a parliamentary committee of politicians would not have the same professional approach. I do not hold that view because politicians are capable of conducting inquiries in a professional and fair manner. There is an inconsistency between referring it to a tribunal and not referring it to a parliamentary committee as distinct from making a section 19 report generally available through the Freedom of Information Act to anyone who seeks it. I would like to consult with the Attorney General about the implications of that and come back to the Deputy at a later stage.
Given what the Minister said, is Deputy Rabbitte pressing the amendment?
It is not the purpose, object or thrust of the amendment to invite litigation, procrastination or delay. I merely give expression to a view hotly debated in the House some time ago when we considered the terms of reference of the tribunals which are under way and point to the apparent inconsistency to which the Minister has adverted in terms of an instrument of the House having access to a report in these circumstances and the House being denied that information. However, I accept from experience that there are circumstances where confidentiality is necessary and anything less than that could put at risk the process of inquiry. I understand the Minister has said she will consult the Attorney General's office on this point which took up a great deal of time of the House and about which, perhaps with a superficial level of information, a great many Members are concerned. I would like to hear the Minister's more definitive reply on Report Stage.
Is the amendment withdrawn in the meantime with leave to resubmit?
Yes.
Amendment, by leave, withdrawn.
SECTION 30.
I move amendment No. 41:
In page 22, between lines 24 and 25, to insert the following:
"(b) by the substitution of the following for clause (V) of subsection (1)(a)(i):
'(V) the Taxes Consolidation Act, 1997, or an offence under an enactment referred to in section 1078(1) of that Act;',
and".
These amendments relate to section 21 of the Companies Act which deals with the question of disclosure of information, books and documents uncovered pursuant to an examination of books and documents of a company under section 19 or secured pursuant to a search warrant under section 20 of the Act. Section 21 provides that such information should not be disclosed except to certain competent authorities or for specific purposes detailed in section 21(1).
The effects of the amendments are twofold. A technical amendment is proposed in respect of clause V of section 21(1)(a)(i). Clause V provides for the disclosure of information for the investigation or prosecution of an offence under the Taxes Consolidation Act, 1997. The Office of the Revenue Commissioners was advised that this reference to the Taxes Consolidation Act is not sufficiently broad. While the Act covers all Revenue legislation, the offences under the Act are limited to certain specified offences. The intent of the reference to the Act in section 21 is that all Revenue offences be covered, and the amendment achieves this by specifying that it deals not only with offences under the Taxes Consolidation Act but also with all offences under any enactment referred to in section 1078(1) of the Taxes Consolidation Act, for example, the Customs Acts, the Tax Acts and the Capital Gains Tax Acts.
The amendment of section 21 follows from a commitment I gave at the first meeting of the committee to examine the disclosure of information by the director of corporate enforcement to the Competition Authority. Deputy Rabbitte's amendment No. 9 suggested the director be given the function of passing to the authority information relating to breaches of competition law. I agreed with the substance of that amendment in that the director of corporate enforcement should be permitted to disclose information to the Competition Authority in appropriate cases and this amendment provides accordingly.
While the amendment relates to section 21 of the Companies Act, 1990, section 17 of the Bill contains a cross-reference to that section, the effect of which is that all official information obtained by the director of corporate enforcement, whether under section 19 or otherwise, may be disclosed for the purposes or to the competent authorities listed in section 21. The amendment provides for the extension of the list of purposes in section 21(1) for which disclosure may be permitted to include disclosure for the purpose of the performance by the Competition Authority of any of its functions. This will allow the director of corporate enforcement to disclose information to the Competition Authority where the director considers the information in question may be required for the performance by the authority of its functions.
I did not understand the amendment when it first appeared and I am still somewhat bemused by it. I am not clear about the legal advice that states that, despite there being a reference to the Taxes Consolidation Act, express reference must also be made to an offence in certain other enactments. What were the three taxes the Minister said might not otherwise be included? One was capital gains tax.
The Customs Acts, Tax Acts and Capital Gains Tax Acts. They are examples. It is not confined to those three.
Under section 1078(1)?
Yes, that is right.
I bow to superior advice but I thought they were automatically embraced by the term "Consolidation Act". I thought that was the purpose of consolidating the legislation in the first place.
I share the Deputy's view that, if the Acts are consolidated, the offences are also consolidated, but that does not appear to be the case according to the advice. Not all Revenue offences are covered if the wording "the Consolidation Act" is used. Reference must be included to "under an enactment referred to in section 1078(1) of the Consolidation Act".
With that professional opinion available to us, I gather we agree amendment No. 41.
I imagined that, as section 1078 is part of the Taxes Consolidation, referring to all offences under the Act would include it. However, I am advised that, legally, we must refer to all offences referred to in section 1078(1). I never really understood law.
It might be helpful if we could obtain clarification on this for Deputy Rabbitte prior to Report Stage.
Is it expected a transcript of proceedings will be available before we resume? Is it feasible to obtain the transcript within a reasonable time?
Yes. I understand priority is given to Bills. A transcript will be available reasonably quickly. It should not take too long. The delivery of transcripts is probably something that should be referred to Members' services.
If it helps committee members, if they want the notes I read, I am happy to make them available to them. I accept it is difficult to take in exactly what has been said.
That would also be helpful. Perhaps we could also obtain clarification for Deputy Rabbitte on the Taxes Consolidation Act prior to Report Stage, if possible and if the information is available.
Amendment agreed to.
Amendment No. 42 is consequential on amendment No. 43 and both may be discussed together by agreement.
I move amendment No. 42:
In page 22, paragraph (b), line 29, to delete "section,'," and substitute "section;'.".
These amendments provide for the deletion of paragraph (c) of section 30. They contain a technical amendment of section 21(1)(i) of the Companies Act, 1990. The effect of the amendment is to provide for the use of the words "him or her" in a reference in that paragraph to the director of corporate enforcement. This is to make the provision gender neutral in language. However, as the reference in question occurs in an enactment which predates the introduction to legislation of gender neutral language - I suppose before people like me were around - the amendment effected by section 30(c) is not appropriate and it is proposed on the advice on the Parliamentary Counsel to remove the said paragraph which has no other substantive effect.
Amendment agreed to.
I move amendment No. 43:
In page 22, to delete lines 30 to 32.
Amendment agreed to.
I move amendment No. 44:
In page 22, between lines 32 and 33, to insert the following subsection:
"(2) Section 21(3) of the Act of 1990 is hereby amended by the insertion after paragraph (a) of the following:
'(aa) either House of the Oireachtas or a committee appointed by either or both such Houses;'.".
This amendment inserts a new subsection before section 31 which would have the effect of amending the 1990 Act by including "either House of the Oireachtas or a committee appointed by either or both such Houses". The import of that would be to allow the inspector's report to be given to a Dáil inquiry for the purpose of its inquiries. To some extent it goes back to the discussion we just had. For example, it is easy to foresee a situation where a parliamentary committee, following the inspector's report being drawn up, would want a wider ranging examination of issues connected with or arising from that. The object of the amendment is to enable that committee to get its hands on the report. As I have said, we have had the traffic running the other way. For example, the Tánaiste referred to the DIRT inquiry and there are aspects of that inquiry which are effectively being investigated by Mr. Justice Moriarty. My memory is that he is required to make recommendations on certain matters, so why should it not apply the other way around? Why should the inspector's report not come into the possession of a committee charged with making inquiries in broadly the same area?
The Tánaiste gave the committee an undertaking on amendment No. 40 that she will come back to us on Report Stage. How stands the amendment?
Does the Tánaiste want to address it in this context? Is there anything she wants to add?
Yes. This might be a more appropriate place to deal with the point I was making. I would like that role of the Oireachtas enhanced, as most Deputies would. It has worked very well in other countries and has already worked well here, notwithstanding the limitations referred to. It is somewhat inconsistent that a tribunal of inquiry could receive a report but a parliamentary inquiry investigating something similar could not. It may well be that such a report would be valuable and helpful to a parliamentary inquiry. We would have to distinguish between a parliamentary inquiry and just releasing the information to the Oireachtas, which would effectively be publishing it. It would be published under privilege and cause the problems I mentioned earlier.
Section 21 allows for not just reports to be protected but warrants that can be initiated under section 20. Section 21 is not just about reports under section 19. It also refers to warrants and it may well be the director of corporate enforcement does not have formal inquiries but will gather information. We need to protect the gathering of information and the warrant procedure, as gardai will be involved in that and will be affected; opening up Garda inquiries would not be helpful. We need to distinguish between a number of different things here but I wish to enhance the role of the Oireachtas in the area of inquiries and not to put it at a disadvantage compared to tribunals of inquiry. Oireachtas Members have proved they can be professional in the manner in which they deal with these issues. It cannot be assumed, as it often is, that by virtue of giving a report to a number of Oireachtas Members who have a particular duty to perform it constitutes bringing a matter into the public domain as they would not adopt a professional approach. I ask Deputy Rabbitte to agree to dealing with this in our next debate or at least to report back once I have discussed the matter with the Attorney General and take legal advice on the implications of the amendment.
I welcome that and it would be helpful to get the Attorney General's view. One could have a situation where the inspector's report is no more than preliminary to an investigation of a wider or related issue. It is not difficult at all to foresee that. The inspector may have gone in on a narrow stream and the report may become available. The Dáil may decide there are wider matters to be investigated. In those circumstances it seems there is a strong case for the report to become available.
The Attorney General made an interesting submission, one on which he obviously did a lot of work, to the Public Accounts Committee on the perceived efficacy of parliamentary inquiries versus tribunals of inquiry. That will be dealt with at some length in the final Public Accounts Committee report on the DIRT issue. It seems to me that Members have privately expressed concerns on occasion about the duration of tribunals of inquiry in the sense that whereas Members obviously do not feel they can say so publicly, the preliminary stage of investigation might sift out some issues rather than them becoming the subject of interminable public inquiry. Obviously that is being used to a lesser or greater extent in the tribunals under way. However, similarly here one could see a situation where information has been professionally assimilated which would be very valuable to an inquiry the Dáil might decide ought to be undertaken by a particular committee. It ought to have access to that information consistent with there being no legal or constitutional infirmity arising from that.
Amendment, by leave, withdrawn.
Section 30, as amended, agreed to.
Section 31 agreed to.
SECTION 32.
I move amendment No. 45:
In page 23, line 20, after "not" to insert "agree to provide reciprocal assistance to the Director or".
This amendment seeks to oblige foreign regulators to assist us as well as vice versa. Unless there is some reason we cannot so legislate it seems desirable that we would ask foreign regulators in these circumstances to reciprocate.
The amendment relates to section 32 which provides for the exercise by the director of corporate enforcement of the investigative powers available under Part 2 of the 1990 Act on behalf of or at the request of a company law authority from another jurisdiction. This is part of a proposed system of reciprocal assistance with such authorities outside the State. Under the new provision the director may refuse to undertake an investigation on behalf of the company law authority in another jurisdiction if the authority making the request did not agree to make a contribution to the costs of the investigation as the director considers appropriate.
This amendment proposes that the director should also decline to accede to a request for assistance from a foreign company law authority if the authority in question does not agree to provide reciprocal assistance to the director. I consider the such an additional provision would unnecessarily restrict the director in dealing with requests for assistance from company law authorities in other jurisdictions.
The provision whereby the director is empowered to act on a request for assistance is intended to form a basis for reciprocal assistance to be extended to the director. It would be onerous for the director to have to be satisfied in every instance that a foreign authority to which he or she proposed to furnish assistance would, if the occasion arose, similarly facilitate the director's inquiries. The relationship would have to be one of mutual trust and it would seem pointless to restrict the director from giving assistance in a particular case where he or she considers it would be in the best interests of all concerned simply because he or she could not extract a promise that reciprocal assistance would be furnished at some future date if the need arose.
I understand the point the Deputy is making in that it is fundamental to some jurisdictions not to co-operate. However, such jurisdictions are unlikely to look for assistance in similar circumstances. It would be difficult to implement the Deputy's proposal. If, for example, one month after this office is established, the director received a request from the authorities in what is broadly a friendly jurisdiction, it would be difficult for him or her to satisfy himself or herself before giving information or assistance. If the director gave information and in six months time sought information from the authority in question which was not forthcoming, it would be hard for the director to prove that he or she was satisfied before co-operating with that authority that it would reciprocate.
There has been a high level of co-operation, certainly with authorities in the neighbouring jurisdiction, regarding some of the inquiries. To the best of my knowledge that co-operation has been forthcoming. It is preferable if we can approach this on the basis of mutual trust and co-operation rather than legislation. I am not sure the jurisdictions the Deputy would wish to influence would be influenced one way or the other by inserting these provisions in Irish legislation. I do not think that would have any impact.
This is an important section as it concerns the manner in which the director will conduct his or her relations with counterparts overseas. This could be important, particularly where inquiries would take the director out of this jurisdiction.
I would have thought that matters in Europe would have been developed, particularly in the context of the EU. Has the Minister or her Department held discussions with their EU counterparts on this issue of mutual co-operation, trust, respect and development? Whatever about jurisdictions outside the EU in which we may face difficulties, I would have thought that, within the EU, mutual co-operation could be placed on a reasonable footing.
Will the Minister comment on the position in other EU jurisdictions in terms of mutual agreements, arrangements or co-operation which could give rise to a situation where international inquiries would not be frustrated? There should be much common ground within the EU.
There have been a number of EU initiatives to strengthen cross-border co-operation in the general area, particularly concerning criminal proceedings. These initiatives include mutual assistance which provide a framework for co-operation between the relevant justice authorities with respect to criminal investigations. Similarly, Directive 95/26 (EEC) - the so-called BCCI directive - has provided the legal framework for banking and related supervisors to co-operate with one another and with company law authorities in their respective jurisdictions.
There is a high level of co-operation at EU level. During the Bula inquiry information was sought from Jersey which was supportive and co-operative. Information was also sought by my Department from the UK authorities regarding a number of other inquiries. The procedure is that one goes through the equivalent UK Department. The UK authorities have been very supportive.
I am not aware of any difficulties except those concerning some of the obvious places where litigation is pending and where, as a matter of principle, there is a lack of co-operation unless the matter involves serious criminal investigations. Since many of these jurisdictions exist as tax havens, they do not as a matter of principle co-operate on tax evasion or alleged tax evasion or defrauding creditors, revenue authorities or others.
Notwithstanding globalisation and so on, I am not sure that this kind of amendment is the best way to proceed. It would have no effect on those from whom we might wish to obtain information. A more co-operative approach regarding friendly jurisdictions is working well without the need to impose a legal requirement on the director to satisfy himself or herself. This is not just a policy, a set of guidelines or a code of conduct. We are enacting legislation. When one places a legal or statutory requirement on an officer, he or she has to fulfil that requirement which is easier said than done.
The Minister may be correct in that my amendment may be misdirected towards jurisdictions which are unlikely to respond in any event. However, the purpose of the amendment was to try to avail of the opportunity of the enactment of this Bill to nail down co-operation from these jurisdictions in so far as that is possible.
The amendment is not intended to weaken the director's hand or to put him or her into a position where he or she would subsequently be unable to defend actions. The Minister said that good reciprocal arrangements exist with most normal democracies, as borne out by her recent or current inquiries. I accept that but it is manifestly not the case concerning a small number of jurisdictions.
Her argument, as I understand it, is that we cannot legislate for this situation. However, the nature of modern commerce is transnational and the invocation of this section would be unlikely to be other than in such a transnational context. This is why the idea occurred that, if possible, we should legislate for reciprocation.
That is the issue. Notwithstanding how important we sometimes think we are, there is nothing we can do which will have a global impact. There is a good spirit of co-operation which works well. I am always reluctant to be too prescriptive and to bring forward statutory requirements when things work well on a voluntary or co-operative basis which is the case.
We would like to receive co-operation from some jurisdictions and I would accept any amendment if I thought it would achieve such co-operation. However, there are jurisdictions in which some Irish citizens live as tax exiles and on which legislation passed here will make no difference. Irish citizens are tax exiles in some parts of the world and these provisions may make things more difficult for the director. If one places a statutory requirement on an officer, the officer must fulfil that. That could prove overly bureaucratic, cumbersome, legalistic and expensive.
Amendment, by leave, withdrawn.
Section 32 agreed to.
NEW SECTIONS.
I move amendment No. 45a:
In page 23, before section 33, to insert the following new section:
"33.-(1) Notwithstanding subsections (2) and (3) of section 14 or any other provision of this Act, the Minister or any officer of the Minister authorised by him or her under section 19 of the Act of 1990 before the passing of this Act may, in relation to such body or bodies and to such extent as may be prescribed, continue to exercise, after such passing, the powers conferred on them respectively by sections 19 to 23 of the Act of 1990.
(2) In subsection (1), 'sections 19 to 23 of the Act of 1990' means those sections as they stand amended by this Act but with the substitution for references in them to the Director of references to the Minister or an officer of the Minister authorised by the Minister under section 19 of the Act of 1990, as appropriate.".
This amendment relates to the ongoing examination of books and documents under section 19 of the Companies Act, 1990, by the authorised officer appointed by me. I signalled to the committee at the last meeting that I intended to table an amendment to provide for the continuance of those examinations by the authorised officer, notwithstanding the establishment of the director of corporate enforcement. As I explained to the committee previously, I consider it beneficial that ongoing section 19 examinations be continued and concluded by the existing authorised officer and that he should report to me in relation to those cases in respect of which I appointed him as an authorised officer. This is in the context of the officer's desire not to transfer to the office of the director of corporate enforcement upon its establishment and his willingness to continue with the examinations he has already commenced on my behalf.
The amendment provides that ongoing examinations may be continued by the Minister or the authorised officer appointed before the passing of the Act in relation to such bodies as may be prescribed in regulations. The amendment also provides that the authorised officer will have available to him the extended powers under section 19 which are provided for in the repeal and replacement of that section by section 28 of the Bill. These will include the power to seek copies of the books and documents of a body from individuals and to require persons to give all assistance with the examinations of books and documents as they are reasonably able to give. It is appropriate to extend to the authorised officer the additional powers being provided in the Bill for the director of corporate enforcement as this should facilitate the speedy and comprehensive completion of the ongoing examinations.
This is a welcome amendment which clarifies matters raised at the previous meeting.
Could this lead to a situation whereby we could have the office of the director of corporate enforcement, on the one hand, and the Minister and her officials on the other initiating parallel investigations? I have just received the amendment and have not had an opportunity to examine it in detail. Is it clear that it only refers to certain specific inquiries which are currently under way?
The text of the amendment was circulated on 31 January.
That was a long time ago.
The amendment is in line with a request made at the previous meeting by the committee regarding current investigations.
This matter will be dealt with by regulation. Five current examinations by the authorised officer are well advanced. These relate to Celtic Helicopters Limited, College Trustees Limited, Guinness and Mahon Ireland Limited, Hamilton Ross Company Limited and Kenforth Securities. The examinations of the books of Kenforth Securities and Celtic Helicopters are at a very advanced stage and I expect to receive the final reports very shortly, probably before the Bill is enacted. The examination of College Trustees Limited, Guinness and Mahon Ireland Limited and Hamilton Ross Company Limited are ongoing and I expect I will have to prescribe these under the regulations. Two other section 19 examinations into Dunnes Stores Ireland Company and Dunnes Stores Ilac Centre Limited have not commenced properly as considerable legal issues have arisen. An appeal has been lodged in the Supreme Court and will be heard on 2 July. Accordingly, it is my intention that these latter investigations would transfer to the director of corporate enforcement because, effectively, they have not started.
As I explained at the previous meeting, the authorised officer has completed a considerable amount of work. He is not transferring to the new office and for reasons of efficiency and the avoidance of duplication, it makes sense for him to conclude the ongoing investigations. Deputy Rabbitte raised an interesting point in regard to whether there is anything to prevent the new director initiating these inquiries and I must ensure the regulations address that. I do not believe the director would attempt to start all over again but the law should bring certainty to these issues.
It is important that the Minister would set out explicitly the particular inquiries to which this section, and only this section, is intended to apply. If there were to be a brouhaha tomorrow arising from the latest edition of The Phoenix, and the Minister were to decide to act immediately in terms of a section 19 investigation, which she could do under the existing law, would that option continue to exist under this section following the enactment of this legislation?
Clearly, the Minister will have the power to do that until such time as it is transferred to the new director. We cannot create a vacuum. If a major issue were to arise between now and the enactment of this legislation, which I hope will be enacted quickly, it would be very foolish of me to initiate a section 19 inquiry in advance of the director taking up these responsibilities. However, this is a judgment issue and one should be prepared to use one's powers for as long as one has them. If any such inquiry were to be initiated in the coming weeks, I would envisage it being transferred to the new office of the director of corporate enforcement on enactment of the legislation. Otherwise, a very unsatisfactory situation could arise with inquiries in the Department lasting for an indefinite period. The only reason we are retaining these powers is that some of these inquiries are very advanced and will, hopefully, be completed quickly. It would be inefficient to transfer them when the work is at such an advanced stage.
The recommendations of the company law enforcement group, chaired by the Attorney General and comprising a considerable number of people from a wide range of areas, were unanimous. The group recommended that the power to carry out investigations would remain with the Minister and I sought the Government's clearance for that to be transferred. The decision to hold an inquiry is not a political function; it is one which, taking account of the facts, should be carried out on a completely independent basis. The job of politicians is to make policy and enact legislation. Thereafter, the operation or execution of those powers should be a matter for an independent officer. This will fundamentally alter the manner in which decisions are made to hold investigations. They will be less of a political matter and more of a normal occurrence in the enforcement of company law, a very desirable end indeed.
I do not know whether Deputy Rabbitte has any inside knowledge on stories due to be published in Magill or The Phoenix but, were such a situation to arise, I would envisage the new office taking over any inquiry which might be initiated.
That is eminently sensible. Nobody on this side wants to deprive the Minister of her day in the sun when the reports into the ongoing investigations finally see the light of day. We look forward to that. If we were to be truthful, our views on this matter are, to some extent, informed by whoever happens to be holding the office at a given time. I am not persuaded that it is desirable to hand over decisions on matters of public interest to various quangos and bodies and remove the political domain entirely from the decision making. That is probably a reflection of the current political environment. Perhaps politicians have allowed themselves to be too affected by some of the public comment which, at the end of the day, relates to a very small number of politicians. Very often one finds oneself unable to use the floor of the House to raise questions of public interest because one is informed it is a matter for the National Roads Authority, the Competition Authority or some other authority. Therefore, we cannot seek accountability or answers. There is a view that the Minister of the day should be entitled to request the director to initiate an inquiry or, given the power of the director, perhaps he or she could do so.
I am uncomfortable about the erosion of the position of parliament in that Government is being devolved to various bodies and parliament is being reduced to the role of cipher. Taken together with other developments such as the Holy Grail of social partnership, no one would question that aspect. There was a time when the Tánaiste would question this, but not anymore. Now we all have to bow in that direction, regardless of whether it is daft or mad. It is the one thing that causes the officials in the Tánaiste's Department to really run for drinks of water, if there was ever any question of one doing anything that was not cleared with Raglan Road and IBEC. At the end of the day, we are elected to govern, and the majority in the House decides whose privilege it is. I have some reservations about us presiding over the erosion of our powers.
I appreciate Deputy Rabbitte's concerns but we are on amendment No. 45a. I have given him a lot of leeway.
That philosophical content was essential for someone holding the Chairman's exalted position.
Notwithstanding the different political hats we wear, I agree with most of what Deputy Rabbitte said. There is a cliché about democratic deficits and we hear a lot about the institutions in Europe. There is certainly a parliamentary deficit in this country. The social partnership negotiations have now become so all-encompassing they include not just wage related and tax related issues but issues to do with education, health and so on. A wide variety of issues are negotiated and agreed. When new Governments take over they honour the commitment of their predecessors, and perhaps add to that. Likewise in relation to inquiries. I do not disagree with Deputy Rabbitte. He was Minister of State at the Department of Enterprise, Trade and Employment, therefore, he is well aware of the thinking in regard to the social partnership. Some officials believe one can do nothing if one does not consult the social partners. Consultation is not a bad thing; it can often be a very good thing. Sometimes consensus is a substitute for inactivity, compromise or inertia.
Politicians are elected to govern and make the laws, therefore, we should assert our right. That is why I am keen to ensure that a parliamentary inquiry is not put at a disadvantage vis-à-vis an inquiry in another forum. For example, if I or my predecessor carried out a section 19 inquiry into the banks in relation to the DIRT issue and a committee subsequently decided to have the inquiry in which Deputy Rabbitte participated, under existing law I could not have made the section 19 report available to that inquiry, which does not make a lot of sense. I would like to discuss this issue with the Attorney General in advance of the next meeting.
However, that is not the point we were discussing here. We were discussing whether inquiries should be the sole responsibility of the director or whether there should be a political function. On balance, I have come to the conclusion, taking into consideration the medium to long-term, that it would be better to have it done by an independent officer who is not politically accountable in the sense that politicians are and who can make the decisions based purely on the fact and, I hope, cannot be lobbied successfully by power vested interests not to have an inquiry. Generally the officers who have served this country in these positions and in other areas have done their job with great expertise and integrity. I envisage that continuing under the new office, which is important. This is a very small country where most people know each other, therefore, it is important that the law is enforced without fear or favour, and that this is done on the basis of the facts that emerge and not on the basis of who might be involved. On balance, I believe this is the correct approach for the future, not that I wish to diminish the role of Ministers. I would say to Deputy Rabbitte that I do not know about the day in the sun; it could be a day in the rain as much as a day in the sun. It is important that from now on there is a new culture in this area. It is more important to change the regime and the culture than the specific inquiries or individuals involved in the specific inquiries.
Amendment agreed to.
I thank the Tánaiste and her officials for their presence here today. I will ask the Clerk to arrange the next meeting as soon as possible so that we can complete our consideration of the Bill. I thank Deputies Flanagan, Rabbitte and others for their contributions.
The Select Committee adjourned at 4.10 p.m.