I move amendment No. 1:
In page 3, line 22, to delete "such" and substitute "1 January 2007 or such prior".
This amendment is to ensure the Bill would come into operation on 1 January next year in accordance with the EU directive. It is more explicit than what is contained in the original text.
While I appreciate the intention behind the Deputy's proposal, unfortunately, I am not able to accept it. There are a number of provisions throughout the Bill, especially in Part 3 but also in Part 4, which relate to measures that cannot be commenced until some other building blocks that will facilitate their operation are in place. For example, it will be necessary to prepare regulations to transpose the EU transparency directive before a number of the provisions in Part 3 can be commenced. In the circumstances, it would be inappropriate to set a definite commencement date of 1 January 2007 for all of the provisions of the Bill. We need the flexibility afforded by the formula included in section 2.
Amendments Nos. 2, 27 to 33, inclusive, and 39 to 41, inclusive, are related and will be discussed together.
I move amendment No. 2:
In page 3, to delete line 31 and substitute the following:
"Employment;
"Regulations of 2006" means the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (S.I. No. 255 of 2006).".
Some background information will help Deputies to understand what we are doing with these amendments. The primary national law relating to takeovers is the Irish Takeover Panel Act 1997 which provided for the establishment on a statutory basis of the Irish Takeover Panel. Deputy Quinn was instrumental in getting the process into operation. The panel has extensive rules governing the various aspects of takeovers, including full takeovers, as well as the acquisition of a substantial interest in a target company. As originally passed, the Act and the panel's powers cover companies listed in the market as being operated by a prescribed market operator, the one prescribed being the Irish Stock Exchange.
In 2001, by means of the ministerial regulations made by my predecessor, Irish registered companies whose securities were not listed and traded in Ireland but were traded in other specified foreign markets were brought within the scope of the panel's supervision. In 2005 section 75 of the Investment Funds, Companies and Miscellaneous Provisions Act specifically exempted companies where the only securities of a company listed in the Irish market were the debentures or bonds that did not confer voting rights, as long as the company was not otherwise prescribed by the Minister.
Earlier this year, the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006, SI 255 of 2006, was signed into law by the Minister for Enterprise, Trade and Employment, Deputy Martin. These regulations, which came into effect on 20 May 2006, are designed to transpose into Irish law the provisions necessary to give effect to the relevant EU directive. Compared with the current regime applying to takeovers under the Irish Takeover Panel Act 1997, the directive has a narrower focus with regard to the range of companies covered and on the rules made by the panel for the exercise of its supervisory functions under the Act. The directive only applies to companies admitted to trading on the regulated market which, in an Irish context, essentially comprises companies on the official list of the Irish Stock Exchange, whereas the 1997 Act applies to a wider cohort of listed companies. In terms of transactions, the directive only applies to takeover bids, whereas the Act also covers other transactions, such as substantial acquisitions of shares and offers other than takeovers.
As a result of the transposition of the directive, certain differences have arisen in the Irish takeovers regime, depending on whether the company is directive or non-directive. The primary purpose of the takeover provisions of the Bill and the amendments tabled is to empower the panel to minimise these differences, to ensure it can, where appropriate, apply a single set of rules to all companies and transactions under its jurisdiction. The amendments to the 1997 Act contained in 2006 Bill are relatively comprehensive, providing, for example, for the alignment of the scheduled principles of the 1997 Act with those applicable in the case of the EU directive and for the substitution and alignment of the treatment of companies brought for the first time within the remit of the panel by virtue of the 2001 regulations, and in the process updating the markets specified in the 2001 regulations.
Following further consideration and reflection, however, a number of specific issues were identified which required the amendments before the select committee. Perhaps the most significant of these amendments involves the substitution of subsection 1(3) of the 1997 Act, which is designed, as far as possible, to align the definition of "acting in concert" in that Act with the 2006 regulations. This should offer greater clarity to market participants and the Irish takeover panel, as well as avoiding undesirable confusion. The second significant amendment pertains to the substitution of section 7D by the insertion of section 17 into the 1997 Act. The revised section 7D is expanded in content to spell out more explicitly the powers of the Irish takeover panel when making rules and the circumstances when these can be the same or different according to whether the proposed action is for a takeover bid, a takeover or another relevant action within the meaning of the 1997 Act. The remaining amendments are essentially consequential amendments arising from these circumstances. I commend the amendment to the committee.
Amendments Nos. 3 and 4 are related and can be discussed together, by agreement. Is that agreed? Agreed.
I move amendment No. 3:
In page 4, before section 6, but in Part 2, to insert the following new section:
"6.—(1) Part III of the Companies (Amendment) (No. 2) Act 1999 is amended—
(a) in section 32(1) (as amended by the Companies (Auditing and Accounting) Act 2003)—
(i) by substituting "Subject to sections 32A and 32B" for "Subject to sections 32A and 33(1)", and
(ii) by substituting the following paragraph for paragraph (ii):
"(ii) unless and until—
(I) circumstances, if any, arise in that financial year which result in one or more of the said conditions not being satisfied in respect of that year, or
(II) circumstances otherwise arise by reason of which the said company is not entitled to the exemption in respect of that financial year,
the provisions mentioned in subsection (2) shall not apply to the said company in respect of that year.",
(b) in section 32(3)—
(i) by substituting, in paragraph (a)(ii), “€7.3 million” for “€1,500,000” (inserted by the Companies (Auditing and Accounting) Act 2003), and
(ii) by substituting, in paragraph (a)(iii), “€3.65 million” for “£1,500,000”,
(c) by inserting the following section after section 32A (inserted by the Companies (Auditing and Accounting) Act 2003):
"32B.—Notwithstanding that the conditions specified in section 32(3) are satisfied, a company is not entitled to the exemption in a financial year if a notice, with respect to that year, is served, under and in accordance with section 33(1) and (2), on the company.",
(d) in section 33—
(i) by substituting the following subsections for subsections (1) and (2):
"(1) Any member or members of a company holding shares in the company that confer, in aggregate, not less than one-tenth of the total voting rights in the company may serve a notice in writing on the company stating that that member or those members do not wish the exemption to be available to the company in a financial year specified in the notice.
(2) A notice under subsection (1) may be served on the company either—
(a) during the financial year immediately preceding the financial year to which the notice relates, or
(b) during the financial year to which the notice relates (but not later than 1 month before the end of that year).”,
(ii) by deleting subsection (3), and
(iii) in subsection (4), by substituting the following paragraph for paragraph (c):
"(c) no notice under subsection (1) has, in accordance with subsection (2), been served on the company, and”,
and
(e) in section 35, by substituting the following subsection for subsection (1):
"(1) Whenever by reason of—
(a) circumstances referred to in section 32(1)(ii) arising in the financial year concerned the exemption ceases to have effect in relation to a company in respect of that year, or
(b) circumstances otherwise arising a company is not entitled to the exemption in respect of the financial year concerned,
it shall be the duty of the directors of the company to appoint an auditor of the company as soon as may be after those circumstances arise and such an appointment may be made by the directors notwithstanding the provisions of section 160 of the Principal Act.".
(2) Nothing in subsection (1)(b) prejudices the future exercise of the power under subsection (7) of section 32 of the Companies (Amendment)(No. 2) Act 1999 in relation to subsection (3) (as it stands amended by subsection (1)(b)) of that section 32.”.
Deputies may recall that in my contribution on Second Stage, when I gave an overview of the provisions contained in the Bill, I made specific mention of an objective that I wished to have accommodated in the context of the audit exemption provision. It was my priority that the increased thresholds for turnover and balance sheets introduced in section 6 should be capable of being availed of as early as possible by companies and, in particular, by companies for which the financial year begins on or after 1 January 2007. To give effect to that it has proved necessary to make a larger number of amendments than might have been thought necessary. This is especially so as the provisions of Part III of the Companies (Amendment)(No. 2) Act 1999, which first introduced the possibility for a company not to appoint an auditor, contain a number of interrelated and interdependent provisions such that when one is changed, a number of consequential amendments must be made.
The essence of the changes now being made will still enable a member or members holding not less than 10% of the voting shares of a company that would otherwise be eligible to avail of the exemption to notify the directors that the exemption should not be availed of. Under the existing provisions, such a notification would have to be made no later than one month before the end of their preceding financial year. Under the new arrangements, such a request can be made in the preceding financial year or in the year when the exemption is being availed of provided it is made at least one month before the end of that financial year.
However, in making the necessary revisions we may have unwittingly removed an element of the original approach which continues to be relevant in the new scenario, that is, the two-month period we had provided in respect of the initial financial year to which the new audit thresholds would be applicable. This pause was expressly provided to enable a member or members holding not less than 10% of the voting shares of a company that would otherwise be eligible to avail of the exemption to notify the director that the exemption should not be availed of. As just mentioned in the previous context, such a notification would have to be made no later than one month before the end of the preceding financial year.
Notwithstanding that we are proceeding with the different approach, I consider that on balance there may be merit in reinserting the two-month period in respect of the financial years in progress at the time of commencement of the new provision. There is no need to have the two-month provision apply for subsequent years. This would enable early take-up of the new dispensation, subject to the relevant criteria being met. It would also appear to meet what I understand Deputy Quinn is seeking to achieve in his amendment to section 6(2). I intend to have this matter reviewed before Report Stage and, if necessary and appropriate, I will bring forward an amendment to deal with that aspect.
The other substantial change being made is to section 35 of the Companies (Amendment)(No. 2) Act to put beyond doubt that where a company fails to file its returns on time in the Companies Registration Office or a notification not to avail of the exemption is made, the directors must appoint auditors. I trust that explains what the amendments are designed to achieve, and I commend them to the committee.
I welcome the amendment to increase the exemption from audit requirement. Obviously, it is a policy U-turn by the Government arising from a number of other items of legislation-----
It is a change of mind.
I know that. It is a change of heart, if not a change of mind, on exempting small business and small companies from the onerous requirements under audit exemption. I welcome it.
We are deleting the existing section 6 and, consequently, my amendment to a part of section 6 falls if we accept the substantial amendment now proposed by the Minster of State. We received representations that the new regime would be delayed too long if the Bill stands as currently drafted. The note received states that under this Bill, it is proposed to increase the audit exemption threshold to €7.3 million, which would be in accordance with most European Union member states. It further states that the Bill is worded, however, to make this amendment effective for accounting periods commencing - that is the point of the reference in line 22 of my amendment - on or after 1 January 2007. The note states also that the first accounting period eligible for exemption under the increased thresholds will therefore be the year ending 31 December 2007, effectively 15 months away.
By contrast the United Kingdom Chancellor announced in his budget speech of March 2003 that he was raising the threshold to £5.6 million sterling. The note states that was done by ministerial order by Patricia Hewitt, MP, then trade Minister, within five weeks and was made effective for accounting periods ending on or after the date of the ministerial order. The contrast is stark.
In the meantime, international auditing standards now apply to all audits since 14 December 2004, irrespective of the size of the entity. The European Union's approach and that of the Auditing Practices Board which lays down standards for both the United Kingdom and Ireland is that each member state has the power to remove small companies from this imposition if it so chooses. These tough standards must prevail in the post-Enron era. Therefore, for the next 15 months small companies with a turnover of between €1.5 million and €7.3 million will be burdened with the cost of an audit that must be conducted under international auditing standards, as if the original provision had gone through. Small accountancy practices will need to retrain principals and staff to conduct audits under this IAS, notwithstanding the fact that most of their small client companies will not be subject to the audit requirement within 15 months. This does not make good economic or business sense.
It would make sense to amend section 6(2) of the Investment Funds, Companies and Miscellaneous Provisions Bill 2006 such that the amendment affected by subsection (1) would apply as respects a financial year of a company that ends not earlier than two months after the commencement of the section. This is the professional advice the Labour Party has received. The Minister of State who is not only a Member of the Oireachtas but also a professional accountant comprehends these matters better than I do. I get the sense that the new section 6 he has introduced represents a more substantial and comprehensive approach to this problem and meets my specific concern with others.
The amendment will ensure the new thresholds are available to companies at the earliest possible date. It could be the end of the year or the middle or end of January, for example, subject to clarification of the two-month provision. The point the Deputy made has been acknowledged. That is why we seek clarification.
I move amendment No. 5:
In page 4, before section 7, to insert the following new section:
"7.—(1) In this section "Act of 1990" means the Companies Act 1990.
(2) Section 150 (as amended by the Company Law Enforcement Act 2001) of the Act of 1990 is amended by substituting the following subsection for subsection (4B):
"(4B) The court, on the hearing of an application for a declaration under subsection (1) by the Director, a liquidator or a receiver (in this subsection referred to as the "applicant"), may order that the directors against whom the declaration is made shall bear—
(a) the costs of the application, and
(b) the whole (or such portion of them as the court specifies) of the costs and expenses incurred by the applicant—
(i) in investigating the matters the subject of the application, and
(ii) in so far as they do not fall within paragraph (a), in collecting evidence in respect of those matters, including so much of the remuneration and expenses of the applicant as are attributable to such investigation and collection.".
(3) Section 160 (as amended by the Company Law Enforcement Act 2001) of the Act of 1990 is amended by substituting the following subsection for subsection (9B):
"(9B) The court, on the hearing of an application for a disqualification order under subsection (2), may order that the persons disqualified or against whom a declaration under section 150 is made as a result of the application shall bear—
(a) the costs of the application, and
(b) in the case of an application by the Director, the Director of Public Prosecutions, a liquidator, a receiver or an examiner (in this paragraph referred to as the “applicant”), in addition to the costs referred to in paragraph (a), the whole (or such portion of them as the court specifies) of the costs and expenses incurred by the applicant—
(i) in investigating the matters the subject of the application, and
(ii) in so far as they do not fall within paragraph (a), in collecting evidence in respect of those matters, including so much of the remuneration and expenses of the applicant as are attributable to such investigation and collection.”.”.
This amendment relates to the recovery of costs in respect of applications for restrictions on and disqualifications of persons acting as directors. The purpose of the amendment to sections 150(4B) and 160(9B) of the Companies Act 1990 is to permit the High Court to order that the costs of investigating, prosecuting, restriction and disqualification in respect of applications, or proportions of such costs specified in court, can be recovered from the restricted or disqualified company directors rather than just the legal costs, as is the case at present. Receivers, liquidators and the Director of Corporate Enforcement, the primary applicants pursuant to section 150, are unable to obtain the majority of the costs of investigating matters on which the application is grounded if they are successful in their applications. This is not regarded as consistent with the intention behind the amendment to the legislation contained in section 41 of the 2001 Act. Accordingly, I recommend the amendment to the committee.
I accept it on condition that the Minister of State print it in block letters and make it available in the tent in Galway.
That will be the Fine Gael tent. I would not know how to get there.
It is a sensible measure.
I move amendment No. 6:
In page 5, line 36, before "in," to insert "for".
This is just to tidy up section 8. I presume "for" was meant rather than "in". This is not earth-shattering stuff.
I have been informed that the wording of the subsection is satisfactory and that the amendment proposed by the Deputy is unnecessary.
Will the Minister of State explain why?
The proposed new section 43(a)(ii) states that "subject to, and to the extent provided in, paragraph (c), the guarantor (if any)” and so on. The Deputy has proposed to insert the word “for” before the word “in”.
Is that okay?
That would lead to the inclusion of the phrase "to the extent provided for in" in the Bill.
We could delete "in" and include "for".
We should be serious about this. We are not being serious. This is the stuff that legal cases are made of.
Perhaps I should have proposed that we insert "for" instead of "in".
The Office of the Chief Parliamentary Counsel has told us that this wording is okay.
Does the word "in" refer to another particular paragraph that has already been mentioned?
Yes, it refers to paragraph (c).
That is fine.
Should the apostrophe be moved? I am being serious. Guys make fortunes from issues of this nature. If the Minister of State wants to return to this matter on Report Stage-----
That is an interesting one.
We will have a look at that. The Deputy has made a good point.
We should have the phrase "provided in paragraph (c)” without an apostrophe in the middle of it.
I have no problem with accepting that, as long as the experts agree with the point that has been made.
Exactly.
The current wording does not give the impression that paragraph (c) is being referred to.
I know. I am thinking back to the days when I was doing English. The basic phrase being used in this section is "subject to paragraph (c)”. The phrase “and to the extent provided in” fits into that.
Okay. All I am saying is——
We will put it——
The Minister of State should run it by them again.
We will leave it to the experts.
That is what Report Stage is for.
Yes.
This is the stuff that keeps companies in court for days.
We will definitely have that checked out.
I need to make a statement before we move on to Part 3 of the Bill.
Yes.
I would like to mention that, subject to it proving possible to resolve outstanding difficulties in the meantime, I intend to introduce for consideration on Report Stage amendments to tackle three particular issues, all of which relate to the Companies Acts. I expect that the amendments will be proposed to Part 2 of the Bill on Report Stage, as long as the necessary work is completed. I will discuss the matters to which the proposed amendments will relate.
The first issue is the issuing of debentures or other debt securities by private companies. Part 5 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005, which was enacted last year, paved the way for the transposition into Irish law of a new EU directive that modernises the law relating to the publication of a prospectus when raising capital through the issue of securities. The associated transposing regulation, which was SI 324 of 2005, completed the necessary transposing law.
As part of the process, the opportunity was taken to change provisions in national law contained in the Companies Act 1963. Arising from these amendments, which involve the repeal of a number of provisions in Part III of the 1963 Act, a certain doubt has been created about the manner in which private companies can issue debentures or other debt securities. The matter has been examined by the Company Law Review Group. While a clear mechanism for addressing the matter has been identified in the context of the reform and consolidation Bill that the group is recommending, I was hoping to help to remove the doubts which exist in the context of the existing law. It is a complex issue, however. If it proves possible to come up with appropriate amendments to address the issues arising in this regard, I intend to table them on Report Stage.
The second issue relates to section 45 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005. In this regard, we received in recent weeks a submission from a number of legal firms that advise parties which issue prospectuses which primarily relate to debt securities. In the submission, the legal firms drew attention to a particular difficulty arising from the operation of section 45 of the 2005 Act. I had hoped to address the issue on Committee Stage. Any amendment that proposes to remove the main difficulty which has been identified will give rise to a need for consequential amendments. As with the previous issue, I hope all the necessary work can be undertaken before Report Stage to allow me the opportunity to table an appropriate amendment on this issue.
The final issue relates to statutory declarations. My officials and I have been grappling with a particular problem that first came to the attention of the Companies Registration Office earlier this year. In a number of provisions in the Companies Acts, documents that must be filed in the CRO have to contain a statutory declaration. It will usually be a director of the company that makes the declaration. Such declarations must be made before one of a number of persons who are authorised to receive or witness them. Particular issues arise when the declarations are made and taken abroad. The matter has been the subject of lengthy consideration and legal advice. While I had hoped to bring the appropriate proposal for amendment before the committee, this has not proved to be possible in the time available. In the circumstances, it is my intention to continue my consideration of this complex matter with the assistance of all interests concerned. If possible, I intend to bring forward appropriate amendments to resolve the matter on Report Stage.
Amendments Nos. 7, 8 and 10 to 16, inclusive, are related and may be discussed together.
I move amendment No. 7:
In page 6, before section 9, but in Part 3, to insert the following new section:
"9.—Section 9(2) of the Companies (Auditing and Accounting) Act 2003 is amended by inserting the following paragraph after paragraph (m):
"(ma) to perform the functions conferred on it by Transparency (regulated markets) law (within the meaning of Part 3 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006) in respect of the matters referred to in Article 24(4)(h) of the Transparency (Regulated Markets) Directive (within the meaning of that Part);”.”.
The amendments I have tabled arise due to the implementation of the EU transparency directive. The Irish Auditing and Accounting Supervising Authority, IASA, is the appropriate body to carry out the functions entailed in Article 24 (4)(h) of the Transparency (Regulated Markets) Directive, which include a requirement to ensure “that information referred to in this directive is drawn up in accordance with the relevant reporting framework and to take appropriate measures in case of discovered infringements”. It is projected that IASA carries out this work on the basis of designation as a competent authority under the transparency directive. IASA’s involvement is being provided for both in the Bill and in regulations under the transparency directive.
The first of the amendments is introduced by the insertion of a new section 9 into this Bill, which confers functions on IASA in respect of Article 24(4)(h), by way of an insertion at section 9 of the Companies Auditing and Accounting Act 2003. The other amendments being discussed in this group arise because of the desirability of assigning IASA functions under Article 24 (4)(h) as a projected competent authority, with the result that there will be two competent authorities under the directive. Consequently, there is a need to distinguish them in references in this Bill.
In respect of Deputy Hogan's amendments, the term "transparency (regulated markets) law" is specifically defined in section 9 for the purposes of part 3 of the Bill. I have been advised that it is satisfactory as so drafted. I commend the amendments that I have tabled to the committee.
In the committee's deliberations on the grocery trade, we have found that it is difficult to make a strong assertion about profitability and turnover if we do not know the true extent of the market. For example, multiples do not have to publish their turnover and profit figures.
To what amendment does the Deputy refer?
I am talking about amendmentNo. 7 and my amendment, which deals with the issue of transparency and the transparency directive. I am trying to explain the reasons I tabled the amendment.
During our deliberations, the members of the committee were quite exasperated when trying to discover the true extent of profitability and turnover among private companies given that we were asked to make certain decisions about how to regulate the groceries market. If we do not know the extent of turnover and profitability among the main players in a marketplace who carry out more than 70% of the business involved, it is very difficult to make policy decisions and enact legislation in the true spirit of openness and transparency which we require. If an issue is of public interest, such as the price of food in the context of household budgets, we must find out the extent of profitability and turnover of all the players in the market to establish what policy changes are required in law and to elucidate matters as a committee in concert with the Minister in a transparent way.
The grocery trade is one example from recent months on which we had to make assumptions in the absence of facts. I ask the Minister to consider the matter and force certain companies in traded areas of significant importance, such as the financial obligations of households, to provide information where a policy change is required in the public interest. We should know the figures involved. Some companies in the private sector provide the information voluntarily anyway, but others choose not to, resulting in policy decisions made on the hoof which are at variance with what needs to be done.
The amendments relate to a transparency (regulated markets) law. What that entails is set out plainly in Part 3 of the Bill in three subsections of section 9(1). Section 9(1)(a) defines transparency (regulated markets) law as ”the measures adopted for the time being by the State to implement the Transparency (Regulated Markets) Directive and any supplemental Directive (whether an Act of the Oireachtas, regulations under section 3 of the European Communities Act 1972, regulations under section 10 or any other enactment (other than, save where the context otherwise admits, this Part))”. According to section 9(1)(b) such law also includes “any measures directly applicable in the State in consequence of the Transparency (Regulated Markets) Directive and, without prejudice to the generality of this paragraph, includes any Regulation or Decision made by the Commission pursuant to the procedure referred to in Article 27(2) of that Directive”. Section 9(1)(c) further provides that the law also includes “any supplementary and consequential measures adopted for the time being by the State in respect of any Regulation or Decision made by the Commission in consequence of the Transparency (Regulated Markets) Directive pursuant to the foregoing procedure”.
The Minister of State has set out a finite interpretation of what it means whereas I wish to provide him with scope to expand on it given that we have nothing to hide on policy matters.
The transparency directive involves the harmonisation of requirements to disclose information about issuers whose securities are admitted to trading on a regulated market. It replaces and updates part of the EU's existing legislation in this area, which is the consolidated admissions and reports directive, 2001/34/EC. The transparency directive is designed to enhance transparency on EU capital markets by requiring regulated market issuers to produce periodic financial reports, annually and half-yearly, as well as quarterly management statements. Shareholders in such companies will be required to disclose major holdings when acquisitions or disposals cause these to reach or breach certain thresholds. The directive also deals with the mechanisms through which the information is to be disseminated and stored. It sets out quite clearly what information must be put in the public arena.
I have a drafting query which the Minister of State might refer back to his experts. There is an inconsistency in the use of upper and lower case initial letters at the different points at which the words "regulated markets" appear in parenthesis. For the purposes of consistency, should the words in parenthesis be rendered with upper case initial letters throughout the Bill? For consistency, should "(regulated markets)" in line 28 not also be in capitals?
We will definitely do that. In another section it is all in capitals.
I move amendment No. 9:
In page 7, between lines 24 and 25, to insert the following subsections:
"(3) Civil liability shall not be created by regulations under subsection (2) in respect of a contravention of regulations under this section save in respect of such a contravention that involves either—
(a) an untrue or misleading statement, or
(b) the omission from a statement of any matter required to be included in it, being, in either case, a statement—
(i) that is contained in a publication made in purported compliance with a provision of Transparency (regulated markets) law specified in the regulations, and
(ii) in respect of which a person suffers a loss by reason of the person's acquiring or contracting to acquire securities (or an interest in them) in reliance on that publication at a time when, and in circumstances in which, it was reasonable for the person to rely on that publication, and the following condition is fulfilled in respect of that publication.
(4) That condition is that a person discharging responsibilities within the issuer of the securities referred to in subsection (3) in relation to that publication (being responsibilities of a kind specified in regulations under this section)—
(a) knew the statement concerned to be untrue or misleading or was reckless as to whether it was untrue or misleading, or
(b) knew the omission concerned to be dishonest concealment of a material fact.”.
As it stands, section 10(2)(b) would give the Minister power to make regulations creating civil liability provisions in respect of contraventions of the proposed regulations to transpose the EU transparency directive to enable any person suffering loss thereby to recover compensation for that loss. The proposed amendment sets out the broad parameters that would govern the power of the Minister to create civil liability by regulations. The EU directive requires member states to have liability provisions applicable to persons with responsibility for publications arising mainly in respect of Articles 4 to 6, inclusive, of the directive, which deal with annual and half-yearly financial reports and quarterly management statements, respectively.
Owing to the serious concerns expressed by the industry here about the potential scope of the liability, which could arise from these articles, the proposed amendment would have the effect of limiting the liability applying to the issuer, or relevant person within the issuer with responsibility for the reports in question, which could be applied in the regulations. In this regard, the directive gives the member state power to determine the extent of the liability. The approach proposed is largely in line with that being adopted in the UK, which, like Ireland, is a common law jurisdiction and where similar concerns have been expressed over the potential liability arising. For competitive reasons the industry here considers it very important that our regime in this sensitive area should not be out of line with that of the UK.
I move amendment No. 10:
In page 7, lines 37 to 39, to delete subsection (1) and substitute the following:
"12.—(1) In this section "competent authority" means the competent authority designated under Transparency (regulated markets) law for the purposes of the provisions of the Transparency (Regulated Markets) Directive (other than Article 24 (4)(h) of that Directive).”.
I move amendment No. 12:
In page 8, subsection (3), line 19, after"Directive" to insert ", other than paragraph (4)(h) of that Article”.
I move amendment No. 15:
In page 9, subsection (1), lines 1 and 2, to delete "competent authority designated under Transparency (regulated markets) law" and substitute "competent authority referred to in section 12(1)”.
Amendment No. 17 is out of order.
I do not know how the amendment could be out of order. As it is a miscellaneous provisions Bill, we can discuss anything under the sun regarding various aspects of the legislation. I would be glad to have the opportunity to get a reasonable explanation of the matter before Report Stage. I intend to submit the amendment again on Report Stage, as I cannot understand why it has been removed. Other amendments relating to consumer law have also been ruled out of order. I would like an explanation.
The Deputy should take the matter up with the Bills office because we have had no hand, act or part in it.
I ask the Chairman to have the clerk make inquiries with the Bills office in advance of Report Stage.
They will explain afterwards.
I accept the note I received from the Chairman that my amendment No. 26 is not relevant to the provisions of the Bill and that it involves a potential charge upon Revenue. However, it is relevant to the provisions of the Bill in that it involves a miscellaneous item of legislation. While I accept that it does potentially carry a charge, I wish to draw the Minister of State's attention to the nonsense of having the concept of a sub-minimum rate. It is either a minimum rate or it is not. It is a little like describing somebody as being sub-human. One is either human or one is not. Likewise, one is either pregnant or one is not. This partial state of being half-human or half-pregnant is ridiculous.
If someone over 18 years of age starts to work in the labour market, the provision of the minimum wage still prevails. Therefore, he or she does not receive the full value of the minimum wage for at least two years. Whatever about young people aged 16, 17 or 18 years who come in at a rate of 60%, 70%, 80% and so forth, there were concerns about the dislodgement or displacement effect minimum wage legislation might have had in a much more frail marketplace. I know it is probably, technically, the responsibility of the Minister of State's colleague, Deputy Killeen, but it is an economic measure rather than a labour market one and should be examined.
I will raise the matter again on Report Stage to have it properly debated. I accept the ruling of the Chair in regard to the admissibility of the amendment at this point but the Minister of State may wish to respond. Given the nature of the market and the level of abuse we have discovered in the workplace generally which make it impossible for the existing labour inspectorate to police a labour force of in excess of 2 million, certain statutory minimum standards are required. Although the current rate is €7.65, it is the case that many registered agreements in the labour market provide for a figure close to €14.
The arrangements for a review of the national minimum wage were addressed by the social partners in the recent national agreement, Towards 2016. The issue of removing the category to which the Deputy referred - the sub-minimum rate - was not one to which the social partners adverted.
They do not have to be elected; we do.
I agree but any proposal in this regard should be dealt with within the social partnership framework. I will bring the Deputy's points to the attention of the Minister of State, Deputy Killeen. I do not know if it will be possible to raise the amendment on Report Stage but the matter can be taken up with the Bills Office.
I move amendment No. 27:
In page 9, before section 15, but in Part 4, to insert the following new section:
15.—Section 1 of the Irish Takeover Panel Act 1997 is amended—
(a) by inserting after ‘relevant transaction in the definition of “acting in concert”, in subsection (1), “(other than a bid referred to in that subsection)”, and
(b) by substituting the following subsection for subsection (3):
"(3)(a) For the purposes of this Act, two or more persons shall be deemed to be acting in concert as respects a takeover or other relevant transaction (in neither case being a bid to which the Regulations of 2006 apply) if they co-operate on the basis of an agreement, either express or tacit, either oral or written, aimed at:
(i) either—
(I) the acquisition by any one or more of them of securities in the relevant company concerned, or
(II) the doing, or the procuring of the doing, of any act that will or may result in an increase in the proportion of securities in the relevant company concerned held by any one or more of them, or
(ii) either—
(I) acquiring control of the relevant company concerned, or
(II) frustrating the successful outcome of an offer made for the purpose of the acquisition of control of the relevant company concerned, and 'acting in concert' shall be construed accordingly.
(b) For the purposes of this subsection and without prejudice to any rules under section 8, persons controlled by another person within the meaning of Article 87 of Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 shall be deemed to be persons acting in concert, as respects the matters mentioned in paragraph (a), with that other person and with each other.
(c) In this subsection—
‘bid to which the Regulations of 2006 apply' means a takeover bid, within the meaning of the Regulations of 2006, which the Panel has, by virtue of Regulation 6 of those Regulations, jurisdiction to supervise; ‘Regulations of 2006' means the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (S.I. No. 255 of 2006).".".
I move amendment No. 28:
In page 9, to delete lines 15 to 34 and substitute the following:
"(c) a public limited company—
(i) one or more of the securities of which are, for the time being, authorised to be traded on any of the following markets, namely:
(I) one or more of the markets operated by the London Stock Exchange or any successor of that Exchange (whether created by the merger of 2 or more exchanges or otherwise);
(II) the New York Stock Exchange;
(III) the market known as Nasdaq operated by Nasdaq Stock Market, Incorporated, or
(ii) falling within any other class of public limited company which, in order to secure more fully the protection of shareholders, the Minister, after consultation with the Panel, prescribes for the purposes of this paragraph, other than a public limited company (in section 2B referred to as an 'excepted company') the only securities of which, for the time being, are authorised to be traded on a market referred to in any of the preceding clauses are those specified in section 2B,".
I move amendment No. 29:
In page 9, lines 37 and 38, to delete "subparagraph (i), (ii), (iii) or (iv) of paragraph (c)” and substitute “clause (I), (II) or (II) of paragraph (c)(i)”.
I move amendment No. 30:
In page 9, line 40, to delete "subparagraphs" and substitute "clauses".
I move amendment No. 31:
In page 9, line 47, to delete "subparagraphs" and substitute "clauses".
I move amendment No. 32:
In page 9, before section 16, to insert the following new section:
"16.—Section 2 (as amended by the Act of 2005) of the Irish Takeover Panel Act 1997 is further amended by substituting the following subparagraph for subparagraph (II) of paragraph (iii):
"(II) which is not a company referred to in paragraph (c)(i) or (ii) or firstly referred to in paragraph (d).”.”.
I move amendment No. 33:
In page 11, to delete lines 7 to 12 and substitute the following:
"(7D) (a) Rules under any of the preceding subsections may contain such supplementary, incidental or consequential provisions as appear to the Panel to be necessary or desirable in respect of the matters mentioned in the particular subsection to which the rules concerned relate.
(b) Different rules may be made under this section in relation to any thing referred to in this section respecting a company by reference to whether the company is or is not a company a bid in respect of which the Panel has, by virtue of Regulation 6 of the Regulations, jurisdiction to supervise (which bid is referred to in paragraph (c) as a ‘Directive bid’).
(c) Paragraph (b) is without prejudice to the Panel’s power to make uniform provision in rules under this section in relation to every company—
(i) a Directive bid, or
(ii) a takeover or other relevant transaction, in respect of which the Panel has jurisdiction to supervise.".".
I understand the complexity of the Bill but I presume all of these substantial ministerial amendments, which have arrived at a relatively late stage, are the product of second thoughts, U-turns, greater wisdom and representations from different bodies. To a certain extent we are giving our assent to a blank cheque on the basis that the Minister has better resources than we have in bringing forward the amendments. Given the practice and precedents that different Administrations have adopted, I have no problem with that. However, the Minister of State might, for the record of the House, indicate why there has been a substantial re-think on a number of fronts.
One of the main contributors to the consultation process was the Irish Takeover Panel. Many of the amendments we are making could not have been brought about by regulation so they had to be made in the primary legislation.
What is the Irish Takeover Panel?
It is a statutory body established under the 1997 Act.
I presume it was understood that if the changes that are now being enacted in primary legislation were considered to be desirable in the first place - the directive did not exactly fall from the sky - some group which negotiated this directive, or participated in its negotiation in draft form, was aware of its impact on primary legislation. I do not intend to impede the process but there is a duty of care and democratic scrutiny which, frankly, we are not in a position to provide on behalf of citizens.
We always had the national law. When the directive arrived we had to try to make it and national law work together. The takeovers directive has a narrower focus as regards the range of companies and transactions covered compared to the current regime applying to takeovers in Ireland under the Irish Takeover Panel Act and the rules made by the panel for the exercise of its supervisory functions under the Act. The directive only applies to companies admitted to trading on a regulated market. In an Irish context, this essentially means companies on the officially listed Irish Stock Exchange whereas the 1997 Act applies to a wider cohort of listed companies. In terms of transactions, the directive only applies to takeover bids whereas the Act covers other transactions as well.
Deputy Quinn is suggesting that those who were involved with the directive should have had the amendments included when the legislation was being drawn up.
I am responding to my responsibilities as a Member of the Oireachtas. We are providing scrutiny of legislation. However, we are not competent to do so because of the complexity of these technical amendments being introduced. I trust the Minister of State and his officials as I have been on his side of the fence in the past. However, I do not believe we are doing our job as well as we should. I accept there are deadlines for establishing a timetable to meet the regulations. In future if an issue such as this emerges, a two-hour consultation with the committee should be held. Anyone from Mars examining the way we make regulations would agree it is not an acceptable standard, particularly when we aspire to be a serious international financial services centre of excellence, open to scrutiny and probity.
I accept Deputy Quinn's point and I agree with his comments. My officials came before the Sub-Committee on European Scrutiny. I accept they should have been before this committee for a general discussion. We will note it for future reference.
I note that.
I move amendment No. 37:
In page 12, before section 20, to insert the following new section:
"20.—The Central Bank and Financial Services Authority of Ireland Act 2003 is amended in Article 3 of Part 21 of Schedule 1 by the insertion of the following after section 7:
7A.—(1) The Director may, in the interests of better informing consumers, conduct price surveys in order to—
(a) make consumers aware of price discrepancies,
(b) assess competitiveness or other practices under sections 4 and 5 of the Competition Act 2002, or
(c) for such other reason as the Director may, from time to time, deem necessary.
(2) The Director shall not be limited by national or currency boundaries in carrying out a price survey referred to in subsection (1).
(3) The Director shall be empowered to—
(a) (i) publish or part-publish all or any part of information,
(ii) create an electronic database containing data, gathered by him or her under this section, and
(b) make any electronic database created under paragraph (a)(ii) publicly available on-line.
7B.—The Director may compile and publish codes of conduct for service providers and retailers on such issues as he or she may, from time to time, deem appropriate, including the passing on of costs such as exchange rate movements.
7C.—(1) The Director may establish the ‘Good Practice Provider Quality Mark'.
(2) The Good Practice Provider Quality Mark shall be awarded to suppliers of goods and services who agree to be bound by a code of practice compiled and published under section 7B.".".
This amendment seeks to ensure the consumer is informed openly about charges and establishes a system to allow this. There are many codes of conducts and quality marks available in law through the office of the Director of Consumer Affairs and the National Consumer Agency. The best practice outlined by the Government could be put into practice sooner rather than later. It is important that any best practice for the consumer is enshrined in law. Voluntary codes do not work. The former Director of Consumer Affairs, Carmel Foley, was restricted by law. She had no power to name and shame retailers who were unscrupulously using excessive pricing on particular days, such as days on which there were large sporting events.
This amendment will make it easier for consumers to understand the discrepancies and differences in financial products that may be offered by financial institutions. There is not a day in the week when a new product range is not launched by a bank or a building society. People have difficulties in comparing them, particularly in the small print detail. The legislation provides an opportunity to give more transparency and interpret it for consumers so they can make informed decisions.
As much as I would like to accept the amendment, I cannot do so. The amendment refers to the Central Bank and Financial Services Authority of Ireland Act 2003 which comes under the remit of the Minister for Finance. I will bring the Deputy's proposal to the attention of the Minister for Finance.
I move amendment No. 39:
In page 12, line 3, to delete "The following Regulation" and substitute "(1) The following Regulation".
I move amendment No. 40:
In page 12, to delete lines 4 and 5 and substitute "the Regulations of 2006:".
I move amendment No. 41:
In page 12, between lines 8 and 9, to insert the following subsection:
"(2) The following paragraphs are substituted for paragraph (1) of Regulation 8 of the Regulations of 2006:
"(1) In paragraph (1A) the reference to subsection (3) of section 1 of the Act of 1997 (as it stands amended otherwise than by these Regulations) is a reference to the subsection (3) inserted in that section by the Investment Funds, Companies and Miscellaneous Provisions Act 2006.
(1A) Without prejudice to the continued application of subsection (3) of section 1 of the Act of 1997 (as it stands amended otherwise than by these Regulations) to companies referred to in Regulation 4(2), paragraph (2) has effect in relation to the application of the Act of 1997 by virtue of Regulation 4(1).".".
We may not have fully interpreted the intent of this section. Will the Minister of State outline what will happen in the movement to the new regime for consumer affairs from the existing role? Where stands the present incumbent and what is the continuity of protection?
Section 21 amends the Consumer Information Act 1978 by repealing section 9 (11)(b). The amendment removes the restriction that the Minister may not find a person to perform the functions of the Director of Consumer Affairs for a period of more than six months. A person was appointed to perform the functions of the director in August 2006 as it was not considered practicable to fill the vacancy arising from the resignation of the previous director in the normal way.
The legislation to establish the NCA is expected to be published before the end of the year and the NCA is expected to be up and running early in 2007. It is necessary, therefore, to remove the six months' restriction in section 9 (11)(b) so that the person performing the functions of the director can continue to carry out those important functions until they can be transferred to the NCA. I hope this explains the purpose of this section in the Bill.
The new incumbent is doing an excellent job. Is the Minister of State saying that by removing this provision in section 9 (11)(b) of the Consumer Information Act 1978, a smooth transition from the existing legal position to the new envisaged position can be provided without any legislative impediment?
Yes.
I move amendment No. 42:
In page 12, after section 21, to insert the following new section:
"22.—(1) Section 33C(1) of the Central Bank Act 1942 (inserted by the Central Bank and Financial Services Authority of Ireland Act 2003) is amended by inserting the following paragraph after paragraph (a):
"(ab) to perform the functions the Bank has under regulations for the time being in force under section 10 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006;”.
(2) Section 33AN of the Central Bank Act 1942 (inserted by the Central Bank and Financial Services Authority of Ireland Act 2004) is amended—
(a) by substituting the following definition for the definition of “designated enactment” (inserted by the Act of 2005):
" ‘designated enactment' does not include Part 4 or 5 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 or Part 3 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006;”,
and
(b) by substituting the following definition for the definition of “designated statutory instrument” (inserted by the Act of 2005):
" ‘designated statutory instrument' does not include the Market Abuse (Directive 2003/6/EC) Regulations 2005 (S.I. No. 342 of 2005), the Prospectus (Directive 2003/71/EC) Regulations 2005 (S.I. No. 324 of 2005) or regulations for the time being in force under section 10 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006; ”.
(3) Schedule 2 to the Central Bank Act 1942 (inserted by the Central Bank and Financial Services Authority of Ireland Act 2003) is amended by inserting in Part 1 the following item after the item relating to the Investment Funds, Companies and Miscellaneous Provisions Act 2005 (inserted by the Act of 2005):
"
|
No. - of 2006 |
Investment Funds, Companies and Miscellaneous Provisions Act 2006 |
The whole Act |
".".
This is a new section. Section 87 of the Investment Funds Companies and Miscellaneous Provisions Act 2005 added the legislation which implemented the prospectus and the market abuse directive last year to those enactments to which sections 33(c) and 33(n) and Schedule 2 to the Central Bank Act 1942 refer.
This new section adds a proposed transparency regulated markets law to the 1942 Act. The Financial Regulator will be the central competent authority for the purposes of the transparency directive and in the implementing legislation will have a range of sanctions at its disposal, including administrative sanctions for the purpose of ensuring compliance. The purpose of the first part of the new section is to ensure that the administrative sanctions which are regulated processes under the Central Bank and Financial Services Authority Act 2004 for the separate purpose of regulating financial institutions do not apply to the transparency legislation.
The purpose of the second part of the new section is to ensure that the Financial Regulator can discharge the functions of the Central Bank and Financial Services Authority arising under Part 3 of this Bill and the whole of the upcoming regulations implementing the transparency directive. I commend the amendment to the committee.
How was the Minister of State able to introduce this amendment as a new section when it is to do with the Minister for Finance but I could not introduce mine?
We discussed Deputy Hogan's amendment but I did not accept it.
I thought the Minister of State said that mine was appropriate to the Minister for Finance while his own was appropriate to himself.
We appoint the competent authority in this instance.
Before we conclude, I wish to bring to members' attention that I tabled an amendment to make a change to the Netting of Financial Contracts Act 1995. I was advised, however, that because the amendment did not strictly fall within the terms of the Bill, as published, it could not be discussed on Committee Stage and that it would be necessary for me to move an appropriate motion on Report Stage. It is my intention to do so.
I thank the Minister of State and his officials for attending the meeting. I also thank Deputies Quinn, Hogan and Callanan for their co-operation.
When does the Minister of State propose to take Report Stage?
We do not yet have a date. The matter is being discussed with the Chief Whip.
Is it the intention to complete Report Stage by the end of the year?
Yes.
The Minister of State will have to go back to the Seanad but I assume that is pro forma.
Yes. I thank the Vice Chairman for chairing the meeting and Deputies Quinn, Hogan and Callanan for their contributions and co-operation. I also thank the clerk to the committee and the other officials, as well as my own staff for helping me deal with the sometimes difficult and strange terminology involved in the Bill. I look forward to its speedy movement through Report Stage.
