In relation to these guaranteed companies, the position up to this was that they had not been asked to file a return. Now under this section I understand they are to be asked to return a balance sheet.
SECTION 128.
Question proposed : " That Section 128 stand part of the Bill."
That is so.
I think it is undesirable in regard to the purely charitable holding company and I would suggest that the Minister should give consideration to this. It is a bit difficult to draft and that is why I did not put down an amendment. There should be given, on the analogy of the Charities Act, a power to the Commissioners of Charitable Donations and Bequests to exempt from the balance sheet demand of Section 128, any company that they certify as a purely charitable holding company.
I do not think that would be unreasonable. The intention was to make sure that some of these alleged charitable organisations would not escape——
I agree.
——and having collected a lot of money only pay out an infinitesimal portion of the money donated for the charity.
I am entirely with the Minister in wanting to stop that but equally I think it would be undesirable that the genuine charity, which was the holding company for the various Orders and so forth, should have this obligation put on them. I think the way to deal with it would be to give the Commissioners of Charitable Donations and Bequests the power of exemption as they have in certain cases under the Charities Act.
I will consider an amendment. I think it is reasonable.
On subsection (2) of Section 128, is this a new provision ? It says " If any such balance sheet as aforesaid or document required by law to be annexed thereto did not comply with the requirements of the law as in force at the date of audit ". That is going to be a requirement on a company to judge whether it has complied with the law itself. I find it difficult to visualise the case here when they have deliberately broken the law in the first instance.
Oh, no.
What does it mean?
Subsection (5)?
No, subsection (2). It clearly wants the accounts in the form in which this Bill is going to specify the accounts as being lawful and otherwise in the Bill the form of these accounts will be positively specified and I think it is to be assumed that the accounts that will be furnished with the thing are the lawful accounts. It is rather peculiar to provide that he will break the law and then amend himself further. I do not understand the reason for that subsection as such.
I think it might apply to cases where group accounts are concerned, where a company would be presenting, not just its own balance sheet and profit and loss account but perhaps the accounts of individual subsidiaries which it is quite entitled to do under a later section of the Bill. It is possible that those accounts might not be, through no fault of the holding company itself, quite in accordance with the law and I do not think there is anything wrong in enabling them to introduce whatever corrections are needed. But it would have other uses too.
On the holding company?
Yes, because they are presenting the accounts to the Registrar.
There is a nice point about the accounts of the individual subsidiaries.
It would also be useful in this respect, that a company has to comply with these requirements within 60 days. We must give them an opportunity to fix up their accounts so that they can file them within the 60 days.
Surely, before the annual meetings in all cases, the accounts must be in proper legal form and we must assume that that has been done in each and every individual case and if that is done, what is the necessity for this section and does it not seem to admit on the face of the Bill that there is something going to be wrong in the first instance? I may have misread the subsection but that is the impression it makes on me.
Supposing the documents have been filed, supposing a prosecution is then brought under subsection (6) and in such prosecution it appears clear that there is a mistake, that they are wrong, how can they be rectified unless you have subsection (2) ? That is my understanding of it.
This is filing with the Registrar of Companies, though. I do not know that that helps very much. I think that if you have as much an error as that, it is a question for rectification of another sort. However, I will not make an awful lot of point of it but somehow I do not like the drafting of it.
They have that in Britain in that form, too. I think it serves a useful purpose all right.
Audited accounts can be corrected subsequent to filing.
Unless there is a new audit. It may be the account is sent back to the auditors to put it in another form.
Supposing a printer's error has been discovered after the printed copy has been filed.
It seems to me we are copying this section from the British precedent without really knowing what it is about.
If it is merely a question of rectifying a mistake, then would not it be better to put in a straightforward provision to rectify a mistake, but here you are saying a document does not comply with the law; you are assuming that a document which should comply with the law does not comply with the law and if it does not comply with the law, it can be amended.
But you could have a company which is not bound, and its accounts would not necessarily be in the form required by the provisions of this Bill.
How can you force them into the form that they should be in? How can you force the accounts into the form? What auditor is going to do that for you?
It seems to me that what Deputy Byrne has just said is probably right. May I suggest that we will have another look at it to make sure we really know?
While you are having a look at it, perhaps you could tell me why is subsection (5) necessary in view of the terms of subsection (4) which says the section shall not apply to a private company?
It arises out of Section 151, I think, of the Bill.
Of this Bill?
Of the Bill, yes—Section 151. Under Section 151 the directors are given pretty wide scope as to the form in which they can present group accounts. It is quite permissible for them to present the individual accounts of the subsidiaries and it could well be that one or more of the subsidiaries was a private company. In the absence of subsection (5) they would be obliged in filing the group accounts to send in the accounts of the private company and that would really be in conflict with the principle which we have been maintaining all along, that a private company should not have to have its accounts filed for public inspection.
Even though it is a subsidiary of a public company?
Yes.
But the group accounts must include the accounts of that subsidiary, is not that so?
It all depends on what you mean by the word " include ". This really applies in a case where, instead of extracting the figures from the accounts of the subsidiaries, they submit the individual accounts of the subsidiaries——
Instead of consolidating them?
——instead of consolidating them—which is quite permissible under Section 151.
Better leave it until we come to Section 151.
On this section, there is a body of opinion which opposes the exemption granted to private companies from filing their balance sheet with the Registrar. I had intended putting down an amendment which to an extent would have related to the point made a few weeks ago by Deputy Norton when he was speaking of the abuses of limited limitation generally. I had intended suggesting that we should require with the annual return in the case of private companies some form of declaration of solvency to be made by the directors, a declaration to be made with considerable formality, if possible sworn before Commissioners for Oaths, declaring the company was solvent and would in the normal course of trade be in a position to pay its debts and if they felt unable to furnish such a declaration such private company should be compelled to furnish its accounts so that the public at large may be on notice of its insolvent position.
That is a very radical departure.
It is.
Our own Committee did consider that very point but they concluded that although the filing of accounts might be of some assistance to creditors or even prospective creditors, the advantages which it might confer would be outweighed by the obvious objections to imposing that obligation on private companies. I suppose there are other ways of securing the information that Deputy Byrne says might be made available to creditors, the commercial intelligence agencies, and others like that. But, as the point has been examined by our own committee, I think it is as well to conform with their recommendations in this respect.
I can see the force of the Minister's viewpoint, but I must say that it occurred to me that our committee was very much influenced by what was going on in England. The position in England is that public companies are of far greater consequence than they are here and, correspondingly, the abuses of private companies are of less significance than they are here, and I think that imposes upon us a very strong obligation to consider very seriously this matter of the very wide privileges that limited limitation gives to unscrupulous persons and the need to protect the public against unscrupulous persons.
I suppose again it was a question of legislating for the greater good. As Deputy Byrne knows, the majority of private companies here are small family businesses, respectable businesses, which might be affected by disclosure of their accounts in one way or another. I think it would be open to serious objection if these small family businesses had to declare fully their annual accounts.
I can see no objection if they are solvent.
If they were passing through a difficult period they would be very vulnerable and their credit might be affected. Small bodies can feel a blast of the cold wind and be much more affected by it than big bodies, and the suggestion made might have a serious effect on the business of such a small company.
I would say that this is wholly undesirable and quite unnecessary.
It would be very difficult to say when a company is solvent. What would be the test? From one point of view you would have to liquidate to find out.
You have a paper item in a balance sheet of goodwill. Who, in fact, is going to tell whether or not there is goodwill ? I can see the point raised by Deputy Byrne, but there is a limit to the amount of swaddling in cotton wool that we can do for people who should take their own precautions.
Yes, and I think it is obvious that the balance of advantage and disadvantage is in favour of leaving the matter as it is in the Bill.
Question put and agreed to.