Special Committee Companies Bill, 1962 debate -
Wednesday, 20 Mar 1963

SECTION 166.

Mr. Cosgrave

I move amendment No. 61 :

To delete paragraph (b) (iii) and substitute the following;—

" (b) (iii) that its members have not been given a fair and accurate account of its affairs."

The purpose of this amendment is to change the terms of paragraph (b) (iii). As the paragraph is drafted at present, it is open to a member to complain to the Minister that he is not being given all the information relating to its affairs which he might reasonably expect. I think that is rather vague in the sense that a shareholder may have his own opinion about what is reasonable or what is desirable but provided the company furnishes sufficient information to give a fair and accurate account of its affairs, I think it should not be called upon to go further. I know of a case where at a company meeting a shareholder who was refused information which he sought expressed the view that he would see that the information was disclosed and used unreasonable threats to force the directors to give such information. As I understand it, our objective in this section is to secure that members be given a full and accurate picture of the company's affairs but not to the extent to which an individual might consider was reasonable or what he might expect. Provided of course one person's reaction is as reasonable as another's that is fair enough. I think it would be going too far to consider that in a case of this sort what a reasonable man might expect is what is right to raise. The shareholder who pushes it to extremes is very likely to be a person who has either a grievance or a fixed idea about it. Consequently I have rephrased it to read: " That its members have not been given a fair and accurate account of its affairs ", so as not to oblige the company to give information when it might not be in the company's interest to accede to an unreasonable request.

Mr. Sweetman

I think Deputy Cosgrave has made a case.

Mr. J. Lynch

I think I have miscalculated the case Deputy Cosgrave was going to make. I anticipated that he felt that the subparagraph as it stands was not wide enough to ensure that a member of a company had access to reasonably satisfactory accounts and other information and I was going to answer by saying that the section is wider than the amendment he proposes.

Mr. Cosgrave

I think it is a bit too wide.

Mr. J. Lynch

The Deputy has made that point now but on the other hand, the amendment could be construed as referring only to accounts because the affairs of the company are reasonably disclosed in its accounts or if not in the accounts, in the directors' report that must accompany the accounts.

Mr. Cosgrave

I could easily change it by saying " a fair and accurate report of its affairs " if the Minister wishes.

Mr. J. Lynch

I am not really talking about the phraseology of his amendment; rather I am talking about the object of the amendment. I thought it would be better for the Minister to have pretty wide reasons for exercising his discretion under this subsection. Deputy Cosgrave's amendment could possibly be limited to accounts. There could be a lot of other information which might reasonably be required by members. For instance, about the placing of contracts, the supply of raw materials, and a lot of other things. I feel that it is in the best interest of minorities, whom we are trying to protect here, and the members in general, that the Minister's discretion should be a bit wider than envisaged in the amendment. I might recall what I said on the Second Reading of the Bill about the Minister's power to appoint inspectors. I said :

The appointment of an inspector to investigate the affairs of a company is of its very nature something which cannot be kept secret and as soon as it becomes public knowledge some damage is inevitably done to the commercial reputation of the company in question—

and that is so far in favour of Deputy Cosgrave's amendment—

even if it is subsequently found that there was nothing amiss. In the past it has always been the practice in considering applications for the appointment of inspectors to bear this point particularly in mind, and, so far as I myself am concerned at any rate, there will be no change in this respect in the future.

Now, the Minister for Industry and Commerce to whom certain functions are entrusted under this Bill as we propose it, will naturally exercise his discretion and make decisions in the interest of the proper conduct of trade within the State to ensure that no company is unreasonably damaged in its reputation. With that in mind, I suggest it would be better to leave to the Minister the wider discretion given in sub-paragraph (iii) rather than the rather limited scope which Deputy Cosgrave's amendment proposes.

Major de Valera

To what information is an ordinary shareholder entitled? He is entitled to the information at the annual general meeting, the information specifically provided for here, and no more. The Minister referred to the question of contracts and so on. There is certain information that statutorily is required to be given and beyond that it is not necessary to go and in fact we have had to decide that you cannot give as much power as you would like because of the abuse of that power. Suppose a company were doing business in a certain commodity and imported some goods from behind the Iron Curtain. I could nearly bet my life that, per se, you would get somebody to ask for an inspection or raise an objection on such ground here. Would such an application be considered under Section 166?

Mr. J. Lynch

Certainly not.

Chairman

That is a matter of political affiliations.

Major de Valera

Yes, but it concerns contracts and the Minister mentioned contracts.

Chairman

Yes, but as I understood it, what the Minister meant was the improper placing of the contracts to the prejudice of a company

Major de Valera

I agree. I stand corrected on that and I accept that interpretation of what the Minister said. Perhaps I was putting a wrong interpretation on it.

Mr. J. Lynch

What I had in mind as far as contracts are concerned was the placing of contracts in which the directors of a company might have a special interest on terms which might be unfavourable to members of the company

Mr. Cosgrave

If you leave absolute discretion to the Minister, that might vary greatly and one Minister might have an entirely different view from another. Is it desirable to give such a wide discretion without imposing some limitation on discretion in regard to what should be disclosed ?

Mr. J. Lynch

In that event, one might ask the Deputy what he means by " an accurate account of the company's affairs " ?

Mr. Cosgrave

I mean the same as the phrase " the accounts give an accurate picture " which I think is the phrase used somewhere else. I framed it that way because I did not want to limit it to accounts. I really mean a report.

Mr. J. Lynch

If you can envisage the situation which we were just talking about, a company placing a contract which is to the particular advantage of a director but not to the advantage of the company as a whole, and the members of the company making inquiries about it, the amendment might not be wide enough.

Mr. Cosgrave

We know of cases where an individual shareholder may be right, although the directors and the majority of shareholders take a different view, but the actual issue raised by him is correct. On the other hand, there have been cases where an individual shareholder had a bee in his bonnet and raised something merely for the sake of raising it and caused a great deal of unnecessary annoyance. That in fact may damage the position of the company. As the subsection is drafted, I propose that any member of the company can go to the Minister and say : " I have such and such a view. I believe the company is not giving certain information and I want it disclosed." If the Minister accepts that complaint, he can initiate an investigation. On the other hand, if he does not accept it, discretion as to what is to be done is left to the Minister.

Mr. J. Lynch

Yes, but surely if we have, as obviously we have, confidence in the intergrity of the courts, we must have some confidence in the integrity of Ministers ?

Mr. Sweetman

I beg your pardon?

Mr. Cosgrave

I agree, the only question is why we want to leave such a wide discretion.

Mr. Byrne

Surely the Minister would have regard to what is sound commercial practice ?

Mr. J. Lynch

Obviously Deputy Byrne is quite right, the Minister will have to have regard to what is sound commercial practice.

Mr. Norton

I think the amendment is only to paragraph (b) (iii) and I cannot see very much difference between the (b) (iii) in the section and what the amendment suggests. One is that the report is fair and accurate and the other is that the information is all that they might reasonably expect. I do not see much of a gap there.

Mr. J. Lynch

I doubt if there is much of a difference.

Mr. Norton

It seems to me that the section would include this amendment.

Mr. J. Lynch

If I know what the point of difference is between Deputy Cosgrave's amendment and the sub-paragraph as it stands, I think I can go a long way to meet him but I doubt if there is much difference, as Deputy Norton pointed out.

Chairman

Do you wish to press this amendment further, Deputy?

Mr. Cosgrave

I do not wish to press it. I will withdraw it and see if I can redraft it.

Mr. Norton

It could be done this way to say that its members have not been given a fair and accurate account of its affairs and that they have not been given all the information which they might reasonably expect.

Mr. J. Lynch

I would be quite willing to do that.

Mr. Cosgrave

Perhaps the Minister would have the better facilities for re-drafting it.

Amendment, by leave, withdrawn.

Mr. Cosgrave

I move amendment No. 62 :

To add a new subsection as follows :—

" () A person appointed an inspector by the Minister shall have at least five years' practical experience in industry or commerce or be not below the rank of principal officer in the Civil Service."

The purpose of this amendment is to secure that a person appointed an inspector will have minimum qualifications. I have received some suggestions that some minimum qualifications should be laid down for inspectors. I understand at the moment there is no set standard. Whether or not it would be possible to get such minimum qualifications as say, either a person having a certain number of years experience in industry or a person not below the rank of a principal officer in the Department, there is certainly a case for having certain minimum qualifications for inspectors. They have certain defined duties and up to the present the procedure has been that persons from a particular section of the Department were appointed to do this work. Whether they had any particular experience or merely gathered it over the years by reason of their work and contact with industry or commerce, I am not certain. However, I am moving the amendment for the purpose of getting the Minister's opinion and getting some information on what the standard practice is on the matter.

Chairman

Does the amendment apply only to Section 166 or does it apply equally to Section 165?

Mr. Cosgrave

It would apply to all inspectors.

Mr. J. Lynch

I think it would apply to all inspectors. In the first place there is an obvious omission in Deputy Cosgrave's amendment, that is, that a barrister or a solicitor would be excluded or even an accountant, for that matter, except that an accountant with five years' practice could be presumed to have practical experience of industry and commerce. But a barrister could certainly be excluded. I understand that many years ago attempts were made to set down certain requirements for inspectors and it was found that this involved certain difficulties; in Britain the practice has evolved of appointing two inspectors, one, a qualified accountant and the other, a senior barrister. In the only case that I had personally I appointed an accountant of a very well known accountancy firm and a well known senior counsel. I think that practice ought to be followed and I should not like to exclude the possibility of appointing a senior counsel because of his capacity to adduce and assess evidence. I think it is better to leave it in general terms because it is in the Minister's interest to ensure that an investigation is properly carried out and there is, therefore, very little danger that he would appoint an incompetent person; to try to spell out the qualifications may create difficulties, as it did apparently in the past.

Major de Valera

I think it would.

Mr. Cosgrave

There are no minimum standards laid down by the Board of Trade.

Mr. J. Lynch

No, but I believe at one time they tried to do it and they decided it would be better to forget about it altogether. In any event, the occasions on which the appointment of inspectors arises here are so few and far between it is hardly likely that the list of competent persons available would be exhausted so that one could reasonably rely on procuring the best, or two of the best, possible persons for the job.

Mr. Cosgrave

I have no intention of limiting it. I merely wanted to get from the Minister an expression of the general practice.

Amendment, by leave, withdrawn.

Question proposed : " That Section 166 stand part of the Bill."

Mr. Byrne

Could the Minister give us an idea of the number of investigations held in, say, the past ten years?

Mr. J. Lynch

Only one—the one that is currently being conducted.

Mr. Norton

Is it the only one—the one in relation to Irish Estates?

Mr. J. Lynch

That is right, but I believe there were two others since the establishment of the State.

Mr. Norton

It would not seem a lucrative occupation.

Mr. J. Lynch

Obviously not. That is why I say, the occasions are so few and far between, it is obvious the Minister involved would be able to select a really good man.

Question put and agreed to.