I move amendment No. 95 :
In subsection (1) to delete lines 48 to 50 and substitute : ", on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine not exceeding £500 or to both or, on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding £100 or to both."
Subsection (2) reads :
For the purposes of this section proper books of accounts shall be deemed not to have been kept in the case of a company if there have not been kept . . . of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.
Is that going into absolute detail from the point of view of defence? Supposing a packet of stationery or some carbon paper is bought. I would imagine that every sizeable firm would have some small routine expenditure that is recorded in bulk but it is unlikely that the buyer or seller would be identified. I know what is meant in the section and I am completely in agreement with it but, being worded so widely, does it not make an offence out of a triviality?
It is not expected that unusual or unnecessary detail would be required under this section but the entries that would be normal in a particular type of business would be expected. The wording of English and Six-County law is the same and we understand that the courts would give a reasonable interpretation of what details are required under the section.
Supposing it were the carbon paper I mentioned, I would expect any well-kept company to have such purchases entered but the point I am making is in connection with the identification of buyers and sellers.
Is this section recommended by the Bankruptcy Committee?
The Company Law Reform Committee did not recommend it specifically but paragraph 171 of their report has a bearing on the matter.
Surely if this is amended in any way, the whole section will be weakened. As I see it, a company whose affairs were under review could have a very large number of small transactions which would in themselves be a matter for raising considerable suspicion. If it is stated that only certain classes of transaction have to be sufficiently recorded, it would open the door to a considerable number of small transactions. We will have to leave it to the court to decide what was reasonable and what was not.
This means that every item, no matter how small, must be recorded by any company in the books of account, not only the transactions but also the buyers and sellers thereof, in such detail as to enable the goods and the buyers and sellers thereof to be identified. It is going to dictate a certain form of entry in all books—that you must record exactly from whom the thing was purchased.
This only arises on the question of winding up.
It says within two years. You cannot say that a company will not be wound up in two years. Therefore, it is a provision that must always be observed.
It is better to provide something like this and leave the court to interpret to what extent the entries in the books are reasonable.
But we are taking away the discretion of the court. Subsection (2) says :
For the purposes of this section proper books of account shall be deemed not to have been kept if there have not been kept . . .
You are prescribing. You are taking away the discretion of the court here.
This must be related to subsection (1), which provides what is to happen if proper books of account are not kept by a company. It provides :
. . . every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on the default was excusable, be liable . . .
I think that gives him sufficient latitude in regard to recording the names of the sellers of the carbon paper.
In order to be sure of ourselves and the law and in order to catch everything, we may be imposing impossible details on the day to day management of companies, which has always been the bugbear of this code.
Is this in similar terms to the legislation in England and Northern Ireland ?
It is identical.
What has been the experience there ?
It has not caused any trouble. The courts have interpreted the section reasonably. On the other hand, it has been found to be a very desirable provision.
It is desirable all right, but are you not building up a superstructure of work to ensure, if you are winding up the company at a later stage, there is obvious compliance with the section beforehand ? This operates for two years prior to winding up the company. If it only operated from the commencement of the winding up, you could say: "All right; we will have to be careful from now on." But since you never know when a company is going to be wound up, you will always have to comply with the section because it stretches back for two years. Is that not a difficulty ?
On the other hand, there is some stage when the officers of the company would know the winding up was imminent. Then they might become careless about entries in order to conceal the purchase and sale of goods and chattels. However, I would not be averse from introducing such words as "where it is reasonable" or something like that.
Once the red flag is up about the company's finances and solvency, the officers and staff must have something to do besides " everybody to the Boats." Instead of manning the boats, the books become the lifeboats.
This would attack imprest accounts. I understand that in some countries a company would find it more economical to give the head of a department a small imprest account to cover stationery or something like that. For certain purposes, it is more economical to do it that way than to account in detail for the expenditure. That all seems to go by the board under this section. It makes the operation of imprest accounts extremely difficult.
Only if the officers are acting dishonestly. They are liable for penalty only if they are acting dishonestly.
On the other hand, subsection (2) says : " For the purposes of this section proper books of account shall be deemed not to have been kept . . ." It puts an onus on them in regard to the honesty of this. It imposes an onus I would not like to carry if I could avoid it. I would play safe. I would have everything in it in the most minute detail.
But under subsection (1), default is excusable. The officer has a complete get-out if he personally is honest and can show himself to be honest; and if the default is then excusable, there is no penalty. I think Deputy de Valera is being a little bit mesmerised by the terms of subsection (2). Only accounting officers of a company who have acted dishonestly are inexcusable. I do not think summaries instead of detailed entries could be held to be inexcusable.
I would not like to legislate on the basis of making excuses for defaults. I would prefer that legislation would be something we would all live up to. We must approach it on the basis that, if the law says something, we would all live up to it and not seek excuses for our defaults from it.
Is it not like our differences on the previous section? In trying to decide if it was proper to make provision for small private companies, we found nobody could define what a small private company was and we had to leave the section. Unless we say everything must be properly recorded, we face the position of saying that every piece of carbon paper, small quantities of stationery, lavatory paper, ink, or something like that, need not be so recorded—which does not make sense at all.
But it is open under this code to say that the buyers and sellers must be identified. If the Minister would consider inserting the word "reasonably" before "identified", I would be satisfied.
I have said already I would be prepared to put in such a term as " in reasonable circumstances " or " where such is reasonable "—appropriate wording in order to take the edge off it to meet Deputy de Valera's point. I might mention that, even though I will consider the introduction of such wording, this has been the law for over 30 years in Britain and we do not seem to have heard complaints about people being pursued for not entering in the carbon paper and blotting paper.
I move amendment No. 96 :
In subsection (3) to add the following "or, on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding £100 or to both".
This is a new section, which was recommended in paragraph 201 of the report of our Committee on Company Law Reform.
