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

SECTION 158.

Government Amendment No. 1:

*1. In page 94, between lines 32 and 33, to insert a new sub-section as follows:

" (6) Subsections (4) and (5) shall not apply to a company, formed by direction of an Act of the Oireachtas of Saorstát Éireann or of the Oireachtas, the principal objects of which include the acquisition and underwriting of shares or other securities of companies carrying on a trade or industry in the State."

Mr. J. Lynch

This is the section which, inter alia, requires companies which have a 20 per cent equity holding in another company to disclose that fact in the directors’ report. During the Recommittal Stage before the Special Committee of the Dáil, I proposed an amendment to the effect that companies formed by direction of an Act of the Oireachtas might be excluded from this obligation. I mentioned specifically the company I had in mind, the Industrial Credit Company which provides finance for industrial undertakings in this country by way of equity holding, debenture and in other forms.

Business suspended at 7.30 p.m. and resumed at 7.40 p.m.

Mr. J. Lynch

It was represented to me by the Industrial Credit Company that their activities might be restricted if this obligation is imposed on them. They advanced two main reasons for this. The first is that some of those who would go to the Industrial Credit Company in the ordinary way might be deterred from so doing because of the publication of the fact that the Industrial Credit Company had a 20 per cent or more holding in that company.

Secondly, the Industrial Credit Company suggested to me that the 20 per cent or more holding might be reduced during the course of a year between two directors' reports. It might create difficulties for the other company if a report in a succeeding year indicated that the Industrial Credit Company no longer had an equity holding in it. In general they represented to me that it would not be in the national interest that there would be any inhibition on industrial companies seeking assistance in the form of equity from the Industrial Credit Company.

I should say that during the course of the Bill's discussion by the Special Committee of the Dáil, I introduced this amendment on Recommittal Stage, and some members of the Dáil Special Committee did not appear to accept the reasons I advanced as being sufficient to warrant this amendment. I withdrew the amendment at that stage because I felt that as far as possible I should seek unanimity within the Committee. I did say at that time that I would reconsider whether it would be desirable to introduce the amendment again before the Seanad. Meanwhile, I have had further consultations with the Industrial Credit Company and they have repeated their representations. It is on that basis that I am now proposing the amendment.

Mr. Lindsay

I object to this amendment on the general principle that it puts borrowers from the Industrial Credit Company into a very special position as against borrowers from other sources. In those circumstances I do not see any reason for assisting borrowers who borrow from one place any more than borrowers who have to go somewhere else. I think it affects the whole principle of the Bill since a great part of the Bill is devoted to the necessity for publication, for making returns of the most accurate and exacting kind. For that reason, and on that principle only, which puts these people into a very special position, I do not think legislation of this kind should single out any group of borrowers for special privilege. I, therefore, oppose this amendment.

Mr. Fitzpatrick

Am I right in thinking the section, as at present drafted, imposes on the Industrial Credit Company an obligation to disclose in their annual report the name of any corporate body, of which the Industrial Credit Company are the holding company or any company who have borrowed from the Industrial Credit Company ?

The section as drafted will not have the effect of compelling the Industrial Credit Company to do as I say? I have read the discussion by the Special Committee set up by the Dáil to consider this and apparently the argument put forward there, as a result of discussions with the Industrial Credit Company, was that it would cast a slur on the borrowing company to disclose that it had borrowed a substantial amount from the Industrial Credit Company. I do not agree with that. The fact that the Industrial Credit Company, presumably after full investigation, sees fit to advance money to a company should be evidence of the credit-worthiness of that company. Another aspect of it is that the borrowing company is compelled in its annual report to disclose the fact that it has borrowed from the Industrial Credit Company. Therefore, the section as it stands does nothing more than enable the general public, by having a look at the report of the Industrial Credit Company, to ascertain the number of companies who have borrowed substantial sums from them instead of having to go and search through the various reports of companies in which they are interested.

Mr. J. Lynch

Borrowing is not in question here. It is the acquisition of equity holding of shares by the Industrial Credit Company. It is desirable that the Industrial Credit Company should take equity interest in a company rather than by way of debenture, by loan capital or otherwise. One of the purposes of the Industrial Credit Company is to create an industrial capital market in this country. It is in the national interest that people who want to buy industrial equities should be able to look around in their home market, and in their home industries, rather than invest their money abroad. When the Industrial Credit Company takes an equity interest in another company they usually try to make these equity interests available to the general public. In that way they do generate an equity industrial market. If this obligation is imposed on the Industrial Credit Company the likelihood is that people will look for funds in the form of loan capital rather than share capital, perhaps in the form of debentures, which from the Industrial Credit Company's point of view and from the national point of view is less desirable than the taking of equity interest by the Industrial Credit Company in the borrowing company if I might call it that. I would like to suggest to the Committee that in a matter like this the Industrial Credit Company are the experts, that they ought to be the best judges of the consequences on them of the section as it stands. The section originally was not aimed at all at the Industrial Credit Company but was rather aimed at a trend which is not so evident in Ireland as it is in Britain and elsewhere, namely the takeover by one company of another. If the section is enacted the shareholders in company A which might be taken over by company B would know of a major holding by company B in their company and will be in a position at least to anticipate the possibility of a takeover bid. While that sort of thing is not very prevalent in this country and the desirability of legislating for it at this stage may be in question, it was, nevertheless, desirable to have this provision here. The section as it stands unwittingly covers the Industrial Credit Company and that is another reason why perhaps the commitee should take the viewpoint of the Industrial Credit Company into account. I started off by correcting the Senator's misinterpretation—if he had misinterpreted—of share capital as against loan capital.

Mr. Fitzpatrick

Why does the Industrial Credit Company think that this obligation to disclose would prevent companies accepting advances of share capital, as we say, from the Industrial Credit Company?

Mr. J. Lynch

I should like to quote a note I have here :

If the requirements stand, we may find that some of our clients and potential clients will be sensitive regarding the disclosure of our interest in their companies. Industrialists might wish to avoid the publicity attending the holding by the Industrial Credit Company of over 20 per cent of their equity and this might make it even more difficult for us than at present to participate in equity.

Behind that is the suggestion that a company looking for share capital from the Industrial Credit Company might be regarded by the public as being unable to get that equity elsewhere and as having to go to a Government agency which would be regarded as more liberal in taking up equity shares than other providers of finance. It does happen that an industrial company when it is young may not be completely viable. The Industrial Credit Company is charged with the task of helping industry in that way and the public may not have the same means of examining the potential of that company as the Industrial Credit Company. That company might find it difficult to get the required equity investment from sources other than the Industrial Credit Company. I believe that is a good argument and that there would be a danger that these companies in future would seek not equity investment but loan capital from the Industrial Credit Company and thereby restrict one of the purposes of the Credit Company.

Mr. Ross

Is it not the general practice for the Industrial Credit Company to take up shares itself?

Mr. J. Lynch

Yes.

Mr. Ross

Therefore, if you search in the Company's Office you will find that the Industrial Credit Company has a shareholding in a company so this information is available straight away.

Mr. J. Lynch

I understand that many of their holdings are registered in the names of nominees.

Mr. Fitzpatrick

Is it not necessary to disclose in the annual report that a company has repayments of share capital from the Industrial Credit Company ?

Mr. J. Lynch

That is not necessarily required.

Mr. Lindsay

Is there any analogy between the Industrial Credit Company and Bord Fáilte? Where Bord Fáilte makes substantial grants and loans to hoteliers I think that is included in their annual Report.

Mr. J. Lynch

Bord Fáilte would not be a company within the meaning of this Bill.

Mr. Lindsay

I understand that. I am just drawing the analogy. I would also like to know whether the Industrial Credit Company feel there may be a sensitivity on the part of people who have already borrowed from them or on the part of prospective borrowers, or whether they have any evidence of people being sensitive since the introduction of this Bill.

Mr. J. Lynch

I explained to the Industrial Credit Company that there was opposition expressed to the acceptance of this amendment in the Dáil Committee. Since then the report of the proceedings of the Dáil committee has been available to the Industrial Credit Company and they continue to press this very hard. The Chairman of the Industrial Credit Company, who is one of our most conscientious public officials, has come to me on a number of occasions pressing this point and I take it that if there is any sensitivity he must know of it and he certainly would not press it as hard as he has were it not for the danger and possibly the effect of such sensitivity.

Chairman

Quite apart from the feeling of the Industrial Credit Company on this matter, I think this amendment should be passed; otherwise the section will do something which was not originally intended. This section was obviously intended at the beginning for the benefit of the shareholders of the company, debenture holders or others interested, so that they could know exactly what were the ramifications of the company—what interests and connections this company had. It is a very useful section for those reasons but it is now doing something which is quite irrelevant to that original intention. I am sure that the shareholders of the Industrial Credit Company can find out all they want to know about the shareholding of the Industrial Credit Company without having to avail of this Bill. It is now doing something which was not intended and which is quite unnecessary.

Mr. Lindsay

I can well see the force of that but I do not think a State Company should have the advantage of secrecy which is denied to other companies by this Bill.

Mr. J. Lynch

The advantage is not to the Industrial Credit Company but to the other companies, the clients of the Credit Company.

Mr. Lindsay

I do not see that such clients should be in any special position.

Mr. Ross

I can see the point in regard to the Industrial Credit Company and the people who are borrowing from them. However, at present the Industrial Credit Company is the only company that does this sort of business on any reasonable scale but I can foresee that the time will come when industrial development and financial development will increase in this country and we shall have other companies doing this in competition. It might meet the Industrial Credit Company's point if one were not to give them a privileged position, because I do not think they should have that privileged position, but to take the amendment and delete the words " formed by direction of an Act of the Oireachtas of Saorstát Éireann or of the Oireachtas ". Then this type of company, whether a statutory one or not, would be able to give these borrowers the same protection.

Mr. J. Lynch

That would possibly defeat the object of the section. It would be easy for a company to introduce the words of the last three lines of this amendment.

Mr. Ross

I can see that. The fear in my mind is that at some later stage other people will do this sort of business, and it is well that they should. They will then be at a disadvantage in competition with the Industrial Credit Company; the Company will be able to go to potential operators and say—we can give you secrecy.

Mr. J. Lynch

That is a possibility that can arise. On the other hand, we have the present certainty of the position of the Industrial Credit Company and the genuine confidence they hold. If the development which the Senator fears did arise, that there would be other companies on the same job as the Industrial Credit Company, we could take steps to ensure that the Industrial Credit Company will have no advantage over its rivals.

Mr. Lindsay

Would it prevent possible rivals from coming in if they knew that the Industrial Credit Company had the advantage?

Mr. Ross

The Industrial Credit Company will not be in a monopoly position.

Mr. J. Lynch

The reason the Industrial Credit Company do this is that at the moment nobody else is doing it in the country. The Senator is aware that general policy accepted in this country in matters of trade and commerce is that the State will not intervene where private enterprise are doing the job. The State has had to intervene here. If there were other companies then there would be no necessity for the Industrial Credit Company to do this kind of business. I believe that it is possible for the Industrial Credit Company to disappear from this aspect of the business in time.

Mr. Lindsay

That would be an undesirable thing.

Mr. Ross

I think that it will be extraordinarily difficult to adjust the position at a later stage. We will have to think about this again and perhaps say something about the amount paid from principal trading activities, in order to pin this down firmly to a company which is engaged in the business of finance, or a company generally engaged in that sort of business. I agree that it is too wide as it is.

Mr. J. Lynch

There would always be this justification in favour of the Industrial Credit Company in effect, that, while they are doing a financial job, they are doing national work as well. There would be no danger of the Industrial Credit Company using their position for the sake of profit. Their whole object is to stimulate industrial activity.

Mr. Lindsay

I think the Minister for Finance is the principal shareholder in the Company and as such he is responsible for the Company. I think the public should have the right to know what is being done with their money and to whom it is being given.

Mr. Fitzpatrick

The shareholders of the Industrial Credit Company are actually the taxpayers of this country, as Senator Lindsay has said in so many words, and I know that the Industrial Credit Company virtually owns some companies—some very good companies and some not so good. I think that the public in general ought to have a handy reference to know what the Industrial Credit Company is doing with the money provided. The Minister's view seems to be based on the assumption that the acceptance of help from the Industrial Credit Company by another company casts some sort of slur on the borrowing company. That should not be. I think that it should be a certificate to the borrowing company that it is creditworthy, that it has been vetted, inspected and checked on by the Industrial Credit Company and that the Industrial Credit Company is satisfied that it is a more than reasonably sound company and that it has more than reasonable chances of success. If help is given to a company in that spirit it should not be any slur on the company who receives it.

Mr. J. Lynch

In the first place the Act Establishing the Industrial Credit Company could have provided for this. It did not. Secondly, the Company has survived for several years now and, as far as I know, there does not seem to have been public demand for something of this nature. Ultimately, we come to a section in a new Companies Bill dealing with another situation altogether and we find the Industrial Credit Company caught up in this and put in a situation which should be avoided in the public interest generally and in the national interest. I can appreciate the suggestions made by both Senator Lindsay and Senator Fitzpatrick that the public are really the shareholders of the Industrial Credit Company through the Minister for Finance but I do not think that that is sufficient to justify something which is not in the national interest. It would be possible—if the situation which Senator Ross envisages developed, namely, that other people would come into this business—to deal with that situation in amending legislation.

Mr. Nash

First of all, subsection (4) of the section as it stands is most important, and had it existed heretofore it would have meant that certain shareholders holding shares in recent years would not have been able to have so much money in circulation as against people who had shares in companies over very many years. I know of one or two Irish companies where people took up shares originally when they were scarcely valuable. In more recent times there was a tendency towards take-over bids which were turned down. The people who made the take-over bids started buying in the market and had offered 20 per cent. Some shrewd speculators spotted this and started buying shares and some made up to 300 per cent profit at the expense of the companies. Therefore, it is most important that there should be in a Companies Bill something of the nature of subsection (4) of Section 158. It does not apply to the Industrial Credit Company as it has operated heretofore because shares are not bought by them with a view to getting some controlling interest and then going to the Directors and saying : " Look here, we already own so much of the equity of your company and unless you put two of us on the Board we will make things unpleasant for you. Unless you are prepared to negotiate with us we will take further steps." Those are the ruthless sort of things done in business and this subsection does not apply to the Industrial Credit Company at all. Why drag the Industrial Credit Company into it ?

Now I come to the second point regarding the sensitivity of companies. No company starting off would pay more than it would pay in the bank for borrowed capital. It would borrow capital for 6½ per cent and where a company or its equity would not have that money to pay you are not going to sink your capital in it. A company that goes to the Industrial Credit Company for money has a scheme in mind. They are prepared to sink £20,000, £30,000 or £40,000 of their own money. They go to the Industrial Credit Company and say : " We need £80,000 to get this on its feet; are you prepared to facilitate us? You take up equity for £40,000 and we take £40,000." Having investigated the matter the Industrial Credit Company might agree. They might say : " You put up £50,000 and we will take up £50,000, or put up £60,000 and we will take £40,000." Right away you can assume that the people putting their £40,000 into it are looking at it in a purely speculative way. It is a most sensitive situation at the beginning. They will not increase the risk beyond what is necessary; they would prefer to drop the whole thing and advertise to the general public. By letting the Industrial Credit Company take an equity, not only do they get their money back but sometimes get it back at a profit. People are prepared to go back to the Industrial Credit Company and say, when the shares are paying 5 per cent, 6 per cent or 8 per cent, " We are prepared to take these shares from you at a profit." That releases money to the Industrial Credit Company for some other business. I can see Senator Lindsay's arguments but I know from my own experience of business that it would create a sensitivity that would not help to encourage speculators who are prepared to put their money into businesses just starting.

Mr. J. Lynch

Without in any way embellishing Senator Nash's argument, it may be that the opposition expressed to this amendment has arisen from the situation that developed in the Dáil a year or more ago about advances by the Industrial Credit Company of a substantial nature to a very big undertaking in Ireland—I need not mention names. That I suggest is in a different category, and I might be meeting an argument that does not apply or might not be present to the minds of the Senators.

Mr. Lindsay

No. I am arguing this case on its merits.

Mr. J. Lynch

I feel, as a result of recent representations of the Industrial Credit Company to me, strongly enough about this to press the amendment as hard as I can. Senator Ross has suggested what I think might be a reasonable compromise. The two officials with me have been working out something on the lines which Senator Ross has suggested and I will ask the Committee to consider it, in other words to omit the words:

formed by direction of an Act of the Oireachtas of Saorstát Éireann or of the Oireachtas, the principal objects of which include the acquisition and underwriting of shares or other securities of companies carrying on a trade or industry in the State.

and put it in this form :

shall not apply to a company which is principally engaged in the acquisition and underwriting of shares or other securities of companies carrying on a trade or industry in the State and which holds a certificate of exemption issued by the Minister from the requirements of those subsections.

That would give the Minister for Industry and Commerce the opportunity of ensuring that only bona fide companies would enjoy this exemption. I think it would possibly meet Senator Ross’s suggestion and the point raised by Senator Lindsay in so far as he suggests that the amendment as it stands would put the Industrial Credit Company or its clients in a privileged position.

Chairman

If the Committee agrees that the amendment should be amended as suggested by the Minister it would read as follows :—

Subsection (4) and (5) shall not apply to a company which is principally engaged in the acquisition and underwriting of shares or other securities of companies carrying on a trade or industry in the State and which holds a certificate of exemption issued by the Minister from the requirements of those subsections.

Mr. Lindsay

Why not just say " engaged " and leave out " principally " altogether ?

Mr. J. Lynch

It would be very wide then.

Mr. Nash

I see a weakness in that. Suppose I wanted to make a takeover bid in a company what is to prevent me getting such a company to buy the shares for me ? I can pay them a commission to buy the shares for me. The whole purpose of this subsection is to prevent enormous profits being made by certain speculators on the Stock Exchange and to protect other people, who are ordinary bona fide investors, not particularly skilled in the ramifications of the Stock Exchange.

Chairman

You have to get a licence from the Minister and it would not be just given to any company at all.

Mr. Ross

Apart from that, the speculators about whom Senator Nash is talking do not use a body corporate. They would be completely outside.

Mr. Nash

If they do not use a body corporate they are outside and they are very apt to find themselves in difficulty because it means that in the case of any of those companies who are buying adequate shares to give you sufficient control you must have an enormous amount of liquid cash on hands. If you happen to be unfortunate to die within three years or thereabouts you are going to have so much in death duties.

Mr. J. Lynch

I think what Senator Nash is worried about is the possible abuse. I can assure the Senator that the Minister for Industry and Commerce for the time being can make quite sure that he will give a certificate only to genuine companies.

Mr. Lindsay

I think that I would go so far as to say that Section 158, as it stands, obviates abuses of any kind ; giving a veil of secrecy to the lendings or the equitable activities of the Industrial Credit Company could very well lead to abuses, not by the company itself, but it might be imposed upon to a degree. Accordingly, I still feel strongly about this, particularly on the principle that it is public money and that the public are entitled, by way of annual report from the company, to know where that money has gone and for what purpose it has been used.

Mr. Fitzpatrick

The Minister referred to a company which had obtained various advances, possibly running into millions—I think we all know the company of which he was speaking. I know another company, much smaller and certainly not nearly as well known, and so far as can be ascertained it has over a long number of years obtained advances, by share capital or other ways, of between £400,000 and £500,000. A lot of people are curious about this. If they want to check up on that they have to go to the Companies Office and sift through returns, whereas, if this Bill goes through, as drafted, there would be an obligation on the Industrial Credit Company to disclose the fact that it held 20 per cent of the shares in this company.

Mr. Ross

Any shareholder could advance £1 million by taking up preference shares.

Mr. J. Lynch

Yes. If the Credit Company wanted a way out of this section they could proceed in that way rather than by way of equity. But we want to encourage equity participation.

Chairman

The fact that it is confined to voting rights only emphasises that it is for the benefit of shareholders who want to know what the ramifications of their company are.

Mr. Lindsay

I do not know how valid this comment might be. Being Irish, I am naturally suspicious and I do not think any legislation should contain a provision that would give rise to suspicion in the mind of the public—even one member—that there was a company like the Industrial Credit Company enabled by legislation to withhold information in relation to the monies which they are spending.

Chairman

It is only withheld under the provisions of this section.

Mr. Lindsay

Take another example. If a member of the Dáil, for instance, asks the Minister for Industry and Commerce questions as to what sums have been expended by the Industrial Credit Company to various companies, A, B, C, I think the answer would be that it is an everyday transaction for which the Minister has no function. Again, you are putting in this Bill a certain suspicion.

Mr. J. Lynch

The Minister for Finance would have responsibility in that instance but the suggestion is relevant in any event.

Mr. Fitzpatrick

I think it is true to say that the opposition in the Dáil Committee was practically unanimous and came from all sides of the House.

Mr. Lindsay

I want to say I am not speaking in any way politically.

Mr. J. Lynch

As Senator Fitzpatrick has said, any comment that was made on this whole Bill and on this section in particular was general and was not Party at all. There was one Deputy—peculiarly enough he was an industrialist—who favoured my point of view. I wonder whether Senator Ross's suggestion would be acceptable as an alternative. If not, I would have to hold my position here and ask the Committee to accept what I have said as being what the true position is, and that it would possibly create difficulties for the Industrial Credit Company. It would be a deterrent to their activities and it would be embarrassing, not so much for the Industrial Credit Company but for their clients.

There is another aspect that I have not mentioned. It is not a strong argument but, nevertheless, it is an argument. The directors' report of the Industrial Credit Company would, from one year to another, carry under this section, a list of companies in which their holdings are more than 20 per cent. In a subsequent year that company might disappear because the equity holding of the Industrial Credit Company might drop below 20 per cent. That could have repercussions on the stock market which would not be justifiable, perhaps. There may be a suggestion, at the disappearance of the company from that list, that the Industrial Credit Company have lost confidence in them,—

Mr. Fitzpatrick

Or perhaps that they did not require the assistance any longer.

Mr. J. Lynch

Or, as the Senator says, it might stimulate activity in the opposite direction, both of which would be undesirable in the circumstances. It is, I suggest, an argument that further strengthens the contention that the Industrial Credit Company should be relieved of the obligations of the subsections in question. May I repeat that the purpose of the section was never intended to achieve this ?

Chairman

Does anybody wish to say anything further ?

Mr. J. Lynch

I would ask the Chairman to put the amendment either in the original form or in the suggested amended form. If the suggested amendment is not acceptable I would propose putting my original amendment and dividing on it.

Chairman

What I propose to put is the Government's amendment as amended. Do the Committee agree to accept the amendment as amended ?

Mr. Lindsay

I do not.

Mr. Ross

I do.

Mr. Fitzpatrick

I do not.

Chairman

Do the Committee agree to amend the Government amendment ? If they do, I shall put the amended amendment to the Committee.

Mr. J. Lynch

Would that compromise those against ?

Mr. Lindsay

It does, of course. Would there be any possibility of leaving this over until we see if we can get from the Industrial Credit Company something more specific than this vague notion of sensitivity ? I do not suppose we have any power to bring the Chairman of the Industrial Credit Company here.

Mr. J. Lynch

As the Committee are aware, the Seanad has ordered that the Bill be returned by 4th December. I do not see that we would serve any useful purpose by postponing a decision on this now. I have advanced all the arguments I can and I am convinced that the amendment is justified. I do not think I can change my point of view on this, but I do not know whether it would be possible for Senators to change theirs.

Chairman

The Minister has given us at length the objections of the Industrial Credit Company and I do not think there is any point in asking the company to give us any further elaboration of these objections.

Mr. J. Lynch

After the discussion by the Dáil Committee, I took it upon myself to ask the company if they really wanted this, if they were really serious, and they demonstrated to me just how serious it was for them. They pointed out that it would prejudice their operations and would act as a deterrent to the type of work they are most anxious to do. I do not think that there is now any question of the Industrial Credit Company giving it any further thought. They have given it all the thought they can.

Mr. Nash

The point of view of Senators Lindsay and Fitzpatrick is that the general public should always know what becomes of the taxpayers' money. That is a logical argument and a logical basis on which to put an argument, but by refusing to accept the amendment, you do not carry that out because any preference shares taken up by the Industrial Credit Company, or any debentures taken up by them are not disclosed anyway. It is only the equity holdings that are covered. From the point of view of the public, the most desirable thing that could happen is to have equity taken out in any companies by the Industrial Credit Company, because that gives them a right to have directors on the boards to see everything is run in the national interest, to set out general relations with labour and to see that the labour position is not abused. By not having the Minister's amendment, I think you might give rise to the more undesirable position where the Industrial Credit Company are merely in the position of money lenders at a fixed rate of interest. That is what would be happening instead. From the national point of view, I think that would be undesirable. Perhaps if Seantor Lindsay would agree that this does not give the information which he thinks should be given, he would also agree that the incorporation of this suggestion does not give the information either. There would be nothing gained by the suggestion ; in fact, I think there would be a great deal lost.

Mr. Fitzpatrick

Our point is that it is fundamentally wrong to pass a measure like this and make in it special provision for State or semi-State bodies. That sort of thing is creeping into legislation in general and it is an unhealthy move.

Mr. Ross

I think the Minister has met the point at issue. The point now surely is that this is really something in the nature of a banking transaction, only it happens to have more peculiar reasons for the taking up of shares in an equity form. It can be regarded as a banking transaction where the borrower has got the protection he would have if he were given debentures, or a preference shareholder, or a person borrowing money from his bank in the ordinary way. As I see it, the State company are being given the ability to give these protections, not because they are a State company but because they are in this particular business, which is a form of banking. Perhaps Senators would accordingly agree my suggestion for altering the amendment would meet that point.

Mr. Fitzpatrick

Senator Ross's suggestion is limited by the fact that the Minister's certificate must be given. It is unlikely the Minister, being the Minister for Industry and Commerce, himself having an interest in the Industrial Credit Company, will give certificates in respect of any company other than the Industrial Credit Company.

Mr. Ross

We must accept without question that he will give it to the Industrial Credit Company, but it is a matter of good faith from then on as to whether he would refuse it to some other company in a similar line of business which is in a competitive trading position.

Mr. J. Lynch

Indeed the intention would be to encourage other companies. I think Senator Ross has put it very clearly—that this is in essence a banking transaction. Those who borrow from the banks have all the protection in so far as indebtedness is concerned. It would be a retrograde step to have disclosures obligatory in this case.

Mr. Fitzpatrick

Do the Industrial Credit Company issue an annual report in which they show what they are doing with the money provided ?

Mr. Lindsay

They give the sum expended but do not show to whom or to what company they give it.

Mr. J. Lynch

I shall go another bit and say that we might leave out the requirement of the certificate altogether.

Mr. Nash

I would be inclined to oppose the amendment if that requirement is left out. I can see that it would lead back to the abuses which this subsection is designed to eliminate. The purpose of the subsection is to prevent the abuse of speculators in the stock exchanges making money at the expense of the ordinary man who has £200, £300, £400 or £500 to invest.

Mr. J. Lynch

May I make a suggestion in relation to the amendment, if adopted ? If it goes unanimously from this Committee, Senators Lindsay and Fitzpatrick having met my point, it will be available to the Dáil and the Dáil will have to go back on it and debate it fully. Would the two Senators agree to acquiesce in those circumstances ?

Mr. Lindsay

The Minister is being too nice to us.

Mr. J. Lynch

It is practical politics.

Mr. Lindsay

We can take great force from the fact that there was almost unanimous objection to this in the Dáil Committee.

Chairman

Really we have thrashed this out very fully and I suggest we now proceed to vote on it.

Mr. Ross

We know now how the vote will go. Could we not reconsider it on a Recommittal Stage ?

Mr. Lindsay

You do not know how the vote would go. Senator Nash would be against the amendment omitting the Minister's certificate, for instance.

Mr. J. Lynch

This will be going back to the Seanad on Report and amendments will be permitted there.

Mr. Fitzpatrick

On the basis that it would not be creating an undue privilege for a State-controlled body, I would support it without the provision for the Minister's certificate.

Chairman

You mean the Minister's amendment, as amended, and without the provision for the Minister's certificate ?

Mr. Fitzpatrick

Yes.

Chairman

Companies would then have to interpret the Act for themselves as to whether they were that type of company or not.

Mr. J. Lynch

There could be another formula. Section 45 deals with certificates of exemption in certain cases, to be given by a recognised stock exchange. If the certificate were to be given by the Dublin or Cork stock exchange, it would perhaps make the thing more objective.

Chairman

Would there not be some difficulty as to how it would come before the stock exchange?

Mr. J. Lynch

The Oireachtas would have no control over a situation like that.

Mr. Lindsay

Is it not the general idea in enacting legislation that the Oireachtas would have control?

Mr. J. Lynch

There are sections in the Bill which give certain functions to bodies outside the Oireachtas but, of course, any breach of the Act would be within the control of the Oireachtas.

Mr. Lindsay

At the risk of repeating myself, the Oireachtas votes money to the Industrial Credit Company and if this amendment is incorporated in this Bill and the Bill subsequently becomes an Act the Oireachtas is, by so doing, shedding itself of the responsibility as to how that money is to be expended and depriving itself of the right to inquire into the method of expenditure.

Mr. J. Lynch

The Oireachtas in setting up the Industrial Credit Company in the original Act has already decided that the Company need not come under that strict control and obviously with good reason at the time.

Mr. Ross

Then Section 45 would not apply to every case. It would only apply to a case where it is proposed to offer shares?

Mr. J. Lynch

It is just the formula that is being referred to. The certificate could be issued not by a Minister of State but by a recognised stock exchange.

Mr. Ross

I see.

Chairman

It is hard to see in what way it would come before the stock exchange for decision.

Mr. Ross

I would prefer to see the Minister's certificate.

Chairman

Could we get back to the original amendment and the amendment of that amendment that has been suggested? We had better vote on it but, first of all, I am asking the committee whether they wish to amend the Minister's amendment. If they do not I will put the Minister's amendment. If they do I will put the Minister's amendment as amended for a further vote.

Amendment amended, by leave, to read as follows:—

" In page 94, between lines 32 and 33, to insert a new subsection as follows:

‘ (6) Subsections (4) and (5) shall not apply to a company which is principally engaged in the acquisition and underwriting of shares or other securities of companies carrying on a trade or industry in the State and which holds a certificate of exemption issued by the Minister from the requirements of those subsections.'"

Chairman

Now I am putting the amendment as amended.

Mr. Fitzpatrick

Before you put the amendment, if the section is amended as proposed will that give an opportunity of raising the matter on the vote for Industry and Commerce in the Dáil each year?

Mr. J. Lynch

As I explained to Senator Lindsay, the activities of the Industrial Credit Company come under the Minister for Finance but, of course, anything relevant to this Act will come under the Minister for Industry and Commerce.

Mr. Fitzpatrick

Could the Minister's action in refusing to grant a certificate under this section be raised on the Minister's vote?

Mr. J. Lynch

Yes, certainly.

Mr. Lindsay

Or by Parliamentary question.

Mr. J. Lynch

Certainly, yes. I misunderstood the Senator and I thought he referred only to the activities of the Industrial Credit Company. The granting or withholding of a certificate would come within the purview of the Minister for Industry and Commerce and, therefore, would be relevant on his vote.

Amendment, as amended, agreed to.

Question proposed : " That Section 158, as amended, stand part of the Bill."

Mr. Ross

Subsection(4) (a) reads:

the body corporate is a subsidiary of the company;

Subsection (4) (b) reads :

although the body corporate is not a subsidiary of the company the company is beneficially entitled to more than 20 per cent in nominal value of its shares . . .

Suppose the position were that company A held a 100 per cent shareholding in company B and company B held a more than 20 per cent shareholding in company C, would company A not escape then by employing a wholly-owned subsidiary? Is company A beneficially entitled to 20 per cent of the shares in company C?

Mr. J. Lynch

There would be a chain of information there. Company A would have to disclose its relationship with Company B and Company B would disclose its relationship with Company C.

Mr. Ross

Is the company beneficially entitled to more than 20 per cent in the nominal value of the shares where a 100 per cent subsidiary is interposed between them?

Mr. J. Lynch

There is no direct relation between A and C, unless C is a subsidiary of B.

Mr. Ross

That is my point.

Mr. J. Lynch

But there is a sequence you can follow up. A is related to B and B to C. The information would be given by A about B and by B about C.

Mr. Ross

A would give information as to its shareholding in B under (4) (a) and B would do the same for C under (4) (b)?

Mr. J. Lynch

Yes.

Mr. Ross

" Although the body corporate is not a subsidiary "—is that not the same body corporate ?

Mr. J. Lynch

There is just one body corporate but there is a relationship which A discloses in regard to B. As regards the value of B's holdings in C you would have an idea of how much of company C was owned by B.

Mr. Nash

I am inclined to agree with Senator Ross's point. You could go down to the Companies Office and get up a file in relation to company A and find in the company A file that it has a wholly-owned subsidiary called company B. If you stop at the company A file that is all you discover. If you want to pursue it further you have to ask for the company B file and then you find that company B has a 25 per cent holding in some other company. But you will not get the whole thing in the one file. I think that is Senator Ross's point.

Mr. Ross

My point was more than that. It was a fear—

Mr. J. Lynch

That company B would be eliminated ?

Mr. Ross

Not so much that as that there would be no disclosure of company B as a holding company. If you search you will find company A with company B as a wholly-owned subsidiary company but then you have to look up company B.

Mr. J. Lynch

Having looked at company B you will see company B shows a declaration of its holding in another company if it is in excess of 20 per cent. There is a chain of information—

Mr. Ross

Yes, I see that.

Mr. J. Lynch

There is also the important point in connection with paragraph (a) that by definition " subsidiary" includes "sub-subsidiary."

Question put and agreed to.

Sections 159 to 189 inclusive agreed to.