Continuing from our meeting last week, whan section 4, as amended, was agreed to, we now come to section 25, amendment No. 29 in the name of the Minister. Amendment No. 58 is consequential and amendments Nos. 29 and 58 should be discussed together. Agreed? Agreed. Acceptance of this amendment involves the deletion of the existing section 25. The Minister to move amendment No. 29.
NEW SECTIONS
NEW SECTIONS.
I move amendment No. 29:
In page 26, before section 25, to insert the following new section:
"25.—(1) For the purposes of this Part, a person is connected with a director of a company if, but only if, he is—
(a) that director's spouse, parent, brother, sister or child;
(b) a person acting in his capacity as the trustee of any trust, the principal beneficiaries of which are the director, his spouse or any of his children or any body corporate which he controls; or
(c) a partner of that director;
unless that person is also a director of the company.
(2) A body corporate shall also be deemed to be connected with a director of a company if it is controlled by that director.
(3) For the purposes of this section, a director of a company shall be deemed to control a body corporate if, but only if, he is, alone or together with any of the persons referred to in paragraph (a), (b) or (c) of subsection (1), interested in more than one-half of the equity share capital of that body or entitled to exercise or control the exercise of more than one-half of the voting power at any general meeting of that body.
(4) In subsection (3)—
(a) ‘equity share capital' has the same meaning as in section 155 of the Principal Act; and
(b) references to voting power exercised by a director shall include references to voting power exercised by another body corporate which that director controls.
(5) The provisions of section 49 shall have effect for the purposes of subsection (3) with the substitution of the words ‘more than half' for the words ‘one-third or more' in subsections (5) and (6) of that section.".
It has been strongly represented to my Department that section 25, which defines what a connected person is, for the purposes of Part III of the Bill, is both too wide-ranging in an Irish context and too complicated. Having examined it in depth I have to agree. Amendment No. 29 tries both to simplify the definition as well as making it less wide-ranging. The main change proposed arises from the present section 25 (1) (b) which involves complicated and, in my view, circular attempts in subsections (2) and (3) to try to define concepts such as association with and control of a connected body corporate by a director of a company. What I propose in the amendment is to draw back from very remote or indirect suggestions with association or control and content ourselves instead with easier more straightforward tests of connection between the company director and another body corporate. Therefore, if we compare the existing section 25 with the revised section in the amendment, the following changes would arise. First, what is currently subsection (1) (b) would be moved to a separate subsection (2). So we would not speak of a body corporate being associated with the director but more simply being controlled by him. This means that we can omit the present subsections (2) (a) and (3) (a), which together make the whole section very complex, circular and difficult to understand.
Second, we have also incorporated the present subsection 2 (b) into a new simplified subsection (3). Third, we have simplified the wording of the present subsection (3) (b) in the new subsection (4); we have narrowed down the scope of the present subsections (1) (c) and (d) which are now subsections (1) (b) and (c) and, finally, we have incorporated the present subsection (4) into the new subsection (5). I hope the Committee will agree that the new section will represent a big improvement on the present version of the Bill. For one thing, I think it is much clearer than the present text which many people found rather complex and difficult to grasp. Secondly, I think it is a more realistic attempt to define situations where, for the purposes of this Part of the Bill, a connection should be established between directors of a company, on the one hand, and other companies in which they have a direct interest, on the other.
Amendment No. 58 to section 38 is consequential on amendment No. 29. Subsection (7) of section 38 is only necessary if we retain the present complicated formulation of section 25 under which a body corporate can be said to be connected to a director of a company even though he does not control it. Under the new section 25, however, a body corporate will only be connected to a director if it is controlled by him. Under this new arrangement, therefore, section 38 (7) is no longer necessary and can be deleted. That is what this consequential amendment would do.
I think it is well accepted that the existing provisions were far too wide and the intention of the amendment is therefore welcome. I am just wondering about subsection (2) of the proposed new section, which says, "A body corporate shall also be deemed to be connected with a director of a company if it is controlled by that director". I wonder should that not be extended to include "or by persons connected with him acting in concert with him". It would appear that subsection (2) may be unnecessarily narrow and that the Minister has gone too far in the opposite direction.
Subsection (3) of the amendment covers the very point Deputy Bruton is making, because it states that a director shall control the body corporate if he is alone or together with any of the persons referred to in paragraph (a), (b) or (c) of subsection (1), interested in more than half of the equity.
In relation to the mention of a spouse, what would happen in the case of a separated spouse who has no judicial connection any longer but is still regarded as a spouse? Did the Minister examine that possibility? I can foresee a situation arising in the future where, when somebody is being faced with defining what this Act means, they would have difficulties in that area. I think it might be something for the parliamentary draftsman to have a look at.
I will take the opportunity between now and Report Stage to look at the Interpretation Act, 1937, to see how the spouse is defined there. I have not got it here. This is the worst of operating in a room like this, you have no access to anything. I am sorry about that.
It is all right, I would appreciate it if the Minister would just have a look at it before Report Stage.
To follow on on what Deputy Barrett said, I notice that in section 3 the term "child" is defined and a parent is defined accordingly. The Minister will no doubt be aware that in succession legislation there is distinction between brothers and sisters of the half blood and of the whole blood. We are not quite clear on the meaning of "brother" or "sister" here, for the purposes of this legislation either. Would the Minister undertake to look at that as well, or is it the intention of the Minister to confine it to relationships of the whole blood?
I will look at that also. I cannot say offhand. Again, I am afraid that having to discuss these things in a place like this, with no facilities and no books, is totally unsatisfactory. Normally relations as defined, include relations of the half blood and collaterals as defined include collaterals of the half blood. I take it that the collaterals mentioned in this amendment include collaterals of the half blood. It would, to my mind, be quite unsatisfactory if they did not. I will check it.
The Minister referred to Deputy Bruton's question about the number of people who together control a company for the purpose of the definition of whether a director or people associated with him control a company. I take it that in subsection (3) when we are talking about the director together with any of the persons referred to in paragraphs (a), (b) or (c) that what we mean there is any or all of the people referred to in paragraphs (a), (b) and (c).
Yes.
Subsection (1) (b), states "a person acting in his capacity as the trustee of any trust, the principal beneficiaries of which are the director, his spouse or any of his children or any body corporate which he controls". Does that include discretionary trust? The discretionary trust would come into play when the discretion is exercised in favour of the director because at that stage he is interested, but does it include the beneficiaries of a discretionary trust? What does the term "principal" there mean? Does it mean that they are the beneficiaries to the extent of more than half or does it mean that they are simply the largest group of beneficiaries?
The answer to the first question is yes. I think principal in this context means main.
Rather than more than half?
Yes.
Amendment agreed to.
Acceptance of this amendment involves the deletion of section 25 of the Bill. Amendment No. 30 in the names of Deputies Bruton and Barrett is a new section and should be taken on its own and not grouped with any others.
I move amendment No. 30:
In page 26, before section 25, to insert the following new section:
"25.—The directors of a company shall have regard, in the performance of their duties, to interests of the members of the company as a whole, and to the interests of the company's employees as a whole.".
The purpose of this proposed amendment is to extend the responsibilities of directors which hitherto have been concerned with shareholders to also include the interests of the company's employees. It is fairly well established now that employees in a company who worked for it for many years acquire what could be described almost as a property interest in their job in the company. It is the issue in which they have invested their lives and their time to the greatest extent. We have a situation at the moment in which the directors of the company see their responsibilities under current company law as not including employees in this sense of a legal obligation. I know that directors will always endeavour for the purposes of good industrial relations to convey the impression, real or otherwise, that they are taking the employees' interests into account. That is more a matter of policy on their part than a matter of obligation. The Fine Gael amendment here would tend to have a beneficial effect on company law and move away somewhat from the adversarial approach we have at the moment to industrial relations by conferring on directors the responsibility to take account of the interests of employees.
As the Deputy is aware, the 1963 Act, sections 174 to 199 inclusive, contains a number of provisions regarding directors and other officers. These are pretty extensive and include provisions to guarantee election or dismissal of directors. In the circumstances, using the available procedures, members are in a position to ensure that their interests are not prejudiced by the actions of directors without at least having the opportunity to question them in their appropriate forum which would normally be the annual general meeting.
In regard to employees the normal industrial relations procedures would seem to me to be the appropriate manner in which their position would be safe-guarded and protected. The Deputy, when moving the amendment, concentrated on that part of his amendment rather than on the other part related to members. There are various provisions in addition to the 25 sections that I mentioned in the 1963 Act which cover what the Deputy is getting at. Both in existing legislation and in the present Bill in particular provision is made for both members and employees to become directly involved in certain situations affecting their company. Section 205 of the 1963 Act is a case in point where a member, if he feels that the affairs of the company are being conducted in a way that is oppressive to him, has certain rights. Similarly, and again by way of example, both members and employees are given the right under Part IX of the present Bill to petition the court for the appointment of an examiner to the company if they feel their respective rights are not being properly protected by the board.
By the same token section 120 of this Bill, which substitutes a new section for section 298 of the principal Act, enables contributories to make application to the court. Section 146 of this Bill empowers both members and employees to seek court direction in relation to the performance of functions by a receiver. The general philosophy could be summed up by saying that rather than impose a general duty which may be difficult to enforce in practice our approach has been to include specific provisions for members and employees where this is considered appropriate. I have adopted this approach by way of reply to the Deputy's amendment because the issues it raises are many and complex. Indeed the Deputies will be well aware that whole books have been written about the general duty of a director to his company, its shareholders and others. Both British and Irish case law is littered with judgments which have tried to come to grips with the whole area. I have to say that in the Bill we did not set out to codify this extremely wide area of the law since we considered we had more than enough to do in selecting individual areas of abuse for treatment. I have no doubt that the question of the director's general duties of care would be an interesting debate to get into but I do not think this Bill is the appropriate place to do it.
In general it would be dangerous if courts were seen to be, as a result of a new section this amendment might insert, as the place in which to seek to resolve industrial disputes. They are best resolved away from the ordinary courts in the various fora that are made available under industrial relations legislation for the resolution of disputes. I do not think the ordinary legal courts are well fitted for that task. To give it to them would prolong procedures and make it expensive and more difficult to resolve the industrial disputes that will arise from time to time between a company and its employees.
The Minister referred to section 174 and subsequent sections of the 1963 Act as providing an answer to the case made here which is to provide a general responsibility on directors to look after the interests of both members and employees of the company. I would point out to the Minister that those sections to which he referred are almost exclusively procedural sections. They do not confer any rights, and procedures which are not guided by general principles are not particularly useful. A procedure without an objective is literally a road going nowhere. It is to provide an overall purpose under which these procedures might be used that this general section is proposed. The Minister referred to the fact that many books have been written about the general duties of directors. Perhaps the necessity for the writing of all of these books has arisen from the fact that the legislation has not spelled out their responsibilities in a sufficiently clear way. Perhaps some of the litigation and literature that has arisen might not be necessary and a great deal of effort might be saved if a general duty for directors was laid down as contained herein.
The Minister is not correct in his suggestion that the insertion of a general responsibility of this kind would lead to greater amounts of litigation. In fact, one of the sections to which he referred — section 205 of the Act which refers to remedies in cases of oppression of minorities — itself specifically refers to various issues that court may decide. It seems to me that the existing procedures involve the courts but without giving them a clear guideline as to what stance they should take in terms of general principle. It would be beneficial if this were done.
I also would have to say that it is my view that a good deal of the take-over activity taking place at the moment, where people are fighting to obtain 51 per cent of a company, might not be as virulent as it is if the directors, having obtained 51 per cent of the company, were told more clearly than they are at the moment that even with 51 per cent they have a clear obligation to take into account the interests of all the shareholders of the company, including the remaining 49 per cent or whoever are left in the ownership of shares in the company after the so called take-over has been achieved.
So, far from leading to a greater access to litigation and far from encouraging greater industrial relations disputes, I think this proposed section, by placing on directors a responsibility to look after the interests of all the employees and all the members of the company, might be more in line with the co-operative spirit that one wants to see and promote in business. Indeed, the Government themselves, in their Programme for National Recovery and their quadripartite and tripartite approaches to discussions of social issues, are themselves seeking to create this in the industrial sphere. I would suggest that this amendment of ours is, in fact, entirely consistent with the Government’s overall objectives of policy and is one that should be accepted for that reason.
I support my colleague, Deputy Bruton, on this. What the Minister said in reply to the amendment initially, that there is access to the courts and that there is access through the employees suggesting the appointment of an examiner and so on, is quite true. However, it is also a fact that at that stage the onus is being put on those who seek the examination, or who seek to go to litigation, to request the information, thereby setting a scene on a new stage, that of, if you like, antagonistic or adversarial attitudes. These are not helpful to the situation in the normal running of company business. The amendment also places on the directors of the company the need for ongoing day-to-day evaluation of their actions. In other words, lest there be an examination, or something at a later stage, the directors are fully aware, keeping in mind this section, that they have responsibilities to their fellow directors, that they have responsibilities to their employees and the general wellbeing of the company as a whole. By so having, and by having it clearly set out in this amendment, the attitudes and the decisions taken by the company will obviously be much more careful and much more guarded and will have greater heed to the long-term needs and development of that company than if the amendment was not made.
I would like to support the amendment in the names of Deputy Bruton and myself. I think we are moving into a new era in Irish industry and we are talking consistently about the need to involve employees in the day-to-day running of companies in order to bring about success. If somebody has invested many years of his or her life in a company they deserve, at least, from the directors of the company that their interests be regarded and taken into account in the taking of decisions. If we can protect financial interests which, of course, we should, we should also protect the interests of those who create the profits and success of a company.
I do not see anything wrong in inserting in a Companies Bill a section of this nature which obliges people in positions of powers to take various interests into account. If we are talking about participation in the company's activities by the employees, and that is very badly needed in order to bring about success, then we should have it clearly stated in company law that their interests will be regarded. For the life of me, I cannot see how this in any way can weaken this legislation or impose any unreasonable obligations on those whose job it is to direct the company.
We have seen success in other countries where there is active participation by employees in the day-to-day running of a business.
Those of us who had the opportunity of visiting countries abroad have seen that in practice where we should not alone be doing this sort of thing, but also be encouraging participation in ownership by employees in companies. We are here to try to develop Irish industry in a real and practical way and when we have this opportunity we should avail of it to protect the interests of those who have invested their lives in a company. I would urge the committee to support this amendment, which I think can only add to good employer-employee relationships.
I am inclined to agree with the Minister here. Deputy Bruton's amendment is divided into two parts. The first part requires the directors to have regard to the interests of the members of the company, namely the shareholders. The second part obliges the directors to have regard to the interests of the employees. Deputy Bruton mentioned that perhaps the reason there are so many books on company law dealing with the duties of directors where there is so much case law on it, is because the legislation is insufficiently clear. Of course, that is incorrect. The reason there is so much case law is because the protection of the interests of shareholders has developed from common law.
It is really a non-argument to suggest, as Deputy Bruton has suggested, that if we are to encapsulate what the judges have decided into a one or two line sentence in a Companies Bill that is going to bring about some sort of a magical transformation whereby we are going to have less case law. The first part of Deputy Bruton's amendment, "the directors of a company should have regard in the performance of their duties to interests of members of the company" is just stating what the courts have already decided.
Whether this proposed amendment becomes law or not, a myriad of cases will arise as to whether in the particular facts of a situation the directors have discharged their duties having regard to the interests of the shareholders. That will arise in common law; it will arise whether this matter is written in or not.
Deputy Barrett referred to the question of employees sharing the success of a company. I agree fully with what the Deputy said in that regard, but we must bear in mind the fact that under general legislation employees are protected. For instance, employees are protected under unfair dismissals legislation, under reduncancy payments legislation. The interests of employees are bound up, by and large, with the interests of the company. It is no accident that the companies who are doing best can afford to pay their employees better than companies who are, perhaps, doing less well. A number of companies in my own region are examples of that.
If we were to accept the second part of Deputy Bruton's amendment, and I fully understand the thinking behind it and fully agree with the sentiments he has expressed, you could have a situation whereby we could bring the commercial life of the country to a halt. For instance, if a company found that in order to survive it had to undertake a radical reorganisation where up to half the staff were to be let go, I do not think that could be construed — if we were to accept Deputy Bruton's amendment — as being in the interests of the employees as a whole. However, it would certainly be in the interest of the economy that the company should be kept going rather than be allowed to go into liquidation. So while I fully accept the thinking behind the second part of Deputy Bruton's amendment, I do not think it is something that can feasibly be contained in company law.
There is a point of clarification I would like to make which could be relevant to Deputy O'Dea's intervention. I have to point out that section 46 of the 1980 Companies Act in the United Kingdom contains exactly the provision I propose. It has operated in Britain for the last eight years without any of the dire consequences feared by Deputy O'Dea.
I do not fear any dire consequences.
I would point out further, that Mr. Justice Ronan Keane in his book, Company Law in the Republic of Ireland, described this particular gap in company law, the absence of a general duty to look after the interests of members as a whole and employees as, and I quote “one of the most widely discussed lacunae in modern company law”. We are filling a lacuna in this case if we accept this amendment. The drafting of my amendment is based on the relevant language in the UK so the drafting is not a problem. It should not pose a problem for the Minister’s advisers.
If I can just come back very briefly. I was not suggesting any dire consequences. Deputy Bruton seemed to base his argument on the fact that if the law was changed in the way he suggests, there would somehow be fewer cases and there would be more clarity. There would not be more clarity. The question would continue to arise whether in the facts of a particular case the directors had discharged those duties to the shareholders. I have every respect for Justice Ronan Keane. I have read his book but he does not explain — and Deputy Bruton's intervention there does not explain — how there would be less case law and more certainty.
I would agree with the amendment but it proposes merely what all good companies do. I do not know what Japanese law says but it appears to me that it must have some provisions of that nature because that is precisely how they operate and how they make the employees of the company a part of the company. They share in their objectives, names, etc. and they pose in a very benevolent way but they do look after their interests and that is what it should be about. I am concerned about the wording of it, about how meaningful it is. I think it is good that there should be in the law such a phrase: "the directors shall have regard to". It clarifies what a good company should be all about but I do not think it could have any legal effect because it is very difficult for anyone to say what "having regard to the best interests of somebody" is. The tyrant father always has the best interests of his child at heart, that is what it is all about, that is why he is so tyrannical about it. How do you prove that you have not regard to the best interests of your employees or that you have regard to them? I certainly would be fully supportive of the amendment. It would be good that it would be in the law. I do not think any company would have to be too worried about it.
Chairman, I think the intent in the amendment is good. I would like to look at it from a practical point of view and again we are back to a question of interpretation. For example, if a director decides to make a major investment on behalf of his company, an investment he thinks is good for the company and it goes wrong, as can happen, the employees who are part of the company might take the view that what that director has done was indictable. I can see a whole range of legal issues and problems arising on the basis of the interpretation.
I do not know if it extends also to creditors, for example, who, on the basis of a decision taken by a director or a number of directors with regard again to investments or commercial decisions, might take the view that it was not acting in their best interests. Again we would find ourselves back in the courts trying to decide and argue between the two opposing points of view and in the end I think the beneficiaries would probably be either, with all due respects to both professions, accountants and the legal profession. The intent is good but I do not think it possible to give it any substantial meaning by including it in the Bill, from a practical point of view.
On the same lines as Deputy Flood, obviously the amendment represents a very laudable aspiration. My concern, too, is that we would legislate ourselves out of business because it is such a broad statement. I would feel that we would leave ourselves open. Deputy Mac Giolla asked a legitimate question. He approached it from a different angle and asked how, since the proposal is so broad, it could have any effect.
There is a number of questions I would like to put to the Minister. I think he has quite rightly pointed out that this area has been covered by other sections in the Bill but my main concern would be that we would be putting something into law that would complicate procedures. We have in general good employer-employee relations and there are many procedures in place. There are many incentives and rewards for effort. Reference has been made to the need for a spirit of co-operation. While I appreciate the good motives behind the amendment, it would be my concern, firstly, that we would be leaving the way open for litigation and, secondly — this is Deputy Mac Giolla's point — that the provision would be so broad, as to be meaningless. These two very real questions should be addressed.
In supporting the amendment in the names of Deputies Bruton and Barrett, I would have to say that relationships between employees of multinational companies can be affected. Where you have a company established here that is part of a British or an American or some multinational company, employees generally feel that their interests are not taken into account by directors especially where it is dominated by directors from outside the jurisdiction. Certainly by having this section in the Bill, the home directors would have a responsibility to indicate to those who have to say they desire to move the business elsewhere, that they would have to take the interests of the company's employees into consideration, and I believe it is a right thing to include in the Bill at this time.
I would just point out to the committee that the obligation to take into account the interests of all the members of the company is already law, in the sense that it is part of the common law arising from the case of Perciville and Wright. What this does is simply introduce that principle into statute law. I think that, given that Perciville and Wright was decided in 1902 in a British court, it is not inappropriate that at this late stage, we might make it our own law, passed by our own Statute, rather than have the necessity of referring back to a case which was decided in a court in London at that particular juncture in the history of the British Isles.
Could I further say that Mr. Justice Ronan Keane has stated very clearly and I quote, in regard to the responsibilities of directors:
"The duty is owed to the members of the company alone. The directors owe no duty to the employees of the company to have regard to their interests".
That is the existing law. Directors have no legal responsibility to employees under company law at all. To my mind that is just archaic and 19th century in its conception. It is something that we should change. I would say to members of the committee who might say: well, our employee is protected by unfair dismissals legislation and by redundancy and all those sort of things, all that other industrial relations legislation, frequently the necessity for redundancy or for dismissals arises from failure to manage the company properly in the first place with an adequate eye to the interests of the entirety of those concerned including the employees. Therefore, a general duty to look after the interests of the employees might well avoid the necessity to call that other legislation into play in the first place.
Furthermore, giving directors a general responsibility to look after the interests of employees, to my mind is a better way of handling the problem than waiting for the problem to arise and then using extremely intrusive, difficult and turgid provisions of the kind which are contained in the redundancy and unfair dismissals legislation. It is better, if we can, to tackle the problem at its source by requiring directors at all times to take into account the interests of employees. This is not going to have any particularly difficult effects because it is something that has already been provided for in section 46 of the British Act, in a similar jurisdiction, and they have been able to manage for the last nine years without any dire consequences.
Deputy Bruton is suggesting that his amendment is similar to a corresponding provision in Britain and that, of course, is not the case. The provision is now in section 309 of the Companies (Consolidation) Act, 1985, and it is much more tightly drawn than the very open-ended amendment that he has put before the Committee.
The fear I have in regard to Deputy Bruton's amendment is that it is so open-ended that potentially it allows a disaffected employee, who has a complaint, real or imagined, to institute proceedings for virtually anything. I cannot see how any restructuring of a company can take place because of the way the Deputy is arguing. It would seem that if any restructuring took place, and any employee's personal interests were affected, he could apply to the High Court for some kind of order claiming a declaration that his interests were not taken into account. On the strict reading of the amendment that would very probably be the case. If some provision of this kind is to be made, it will have to be a good deal tighter than what is proposed here.
The amendment, also, does not take account of the legislation that has been passed by way of directive in the European Community in regard to worker participation and workers' rights and which will have to be incorporated into Irish law as soon as we are in a position to do that. We are not in a position to do it, unfortunately, until this legislation is passed and out of the way because we have two officials in this country to deal with company law. The British, for example, who are dealing essentially with the same things, have perhaps 100. As well as the directives that have been passed there are prospective directives, including what is broadly called the Social Charter, in whatever form it will finally arrive.
I would, however, make this suggestion to the committee, that between now and Report Stage I would be prepared to look at the possibility of an amendment on the British lines, not because it is British but because it is tighter and seems to me to be more workable and much less open-ended. In those circumstances, I would ask the Deputy to withdraw his amendment at this stage on the basis that we will give consideration to putting down one on the lines of section 309 of the 1985 Act.
I am impressed by the Minister's arguments of the difficulties, although I would have thought employees as a whole avoid the individual's difficulties. However, what disturbs me is Deputy Bruton's quotation from Mr. Justice Keane. I was not aware of that, I think that is horrific and must be addressed in legislation in some way. If this amendment is not suitable for doing that, I am glad to hear that the Minister will consider some alternative on Report Stage because the judgment of Mr. Justice Keane, which is, as Deputy Bruton said, our current legislation, must be altered. If a suitable way of altering that can be found — it is up to Deputy Bruton — I think something on these lines is required.
I just want to say, with respect, that I do not think we are interpreting properly the amendment before us. I do not see these dire consequences, that have been outlined by opposers of this amendment, arising. The amendment states:
The directors of a company shall have regard, in the performance of their duties, to interests of the members of the company as a whole, and to interests of the company's employees as a whole.
I do not see how that would affect the restructuring of a company, if that was necessary. It is in the performance of their duties that we are asking that concern be expressed for the interests of the company's employees as a whole. If it is a question that in order to protect 100 jobs you have to restructure your company, which may involve the redundancy of, say, five employees, the directors in a case like that, in the performance of their duties, would be acting in the interests of the employees as a whole. Therefore, I do not see how this could lead to dire circumstances arising where one individual employee, because he or she felt they were not getting a fair deal, could refer to this section in the Companies Act and hold up the restructuring of a company or cause other difficulties for the company that would not be in the interests of the company.
What we are referring to here is as a whole, and we are asking directors in the performance of their duties to show concern for and interest in the employees as well as the members of the company as a whole. I think we can exaggerate the effects that could arise as a result of this amendment but, with respect, it is very broadly worded and it is an expression, and a correct expression, of concern for all those involved in a company, including employees.
Could I ask the Minister if he would accept the amendment? If he is unhappy with it, having reflected on it, he can introduce a Report Stage amendment to alter the wording in whatever way he deems necessary. I availed, perhaps unfairly, because of where I am sitting, to have a look over the Minister's shoulder at the wording of the British legislation and the difference is not very great. The key wording is that they refer to employees in general as distinct from employees as a whole. I can see the Minister's point in regard to the danger that an individual employee might use this provision. If the substitution of the word "in general" for the words "as a whole" would solve that problem, I would be more than happy with that, but I do not want to withdraw this amendment because I believe it is a valid amendment and the proper procedure would be for it to be accepted. If the Minister, on reflection, thinks of some particular difficulty with it, we can agree to change it later.
I am not anxious to accept it because I can see straight away that there are fundamental difficulties in regard to it. I do not want to import them into the Bill and, as it were, have to try to take them out of it again later on. It is particularly worthy of note, I suggest, that this former section 46 of the British 1980 Act, which is now section 309 of the 1985 Act, refers to the interests of the general body of employees which must be taken into account and in the circumstances the directors may not act solely in the interests of one group of employees while ignoring the interests of the remainder of the company's workforce.
In the amendment, as drafted, of course, that is one of the things that is going to happen. One group of employees will allege that their interests were not taken into account and, because of the way it is worded, it would be open to them to get a declaration that that is the case. If one of the other groups were, as it were, favoured, it would be open to debate as to what would happen in circumstances where directors choose a course of action which advances the interests of the members as a whole as opposed to the employees as a whole, or vice versa. In other words there seems to be scope for such action in that area.
I showed Deputy Bruton section 309 and at least as important a part of the section is the second subsection. His amendment reflects only the first one on its own. I am quite sure the British would not have legislated for the first subsection on its own because it is too broad and how it will be utilised is not set out at all in the first subsection. It is also necessary if you are going to have an amendment of this kind to have a third subsection relating to shadow directors.
I would make one further point in relation to it. Anyone who knows anything about industrial relations — I do not claim to know a great deal about it but I suppose I know something about it — will be conscious of the fact that trade union leaders will always tell you that the last place they want disputes resolved is in the courts, for two reasons. First, they feel the courts are quite unsuitable for the resolution of industrial relations disputes as opposed to legal disputes. Secondly, they hate getting into the courts because other things being equal they tend to come off worst because actions in the High Court are very expensive. Companies, by and large, are better able to sustain them than individual employees or unions for that matter. If a union finds itself in a whole plethora of actions as would be the case under a very broad section like this, the expense to the union would be intolerable. That is why they are not interested in being involved in this way.
Nonetheless, I am prepared to look at the spirit of this amendment in the context of what is in section 309 of the British Act, but I would prefer to do it on Report Stage. Let us study it in advance rather than bring in something now which is totally open-ended and where the onus would be to change it rather than to introduce it. I am sure the Deputy would find that a reasonable approach.
Like the Minister I think that the spirit of what is proposed here is very important. Of all people the company's employees have a real interest in the company and it is one which is not recognised really in company law as it stands today. There is clearly a deficiency there. It is obviously true to suggest that the valid interest of the people who invest their lives in a company must be recognised in company law in some way. I can see, for example, the point equally in what the Minister says and I think Deputy Bruton does too when he suggested that if you move away from the wording and look at the alternative wording in the British Act you can see there are alternatives which are not envisaged by the amendment as we have before us. I would be very happy if the Minister did take the spirit on board and came back at Report Stage with an appropriate amendment but with the arguments finally teased out. The procedure which the Minister is proposing is one which has a great deal of merit. Provided he is prepared to adopt and take on board the spirit of the amendment the objectives of the amendment's proposals are therefore vindicated and defended. I would suggest perhaps to Deputy Bruton that as there is consensus around the table that that particular issue, i.e., the interest of the company's employees in general, should be protected and vindicated in company law and as the inclusion of an amendment on those lines is clearly acceptable to the Minister, it would seem to me to be wise. Indeed, as the Minister has said, there are consequential and related subsections in the British legislation and the relationship that exists between each one would have to be well balanced before we come to the substantive acceptance of an amendment on that.
My feelings are, I would say this to Deputies Bruton and Barrett, that it is a very commendable amendment worth importing into company law. Having done so we should be confident in the Minister in going the route he has proposed.
Deputy John O'Donoghue is substituting for me for the next 20 minutes. I have another meeting to go to.
The Minister is very generously offering to go away and study this. I would point out that this amendment has been before the previous Dáil and before his Department for months. If there was any serious willingness to come forward with an amendment to deal with this general principle, I would have thought the Minister would have come here with an amendment of his own if he does not like this one. It is quite clear what the general principle is that we are trying to achieve now. I know it is a classic technique of Ministers who want to smother Opposition proposals in a committee like this not to accept the proposal put forward by the Opposition in case the Opposition might get some credit for having suggested something useful, but to come and bring something in at Report Stage in his own name which is ever so slightly different in order to convey the impression that everything that is in the legislation is done by the Minister and his officials and that the committee and the Opposition on the committee have not had any particular role in the matter.
The Minister would have been better advised to have accepted this amendment and made whatever further amendments he wants on Report Stage rather than saying that he does not want to accept anything and asking us to accept that on the basis that he is going to come along with some unspecified amendment of his own at a later Stage. One wonders what one is doing here.
I will put the amendment.
(Interruptions.)
Deputy Mac Giolla is in the role of conciliator here but I confess to some disappointment that the Minister has not been able to accept this amendment. That is the proper approach. However, I will not press it at this stage and, simply for the purpose of reintroducing it at Report Stage, I will withdraw it.
Amendment, by leave, withdrawn.