Amendments Nos. 64 and 65 are related and may be discussed together. Is that agreed? Agreed.
SECTION 46.
I move amendment No. 64:
In page 45, subsection (9), line 34, to delete "twelve months" and substitute "three years".
The purpose of these amendments is to change the time limits proposed in section 46(9) from 12 months to three years. Deputies will recall that section 46 makes provision for the keeping and making available for inspection by shareholders of copies of directors' service contracts or, where the contracts are not in writing, written memoranda of such contracts. There are a number of derogations from the general requirements. One of these relates to where the director works wholly or mainly outside the State. Also excluded at present are contracts where the unexpired term of the contract is less than 12 months or where the contract can be terminated by the company without payment of compensation within 12 months.
In our overall examination of Part III and in our efforts to get the balance right and not to impose on companies any more burdens than are considered warranted or necessary, we have re-examined this subsection. I am sure the committee will agree that it is a matter of judgment as to what the appropriate period is in circumstances of this kind. Having reconsidered the matter I am of the view that three years is a more appropriate period. Essentially the effect of the amendment would be to require companies to keep available for inspection contracts which have longer than three years to run or contracts which cannot be terminated without compensation within three years from whenever the request is made. To put it another way, once the contract can be terminated within three years it does not have to be kept available for inspection. I might add that this three year period mirrors corresponding provisions in the Building Societies Act, 1989.
Do I take it that if somebody has a five year written contract, it is no longer necessary to keep a copy after two years? Is that a fair interpretation? Once the contract runs over five years, does it have to be kept?
No. Where the unexpired portion is more than three years, you have to keep it.
After two years one can discard a five year contract. May I ask the Minister one other question which does not strictly relate to the amendment, but relates to the section as a whole? It states that in the case of a director whose contract of service is in writing a copy of that contract must be kept. In the case where it is not in writing a written memorandum setting out the terms has to be kept. I have encountered contracts which were partly oral and partly in writing. What is the situation there?
Secondly, I note that the section states that the contract has to be kept at a specific place. There is no provision in the section whereby a variation of the contract has to be kept at the same place. I would like the Minister's views on that.
The Deputy is posing six markets, which is excellent. He is raising certain difficulties that may arise in relation to particular contracts — written and verbal. I would say that a memorandum of the verbal agreement would have to be retained as part of that contract. The two combined would give a fair interpretation of the contract itself, written and oral. They should be kept at the same location to ensure that they can be compared.
It is a technical point and, as the Deputy knows there are three options in relation to keeping contracts: in a registered office, or in a place where a register of members is kept if other than its registered office, or the principal place of business. I am not sure whether we can make this quite clear because the Deputy is asking about possible difficulties that may arise in relation to a written contract and a verbal contract, but I expect it will be necessary that both should be retained in the one location.
If the Deputy feels that this would not be the case and indicates a relevant section in the Bill I will certainly look at it. Subsection (1) states that all memoranda and all copies of same kept by a company in pursuance of the subsection should be kept in the same place. Basically, we are covered but I should like to hear the Deputy's views on it.
I think the end of subsection (1) only applies to the contract and to the variation. I would like the Minister to have a look at that to ensure that people cannot keep contracts and variations of contracts in different places. The purpose of the section is to keep certain people informed about certain things relating to the company and we have to get that right. There is one other point. I am looking at another subsection here——
The Deputy's point is an interesting one. It is a detail of the Bill and we do not want anyone to get around it when it is enacted. If a point is put forward, it is only fair that we should respond where we see it as an obvious drafting difficulty or flaw in the Bill. The Deputy put forward a very interesting point and we will consider it for Report Stage. We will also have to look at subsection (8) which looks back to subsection (1) as applied to the variation of directors' contracts of service with a company. We may find an answer within that section by an analysis of the section and, if not, we will certainly look at it.
Deputy O'Dea raised a good point here because I do not think that a variation is provided for. Certainly in my own experience I have encountered situations where, in the most improper circumstances, variations of contract of service have suddenly been found which have entitled directors to large golden handshakes, or whatever it might have been, that were not apparent in the contract of services understood at the time of certain developments in the company. When members of the workforce found themselves out of work this kind of variation could be produced and it is important that it is expressly provided for. Furthermore, the agreement should be kept in one specified place. That is an important point.
Subsection (8) says that subsections (1) and (4) shall apply to a variation of a director's contract of service as well as to the contract itself.
Subsection (8)?
It states that subsections (1) and (4) shall apply to the variation of a director's contract of service, which might cover the point the Deputy is talking about.
I do not agree, Chairman. That would mean that all the variations should be kept in the one place. There is one other point there. First, I sincerely thank the Minister for his open and flexible response. Under subsection (8) subsections (1) and (4) should apply to a variation of a director's contract. Subsection (3) obliges a company to send a copy of the contract of service to the Registrar of Companies. Is there an obligation on the company to send a variation of the contract to the Registrar of Companies?
He only sends the notice of where the contracts are kept.
Where is the obligation to send notification of the location of the variation?
It should have been included in section 46 (3) but it is not. The memorandum would have to be referred to in subsection (3) as I see it to tighten it up. On that point we could include it under subsections (1), (3), (4) and (8).
On Report Stage the inter-linking of subsections (1), (3) (4), and (8) should be adequately worked out and clarification given. Is that agreed? Agreed.
I agree and we will come back on Report Stage with a refinement.
Amendment agreed to.
I move amendment No. 65:
In page 45, subsection (9), line 35, to delete "twelve months" and substitute "three years".
Amendment agreed to.
Section 46, as amended, agreed to.