Special Committee on the Companies (No. 2) Bill, 1987 debate -
Tuesday, 9 Jan 1990

SECTION 83.

Mr. O'Malley

I move amendment No. 105:

In page 75, subsection (6), lines 30 and 31, to delete "or contingent or prospective creditor (including an employee)" and substitute ", employee".

The purpose of this amendment is to clear up an inconsistency which has arisen by virtue of an amendment made on Committee Stage in the Seanad. At that time the reference to "contingent or prospective creditor (including an employee)" was substituted for the words "actual or contingent" in relation to a creditor. This amendment was made on the basis of arguments put forward by Senators that an employee should have an express right to apply to the court for a disclosure order under section 83 (2). It had been felt at that stage that the reference to "actual or contingent" would probably cover employees. In the end, however, it was agreed to include a specific reference to employees in the subsection. On reflection, however, it seems as if this may, in fact, have gone too far. The term "contingent or prospective creditor" is extremely wide and I think that not all contingent or prospective creditors should be given the right to apply for a disclosure order. In fact, the only special type of creditor to whom, I think, we ought allow such an application is an employee, and this is the effect of the present amendment.

Mr. O'Dea

On the definition that the Minister has referred to, namely, the definition of financial interest, it is a person who has a financial interest in a company. It is extended to include co-adventurers etc. who would not necessarily have a financial interest in the company themselves but can, of course, be defined so to have for the purpose of the section. What do "lessor", "lessee", "licensor", "licensee" cover? Is it a lessor of property to the company, lessee of the company's property? What precisely is it?

Mr. O'Malley

Yes. The categories of lessor, lessee, licensor or licensee could act in the role of landlord or tenant to the company concerned or might be on the giving or receiving end of a leasing arrangement in relation to goods. While a lessor could be a creditor in certain circumstances he might not, by any means, always be and it is worth while putting in this category separately in its own right. The same applies to the categories of licensor and licensee. We could be talking here, for example, about a private company giving or receiving some kind of franchise to another party, or from another party in relation to goods or services, the franchise being subject to some form of licensing agreement.

Mr. O'Dea

It does not seem one hundred per cent clear from the terminology of subsection (7) that it applies in a case where an agent has been authorised to deal in shares before the disclosure order is made. I agree it can be interpreted that way but it should be made very clear, otherwise a person could simply hand over to an agent or give the agent the power to dispose of and acquire shares on his behalf in anticipation of a disclosure order being made or when an application is being made to the court for a disclosure order.

Mr. O'Malley

This subsection is essentially an anti-avoidance provision. Few people actually buy and sell their own shares. Normally this is done through an agent, usually a stockbroker. It could be easy for a person at whom a disclosure order is addressed to get around it by simply authorising a broker to acquire or dispose of shares or debentures on his behalf and "ensuring" that the broker does not inform him of the relevant acquisition or disposal. To counter this, therefore, this subsection provides that where a person authorises an agent to acquire or dispose of interests in shares or debentures for him, he must ensure that the agent notifies him immediately of any transaction which might give rise to an obligation to comply with a disclosure order.

Mr. O'Dea

Is it clear that the section applies to an agent who acts before the disclosure order is made?

Chairman

The point being made is that an agent goes ahead in anticipation of a disclosure order or where an application for a disclosure is gone to the court but is not yet in existence.

Mr. O'Malley

He is caught.

Chairman

Only for the duration of the order.

Mr. O'Malley

The requirement on anyone to disclose can only exist for the duration of the disclosure order anyway, whether he is a principal or an agent.

Mr. O'Dea

I think it applies where the agency is created before the court actually makes a disclosure order. The obligation to disclose or to keep the principal informed does not just arise after the court has made the disclosure order.

Mr. O'Malley

No, my understanding of it — and I think it is fairly clear — is that if the agency exists before either the making of the order or even the application for the order, it is still binding on the agent.

Amendment agreed to.

Section 83, as amended, agreed to.

Sections 84 and 85 agreed to.