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

SECTION 89.

Mr. J. Bruton

I move amendment No. 107:

In page 78, subsection (2), line 42, to delete "in default".

This is an amendment to section 89. Under section 89, where somebody has failed to comply with a disclosure order, it may be that they will by such failure have no right or interest of any kind whatever in any shares or debentures held by them in the company. In other words, by failing to disclose information they lose their property rights, to the shares in the company. This is a very severe penalty. I have to ask the Minister if it complies with the constitutional provisions concerning the property rights of people in these shares, whether simple non-disclosure should be sufficient to deprive them of rights to shares in a company for which they have paid. However, that is another issue which arises more directly on the section.

The amendment Deputy Barrett and I are proposing here is to extend the category of persons who may apply for relief to the court in respect of a default concerning disclosure of information. At the moment the section provides that a person who fails to provide the information may apply for relief to the court, in which case the court may determine that it will restore their rights to them. It may well happen that a person in default has sold his or her shares in the company to another person between the time they failed to make the disclosure and the time that this comes to the notice of the relevant authorities. In the event of that happening, the relevant authorities may take such action under section 89 which results in the third party, who is innocent in the matter, having his or her rights taken from them under section 89 but a third party, as I read it, does not have the right to apply for relief under section 89 (2). It is only the person in default who has that right. That is why I am suggesting that we remove the words "in default" so that any person may apply to the court for relief against a disability imposed by subsection (1). Obviously, the only people who would apply for relief are people who are suffering a disability, so it is not throwing this remedy open to the whole wide world. Only a very limited number of people would apply anyway. So it seems that the removal of the words "in default" does not open any sluice gate; it simply makes the legislation more effective.

Mr. O'Malley

The nub of the difficulty raised by Deputy Bruton is whether the shares concerned could now be in the possession of an innocent third party and it would be unfair to penalise that third party who may have paid a consideration for the shares. The Deputy fails, however, to take account of the words "held by him" in line 39 of subsection (1) because that shows that it is only where the actual holder of the shares is in default that this can arise. If the default were on the part of some previous holder of the shares the section does not apply. The point made by the Deputy is met by the existence of those three words in line 39 of subsection (1).

Mr. J. Bruton

I take that point. Let us suppose the transaction for the sale of the shares had not been completed but the consideration had been paid, the purchaser would still be relying, to some extent, on the remaining rights of the person who was the original shareholder who was in default. If the original shareholder is unable to enforce those rights, the person who had acquired the shares from him would lose his rights. In any event, it would not seem to cost anything to remove the words "in default" to make absolutely sure that anybody who suffers a disability under section 89 can apply to the court for a remedy.

Mr. O'Malley

A purchasing shareholder would not hand over the money for the shares until such time as he was in a position to register himself, therefore I do not think that situation would arise normally. The reason that the words "in default" are here is that they apply to somebody who has failed to comply with a disclosure order made by a court. That person has put himself at something of a disadvantage. That phraseology is used elsewhere in this Bill and it is also used in earlier companies legislation. I fear that it may cause confusion if we were to change it here. It might have the undesirable effect of giving rise to some abuse inasmuch as it would encourage people to sell on shares as soon as they were subject to a disclosure order. They could not get the relief under subsection (2) unless they were the person in default.

Mr. J. Bruton

Conversely, subsection (1) may encourage people to sell on shares because if the restrictions under subsection (1), as the Minister says, only apply to shares held by the person who is in default, the best way for that section to be evaded entirely would be for the person in default to sell the shares immediately in the knowledge that the person who buys them will not be under any disability. The shares will be just as valuable to the purchaser as they were to the seller.

Mr. O'Malley

Subsection (2) gives relief from the consequences of subsection (1) and if it did gall somebody to sell on the shares in those circumstances it would presumably have achieved the objective of disclosure in that we would now know who owned them.

Mr. J. Bruton

It would not cost anything for the section to be recast to allow any person affected to apply for relief. It may well be that the Minister is correct and that nobody other than the person who is already covered would use this. I do not think it would cost a whole lot and it would be beneficial to broaden it. I realise that there might have to be some consequential changes in the subsection if that were to be done. It would have to read something like —"where a right has been restricted under subsection (1) any person affected may apply to the court for relief".

Mr. O'Malley

I will look at the possibility of rewording it that way before Report Stage.

Amendment, by leave, withdrawn.

Section 89 agreed to.

NEW SECTIONS.

Chairman

Amendment 108 has already been discussed. We first have to decide on Deputy Bruton's amendment to amendment No. 108.

Mr. O'Malley

I move amendment No. 108:

In page 79, before section 90, but in Part IV, to insert the following new section:

"CHAPTER 4

General provisions about share registers etc.

90.—(1) The Minister may, by order, alter any of the charges referred to in—

(a) section 47 (9) or 54 (5) of this Act or section 92 (1) or 119 (1) of the Principal Act, or

(b) section 54 (8) or 80 (2) of this Act, or section 92 (2), 92 (3), 119 (2) or 146 (2) of the Principal Act.

(2) The Minister may also, by order, alter the basis of any of the charges referred to in the provisions specified in subsection (1) (b) from the basis referred to in those provisions to some other basis.

(3) Every order made under this section shall be laid before each House of the Oireachtas as soon as may be after it is made and if a resolution annulling the order is passed by either House within the next 21 days on which that House has sat after the order is laid before it, the order shall be annulled accordingly but without prejudice to the validity of anything previously done thereunder.".

Mr. J. Bruton

I move amendment No. 1 to amendment No. 108:

In the first line of subsection (2), after "by order" to insert "and by reference to the actual costs involved".

The Minister said he would accept it but if he found any technical difficulty with the wording he would come back and amend the wording at Report Stage. In that event we should accept the amendment now in the knowledge that the Minister has the discretion to correct any errors there may be in the wording.

Mr. O'Malley

That is correct.

Amendment to amendment No. 108 agreed to.

Amendment, as amended, agreed to.

Mr. O'Malley

I move amendment No. 109:

In page 79, before section 90, but in Part IV, to insert the following new section:

"91.—(1) Where on the commencement of this section a person has an interest which, if it was acquired after such commencement, would be subject to a notification requirement under Chapter 1 or 2 he shall be under an obligation to make to the company the notification with respect to his interest required by the Chapter concerned.

(2) For the purposes of subsection (1), sections 50 and 63 (1) shall apply as if, for the period of 5 days mentioned in each of those provisions, there were substituted a period of 10 days.

(3) Section 65 shall apply in relation to an agreement notwithstanding that it was made before the commencement of this section or that any such acquisition of shares as is mentioned in subsection (1) (b) of that section took place before such commencement.".

Amendment agreed to.