The proposal to delete section 81 and amendment No. 109 are related. Is it agreed to take section 81 and amendment No. 109 together? Agreed.
SECTION 81.
I move: "That section 81 be deleted". Related amendment No. 109 reads:
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.".
Section 81 contains a transitional provision in respect of the obligations of Chapter 2 of Part IV which deals with disclosure of 5 per cent interest in a plc, whereas there is no such provision in place at present in the case of Chapter 1 which deals with interests held by directors specifically. Amendment No. 109 would fill this gap and bring the two transitional provisions together in a new section 91. This section would appear in the new Chapter 4 that we have just created in Part IV which contains another miscellaneous provision of general application. Making this amendment would allow us to simply delete section 81 as a consequential matter.
Is it agreed to delete section 81? Agreed.
Section 81 deleted.
NEW SECTIONS.
Amendments Nos. 96 to 103, inclusive, form a composite proposal and Deputy Bruton's amendment to amendment No. 102, a new amendment produced this morning, is related. We have to get agreement to discuss amendments Nos. 96 to 103, inclusive, and Deputy Bruton's amendment to amendment No. 102. Is that agreed? Agreed.
I move amendment No. 96:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"82.—Sections 83 to 89 are for the purpose of giving effect to Council Directive 88/627/EEC of 12th December, 1988 (‘the 1988 Directive') on the information to be published when a major holding in a listed company is acquired or disposed of.".
The next group of amendments, in other words amendments Nos. 96 to 103, inclusive, are intended to give effect in Ireland to an EC Directive which was adopted in December 1988 in the general area of disclosure of interest in shares. I gave some background on this in my opening remarks on Part IV of the Bill. The Directive concerned was adopted by the Community at the end of 1988 and its full title is "Council Directive of 12 December 1988 on the Information to be published when a major holding in a listed company is acquired or disposed of". As to the Directive itself, the Irish negotiators in Brussels were very conscious of the terms of Part IV of this Bill and of the desirability of making sure that the final shape of the Directive was as compatible as possible with it. With this in mind they were able by dint of careful negotiations in Brussels to ensure that the Directive which finally emerged required only the minimum amendment to the Bill for its implementation. The Directive is based on the same principle of disclosure of information as underlies Part IV, Chapter 2, of the Bill with the basic difference that the Directive applies only to disclosure of interests in companies which have a full official listing on the Stock Exchange. Apart from that, the Directive follows the broad policy of Part IV but is not generally as strict as that Part. In general, the Directive requires disclosure when a shareholder passes a certain percentage holding in a listed company. However, while the Bill specified a minimum threshold of 5 per cent beyond which single percentage point disclosures must be made, the Directive only requires disclosures where certain specified thresholds are passed, in other words, 10 per cent, 25 per cent, 50 per cent and 75 per cent.
The second additional dimension of the Directive is that we are required to give certain supervisory functions to a competent authority in order to make sure that the provisions of the Directive are complied with. We propose designating the Stock Exchange for this purpose, something we have previously done in implementing other Directives relating to Stock Exchange matters. Finally, in addition to notifying the company of his interest, the Directive requires the shareholder concerned to notify this competent authority directly.
As far as I can figure out this is all about disclosure of information to the Stock Exchange and by the Stock Exchange. Is that right?
And to the company.
There is a provision here, which is the only thing I would be concerned about in this series of amendments, which says that the Stock Exchange shall not be liable for damages in respect of anything that it has failed to do in this area unless the Stock Exchange acted in bad faith. We have all sorts of provisions in this Bill elsewhere which say that if a company director acts not only criminally but recklessly he shall be liable to civil penalties of all kinds. It seems to me that everybody, whether he be making his living as an administrator of the Stock Exchange or making his living as a company director should be subject to the same basic principles of law. I do not think it is a good idea to say that people who are in some sort of administrative function shall not be subject to the same sort of controls. That is why I was suggesting that in addition to the words "bad faith" the words "negligently or recklessly" would be included. On reflection I think to have them liable for negligence is perhaps going a bit far but certainly I think they should be liable and not immune if they behave recklessly as well as in bad faith. Rather than the amendment I have there, perhaps the Minister will accept the following wording: "done or omitted to be done by the Stock Exchange in bad faith or recklessly".
I understand that the wording used in amendment No. 102, the proposed new section 88, is wording that has been used precisely in the application of some earlier Directives into Irish legislation. It was thought advisable to use the same wording because — and I am subject to correction — it may be the actual wording used in the Directive itself. If that is the case I do not want to go beyond the wording of the Directive. The legislation in which this precise wording was previously used is the European Community Stock Exchange Regulations, 1984.
That has to be good legislation.
It was drafted by the Deputy who stayed up late at night to do so.
The Minister mentioned that the EC Directive is more favourable in relation to other countries because this Bill relates to a 5 per cent shareholding whereas the EC Directive specifies a 10 per cent shareholding. Are we not stepping out of line with other European countries by imposing restrictions and obligations on Irish companies which will not apply to European companies? Surely at this stage in our development we should be seen to be at least in line with other European countries; otherwise Ireland will be regarded as less favourable than other EC countries as a place in which to do business.
We were in accord with the British requirements in relation to the Stock Exchange but I understand that in the last month or so the London Stock Exchange has reduced its requirement from five per cent to three per cent under the Companies Act, 1989. The greater the degree of disclosure to and by a Stock Exchange the greater the opportunity to do business because one is better informed. It is arguable that the reason the London Stock Exchange up to now was the leading Stock Exchange in Europe was because there is a higher requirement for disclosure than is the case in Stock Exchanges in other countries. The Directive reflects the position in the other Stock Exchanges more so than in the London Stock Exchange. The Stock Exchange here is associated with the London Stock Exchange. We do not propose in this Bill to follow the most recent British legislation which would reduce the requirements still further to 3 per cent. I think 5 per cent is a reasonable figure but obviously the British felt it appropriate to reduce it to 3 per cent. The fixing of thresholds of this kind invariably arises in the EC Council and efforts are made to meet a middle ground. Some countries in the Community would probably not want any disclosure at all.
Would the Minister not agree that there are more successful companies in Europe than in Britain?
I would agree that many of the European companies are much better at protecting themselves than the British or Irish companies because of our tradition of disclosure and publicity. That is one of the points now being looked at in the Thirteenth Directive on take-over bids which will come before the Council shortly. As we and the British see it, it is unfair that our companies are open to take-overs because a much higher degree of information is available in relation to them than is the case with the typical French or German company.
What is the thinking behind this amendment? Is there a feeling that an authority in the Stock Exchange would be less likely to engage in rigorously policing a case where a person transgressed section 84 if they were not liable to some penalty if they failed to carry out their functions under section 82?
It is to encourage them to get on with fulfilling their functions. If they did not have a safeguard of this kind they would become so bureaucratically and excessively careful that they would not get on with the job. When this sort of jurisdiction was given to them originally in 1984 they were not prepared to accept it either at Irish or European Community level unless the relevant legislation included some form of protection of this kind.
How all-embracing is the term "bad faith"? There could conceivably be collusion between an authority and a person for the purpose of transgressing section 84. Will the authority in the Stock Exchange be liable in that situation?
Clearly collusion would be acting in bad faith and, therefore, the authority in the Stock Exchange would be liable in those circumstances.
Would the Minister not agree that because the EC Directive imposes fewer restrictions on other European countries we are in danger of exposing Irish companies to take-overs from European companies which in turn could have serious implications for the Irish economy in so far as more money could leave the country? While an argument has been made in relation to what the British have done in their Stock Exchange by reducing disclosure from 5 per cent to 3 per cent Irish industry is also at a major disadvantage because more information is available to foreign companies. That also applies in respect of the 1986 Act whereby countries outside the EC are now gaining information in relation to Irish companies, particularly small companies, and exposing them to take-overs which are bad for the Irish economy. Surely we should insist that we should stay in line with what is the norm in Europe and trade on fair grounds. I cannot see how the Germans and French have done any worse than the British simply because they place fewer restrictions on companies in terms of disclosure. At the end of the day, what we are talking about here is exposing Irish business to take-overs by companies from other countries, be they inside or outside the EC which in turn must have an effect on the Irish economy.
I adverted to that very point when I referred to the Thirteenth Directive which is about to come before the Council — I believe it will come before the Council during the Irish Presidency which ends in June. The Directive is designed to meet that very point because both ourselves and the British have objected to the present situation. Nonetheless, it should be borne in mind that because the Stock Exchange here is to be designated the competent authority by this Bill, for the purposes of the Directive concerned it is obviously necessary for the Stock Exchange to enforce its own rules and not to have those in confict with the law.
As I have mentioned, we are not going as far as the British have gone in the 1989 Act, which is to increase the degree of disclosure even more. I suggest the way to rectify the imbalance — and I think the Commission agree with this — is to pass and implement the Thirteenth Directive and I hope we will do that within the next six months.
In addition to the proposed Thirteenth Directive the Commission, I am advised, are doing a study on the barriers to take-overs within the Community. Presumably when that study is completed a further Directive will be drafted and brought forward based on what they feel is necessary as a result of that study.
In relation to those Directives, is unanimity or a majority vote required by the Council of Ministers, and what will be the position after 1992? I felt all along in relation to this legislation that, while we might be pure and inclined to impose restrictions on businesses in this country, we failed to look at what was happening in Europe. I think we can be taken for a shortcut here. I know we need disclosure and all sorts of protections, but let us not expose Irish companies to a far less competitive situation than their counterparts in Europe. It is quite alarming that the same obligations are not imposed on European companies. This highlights the type of exposure that Irish companies are being subjected to every day of the week. Directives are not always brought into being in the interests of Ireland. Very often they are brought into being in the interests of the major players in the European Community. I do not think we should do things unless others are prepared to do the same. This is a fundamental point in dealing with this type of legislation because once you begin to give information, you have to give it to everybody, including competitors, which in turn can affect Irish employment and Irish investment. That is the danger in this legislation and it is already coming to light under the 1986 Act. Our companies are small and very exposed to takeovers from Europe.
We are still dealing with Chapter 2. It is proposed to add these sections to Chapter 2 which applies only to public limited companies and those that are listed, in other words, a very small minority of companies either in Ireland or anywhere else. What is most relevant, therefore, in the context in which we are discussing the matter, is the tradability of shares on the Stock Exchange rather than the preservation of a company as an indigenous company, for example. One of the reasons as I suggested earlier that London and consequently Dublin on a smaller scale are more successful as Stock Exchanges than, for example, Milan, Frankfurt or Paris is that down through the years a higher degree of disclosure has been required in London and Dublin. Therefore, people knew better what they were buying and selling than they did on some of the continental exchanges. I think it is now being recognised by the authorities of the continental exchanges that until they bring their degree of information on public listed and quoted companies up to the London and Dublin standards, they will not have the degree of trade in plc shares that London and Dublin have. This is different to the question of protecting Irish companies as a whole from foreign take-overs. That is something I hope will be met by the Thirteenth Directive, or that the Thirteenth Directive will help meet it. There are approximately 300 public limited companies in Ireland and of those somewhere between 80 and 100 have a full listing on the Stock Exchange. We are talking about, therefore, only a small number of companies which are already subject to a fairly high degree of exposure. I do not think the problem to which Deputy Barrett rightly draws attention in a broader context is appropriate to the much narrower context of the relatively small number of companies we are talking about here.
Let me raise another point with the Minister. It is proposed in amendment No. 98 to insert a new section 84, subsection (5) of which states that where the exchange receives a declaration under the section it shall publish that declaration within three days. Subsection (6) states that it may decide not to publish it if, but only if, it is satisfied about paragraphs (a) or (b). Within the three day period the Stock Exchange might come to the conclusion that it may be detrimental to publish. However, once the three days have elapsed when publication might still be relevant, the Stock Exchange may receive further information or change its mind. Should there not be some provision which would allow the Stock Exchange to publicise the information in those circumstances?
The Directive does not set down a deadline. It leaves it open to a country to prescribe whatever period it thinks appropriate. It was thought that three days were appropriate here because things move quickly in the Stock Exchange. Information more than three days old in some circumstances might well be regarded as out of date. There may be a succession of events where different things come to light at different periods. For that reason, rather than hold it up and allow it all to come out in one go, I think it would be better, if possible, to give it out in instalments as it becomes available, otherwise those who would have inside knowledge obviously would have an advantage over those who would not. The objective of the Directive and therefore of the new sections I am proposing, is to try to get information out to the market as soon as possible. The Stock Exchange are there to ensure that that is done. They are very keen that everybody dealing in the market should have access to information and that we would not have a continuation of this syndrome of insider dealing that has, unfortunately, been a feature of some stock exchanges in more recent years.
I take the Minister's point and I agree that three days is a proper and reasonable period but the point I am making is that there is a certain inflexibility here whereby the Stock Exchange must declare it within three days and it cannot declare it later than three days. Three days, looked at from the other side, is a pretty short period. If the exchange feels that it may be detrimental or contrary to the public interest within the three days and, subsequently, if information comes to the exchange or, on reflection they decide it would not be contrary to the public interest, there should be some provision which would enable them to publicise it later than the three day period, if it is of relevance at that later stage.
I agree. I think the Deputy is right because subsections (5) and (6) as they stand empower the exchange to publish the information within three days or not to publish it within three days. The two subsections as they are drafted do not seem to take account of a position where it might be thought advisable not to publish it within the three days but that it might be advisable in the interests of the market to publish it, say, after ten days. That is, perhaps, a defect in the two subsections as they stand and it is one that I will rectify but I will have to do it for Report Stage because it would be too complicated to try to draft an amendment now. I think the point is a valid one.
In regard to the amendment I will propose to amendment No. 102, I would ask the Minister if he will have a look to see whether the words "bad faith" by the Stock Exchange should be supplemented with the words "recklessly". I should like to ask him whether, notwithstanding the fact that it was not used in the 1984 legislation, it would not be reasonable to include it now because this legislation is being drafted in the light of the general provisions of the 1987 Bill which was not available in 1984.
I agree that that should be done and it will. The Deputy is right to take out the word "negligently" because that was going too far but, certainly, active consideration should be given to the insertion of the words "or recklessly" after the words "in bad faith".
Amendment agreed to.
I move amendment No. 97:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"83.—(1) In sections 84 to 89—
‘the Exchange' means the Committee of the Irish Unit of the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited;
‘functions' includes powers and duties and references to the exercise of functions include, as respects powers and duties, references to the exercise of powers and the carrying out of duties.
(2) For the purposes of sections 84 to 89, each of the following shall be a ‘relevant authority' in relation to the Exchange—
(i) its committee of management,
(ii) its manager, however described.".
Amendment agreed to.
I move amendment No. 98:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"84.—(1) This section applies to interests in shares which—
(a) are comprised in relevant share capital of a public limited company, and
(b) are officially listed on the Exchange.
(2) Where a person becomes aware that he has acquired or ceased to have an interest in shares to which this section applies and, following that acquisition or disposal, the percentage level (within the meaning of section 61) of his interest in that share capital exceeds or falls below the percentage levels referred to in subsection (3), he shall, in addition to the obligation of disclosure to which he is subject under section 59, be under an obligation to notify the Exchange of his interest in the shares following the acquisition or cessation, as the case may be.
(3) The percentage levels referred to in subsection (2) are 10 per cent, 25 per cent, 50 per cent and 75 per cent.
(4) The provisions of this Chapter shall apply as regards the interests which are to be notified to the Exchange, and the manner in which they are to be so notified, as they apply to the interests to be notified to a company under this Chapter.
(5) Where the Exchange receives a declaration under this section it shall, subject to subsection (6), publish, in such manner as it shall determine, but in any event not later than three days after its receipt, the information contained in that declaration.
(6) The Exchange may decide not to publish the information contained in the declaration if, but only if, it is satisfied—
(a) that the disclosure of such information would be contrary to the public interest, or
(b) that such disclosure would be seriously detrimental to the company or companies concerned:
Provided that the Exchange shall not decide not to publish the information under paragraph (b) unless it is satisfied that a decision to do so would be unlikely to mislead the public with regard to the facts and circumstances knowledge of which is necessary for the assessment of the interests in question.".
Amendment agreed to.
I move amendment No. 99:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"85.—(1) If it appears to a relevant authority of the Exchange that any person has contravened section 84, such authority shall forthwith report the matter to the Director of Public Prosecutions and shall furnish to the Director of Public Prosecutions such information and give to him such access to and facilities for inspecting and taking copies of any documents, being information or documents in the possession or under the control of such authority and relating to the matter in question, as the Director of Public Prosecutions may require.
(2) Where it appears to a member of the Exchange that any person has contravened section 84, he shall report the matter forthwith to a relevant authority of the Exchange, who shall there-upon come under the duty referred to in subsection (1).
(3) If it appears to a court in any proceedings that any person has committed a contravention as aforesaid, and that no report relating to the matter has been made to the Director of Public Prosecutions under subsection (1), that court may, on the application of any person interested in the proceedings concerned or of its own motion, direct a relevant authority of the Exchange to make such a report, and on a report being made accordingly, this section shall have effect as though the report had been made in pursuance of subsection (1).
(4) If, where any matter is reported or referred to the Director of Public Prosecutions under this section, he considers that the case is one in which a prosecution ought to be instituted and institutes proceedings accordingly, it shall be the duty of a relevant authority of the Exchange, and of every officer of the company whose securities are concerned, and of any other person who appears to the Director of Public Prosecutions to have relevant information (other than any defendant in the proceedings) to give all assistance in connection with the prosecution which he or they are reasonably able to give.
(5) A relevant authority shall have the same powers and duties for the purposes of this section as it has under section 99.
(6) Where the Minister considers it necessary or expedient to do so for the proper and effective administration of this section, he may make such regulations as he thinks appropriate in relation to—
(a) the powers of authorised persons, or
(b) the matters in respect of which, or the persons from whom, authorised persons may require information under section 99, as applied by subsection (5).".
Amendment agreed to.
I move amendment No. 100:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"86.—(1) The annual report required by Regulation 11 of the European Communities (Stock Exchange) Regulations, 1984 (S.I. No. 282 of 1984) (‘the 1984 Regulations') shall include—
(a) the number of written complaints received suggesting possible contraventions of section 84,
(b) the number of reports made under section 85,
(c) the number of instances in which, following the exercise of powers by authorised persons under section 99, as applied by section 85, reports were not so made, and
(d) such other information as may be prescribed.
(2) The First Schedule to the 1984 Regulations is hereby amended by the substitution, for paragraph 5 (c) of Schedule C of the Annex to Council Directive 79/279/EEC of 5 March 1979 set out in that Schedule, of the following:
‘(c) The company must inform the public of any changes in the structure (shareholders and breakdown of holdings) of the major holdings in its capital as compared with information previously published on that subject as soon as such changes come to its notice.
In particular, a company which is not subject to Council Directive 88/627/EEC* on the information to be published when a major holding in a listed company is acquired or disposed of must inform the public within nine calendar days whenever it comes to its notice that a person or entity has acquired or disposed of a number of shares such that his or its holding exceeds or falls below one of the thresholds laid down in Article 4 of that Directive.'.".
Amendment agreed to.
I move amendment No 101:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"87.—(1) Information obtained by any of the following persons by virtue of the exercise by the Exchange of its functions under this Part shall not be disclosed except in accordance with law, namely—
(a) a relevant authority of the Exchange,
(b) an authorised person, or
(c) any person employed or formerly employed by the Exchange.
(2) Subsection (1) shall not prevent a relevant authority of the Exchange from disclosing any information to the Minister under this Part or to a similar authority in another Member State of the European Communities pursuant to section 89.
(3) Any person who contravenes subsection (1) shall be guilty of an offence.".
Amendment agreed to.
I move amendment No 102:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"88.—A relevant authority of the Exchange shall not be liable in damages in respect of anything done or omitted to be done by the authority in connection with the exercise by it of its functions under sections 84 to 89 unless the act or omission complained of was done or omitted to be done in bad faith.".
I move amendment No. 1 to amendment No. 102:
In the last line, after "bad faith" to insert ", negligently or recklessly".
Amendment to amendment, by leave, withdrawn.
Amendment agreed to.
I move amendment No 103:
In page 74, before section 82, but in Chapter 2, to insert the following new section:
"89.—A relevant authority of the Exchange in exercising its functions under sections 84 to 87 shall comply with Article 12 (co-operation between competent authorities in Member States) of the 1988 Directive.".
Amendment agreed to.