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

SECTION 82.

Mr. J. Bruton

I move amendment No. 104:

In page 74, subsection (1), lines 21 to 24, to delete paragraphs (b) and (c).

This Chapter concerns disclosure orders in respect of shares in private companies. As will be seen from amendments Deputy Barrett and I have tabled, I have some reservations about the need for disclosure orders at all in regard to private companies given that the members of the company should know who the other owners of the company are and there may not be any great need to require disclosure in those circumstances. That is something that we will come to later but if one is going to have disclosure orders in respect of the ownership of shares in companies other than public limited companies, I do not see why one should not have disclosure orders applying to building societies or applying to industrial and provident societies, co-operatives and the like. They can be the subject of takeovers too. Substantial private interests can be involved. The economic power and importance of industrial and provident societies and of building societies is incontestable and it seems to me to be strange that section 82 proposes to exempt entirely from these disclosure provisions the industrial and provident societies and the building societies legislation. The industrial and provident societies legislation has not been brought up to date for quite some time. That is the responsibility of the Minister for Industry and Commerce and it would appear to me that the Minister has an opportunity here to provide for disclosure of ownership in the industrial and provident societies by simply removing paragraph (b) of subsection (1) of section 82. The same arguments apply in regard to building societies.

Mr. O'Malley

Section 82 details the scope of Chapter 3 of Part IV of the Bill, in other words, the kind of bodies to which the special disclosure provisions of the Chapter will apply. These disclosure requirements relate primarily to private companies. Obviously, the main type of body to which Chapter 3 will apply will be the "normal" private company incorporated and registered under the Companies Acts. The subsection is, however, phrased in a negative way. In other words, that it "shall apply to all bodies corporate other than" those mentioned in paragraphs (a) to (d). This is to make the coverage as wide as possible but to make that coverage within the company law context. This is the only reason for the mention of industrial and provident societies and building societies in the subsection. It was never our intention that the disclosure provisions should apply to industrial and provident societies or building societies. This would be totally inappropriate in companies legislation. Building societies and industrial and provident societies have different legislation and they have a completely different raison d’�tre and organisational and capital structure in which the shareholding of a member does not have the same connotations as it does in the case of a company. It is, therefore, not considered appropriate that they should be covered here.

Mr. J. Bruton

Are there equivalent disclosure provisions governing share ownership in industrial and provident societies and building societies?

Mr. O'Malley

No, there are not but, on the other hand, the industrial and provident society Acts will have to be brought up to date. They are seriously out of date. That is being looked at at the moment in my Department in conjunction with credit unions. Now the building societies legislation has been brought up to date. If I recall correctly there was an Act last year on it. In fact the reference there in section 82 (1) (c) to 1984 will have to be amended to read 1989. Since building societies operate under different legislation and since they are now answerable to the Central Bank, as I recall it, and since the policy questions relating to building societies are dealt with by the Minister for the Environment, I think it would be inappropriate for us here to seek to legislate in regard to them.

Mr. J. Bruton

I will accept the Minister's argument in regard to building societies but that is not a sufficient argument to deal with industrial and provident societies. As the Minister has admitted, this is the responsibility of his Department. He knows as well as I do that the amendments to the industrial and provident societies have been under consideration in the Department of Industry and Commerce since the early seventies if not earlier, and that legislation has not emerged from the Department of Industry and Commerce in the meantime. Meanwhile, these societies are of immense economic importance. We have seen the takeover of one at least of these societies. We are aware of suggestions that whole geographic areas covered now by industrial and provident societies or co-operatives are to be brought effectively within the control of one individual, an individual with whom the Minister has had other controversies at other times and in other places, to which I will not refer now. It would appear that the Minister should acknowledge the need to have similar disclosure requirements applying to industrial and provident societies and I wonder why he will not take this opportunity.

Mr. O'Malley

I fully acknowledge the need or the desirability of having disclosure requirements. For one thing I do not think there is the same difficulty in identifying the ownership of shares in these societies and in any event "share" in those societies has a different meaning and sense from what "share" has under company law, and it tends frequently in an industrial and provident society and in a building society to reflect the contribution of individual savers rather than something that has a potentially larger value, as a share has. If there is a failure to disclose under industrial and provident societies, I think that failure should be dealt with in industrial and provident society law rather than trying to apply company law to it. I do not think the problem is there. We have had a contested takeover, as the Deputy reminds us, in the last year or so of one of these societies but I do not think either from the point of view of shareholders or from the point of view of the taking over company, the acquiring company, that there was any great problem about identifying the ownership of shares in the society. It is a different matter, of course, with companies. Some of the building societies would have very large numbers indeed of what are nominally shareholders but who are essentially savers.

Mr. J. Bruton

I wonder when the Minister expects to introduce modernisation legislation concerning industrial and provident societies.

Mr. O'Malley

The Deputy will recall that I introduced an Act in 1978 which stopped them indulging in banking, quasi-banking and off-shore banking, which some of them were much addicted to at the time. If they had all obeyed it we would not have had some of the subsequent difficulties we had in another field, but the Deputy will recall that one of them felt himself above the law and went to his grave challenging the constitutionality of the Act. I hope, now that I am back in that Department, when we get all the Directives out of the way and when some of the very small number of officials we have have more spare time to devote to the industrial and provident societies code of legislation, they will do it with their customary vigour and enthusiasm.

Amendment, by leave, withdrawn.

Section 82 agreed to.