In the absence of the Chairman, I will accept nominations for a temporary chairman.
Election of Temporary Chairman
Election of Temporary Chairman.
Clerk to Committee
I propose Deputy O'Dea as temporary chairman.
Clerk to Committee
If there are no further nominations, I call Deputy O'Dea to take the Chair.
Deputy O’Dea took the Chair.
Chairman
At the conclusion of business at the last meeting the committee had disposed of Part V of the Bill. Consideration of the Bill is to resume today at the commencement of Part VI beginning with section 102. Before we start perhaps the Minister would wish to outline the provisions contained in this Part of the Bill for the benefit of the committee.
What time do we sit until today?
Chairman
It is proposed that we conclude at 12.45 p.m. Is that agreed? Agreed.
We come now to Part VI of the Bill which, together with Part VII, many people regard as the real meat of the Bill. I certainly agree that Part VI is very important since it is in winding-up situations that many company law abuses finally come to light and where there is most demand for dishonest directors to be made more fully accountable for their actions. While many of the provisions stand on their own, so to speak, and address individual abuses, I might highlight here one or two for special mention.
For example, section 107 tightens up the existing law on members' voluntary liquidations to try to counter abuses of that procedure. I should also refer specifically to sections 115 and 116 which both tighten up the law on fraudulent trading and introduce the new concept of reckless trading with potential personal liability for directors where this is proved. This is an attempt to deal with those many cases where directors have operated a company in a way which although not actually involving outright fraud, nevertheless completely disregarded the interests of the company's creditors and, indeed, its shareholders for that matter.
Since this is a new concept I am very conscious of the need to get the drafting right to make sure it would not have undesirable effects on business life generally. I should mention here that for that reason section 116 was amended significantly in the Seanad to try to define what we mean by reckless trading. The result is, I think, a big improvement in terms of definition and clarity. Furthermore, so that honest directors who play by the rules will have nothing to fear, a number of safeguards are now built into that section. For example, so long as the person can, if required, show that he acted honestly and responsibly he can be relieved of liability. Section 116 like so many others in the Bill is all about balance. I am confident that this is now just about right. Other areas of note in Part VI which I might mention in passing are sections 113 on fraudulent preference, section 114 on the validity of certain floating charges and sections 118 and 119 which tackle abuses which can occur in inter-company group situations. We can, of course, debate these areas as they arise.
NEW SECTION.
Chairman
The first amendment is No. 127 in the name of the Minister.
Before I move that amendment is it agreed to take amendments Nos. 128 and 129 with it?
Chairman
Yes; it is proposed to take amendments Nos. 127, 128, 129 and the proposed deletion of section 102, together. Agreed? Agreed.
I move amendment No. 127:
In page 86, before section 102 but in Part VI, to insert the following new section:
"102.—Section 99 (2) of the Principal Act is hereby amended by the substitution for paragraph (h) of the following paragraph—
‘(h) a charge on a ship or aircraft or any share in a ship or aircraft;'.".
Section 102 of the Bill makes a number of amendments to section 99 of the Principal Act but rather than make them piecemeal, the Bill is proposing to substitute a complete new section incorporating the amendments in place of section 99. The amendments it was proposed to make are contained in subsections (2), (3), (4), (5) (e) and (j) and subsections (13) (b), (i), (ii) and (iiii) of the present text of section 102. Subsections (2), (3) and (4) would require companies when they are delivering particulars of charges to the Companies Registration Office to insert for the first time a specific monetary limit on the amounts secured by the charge. In addition, any variation of the amount of the charge would similarly have to be notified. However, any variation made within three months before the commencement of a winding-up would be void. Subsections (5) (e) and (j) added to the list of categories of charges which must be registered.
This is a section of the Bill on which the Department have received a great number of submissions and representations. It is very clear from these that the difficulties which would arise from the additional requirements proposed more than outweigh the perceived advantages. In fact, the proposals would create quite serious complications for lending institutions without any commensurate benefits. I am satisfied that the difficulties which have been raised are real ones and, following considerable thought, I have decided that the best thing in all the circumstances would be to withdraw the section from the Bill entirely. This would mean that section 99 of the Principal Act will basically continue as heretofore. Will I wait until the amendments Nos. 128 and 129 are moved before commenting?
It would be helpful to me, as the mover and in view of the fact that they are amendments to a section that the Minister is now proposing to withdraw, if the Minister was to proceed to explain how her current position affects the amendments which were originally presented.
The deletion of the section will also, I believe, meet with the approval of Deputies Bruton and Barrett whose two amendments here, Nos. 128 and 129, sought to remove subsections (2) to (4) from the section in the Bill as well as reverting to the former wording of subsection (5)(e).
Section 102 is being replaced by a minor amendment. On the other hand the minor amendments to section 99 of the Principal Act had been suggested to the Department in relation to a totally separate matter and I am now proposing to make this amendment.
Section 99(2) of the Principal Act specifies the charges to which this section applies and, therefore, which must be registered under its provisions. Paragraph (h) of subsection (2) currently requires charges on ships to be registered. With the recent dramatic developments in the aviation industry, I consider that charges on aircraft should similarly require registration. That is the purpose of this amendment.
Chairman
Is amendment No. 127 agreed?
I would like to welcome the fact that the Minister has accepted in essence the Fine Gael amendments. This indicates that those amendments were validly founded in the first place. I am glad the Minister has seen that our amendments were so. I note that the end result of what we are doing here is reverting to the provisions of section 99 of the original Companies Act with a slight amendment to include a charge on an aircraft in addition to the present provision which covers charges on ships. I presume this is an indication of the increased usage of aircraft as a method of transport and, indeed, of the fact that we have established a very successful aircraft leasing business. I presume that the amendment is designed to facilitate that sort of business. If that is the case I would welcome it.
The only query I would raise with the Minister, given that she has brought in aircraft as well as ships, is to ask if she is sure that she has brought in all the things that she ought to have brought in at this stage. Obviously, we will not be coming back for perhaps another 20 years with an opportunity of amending section 99 of the 1963 Act. I cannot make any suggestions as to additions to the list that are contained in section 99 but I would presume that rather than simply responding to individual representations that the Department have had an overall look at section 99. Are there any other modes of transport, for example, apart from aircraft and ships on which charges of this kind might arise? For example, would a charge potentially arise in respect of a train or heavy truck? I realise that in the case of a train we are talking at the moment about a service that is entirely nationalised and, perhaps, this sort of thing does not arise with a nationalised service. It is not inconceivable that in the next 25 or 30 years that there could be — some Members here might not be too pleased at the prospect — private trains operating on a publicly owned rail network in competition on fair terms with continued publicly-owned trains, and so on. It may not happen, but when making a law here we should be sure that all these eventualities are catered for. We are not making law merely for 1990 but for a good part of the next century as well. Has the Minister examined this matter? In so doing she might explain how these charges arise in regard to ships and aircraft but not other things.
Deputy Bruton is right. The reason for including aviation is because of the developments that have taken place in recent years. There is a limit to what can be included but this was the one item where a strong case was made to the Department. I accept that things change. There has been no other matter advanced by any group in the context of this Bill. For that reason it has not been seen fit to include anything else. The reason for including ships and aviation is the huge outlay involved in these activities. That is why they are specifically mentioned. It would be wrong to start mentioning or including a whole lot of matters simply for the sake of so doing. That would not be desirable in legislation.
I do not want to dwell on this. We are talking here about a floating charge. For instance, in section 102 (4) (f) we are talking about a floating charge on the property of the company. Does that include a charge on machinery owned by the company? If so, does that not include a ship owned by the company already. If not — instead of adding aircraft along with ships should we not have a charge on a mode of transportation in which the company has an interest, or some such phrase, which would of course include ships and aircraft but would not be of a closed nature, which would allow the law to evolve in practice in the light of changes in transport technology.
I can understand the Department have plenty to do to respond to representations they receive and feel they have done a very good job having responded to all those representations but there is more to it than that. If the Minister wants to include ship or aircraft she should add "or any other mode of transport".
I support Deputy Bruton. Modern transport fleets have become very large and will become larger as time goes on in the context of developments in Europe and so on. This means that a transport fleet equally would be liable to a charge as a ship or a plane. In many cases that can be as costly to operate and as powerful in terms of conveying goods or services from point A to point B. Are there any other means whereby goods, cash or whatever can be transmitted from A to B which might also be liable to a charge in those circumstances?
Hydrofoil, for example.
We have got to be realistic. First of all, Deputy Bruton wondered did this charge refer to particular matters. The charge is a floating charge to be imposed on the whole of the assets and property of the company and not on any specific or particular element. We have to be realistic, we cannot include everything. We cannot include, say, the ten year old Mini, the ass and cart or whatever. It might be a good idea — and I will discuss this with the Minister — on Report Stage to give the Minister power to add to the list, by way of regulation or whatever, those charges that should be registered. That might meet with Deputy Bruton's reservations.
That would although I should have preferred that the phraseology of the section be sufficiently broad or general to accommodate this aspect without the necessity for the Minister to make regulations.
I will ask the Minister to consider that on Report Stage — but there is a limit to what can be listed. We will not be able to include everything because developments will occur continuously. It might be a good idea to allow the Minister flexibility by way of regulations, to add as developments occur particular charges that should be registered.
Perhaps the Minister would consider adding an extra line which might incorporate possible developments, which might cater for, as of now, any unforeseen modes of transport or changes that may take place in the meantime.
Chairman
The question is: "That the new section — as proposed by amendment 127 — be there inserted." Is that agreed?
I do not want to hold up the proceedings. I wonder would the Minister elucidate briefly on her remarks that this area had been the subject of many representations. Were they representations mainly from the financial institutions, accountancy bodies or whoever? The entire excision of this section is a major change in the Bill as proposed originally. Was it considered that the constraints imposed, in terms of the prescribed provisions of section 99 (1) were too severe, too onerous on financial institutions for example?
I understand the representations were fairly universal. They included the Confederation of Irish Industry, the banks, many of the professional bodies, accountants, the Law Society and professional groups of that kind. Obviously, the Minister and the Department had to take into account those who were involved in a practical way in levying charges and take from their experience. That is why the proposed amendment was included.
As it would not cost more than a postage stamp, would the Minister inquire from those who are owners of major transport fleets whether they would welcome the facility of having a charge registered against such fleets? They may be their only assets. Therefore, it may increase their ability to levy moneys if such charges could be levied against them. The current case for including ships and aircraft would be based on these being the only assets owned by the companies in question, that in order to raise money the ability to grant a charge would facilitate them. I appreciate the Minister of State's willingness to introduce power for the Minister subsequently to add to the list, by regulation but it would be better if we could do it now; it would be a lot quicker. The Minister would not have to consult the parliamentary draftsman again. Perhaps the Minister would accept my suggestion, that she raise this matter with the relevant commercial interests or, otherwise, write to them and ask them whether they would be interested in this. If they say they are not, then the Minister would not have to do anything about it. If they say they are, then it can be done more easily this way than by waiting.
We have been sufficiently reasonable. We can raise the matter with the CII and others. It would be unrealistic to expect us to send a questionnaire to everybody operating a fleet.
Just to the organisational representative.
I think that is all right.
Amendment agreed to.