I move amendment No. 189:
In page 110, line 8, to delete "section 128 (5) (a)" and substitute "section 129 (3) (a)".
I move amendment No. 189:
In page 110, line 8, to delete "section 128 (5) (a)" and substitute "section 129 (3) (a)".
The Minister is taking powers to vary figures in section 129 (3) which relates to the amount of the paid up capital which must be paid up if a company is to take on board a director who was previously the director of an insolvent company. At the moment the figure that must be paid up is £20,000. It would appear here that if the Minister or another Minister wanted, three or four months after the passage of this Bill, to increase the amount that must be paid up by an insolvent director to £200,000, all he has to do is sign an order and he can do that without coming back here. There is no reference in this section to "vary the amounts in line with the rate of inflation in the intervening period". The Minister has complete discretion to double, treble or quadruple these amounts the day after the Bill is passed and, therefore, to totally alter the intention of the House in this regard. While I have no objection to allowing the Minister the power to index these amounts to their true value, I have the strongest objection to giving himcarte blanche to quadruple these figures at a stroke by making an order. I do not think that is something he or any Minister should be allowed to do.
Has the Minister power to reduce it also?
Yes. The word "vary" means change either upwards or downwards. In relation to the section, it is a straightforward procedural provision which allows the Minister to vary, upwards or downwards, the minimum capital requirement set out in section 129 (3) (a) as it now is. The provision is similar to section 19 (2) of the Companies (Amendment) Act, 1983. That section applies the same thing to plc's as this applies to private companies. If it was acceptable in regard to plc's I do not see why, in principle, it would not be acceptable in regard to private companies.
The 1983 Act deals with a completely different subject.
The relevant words in the 1983 Act are the heading "The capital of a company; Authorised share capital and the issue of share capital".
The Minister is missing the point completely. The 1983 Act related to the general provisions for the capitalisation of companies and the figures that should apply there. What we are talking about here are penal provisions that will apply to a particular category of companies which have on their boards directors who were previously directors of insolvent companies. This is a new concept of applying restrictions to people simply because the previous company with which they were involved became insolvent. To quote references from the 1983 Act, to my mind, is not to the point because that Act deals with an entirely different subject. In any event the Minister has not given any justification why he should be allowed, by order, to increase these figures out of line with the rate of inflation. There may be members here who are prepared to vote for this Part of the Bill on the basis that £20,000 is not too much to require them to have paid up if they were insolvent, but I think those members might take a different view if there was a requirement that somebody who failed blamelessly had to have a paid up share capital of £300,000 or £400,000. Under this section it would appear the Minister has the power to raise the amount to £300,000 or £400,000 the day after the Bill is passed simply by making an order. I do not think that is a power a Minister should be given.
I would be prepared to accept this section if there was a subsection (d) to the effect: "save that where the Minister proposes to increase amounts under this section he shall not increase it by an amount greater than the increase in the consumer price index between the time at which he is making the increase and the time at which the last increase was made". That would keep it in line with the rate of inflation and would maintain the intention of the House in agreeing to a £20,000 limit. But to allow the Minister to quadruple or quintuple it by making an order is, in my view, beyond what the House wants the Minister to be able to do.
It would appear that there should be flexibility in this section. This is an essential element. For example, if you take the recent appalling case of the Gallagher group, I would have no objection to the Minister imposing a £300,000 fine on a person like that. I do not think people like that should be allowed to get away with a nominal fine. Obviously the only way to deal with people like that is to give the Minister the flexibility within this section.
The section does not give the Minister flexibility to deal with particular cases. If the Minister makes an order it would have to apply to all insolvent directors, including those who are entirely blameless. This section does not confer on the Minister the power to apply a specially high requirement to an individual, say, somebody who was involved in the Gallagher collapse. If he did increase it to cover them, he would have to increase it for every insolvent director under this section.
Are you saying that if he made an order for £300,000 it would have to apply to every company?
It would have to apply to every company and every director. I do not think that is a freedom the Minister should have to apply to every company. I know it is easy to quote an example like that where there is a high degree of public concern and say, "oh well, we want to throw the book at them" but in cases of that kind, it is probable that criminal prosecutions could be brought forward to deal with the case.
This section does not deal with criminal cases; it deals with people who are entirely blameless. They are being put on this list and they will be required to have a certain amount of paid up capital in their company. As Deputy Bell is no doubt aware, there are many people who, because somebody to whom they supplied goods — say, a builder to whom they had supplied three-quarters of his material became bankrupt overnight — got into difficulty, found themselves insolvent, a director of such a company would be restricted under this section. To my mind, that is going to far.
Would the Minister explain the section? We would like to have clarification on section 19 (2) of the 1983 Act before we start talking about £400,000.
Under the section the Minister is being given, in line with the provisions of section 19 (2) of the 1983 Act, order-making powers in regard to minimum capital requirements to ensure that any variation in the capital requirements can be given effect to. In particular, the Minister has been given power under paragraph (a) to require a company to increase their issued share capital where the capital is below the limit specified in the order. Any increase by a company of their capital pursuant to such an order would, of course, be subject to the provisions of the 1963 Companies Act in relation to notification. Section 70 of the 1963 Act requires a company to notify the Registrar of Companies of any increase in their share capital.
Paragraphs (b) and (c) give the Minister power to make supplementary provisions in relation to such matters as, for example, re-registration, change of name and payment for any shares comprised in a company's capital. It could for example, be necessary in the case of an increase in the limits in section 129, to provide for circumstances where a public limited company may wish to change their status to that of a private company. In such circumstances, it may be desirable for the Minister to make provision in an order in relation to re-registration as a private company and also for a change of name where a company would no longer be using the label PLC.
I would draw the Committee's attention and, in particular, that of Deputy Bell who raised the question, to paragraph (c) of section 133 which refers to "different provisions for different cases". There will not necessarily be a blanket figure for everyone. If a higher or lower figure is appropriate to one such case or class of cases, then under this section, as drafted, the Minister will have power to specify a particular limit for that class.
I accept the Minister's interpretation of what the section means, but if that is the case what criteria will the Minister use? The collapse of the Gallagher Group has been mentioned. To my mind what was wrong there was that the existing law was not used to bring the matter to finality quickly. The banking supervision legislation was not used properly. The case was referred to the fraud squad but no decision seems to have been taken about the case, which has been in the hands of the fraud squad for years.
The blame for this collapse — if there is blame in this area, and undoubtedly there is — lies in the fact that the existing law was not properly enforced by the existing enforcement authorities. That failure in regard to the enforcement of the law is not a justification for bringing in draconian provisions that will apply to all potential directors, including those who are entirely blameless, who simply failed in business. Failure is a part of business and I do not think that emotional arguments such as the Gallagher collapse should be brought into this debate at all. There is no justification for making bad law simply because the existing law has not been properly enforced by those charged with responsibility for it. The Minister and other Ministers in Government should be asking themselves why the existing law was not properly enforced in the Gallagher case.
The Deputy said we should not be referring to the Gallagher case but we are now having a discussion on it.
It was referred to, but not by me.
I will allow you to make reference to it, but not to reopen the discussion.
It was the first case——
Both Deputies referred to it and I must ask both of them to refrain from referring to it.
The Minister has already explained that the flexibility I have referred to is provided under section 133 (c). The Deputy contradicted me.
I am prepared to accept that. If the figure paid up for the generality of directors is £20,000 and the Minister wants to have a go at a particular director he can make sure that that guy carries a price tag of £100,000. That means that the Minister, by order, is going to be able to single out one individual and apply a higher subscribed capital to him without any criteria, any hearing, or any inquiry and without giving the person an opportunity to state why this requirement in their case is unfair.
We have heard a lot in recent times about the requirements of natural justice. We have been told that it was contrary to the requirements of natural justice for Senator Norris to be disciplined by the Committee on Procedure and Privileges without giving him the right to have a solicitor with him, and allowing the Chairman, with whom he was in dispute, to sit in judgment on him. If it is a constitutional requirement to have natural justice, it seems section 133 is equally potentially unconstitutional as a result of the matter that was brought to our attention by Deputy Bell. It is obvious that the Minister can now apply these provisions in a discriminatory fashion and can single out one individual and say he must have a price tag of £100,000 if he is to be taken on to a company board, where as the generality of directors who become insolvent do not. No criteria or basis upon which the Minister might make this judgment are set down in this section. If we make a law which gives the Minister the power to single out individuals in the way mentioned by Deputy Bell — I thank him for doing so and for correcting me in my original misinterpretation of the section — it will only make the section worse in that it will allow discrimination to take place. I am further strengthened in my opinion of this section by the revelation that has come to light.
May I ask the Minister the circumstance in which he would envisage using his power under section 133 (c)? How can the Minister decide whether one private company should have a higher paid-up capital than another? Who will advise the Minister? In fact, that power could allow him to reduce the amount down to £1 as well as increase it.
So much for the phoenix syndrome.
It is an extraordinary provision. I imagine that it makes the whole debate on this part of the Bill irrelevant.
If you pay a subscription you might get your amount reduced by order.
What I am concerned about — this happens frequently within my own constituency, in fact it happened within the last week — is where somebody who goes out of business goes around the corner and sets up the following day in his wife's name. There should be some penalty in that type of situation. The only way that penalty can be applied is if the Minister has the flexibility to do so. For £2 one can go around the corner and set up another company.
Why did Deputy Bell not support our amendment which would have increased that to £3,000?
I have sought to point out that the variation here which allows the Minister to make different provisions for different cases should appropriately read "different classes". I made it clear that I did not envisage different people but envisaged different classes of company. That is the case. I should like the Committee to bear in mind that the wording of this section is taken precisely from section 19 of the 1983 Act which was passed on 5 June 1983 under whatever benign administration then occupied the position.
That section was——
It is exactly the same wording——
That legislation was not penal legislation whereas this is penal legislation.
Whoever brings it in should say whether or not it is penal.
That very smart remark by the Chairman was unwarranted.
I unreservedly withdraw it.
The speed at which you did that suggests a lack of reflection both in the withdrawal and in the original remark.
I presumed humour was the order of the day.
Humour can serve its purposes too. I wish to come back to the reference made by the Minister to the 1983 Act. I am not here to justify every paragraph and comma of the 1983 Act, but that Act, which was introduced by the late Frank Cluskey, contains provisions with regard to figures for accounts generally, the publication of accounts and so forth. It does not impose special penalties on individuals, rather it is just general legislation referring to accounts. I do not think the analogy is relevant. As I do not have my copy of the 1983 Act with me I am not able to enter into a long dialogue with the Minister about it. However that is my recollection of what that Act is about. It does not allow a Minister, under the section we have before us, to apply onerous capital requirements to individual directors whom a Minister may, for some reason or other, not like and because such persons are insolvent, to make them carry a price tag of £100,000 rather than £20,000. Even if the Minister were to substitute the word "classes" for "cases", I do not think that would get around it. It would not provide any protection in the sense that "class" could be interpreted to include all companies who become insolvent on 5 March 1992. Only one company might become insolvent on that day and that class would in fact be sufficient to catch the individual the Minister wanted to catch, if that was the way he wanted to do it.
I do not think in substituting "classes" for "cases" we will actually remove the arbitrary, draconian and discriminatory powers being conferred on the Minister by this section. He should think again and perhaps remove paragraph (c) and apply, with regard to the increasing of the amounts under other paragraphs, a requirement that he shall not go beyond indexation. I think that would be quite acceptable.
This is a rather minor matter. If I may say so with respect, Deputy Bruton is trying to make a meal out of it. First, the 1983 Act does not apply to accounts, that is the 1986 Act. The 1983 Act relates to the control of and variation of the capital of plcs and sets down a minimum capital for them. It seeks to achieve, in relation to plcs, in part at least, what this section seeks to achieve in relation to private companies. In so far as protection of the public is concerned, the necessity to have the control in regard to private companies is much greater than it is in regard to plcs, because you do not normally find people forming plcs to engage in disreputable practices.
They are too complicated and too expensive and you need to have too many people and too much money.
They carry on their work in the public gaze.
You rarely, if ever, find them acting with serious impropriety of the kind we are trying to deal with here, whatever about some of the more refined improprieties they might get up to. This form of words was used in 1983. It is used to the best of my knowledge — I cannot quote the precise section — in other parts of the companies code generally and it is used in an earlier section of this Bill, section 43, which we have already passed.
The Minister is using the argument here that four wrongs make a right. He is arguing because bad wording was used before, giving the Minister potentially arbitrary and discriminatory powers, it is justifiable to use them in this case.
In addition, there is a safeguard. Under section 396 of the 1963 Act, any order or variation made under this section can be disallowed by a negative resolution.
All orders are subject to that control. The fact is the Government of the day — and this applies to all Governments — do not provide time for such negative resolutions. They require that they be dealt with in Private Member's time but I do not think that an order the Minister might make which is considered to be unfair to some individual would obtain Private Member's time from an Opposition party.
To put the matter beyond doubt I propose on Report Stage to substitute the word "classes" for the word "cases".
The Minister has given no indication as to what criteria he will use in exercising these powers. If the Minister wants to meet the case being made, he should establish some criteria which would delimit his discretion. I agree with Deputy Bell that there should be flexibility but only within certain guiding principles laid down here.
That is contained in section 128.
It is not. Section 128 simply sets down figures. The provisions of this section allow the Minister to change those figures to any degree; he can quadruple or reduce them, thereby entirely changing the nature of section 128 as agreed.
This is an essential section. The Minister will correct me if I am wrong but it is my understanding that section 133, which refers to section 128 (5) (a) which sets the figures at £50,000 and £10,000, states that they may vary and need not be applied globally as stated.
I think we have discussed this matter at length and we have had points of view——
Does the Minister not see that while he occupies the office he presently holds he might judge something in a rational, reasonable way, and that we are passing legislation here that will remain on the Statute Book for a long time? You can get extremes in Governments. It is possible that there could be somebody in Government in the foreseeable future who might not particularly like the idea of private companies and who would use the power being given here to put a shareholding beyond the reach of most people. The Dáil will not have an opportunity to debate that fully. We all know that orders laid before both Houses of the Oireachtas are never discussed and, even if they are, they cannot be amended. This is dangerous legislation. If the Minister wants to update things he can as Deputy Bruton says use the consumer price index or go to the courts in the event of something extraordinary happening. It would be extremely dangerous to give somebody the power to suddenly increase share capital or indeed reduce it down to £1 if they so wish. Where would our phoenix syndrome be then? The Minister has not given us a satisfactory explanation. All he has done is refer us to previous Acts. Perhaps it is included in previous Acts but so what? We are here debating a Bill which deals with the situation as we see it today. The Minister should give us more details before asking us to give him such a wide-ranging power. Maybe we are all offside here. I understood that the majority of us around here saw the need to promote Irish industry, entrepreneurship and to encourage small people to do their business, but I am beginning to have my doubts.
It might go abroad that I do not share that view. I see the section as giving the Minister the flexibility to take into account the size of the company and the share capital that should be there.
There are no guidelines set out here. It is a question of opinion, that he knows somebody or that he does not like a particular group? Where are the guidelines? There are no guidelines whatsoever. He can just do it and nobody can question it.
One of the difficulties with the present law is the lack of flexibility and we are trying to overcome that within reason to some extent. This is not exactly a precedent that was dragged out of the sky. It is there before. The principle has already been accepted with even less restrictions in an earlier section of the Bill. It is in an Act of 1983 and it may well be in some other Acts, if I could put my finger on them. I should like to give examples of where changes would be necessary and where, perhaps, a different figure would be necessary in one particular class as opposed to another. If this problem became very serious in one industry sector as opposed to another industry sector it would be unfair to impose higher limits on companies generally if the problem was largely arising only in one sector. One could have a higher figure there for that sector. The other instance, of course, is the CPI and if inflation was to take off in the future. We have plenty of examples of law 20 or 30 years ago, where figures were probably appropriate at the time they were fixed, not having a built-in flexibility to take account of changes in values and everything else. This will enable that to be done and we will not find ourselves in the future, or our successors, in the difficulty that many of us are in now in that we are bound by limits that were fixed in the fifties and are no longer appropriate.
The other factor to bear in mind is the question of industry sectors. I do not want to start identifying some of these but it is well known that this problem that we are all trying to cope with here is much worse in certain commercial activities than it is in others. We do not get it at all, perhaps, in others and we get it frequently in some. It is not unreasonable to have some degree of flexibility to allow the Minister at some time in the future to take account of that fact and, perhaps, set a higher limit for one particular class of activity rather than for commercial activity generally. On that basis, and with the assurance I have given the Committee that I will propose on Report Stage the substitution of the word "classes" for the word "cases", the Committee would be entitled to take the view that the section is all right.
I am putting the question because we have discussed this at length and there have been indications generally on how it might be amended in the future.
O'Malley, Desmond J.