Debate resumed on amendment No. 242:
In page 148, subsection (1), lines 9 and 10, to delete "on a continuous and consistent basis".
—(Mr. J. Bruton.)

These amendments are designed to reduce what we believe would become the much increased cost of accountancy to firms as a result of the Bill in its present form. The current provision in section 198 is to the effect that the accounts of the company must be kept on a continuous basis. The practice up to now has been to keep accounts on an annual basis. Each year the company had to have accounts which were capable of being filed and accessible to whoever was entitled to have access to them. Under this provision it would appear that the accounts must be continuously kept, in other words, capable at any time of determining the financial position of the company immediately. It means that accountants will have to keep the books of a company constantly in the same form as they are now required to have them once a year. That will mean significant extra costs to the firms who must pay the fees. We would all like to have companies' accounts up to date all the time, in an ideal world, and if accountants were providing their services free that is the way we would have it, but accountants do not provide their services free and we do not live in an ideal world. To keep their accounts up to date all the time, to have them in a form that would meet the requirements of an accountant and have the transactions of the company correctly recorded and explained will cost a substantial amount extra. I do not think the Government have demonstrated the need for this innovation in our law contained in section 198 and for that reason Deputy Barrett and I have proposed to delete the words "on a continuous and consistent basis", in other words, to retain the existing position, which is that the accounts must be kept in a proper form and must be available, which is normally the case, every year and it is for the simple and very sensible reason that a high level of accountancy costs will not fall on small firms.

I support Deputy Bruton. Throughout this Bill we on this side of the House have consistently argued that there is a difference in the administration of company law in respect of multinational companies, very small companies — consisting of two directors, a husband and wife — or a company employing ten, 15 or 20 people. A very high proportion of small companies are trading successfully but others are just ticking over. In drafting this legislation no attention was paid to the realities of life in that there is an enormous difference between Guinness, Smurfits and other large companies and the small company with two, three, ten or 15 employees.

We would all like to have the ideal in this world but the reality is that if you impose these conditions on small companies it will be impossible for them to operate. We must also realise that it is now easier for companies to move their headquarters out of this country than it was in the past and the more unreasonable obligations are imposed on people the more likely it is that they will look at other places to do business. There will be a loss to the Irish economy as a result of this. Any business trying to run their affairs properly will keep reasonable records which will make it easier for the auditors to carry out the annual audit. To try to impose all the obligations in section 198 on a small or medium sized company is unrealistic. If the Minister is not prepared to accept this amendment will he propose an alternative that shows rational thinking?

The complexity of the accounts is obviously a function of the size of the company. If it is a small company comprising a husband and wife the accounts should not be complex and they should be relatively easy to keep up to date. It is good accounting practice to try to keep books up to date and any modern business worth their salt are transferring their accounts to small PCs. I do not think there is a huge strain. I see the point that in a small family business, like a small sweet shop, the keeping of accounts could conceivably cause a problem but the Bill is merely concerned with keeping a running view of the accounts of the company. Deputy Barrett implied that a company of this size and under should be exempt but I do not think we can make those cutoffs. There is a certain logic in the point but the case is over-stretched. The smaller the company the less complex the accounting function becomes. While I have some sympathy with it I do not see where you could make an arbitrary cutoff.

We have discussed this Bill at length for some time. We have always tried to achieve the ideal situation and I accept the points made by Deputies Bruton and Barrett that there is a differentiation between small and larger companies. In putting legislation together it is important to have efficiency and not to be seen to condone any kind of sloppy practices.

I would ask the Deputies to think again about deleting the words "on a continuous and consistent basis". The terms are broad enough to make it clear what we are trying to achieve in relation to small and larger companies. I would not support this amendment on that basis because there is ideal scope within that terminology to cover both situations.

We had a fairly extensive debate the last day on this amendment and during that debate I outlined the reasons I could not accept it. Having reflected further on the points made by Deputies Bruton and Barrett and my colleagues Deputies Kitt and Roche, they have failed to convince me of the need to delete the requirement that proper books of account should be kept on a continuous and consistent basis. If we are serious about tackling the inadequate bookeeping records kept by some companies, it is necessary to have such a requirement in the companies legislation.

The point made by Deputy Roche in relation to the size of the company is vitally important. The smaller the company the fewer accounts they would have. The points made by Deputy Barrett are not realistic; they are slightly over the top. The fears expressed by Deputy Bruton that the requirement would provide a bonanza for accountants who would argue that there was a need for them to be more involved in the company to ensure that the accounts are consistently and continuously up to date is unrealistic. The section does not require the preparation of accounts but rather that proper books of accounts recording the transactions of the company are kept from which the audited accounts can later be prepared. I am sure that Deputy Rabbitte, who is present, would agree that it is vital that companies know exactly where they are going. From a trade union point of view it would be important that companies keep proper books of accounts. It seems a reasonable requirement. I would like to emphasise the distinction. Paragraph (d) clearly spells out what I have just said. What are required are records which enable the accounts of the company to be readily and properly audited. This clearly does not mean that they have to be audited.

Keeping records on a continuous and consistent basis is no more than an efficient management should consider as a basic tool. In the circumstances, I am happy that the existing wording stand. I hope that, on reflection, Deputies Bruton, Barrett and others who are opposed to this section would consider not pressing this amendment because it would be against the general thrust of the Companies Bill which we are trying to put through the Oireachtas.

We have discussed the matter. It is a simple amendment and we have two distinct positions on it.

I would like to ask some questions. First, I would like greater clarity as to what we mean by books of account. The Minister's case rests to some extent on his interpretation of this. Books of account are not defined in the definition section, which is section 3.

That would come under the section.

It could, but it is relevant to the argument I am making. In the section as it stands books of account should enable the financial position of the company to be determined with reasonable accuracy. If you are looking for a determination of the financial position of the company you must know what the valuation of the stocks held by the company is. If that is what you want to know, it is not simply enough to have an up-to-date record of cheque payments and lodgments, which would be the narrow understanding of books of account. You would also have to have a running revaluation of stocks in order to comply with section 198 (1) (b). Cheque payments and lodgments would not enable you to comply with that subsection.

For that reason I contend that books of account within the meaning of this section must comprehend virtually full information of a kind that would be sufficient to go into a balance sheet, not just ordinary cash movements. If that is the case and my argument is correct, then consider the cost involved in keeping a running revaluation of assets and liabilities, given that some even quite small companies may have stocks which are depreciating in value or increasing in value. To know at any time the financial position of the company with reasonable accurancy one would have to make a judgment about this at any time, and be able to do it at any time. That is too severe.

This section will be used in disputes. Suppose a husband and wife are directors of a company and they fall out, their marriage breaks up, and the wife — or the husband — is trying to make life difficult for the former partner in the business for reasons that have nothing to do with the company, or it may not be a matrimonial partnership but the business breaks up and there is bad blood, the literal meaning of the words here "continuous and consistent basis" at any time in regard to the books could be used as an argument in court in a dispute between two parties who were formerly associated in a company.

It is not what we intend in this section that counts; it is what the law says. If the law contains terminology that is too exacting, it can be used malevolently by people against other people when a company has broken up and the judge, wherever his sympathies may be, will be bound not by our intentions but by the precise wording we pass here. For that reason, given it would appear that we have to have not just cash transactions but also running revaluation of stock to comply with section 198 (1) (b), the use of the terms "at any time" and "on a continuous basis" is excessive and unnecessary and liable to be the subject of vexatious dispute.

Will we take amendment No. 243 with amendment No. 242?

Yes. There is no point discussing it separately.

On the point Deputy Bruton made, section 198 (2) (c) deals with the question of stock accounting. As inflation is relatively even at the moment the problem he mentioned is one accountants discussed ten or 15 years ago when inflation was very high and the cost of keeping stocks had to be updated. The specific requirement in the Bill for books of account is elaborated on in section 198 (2) (c) which covers stocks. It is a very simple trading practice to keep an account of what goods come in and what goods are issued out of stock. No company which has the benefit of the cover of company law should be able to escape the minimum requirement that they behave in that businesslike manner. If you take "continuous and consistent" out, the opposite is "non-continuous and inconsistent".

"Annual" is the existing requirement.

"Annual" is the existing requirement and consistency is also required at the moment. To do this with the stock account of a business is not an onerous task.

It depends on the business.

Not really. Any business that has the benefit of incorporation should not be able to avoid the minimum responsibility of clocking goods in and clocking goods out. I do not think that is a sustainable set of arguments for going against this.

Deputy Roche has spelled out the situation correctly. He has outlined exactly what the situation would be if we did not have the present wording. The 1963 Companies Act provides at section 147 under "Accounts and Audit". "Every company should cause to be kept proper books of accounting relating to—" and section 148 relates to profit and loss accounts and balance sheets for an annual account. They are two different things. Section 198 (1) says:

(a) correctly record and explain the transactions of the company,

(b) will at any time enable the financial position of the company to be determined with reasonable accuracy,

It sounds reasonable and I cannot understand the Deputy's excitement.

This is not music appreciation in which we are engaged, it is law-making.

We want to take good law, not inconsistent law. The opposite, as Deputy Roche says, would not fulfil the requirements of this Bill. I have elaborated for two days on this and I have nothing further to add.

It is only fair that when we pass this legislation, changing something which will have a serious effect on the day to day lives of people in business, we should be able to point out where existing law is not working and say why we need to impose further impositions on people in business. We should not redraft legislation just because we think it is a bright idea. As Deputy Bruton said, we are dealing with what the law will say in the future, and this section 198 (1) (b) says: "will at any time enable the financial position of the company to be determined with reasonable accuracy". To do that involves a lot of work. We can get a reasonable balance between what a business person has to do in his day to day life and what we, as legislators, would like to have as a reasonable protection for possible creditors who may be affected by a company going under. There is a way around this problem if it is teased out. Maybe our solution is not the correct one, and perhaps there is a better way of doing it than is proposed here. This is the ideal solution from a bureaucrat's point of view. It is very easy to compile a long list of regulations to cover every possible loophole, but at the end of the day people have to get on with their lives and run businesses, create jobs and make profits. We are trying to give another side to the story, rather than the ideal.

I have not heard anything from the Minister to convince me that section 147 of the 1963 Act is causing grave difficulties. If we change something to bring in reasonably radical new proposals we should be told the reasons for the change and not just that "we think it is a good idea." We have to be told that section 147 of the 1963 Act is not working for the following reasons, and that there is a need to change what is there and bring in new provisions under section 198 of the new legislation. That is a reasonable request from an Opposition and people in business should be able to read or hear about it. That is why Deputy Bruton and I have put down these amendments.

I would like to correct something the Minister said. I fully recognise the need for keeping proper books in any business. I never suggested otherwise. This section is saying something that will be incorporated in law and will give an auditor power to carry out checks at any time. We must have a clear understanding of the impositions we are imposing on business.

The Deputy is giving the opposite impression. It is proof positive that many companies have gone to the wall because they have not kept proper and continuous records. That is what we are trying to avoid in the future. I am satisfied there is enough evidence to support the requirements under section 198 of this Bill. We have at times, conceded worthwhile arguments which were put forward, but in this case I am very clear and well advised. I am not prepared to accept the amendment.

Amendment put.
The Special Committee divided: Tá, 3; Níl, 5.

Barrett, Séan.

Durkan, Bernard.

Bruton, John.


Cowen, Brian.

Rabbitte, Pat.

Kitt, Tom.

Roche, Dick.

Leyden, Terry.

Amendment declared lost.
Amendment No. 243 not moved.
Question proposed: "That section 198 stand part of the Bill."

What does "readily" and "properly" mean in subsection (1) (d)? Who will decide that in the event of a dispute? Does the Minister feel that term is sufficiently precise? In regard to somebody relying on section 198 (1) (b) "will at any time enable the financial position of the company to be determined with reasonable accuracy", does the Minister not feel that there should be provision for notice here? For instance, if somebody is being required to produce this information and demonstrates that he can produce it, should he be allowed a period of notice? Is there any reference to notice in the section? I understand that a company who contravenes the section shall be guilty of an offence.

With regard to the interpretation of the words "readily" and "properly", "readily" can easily be interpreted as meaning that something is available within reason, without too much difficulty or delay. "Properly" is self-explanatory. This Bill has been cleared by the Attorney General's Office and has gone through the drafting stage. The courts will not have any difficulty interpreting the words. There is no question of notice being given to the persons concerned. This section stands on its own merits.

Section 198 says "the books of account shall be kept at the registered office of the company" and that the company shall make their books of account and returns available in written form at all reasonable times for inspection, without charge, by officers of the company and by other entitled persons. Given that under the section as it now stands, the Minister having rejected our amendments, anybody who has the right to do so under subsection (7), is entitled to simply walk in off the street and expect the accounts to be up to date. That seems to be the meaning of subsection (7) because of the words "at any time" in section 198 (1) (b). Does the Minister accept that that is what the section means — that anybody can just walk in off the street and expect the books to be up to date and on demand all the time?

I do not want to repeat what the whole section requires. On the question of somebody walking in off the street, one has to have some authority to walk to inspect the books of a particular company. It is not open to anyone to walk in off the street and ask to see the books of accounts of a company. They have to have some authority to do so, like an inspector from Revenue. The point is that the books have to be readily and properly audited. In fairness, there should be no great difficulty in having them available as required under section 198. I do not see that it is a big requirement once figures are correctly recorded that explain the transactions of the company. Any reasonable person would say if one wants to run a company efficiently and effectively one has to have accounts and records of transactions. Anyone would reasonably expect that in this day and age. I do not think it is unreasonable. Under section 198, an unreasonable demand is not being put on companies to keep its books and transactions up to date on a continuous and consistent basis. It is good advice. All successful companies keep their books on a continuous and consistent basis. I do not see what the concern raised by Deputy Bruton is.

I am not going back on the amendment. I am simply talking about the meaning of the section before us. First, is the Minister saying that under this section the accounts must be regularly and properly audited? Those are the words the Minister used. My understanding was that that was not the case, that the audit only takes place once a year but that at all times the accounts must be up to date as if they were ready to be audited. If that is so, it would appear from subsections (4) and (7) that any person entitled to inspect the accounts in the normal way is entitled to walk in off the street without notice and do so. Under the Companies Act, who is entitled to inspect books of accounts, apart from officers?

Someone authorised by the courts or by the Minister to carry out that inspection. We are talking about books and records more than accounts. We are talking about invoices and receipts that are available for inspection at a particular time. I think we are mixing up the annual accounts with the books and records which are normally kept by a company at their place of business, which would be available for inspection by a properly authorised person who would come to the premises of the particular company. That is very reasonable from the point of view of the safety and security of everyone involved, including the employees.

The only people who can avail of subsection (7) are officers of the company, somebody appointed by the court or somebody appointed by the Minister. Is that categoric?

The people who are authorised, pursuant to the Companies Act, to inspect the books and accounts of the company are in the Bill.

Where in the Bill?

Section 7 and section 19.

Is the section agreed? Deputy Bruton, the Minister has given replies and I do not want this to turn into argument.

This is argument.

Clarifications have been sought and given.

I do not want to put you in bad humour.

It is not putting me in bad humour. I just want to report progress at the end of the meeting.

It is important to tease out exactly what is required here. We are asking people to do things in the future and I think it is important that we know exactly what we are asking them to do. I want to ask the Minister about persons entitled, pursuant to the Companies Act, to inspect the books of accounts of the company and that includes a record of the assets and liabilities of the company. I would like to know how can one keep a proper up to date record of the assets of a company.

With reasonable accuracy. The financial position of a company should be able to be determined with reasonable accuracy at any given time. One does not have to have the up to date price of one's share that day; one just has to have a reasonably accurate position.

It is not just the value of your shares. There can be other assets.

I just mentioned that there should be reasonable accuracy.

Would it involve revaluation of property on a regular basis? Is the Minister saying this?

I explained this last week. It depends on the company. If it is a property company they would have different requirements than some other trading companies. It depends on the type of company involved.

It does not say this in this section.

Paragraph (b) says "will at any time enable the financial position of the company to be determined with reasonable accuracy". One has to bear in mind that it has to be a reasonable interpretation. It would depend on the company involved. If the Deputy reads through this section, he will be satisfied that it is not necessary to have it in the Bill, and I do not think anybody can dispute this.

I was going to make a point in regard to what is reasonable, if I may. What is reasonable or not reasonable in a specific case is clearly determined by the company.

To filibuster or not to filibuster.

We are pleased Deputy Carey is here, and no doubt later he will be adding considerably to the debate. The point I was making was a point which the Minister has made and which any accountant would take.


The point I am making is that any accountant would take the view that the determination of the valuation of assets — Deputy Barrett mentioned property at one stage — depends on circumstances. There is no requirement whatsoever under this Bill, or under the existing Act, that one has to update property values everyday. That would clearly be an unreasonable approach to adopt, particularly if it involved going out and getting the services of property valuers. Quite clearly that would be detrimental to the business and the point in the law would not be to operate to the detriment of the business. Rather the point in the law is to protect those who are trading with the business. For the law, the courts or for anybody interpreting the legislation to behave in the manner where they would require regular updates, would clearly be unreasonable, and that would clearly be outside the intention of the Bill. By putting the adjective "reasonable" in, we are making it very clear that it is not necessary to have an update on a daily basis, or an hourly basis or whatever basis one wants of the assets of the company. That would be an entirely unreasonable view to take.

I move: "That the question be now put."

You cannot do that. I have notice of the question. You need not worry. I will do my job.

I am invoking the powers of Standing Orders which allow any Member to make such a motion at any time.

With respect to Deputy Bruton——

The Chair is on its feet trying to say something.

I will defer to you, Chairman, but I have other points to make. We are being somewhat obstructive by taking an individual word and seeking to parse and analyse it as we are doing here. A word or a portion of this section has to be read in its context. In the context in which they are laid there, there are no excessive requirements on any business, irrespective of how small or large. There is clearly no requirement that a company should go to the expense of having, for example, professional revaluations of property. That is clearly stretching it. Deputy Barrett is seeking to make a point and I can see that there maybe some pressure there, but I do not think that is a valid point.

For the purpose of clarification, particularly, for Deputy Bruton, Standing Order 58 provides for closure of debate in the Dáil or Committee of the whole Dáil. It allows a Member to claim to move "That the question be now put". This procedure is not available on Special Committee because the Standing Order specifically states that (a) this applies to the Dáil or Committee of the whole Dáil and (b) the Ceann Comhairle must be in the Chair before a Member may claim to move for closure.

Question put.
The Special Committee divided: Tá, 5; Níl, 5.

Cowen, Brian.

Rabbitte, Pat.

Kitt, Tom.

Roche, Dick.

Leyden, Terry.


Barrett, Seán.

Durkan, Bernard.

Bruton, John.

Reynolds, Gerry.

Carey, Donal.

Standing Order 75 provides that in the event of an equality of votes in the Special Committee the question shall be decided in the negative.

Question declared lost.