Dáil Éireann díospóireacht -
Thursday, 17 Dec 1925

Vol. 13 No. 21

INDUSTRIAL TRUST COMPANY OF IRELAND, LIMITED (ACQUISITION OF CAPITAL) BILL, 1925—SECOND STAGE.

The PRESIDENT

I move the Second Reading of this Bill. The purpose of the Bill is to enable the Minister for Finance to acquire 50,000 shares in the Industrial Trust Company of Ireland, to exercise all the rights and powers of a shareholder therein, and to dispose of his holding or any portion of it at any time he thinks fit. As the Company is a private concern and not a public undertaking, the Bill does not give him any privileges other than these, with this exception only, that he may nominate two directors to represent him on the Board of the Company. The present directors are acquainted with the terms of the Bill and have agreed to its terms generally, including the provision for the nomination of directors by the Minister. Since the Company is a private enterprise and the Minister proposes to acquire a substantial portion of its share capital only in order to establish its credit in its earlier and critical stages, it would follow that he will be free to withdraw from it once it is successfully launched. His right, however, to nominate two directors is exercisable only so long as he holds shares, but is extinguished only when he has disposed of his entire holding.

The shares are issued at par and as the Minister is to acquire 50,000 shares, the Bill provides for the issue of £50,000 from the Central Fund for its growing produce. In view of the comparative smallness of the amount, it has not been considered advisable to issue any securities for the purpose of finding money. No expenditure other than the outlay on the shares is contemplated or provided for. All dividends on the shares held by the Minister, and the proceeds of the sale of any of his shares are to be paid into the Central Fund. The Company was incorporated in July last with a share capital of £250,000, divided into 250,000 shares of £1 each, with power to increase the amount of the capital, and with power to issue any shares of the original or new capital, with any preference in the payment of dividends or distribution of assets over any other shares. The subscription list was open from the 27th to 31st July, and over £50,000 worth was subscribed immediately. It has always been proposed, since the time the Company was first mooted, that a large block of shares should be allotted to subscribers in America, and 50,000 was decided as a reasonable number for this purpose. Indeed, the original idea of forming such a company as this came from America, and, accordingly, after the subscription list was closed here, a representative of the Company (Mr. Smith Gordon) went to the United States and succeeded in arranging for the full amount (£50,000) to be subscribed there. Of the total share capital of the Company, exclusive of the amount to be subscribed by the Minister for Finance, slightly over £100,000 has been subscribed.

The minimum subscription upon which the directors could proceed to allotment was £100,000. The first directors of the Company are :—Messrs. David Telford, James Douglas, W. Lombard Murphy, Hugh Kennedy and John Mackie. Of these, Messrs. Douglas and Kennedy are the Government nominees. The powers taken in the Memorandum and Articles of Association are very wide. I will summarise them very shortly: (a) Underwriting, financing and investment of all kinds; (b) lending and borrowing; (c) banking trust, guaranty, title business; (d) management, promotion, purchase and sale of companies, undertakings, property and other business; (e) brokerage, agency and commission business. The main object is to help to finance industrial and commercial undertakings in the Saorstát, and in particular to make loans, the service of which has been guaranteed by the Government under the Trade Loans (Guarantee) Act. Similar industrial Trust Companies have been established, and have operated with success, in most European countries, including Finland, and in America and Japan, and the need for such institution has frequently been experienced here.

Mr. JOHNSON

I feel that this is a measure that ought not to pass without some further explanation. As far as I understand it, I think it is quite desirable and even admirable, but it is well to point out that it is a departure, and probably a good departure, from the normal. I am not quite sure whether I understood the President aright, and that he said one of the purposes was to enable this Company to make loans to assist in financing industrial enterprises for which loans have been guaranteed under the Trade Loans (Guarantee) Act?

The PRESIDENT

Yes.

Mr. JOHNSON

I was rather under the impression that the purpose of such a Company would be to obviate the necessity for these loans being guaranteed by the Government. It has been argued in this way that under that Trade Loans (Guarantee) Act the Company would receive loans from banks under Government guarantee. If there was a failure then the responsibility of that would fall on the Government, but if there were five other companies guaranteed in the same way under that Act, and if those five companies were an outstanding success no benefit of any kind would come to the Government. The Government would only be bearing the losses, and the procedure of the proposed Industrial Trust would obviate the necessity for a Government guarantee being forthcoming. It would be only brought into play in the case of failure, that is to say, the Industrial Trust Company would be having its eggs in a variety of baskets, and that the losses would be placed against the profits. If there were profits in five companies and losses only in one, the profits would be taken into account and there would be no actual loss, and, therefore no call on the Government. I gather from the Minister that is not contemplated, and it therefore removes some of the advantages of such a company. What seems to be the position is that the Industrial Trust Company is simply to take the place of an ordinary bank, and I do not know what the Government's part is in it.

Further, I think that the publication of the purpose, objects and benefits of this procedure by the Minister would be acceptable to the Dáil, and would help the public to understand the value of such a departure. I think that the project of the Government in using this method of stimulating industrial activities is quite a good one. I think it is well that there should be some kind of Government enterprise in matters of this kind, where the project has been well examined and carefully considered, and that the Government's entry into it would give some stability and encourage private investors. I am not sure, from the President's statement, whether this particular Company is preferable to encouraging the further use of the National Land Bank, in as much as the Trade Loans (Guarantee) Act is not being superseded in any way, and that the responsibility for failures in any company or enterprise assisted by capital guaranteed by the Government would still lie on the Government, and in this case only the profitable investment would be the interest of the Trust Company. The Government is really at the back of any company financed by this new organisation, and I am at a loss to understand where the benefit comes in of forming a new company of this kind.

Mr. COLOHAN

I would like to ask the President if one of the reasons why this Bill is brought forward is that firms or societies who have applied for a loan under the Trade Loans (Guarantee) Act, and whose claims have been investigated by the Advisory Committee set up by the Ministry of Industry and Commerce will get a longer time to pay back the loan? I know of a case where a society has been recommended for a loan, and they could only get the loan for a five years' term, but they wanted a ten years' term. Is it possible under this Bill for the Industrial Trust Company to give loans for a term of ten years on the recommendation of the Advisory Committee set up under the Trade Loans (Guarantee) Act?

Mr. BAXTER

I am not opposing the Second Reading. With Deputy Johnson, I agree that the condition of the industries of the country is such as to require a stimulus, and I might be inclined to say that Government assistance of this sort would be more acceptable to our Party than the other methods that have been applied. We are not against the Government taking action of this kind where it is likely to bring results, but may I point out to the President and to the Executive Council that if they come to the conclusion that financial assistance is necessary in order to stimulate industrial development, assistance is also necessary for agriculture. Agricultural credit is perhaps responsible more than anything else for the depressed conditions of agriculture. While we are prepared to support the Bill we want to point out to the President that in our considered opinion the position of our industry should be the first consideration of the State. Already a good deal of action has been taken by the Government to stimulate industrial development, and a further effort is being made now.

We cannot say that very much has been done for agriculture. We are not finding fault, but we want to point out that if there is to be progress or development in agriculture in this country the position of agricultural credit demands immediate consideration and action on the part of the Government. I would like to hear from the President whether, in the consideration of this matter, that aspect of things was brought to his notice or was considered by him. As far as I understand, the activities of this Industrial Trust Company will be entirely towards the development of industries, and that money will not be available for the development of agriculture in any of its branches. If the State is to be called upon to assist by way of putting up money in this form, I think that it has a duty to another industry that is as depressed to-day as any of the industries that will or may benefit from the operations of this Trust Company. If that matter has not been given attention by the Executive Council in coming to a decision, I say that it calls for immediate attention and for a decision on their part. I would like to hear from the President what he has to say on these matters.

The PRESIDENT

I have not gone very carefully through the memorandum and articles of association of this Company as the Minister for Finance had intended to take this Bill. He could not do so, however, as he is engaged at the moment in the Seanad on other business. One of the directors of the Company has been approached on the matter that was raised by Deputy Johnson, and he expressed the hope that the Company would develop ultimately on the lines indicated by him. I am not committing myself to that statement. I am simply giving expression to the opinion that was put forward by this director of the Company; that is to say, that profits on the successful undertakings would be used to make up for the losses on the unsuccessful undertakings. As far as I am aware, one of the original main considerations in putting forward this measure has been more or less on the lines of the question put by Deputy Colohan, that when the Trade Loans Act was passed the difficulty of getting money for a longer period than five years was noticeable almost immediately.

People know very well that the banking institutions in this country have been generally averse to giving long-distance loans, and the case that they make against giving long-distance or long-term loans is a very good one—that they have not got long-distance deposits themselves, and that they are actually in the position of trustees for depositors and may be called upon at very short notice to pay out to depositors the sums they have in their keeping. In consequence, they have to rely very largely upon easily realisable securities and cash, and as everyone knows, banking, with all its infirmities, will not admit of a very considerable rush. The circumstances here during the last few years have put a considerable strain upon our banks. A number of local authorities have had to negotiate loans, and I think that at the present moment the banks generally have advanced to local authorities sums far in excess of what they had advanced in the pre-war period. In a sense that particular money is tied up. With the Trade Loans Act coming into operation they were again faced with applications for long-term loans. Now the sum itself in any one year might be inconsiderable, and this particular Act of itself might not create a difficulty, but presumably when one such Act is passed it is quite likely that other demands would come in. The general position of banks, to put it shortly, is that these long-term loans were not in their line of business ordinarily.

Consequently it was deemed advisable to bring into being an institution such as this—an Industrial Trust Bank —and I am rather pleased to say that the subscriptions from the banks here in Ireland have been very considerable. They are:—Bank of Ireland, £25,000; Hibernian Bank, £5,000; Munster and Leinster Bank, £5,000; National Bank, £5,000; Provincial Bank, £5,000; Royal Bank of Ireland, £2,500, and the Ulster Bank, £2,500. The banks themselves appreciate the necessity for such an institution as this.

I do not think that the matters raised by Deputy Baxter have been specially treated in connection with this particular Trust Company. I presume that with greater capital it is possible it might be able to do some business in connection with agricultural credit, but as far as I know, it was mainly in connection with the Trade Loans Act that this Company was inaugurated, and it is practically assured of sufficient business to pay a dividend on its original subscriptions. It is more than possible that it may develop. I think the articles of association are wide, and beyond that I am not in a position to go.

Mr. JOHNSON

The last statement of the President raises an important point. Could he tell us whether this Company would be empowered to make loans to individuals or to groups. Is it not mainly to take shares in public companies? Is not that its purport rather than to make loans to individuals such as ordinary banks would.

The PRESIDENT

The objects are set out in a number of pages. They are very exhaustive. They consist of something like forty different clauses which are very exhaustive in the matter of description. The second clause runs to practically half of a page. It goes on to say:—"To invest the funds of the Company in or upon or otherwise acquire, hold and deal in securities and investments of every kind which, without limiting the generality of such description, shall be deemed to include (a) the bonds, obligations, securities and stock of the Irish Free State," and so on. I should say that the Company would be in a position to do almost any business so far as I have gone through the articles of association.

Mr. JOHNSON

I only want to avoid the possibility of people imagining that the Government is investing in a company which is going to lend money to ordinary applicants for money.

The PRESIDENT

I do not think so. I think the main purpose of the Bill is to facilitate the working of the Trade Loans Act—that is for long-term loans.

Question—"That the Bill be read a second time"—put and agreed to.

Committee Stage ordered for Tuesday, 12th January, 1926.

Mr. JOHNSON

Would it be possible to have circulated a summary of the articles of association such as appeared in the Press between now and the Committee Stage.

The PRESIDENT

If there is a sufficient number of copies available I will undertake to leave one copy at least in the library.