This is the chief section. It would authorise the Minister to buy 24 per cent of the shares in Bula Limited for £9.54 million. It is necessary, when considering the commercial and general public propriety of the Minister's proposed purchase of these shares, to consider a number of relevant matters which pertain to the company in which he has chosen to buy this minority holding. If in discussing certain aspects of the commercial and legal operations of this company I have to appear critical of them, I apologise in advance. I have no wish to take on the company any more than I had over the last three or four weeks. The Minister has chosen to buy these shares and accordingly it is necessary for us, if we are to examine the proposed deal properly, to look into some of the public facts that are available in relation to the company.
I have had a copy made for me by reputable professional searchers in Dublin of the entire file relating to Bula Limited in the Companies Office. This information is available to every member of the public. The number of this company in the Companies Office is 33738. This search was made about a week or ten days ago. There was some difficulty making it because the file was not available every day, which is unusual. I assume on the day my searchers made the search that they were in a position to copy the entire file and that none of it was missing. On that assumption I make the following comments.
The Articles of Association of this company, which is now called Bula Limited but started out as Wright Limited, contain a most unusual article, unusual in the context of this Bill and of the agreement of the 12th December, 1975, to which the Bill refers. The unusual article, No. 11, is the last of the special drafted articles and is headed "Indemnity". With the Chair's indulgence I will read it because it might not be available to Members of the House who do not want the trouble of going to Dublin Castle to look at it. It reads as follows:
Every Director, Managing Director, Agent, Auditor, Secretary or other officer of the Company should be entitled to be indemnified out of the assets of the Company against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, including any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under Section 391 of the Act in which relief is granted to him by the court, and no director or other officer shall be liable for any loss, damage or misfortune which may happen to or be incurred by the Company in the execution of the duties of his office or in relation thereto. But this Article shall only have effect in so far as its provisions are not avoided by Section 200 of the Act.
During his reply to the Second Stage debate on 2nd February, 1977, the Minister stated that four people whom he named had guaranteed performance of the agreement of the 12th December, 1975. He named the four people —who appear to be the four directors of Bula Limited—Messrs. Roche Senior and Junior, Mr. Wymes and Mr. Wood. They are referred to in this Bill as "certain other parties named in the agreement"; they are not named. They are the four guarantors. Unfortunately we have not seen this agreement; it is a secret document. But the Minister told us when replying to the Second Stage debate that these four gentlemen have guaranteed performance of the agreement by Bula Limited.
Performance of the agreement in the context of what we are talking about now would appear to mean that they would take all steps legally open to them to try to get the company into production, the mine operating and producing profitably at as early a date as possible, and to do all or any other acts which are necessary or conducive to the attainment of the commercial objects of the company. Under that unseen agreement the Minister has certain rights as against the company. When I say "the Minister" I mean, in effect, the taxpayer because it is his £9.54 million that is being used.
If the Minister felt, for example, that planning permission applications were not being pressed ahead sufficiently or that some other steps were not being taken to get the company into profitable production as soon as was reasonably feasible in all the circumstances and started an action, as he would be entitled to do under this agreement, against the company and the guarantors, and if, specifically, he started against the guarantors to get them to honour their guarantee of performance of the terms of the agreement and, let us assume, he was successful and the court took the view that the Minister was entitled to enforce his guarantee of performance against the four guarantors who were also directors, he would find himself in the position—and I suggest that this is a rather anomalous position to be in— that the four guarantors concerned because they are also directors could pass on any claim the Minister might make in this respect to the company. They could seek total indemnification by the company in respect of any claim he might have under the secret agreement of December, 1975, against them.
Then the Minister would be in the position that, having successfully sought a declaration, that he was entitled to have certain things done, the company, in which he would then be a 49 per cent shareholder, would have to indemnify the guarantors and directors against the Minister's action; he would, in fact, be taking the action 49 per cent against himself. The guarantors and directors would be only nominal parties for the purpose of passing on judgment in the action which the Minister, in his capacity as Minister for Industry and Commerce, would be taking against Bula Limited, in which he would be a 49 per cent proprietor by virtue of the fact that presumably at that stage he would hold shares to that amount.
Even the most non-legal minded person would agree that any such situation is ridiculous. Has the Minister taken into account the virtual uselessness of this guarantee provision, which we have not seen, in the agreement, which we have not seen, of the 12th December, 1975? If he himself has to indemnify the defendants against whom he takes action as to 49 per cent he is penalising himself and the taxpayer. What is the point of such an operation? The Minister cannot say that this article II appeared after he signed the agreement; it did not. It was there in the original memorandum and articles of this company registered on 19th March, 1971. More than four-and-a-half years before the Minister signed the agreement he would have been aware of the existence of this indemnity. It is a very broad indemnity but I do not see anything illegal in it because it makes the necessary references to section 200 and section 391. Section 200 prevents certain types of indemnities being given but this does not extend to contractual indemnities of this kind. Section 391 is a section in relief of directors who may have acted negligently but who did not act in bad faith. Of course, that would not arise here because one is assuming that there would be no question of bad faith, it would be a question of inability to fulfil a guarantee, possibly through factors which are outside the direct control of the guarantors. This is a matter which I do not propose to develop any further at this point. But I should like to hear the Minister's views on this because it seems quite futile to have a guarantee when, in fact, the guarantors will be indemnified as to 49 per cent by the Minister.
I now want to deal with the company and what appears to be the evidence disclosed by its public file in the Companies' Registration Office. Although this company was registered on the 19th of March, 1971, it did not file any annual return until the 12th of November, 1974—which is more than three-and-a-half years after its formation and registration. Under the terms of section 125 presumably the company would not have had an obligation to file a return in respect of the calendar year 1971 because that was the year of its incorporation but it would have had a legal obligation to file annual returns for 1972 and 1973 and to file these within a reasonable period. In fact, we find that the two annual returns for 1972 and 1973 were filed together on the 12th November, 1974. It is possible that the 1973 return might have been in time or may not have been too late but quite clearly the return for 1972 was late, being filed nearly two years after the end of the year to which it referred.
Section 125 (2) of the Companies Act, 1963, states:
If a company fails to comply with this section, the company and every officer of the company who is in default shall be liable to a fine not exceeding £100.
Section 125 (3) states:
For the purposes of this section and of Part I of the Fifth Schedule, "director" and "officer" shall include any person in accordance with whose directions or instructions the directors of the company are accustomed to act.
Section 125 (4) states:
Proceedings in relation to an offence under this section may be brought and prosecuted by the registrar of companies.
The registrar frequently prosecutes companies under this section. The numbers are given in the annual report and these companies are fined varying amounts.
It would appear that there was noncompliance in 1974. Assuming that the file is complete and that there was nothing missing when the search was conducted on my behalf, it would seem that the last annual return was filed on the 12th of November, 1974, because up to about a week ago no further annual return was filed. For that reason it appears that there could have been a failure to comply with the provisions of section 125 of the Companies Act, 1963. The two returns filed on the 12th of November, 1974, in respect of the years 1972 and 1973 both contain under section 4, which contains particulars of indebtedness, the return nil, that is, they state that there was no indebtedness on the part of the company on the 31st of December, 1972, and on the 31st December, 1973. The Minister tells me that they have filed subsequent annual returns but that they are not available on the file at the moment. If they had filed returns in respect of the years 1974, 1975 or 1976 presumably that entry could not still be nil. It would be necessary for the company to specify what its indebtedness was and this, of course, is a factor which is extremely relevant when it comes to the question of deciding whether it was wise for the taxpayer to have to pay £9.54 million for 24 per cent of the shares of the company. No doubt it was just an oversight that the returns appear not to have been made as required by section 125 of the Companies Act, 1963.
It is not uncommon for small companies who have not professional secretaries and advisers to overlook these things. After a year or two they get a reminder from the registrar of companies and they usually comply then. But this company is not a small company without access to professional advice.
The secretary of the company is a solicitor of standing and would not normally allow a company to be in default in a matter such as this and, in particular, would not allow any company to be in default where the question of complying with the law was concerned. The annual return does not appear to be the only document where there was failure to make return. One finds on the file also that a special resolution was passed by the company increasing this authorised capital from £100 to £1 million. That resolution was passed at an extraordinary meeting of the members of the company duly convened and held on the 16th July, 1974. Although section 143 of the Companies Act, 1963, requires, again under the sanction of a penalty following prosecution in the District Court for failure to comply, such a resolution to be filed within 15 days of its passing, the resolution was filed more than 18 months after it was passed, which, on the face of it, is not in accordance with section 143 of the Companies Act, 1963.
On this public file in the Companies Office there are a number of references to an agreement of the 17th February, 1975, between the company and somebody called Haras el Chorro, SA. The agreement between the company, who are described at various points in this file in connection with this as the mortgagors, and Haras el Chorro, SA, appears to relate to the minerals included in Folio 26646, County Meath. That appears to be borne out by a number of further references in the file where the charges are concerned. The mortgage of the 13th September, 1976, is in favour of the Northern Bank Finance Corporation Limited, registered on the 15th October. That mortgage covers, according to the particulars on the file, the lands comprised in Folio 26646 County Meath but excluding and excepting thereout the mines and minerals on and under the said lands.
It goes on later to refer separately to those mines and minerals as being all the estate, right, title and interest referred to in paragraph 1 of an agreement dated 17th February, 1975, made between Haras el Chorro, SA and the company and therein described as all the estate, right, title and interest of the vendors in and to any minerals on or under the lands comprised in Folio 26646 aforesaid upon and subject to the terms and conditions contained in the agreement together with the company's rights and benefits acquired under the said contracts.
We are entitled to ask the Minister a number of questions in connection with this. Who are Haras el Chorro, SA? What is in the agreement of the 17th February 1975? Why are the minerals lying under this particular folio excluded? Have they been mortgaged in favour of Haras el Chorro, SA? Were all these facts known to the Minister's advisers and made known to the arbitrators and so on? If there is a mortgage or some other encumbrance, what is the nature of it, the amount of it and the purpose of it? If one had that information it would prevent speculation as to what might have been the nature of whatever agreement has been made.
As the annual returns for 1974, 1975 and 1976 do not appear to be on the file in the Companies Registration Office this has avoided the necessity of stating the indebtedness of the company. As there appears to be an obligation under the law of the land to provide this information as to the up to date indebtedness of the company at the 31st December in each of the years, would the Minister now give us that information? I trust he will not now suggest that it would be commercially damaging to the company to give that information since the Companies Act, 1963, requires it to be given. My recollection is that section 125 is to a great extent a reprint of the corresponding section in the Companies Act, 1908 which to a great extent was a reprint of the corresponding section in the old Act in the 1860's.
One hopes there was not a deliberate intention of trying to conceal those figures in view of the fact that the provisions of the law require them to be given. One must become a little worried, because we have here a company of which the Minister is buying a 24 per cent interest by paying some of the individual shareholders £9½ million for some of their shares. Up to now the company would appear not to have complied with various provisions of the law relating to companies as contained in the Companies Act, 1963.
That Act is a publicly promulgated Act of the Oireachtas and what worries me is that if there is a failure to comply with a publicly promulgated law is there not at least a danger that such company might also, perhaps inadvertently, fail to comply with the provisions of the secret agreement of 12th December, 1975, which this Bill seeks to ratify and give force of law to? It seems that there is a danger that a company which inadvertently failed to comply with a publicly promulgated declared law might equally inadvertently fail to comply with the details contained in the secret agreement of 12th December, 1975, which will become law if this section is passed.