I move: "That the Bill be now read a Second Time."
As Deputies will be aware, the Companies Acts, 1963 to 1977, are the basic statutes governing the operations of different classes of companies in Ireland. As such they have a particular importance in that they provide the framework within which a very substantial part of the economic activity of the country is conducted.
The Companies Act, 1963 has, on the whole, stood the test of time and has served us well. The period since its introduction, however, has seen considerable expansion in our economy and it has been marked by a rapid increase in industrialisation and, of course, our entry into the European Economic Community. Apart from the 1977 Act, which dealt with the method of transferring securities on the Stock Exchange, the only amendment of any substance in the meantime was made by regulation in 1973 to give effect to the First EEC Directive on Company Law. This dealt with the publication of documents and information on companies generally. It is inevitable that substantive revision of the Act should now be necessary to keep pace with the changes stemming from various developments in the interim. The present Bill is a first instalment of an extensive legislative programme which will update our code of company law to suit the circumstances obtaining in the latter part of the 20th century and which will enable us to fulfil our obligations as a member of the EEC.
This Bill deals with only a small number of matters each, perhaps, important in itself, but it is not a major reform of company law nor is it intended as such. Its basic purpose is to cater for a limited number of particular situations where the need for revision of the relevant provisions is obvious at present and where, as some would perhaps say, revision is long overdue. This is not, of course, to say that other provisions of the Act do not require urgent attention; our EEC obligations alone will give rise to a number of extensive measures in the future.
I would hope, therefore, that Deputies in their consideration of the Bill, will bear these circumstances in mind and that they will not be unduly disappointed at the fact that this first Companies (Amendment) Bill is not a more substantial and comprehensive measure.
While I will only touch on them in general terms here it may be useful to summarise the provisions in the present Bill. They comprise the following:
—a number of minor adjustments to facilitate the more efficient operation of the companies registration office,
—an amendment to the provisions in relation to persons who may act as company auditors and public auditors,
—the amendment of a particular provision rendered unconstitutional by a Supreme Court decisions,
—improving, in the interest of employees, the provision about preferential payments in the winding-up of companies,
—the removal of the restriction on the number of partners in the professions of accountant and solicitor to enable them to broaden the scope of their services,
—increasing fines to take account of inflation and revising the provisions in relation to certain legal proceedings in the interests of more effective implementation of the Companies Acts,
—the repeal of sections 29 and 30 of the Industrial Research and Standards Act, 1961, to enable service, as opposed to industrial, companies to use the word "standard" in their names.
Employees will no doubt welcome the changes I propose in section 285 of the 1963 Act which deals with preferential payments in a winding-up. I accept the representations that the list of priority debts in that section is somewhat deficient and accordingly I am extending that list to include pension fund payments owing by a company whether in respect of their own contribution or of contributions deducted from their employees. I am also improving the preferential provisions in so far as they relate to sick pay accruing to employees. In addition, in line with the change in money values since the coming into operation of the present Act, I am increasing from £300 to £1,500 the sum to which priority is given by the same section for employees' salaries or wages in respect of services rendered during the four months prior to winding-up. This too is an issue on which there have been representations down the years.
The provisions dealing with the Companies Registration Office will speed up some of the processes used in that office in the carrying out of the registrar's functions and will strengthen his powers in enforcing the law. It is also necessary to tighten up some of the procedures to ensure that maximum information under the relevant heads is available to the public at the earliest possible date. I would refer, for instance, to the new procedures governing the striking off of companies no longer trading and companies which fail to furnish annual returns for three consecutive years. This provision should help to update considerably the records of the Companies Registration Office and it should be welcomed by practitioners and the business community in general. The same, I hope, will apply in regard to the availability, prior to incorporation of information as to the directors, secretary and registered office of a company. The volume of work involved for the Companies Registration Office in securing lodgment of returns by defaulting companies will be reduced to some extent by virtue of these new procedures.
The Bill contains features which should be welcomed, in particular, by the accountancy and legal professions. I am removing the limitation imposed by section 376 of the 1963 Act which prevents the formation of partnerships consisting of more than 20 persons. I accept the argument that firms of accountants and solicitors may wish to expand so as to identify and concentrate on appropriate areas of specialisation with a view to improving and extending the range of services to their clients. I recognise, too, that these firms may wish to provide organisational structures which will encourage and provide advancement opportunities for their more outstanding practitioners. As the same arguments may also be valid for other professions I propose to introduce, on Committee Stage, an amendment enabling the Minister to allow other professions relief from the limitation of section 376.
Accountants will be especially interested in changes proposed in section 6 which substitutes a new section for section 162 of the Companies Act, 1963. The new provision has two main objectives. The first is to end, six months after the commencement of the Bill, the arrangement under the existing provision where the Minister may authorise a person for appointment as auditor of a company on the basis of having obtained adequate knowledge and experience in employment by a member of a recognised body or as having practised in the State as an accountant, in either case prior to the operative date of the 1963 Act. It will be generally accepted that persons satisfying those provisions have had long enough to establish that fact and in any event it is unrealistic to attempt to operate them with any degree of certainty in 1982. I would draw attention to the fact that the provision whereby authorisations may be granted on the basis of similar qualifications otherwise than from a recognised body still stands. This is an arrangement which enables us to grant recognition, in appropriate circumstances, to accountants from abroad and by so doing to enable, in some cases, Irish people who qualify abroad to return home.
The second objective of the provision is section 6 of the Bill is to give statutory force to what has been the practice, since 1967 of making appointments of public auditors by reference to the same criteria as those for auditors of companies. The phasing out of the criteria which I have just mentioned will also apply to appointments of public auditors. In addition, there is the ending of the present administrative arrangement under which public auditors must apply on a continuing basis for reappointment. Authorisation of all public auditors will, in future, be on a permanent basis and members of recognised bodies will be automatically entitled to act as public auditors just as they are now entitled to act as company auditors. I should explain that public auditors are those who audit the accounts of industrial and provident societies and of friendly societies and they have, up to now, been appointed on an individual basis under the provisions of very old legislation relating to such societies.
A general measure which strikes at all aspects of the Companies Act, 1963 and which, it has to be admitted, is overdue, is the provision in section 15 of the Bill to increase all fines. There are the penalties for failure to comply with all the requirements of the 1963 Act including matters such as the filing of documents, returns and statements, holding meetings and providing other information to the Registrar of Companies.
The increases reflect the fall in the value of money in the time which has elapsed since the fines were fixed and the desirability of enhancing the deterrent effect of these penalties. This is another measure which, it is envisaged, would effect some saving in the resources of the Companies Registration Office which are taken up in the pursuit of companies failing in their obligations.
Because of a Supreme Court decision of some years standing it is necessary, for constitutional reasons, to amend section 168(3) of the Companies Act relating to obligations on officers or agents of a company to make statements and produce books or documents to any inspector investigating the affairs of that company. As I am including this provision on the advice of the Attorney General I trust that it will be generally acceptable.
In concluding I would emphasise again that I recognise that this Bill is a relatively small measure — a first step — in a series of amendments of company law. These will reflect the need for change arising from developments in commercial activity generally and, more immediately from the necessity to translate into Irish law the provisions of EEC Directives already adopted. A draft scheme of the next amending Bill which will give effect to the Second Directive, about the formation of public limited companies and the maintenance and alteration of their capital, was approved by the Government last September. The Bill has now been drafted and is having final scrutiny in my Department. I expect to introduce it later on in this session. Work is proceeding on the measures necessary to give effect to the Third and Fourth Directives and proposals on these will be made as soon as possible.
This is the general background against which I present this Bill. I consider that the amendments it proposes are worth while and accordingly, I recommend the Bill for the approval of the House.