Deputy Wilson reported progress.
Companies (Amendment) Bill, 1985: Committee Stage (Resumed).
Question again proposed: "That section 4, as amended, stand part of the Bill."
I had concluded my remarks on the section.
Question put and agreed to.
SECTION 5.
I move amendment No. 6:
In page 8, paragraph (c) (ii), line 29, after "relate", to insert ", or a previous financial year,".
The purpose of this amendment is to secure that, in the pursuance of the principle of prudence in accounting, account shall be taken not just of liabilities and losses which are likely to arise in respect of the financial year under account but also those liabilities or losses which relate to previous financial years. This approach accords with accepted accounting practices and with Article 31 of the directive.
This section deals with the——
We are on amendment No. 6.
——accounting principles that one applies in these cases. The statement of standard accounting practices identifies the four fundamental accounting concepts which are recorded here: a going concern, consistency, accruals and prudency. These are the accounting principles that we are accustomed to. However, a fifth accounting principle is outlined here.
The new accounting principle is that when determining the aggregate amount of a format item, whether an asset or liability, each individual component of that item should be considered separately. This is new. Spelled out here as well in some detail is the question about the prudency basis on which accounting practice will be complied with henceforth. There seems to be some contradiction in this section and I would like to refer the Minister to it.
I draw the Deputy's attention to the fact that he appears to be dealing with the section. We are on amendment No. 6 and, when we dispose of that, we will come to the section. If he agrees with the amendment we can dispose of it and then come to the section.
I think I can agree with the amendment.
Amendment agreed to.
Question proposed: "That section 5, as amended, stand part of the Bill."
I would like to draw the Minister's attention to section 5 (c) (i) which states that only profits realised at the balance sheet date shall be included in the profit and loss account. Should that more properly have read "only profits earned at the balance sheet date"? Subsection (d) of the same section provides that all income and charges relating to the financial year to which the accounts relate shall be taken into account without regard to the date of receipt of payment. Therefore, there seems to be a contradiction and I take it that subsection (d) is the correct position. In paragraph (i) should "earned" replace "realised"? Does the Minister agree that this would be a better interpretation of the section?
At the end of the period under consideration the auditor establishes the realised profits or losses at the balance sheet date and these will be included in the profit and loss account. In doing so, he has an obligation to take a number of things into account including what is apparent from the examination of the accounts for the period and, as is pointed out in subsection (c) (ii), all liabilities and losses which have arisen or are likely to arise in respect of the financial year to which the accounts relate shall be taken into account, including those liabilities and losses which only become apparent between the balance sheet date and the date on which the accounts are signed in pursuance of section 156 of the Principal Act. Subsection (d) takes accruals into account, that is ordinary accounting practice and there is nothing extraordinary about it. We have also agreed in the amendment to take into account the historical aspect of the accounts, in other words that the auditor would have to take into account any losses which occurred in previous years but had not been taken into account in previous audits. We are ensuring that there will be a true picture of the profit and loss account and balance sheet and that there will be a global perspective in this section.
Will the liabilities and losses which occurred in earlier years but which have only come to light be included because that is not spelled out in the section?
It is in the amendment which we have just agreed that losses for a previous year will be taken into account.
Is that the basis of the amendment?
Yes.
What is the position in so far as the profits from long term contracts and work in progress are concerned and currently considered realised? Will that be the position in the future?
Long term contracts on works realised and works in progress are in accordance with standard accountancy practice, and the amount of profit and loss accruing in the period under review would be determined in the first instance by the company and would be certified by the auditor in the ordinary course of events.
There is another general accounting principle outlined here and I refer to it as the new fifth principle. I take it that subsection (e) outlines the basis for that new principle and that there are now five new accounting principles established in this section as against the four already understood to be there in the statement of standard accounting practices, going concerns, accruals, consistency and prudence. Subsection (e) is outlining the new fifth general accounting principle and must be complied with, that immaterial items do not have to be shown separately. Is that the position?
No, we are saying that any particular item of an asset or liability that falls to be taken into account shall be taken separately. In other words, a prudent principle of accounting will have to be used in determining the value of any asset or liability. Of course, the method of evaluation of assets and liabilities falls to be dealt with in different ways and we are ensuring that each item is assessed properly even though separate items would be valued, so to speak, in accordance with standard practice of accounting.
There seems to be another inconsistency in subsection (c) (ii) in regard to liabilities and losses which only become apparent between the balance sheet date and the date on which the accounts are signed. I would have thought that "published" should have been inserted instead of "signed" in pursuance of the Principal Act which would have been more relevant to establishing the information needed.
No, the point is that the accounts are prepared up to a balance sheet date, audited and presented to the board for confirmation and signing. It is between those two dates that certain matters may come to light in the normal course of events, which is not unusual. They would be considered by the directors and the accounts signed in pursuance of section 156 of the Principal Act. This is not an innovative measure, it is normal standard accounting procedure.
Would foreign currency gains on long term monetary items be brought into the profit and loss account even though they are not considered to be realised?
Of course the accounting procedure would have to take into account the rate of exchange as at the balance sheet date and if there were any major movements the auditor would bring this to the notice of the directors of the company and there would be an agreement in relation to the valuation of foreign currency items. A note to that effect would be inserted in the accounts.
Even though the assets are not realised?
In that case there would always be a note to that effect in the accounts. It would be most imprudent of a company not to have major outstanding items which would affect their balance sheet listed and, under this Bill, such major items would have to be taken into account.
Question put and agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."
We agree to this section which is an important one in so far as any departure from the five accounting principles outlined in section 5 will have to be recorded in the notes to the account. Certainly, the notes will be quite substantial if one has to comply with all the variations outlined in the legislation. I take it that quite some detail will have to be recorded in the notes. I do not have any difficulty in accepting the section but, as it is such an important one, I was anxious to record my views on it.
I can accept what the Deputy has said. In fact, the provision gives effect to Article 31 (2) of the Directive. Indeed, the departure from accounting principles as set out in section 5 will only be exercised in exceptional cases. We do not envisage many of those cases but if there are departure they must be fully explained in notes to the accounts. For the benefit of the Deputy I should like to give some examples. If a board of directors wish to change from historic to a current cost basis of valuation there will have to be substantial notes giving reasons for this attaching to the accounts filed in the Companies Registration Office under the Bill. One might be changing accounting standards in respect of a particular item in the accounts.
The Deputy made reference to currency problems and that may result in a difference, but it will have to be explained in the notes. Changes in the accounting treatment of post balance sheet events can always be matter of substance. For instance, on the question of treatment of valuation of property, if there is a change in that in the post balance sheet period prior to the signing of the accounts, it will have to be explained in the notes to the account. If there is a fundamental change in the nature of the company's business which will mean a departure from the principles as outlined in section 5, there will be a need for a comprehensive note attaching to the accounts. This provision is to copperfasten the principles laid down in section 5 which imposes on companies, as the Deputy said, an onerous responsibility to ensure that any departures from principles are fully explained.
Question put and agreed to.
SECTION 7.
I move amendment No. 7:
In page 9, subsection (1) (b), line 14, to delete "or report such as aforesaid" and substitute "report, or statement, annexed to the annual return,".
The purpose of the amendment is to secure that information provided by way of statements to the accounts will, like the accounts themselves, be provided in the Irish or English language. This is a catch-all amendment to ensure that, where the balance sheet, profit and loss accounts, report or statement are lodged in a language other than the Irish or the English language, there should be annexed to the foreign language version a translation in the English and the Irish language of the balance sheet, profit and loss accounts, report or statement. This is to ensure that any report or statement will be annexed to an annual return. For instance, in the case of an auditor's report or a director's report where statements may attach in a foreign language we want to ensure that a translation of that statement is attached to the submissions to the Companies Registration Office.
I should like some further clarification of this from the Minister. The subsection refers to documentation lodged with the Companies Registration Office in different languages. May I take it that the accounts may be filed in the Irish language alone?
Yes. Subsection (1) (b) refers to documents in a language other than the English language or the Irish language. Of course, accounts can be submitted in the first language of the nation.
If accounts are submitted in a foreign language but a language that is permissible under the Treaty, is it necessary to have a translation in either the English language or the Irish language?
Yes.
Can companies have the format laid out in French and a translation in English or Irish of the rest of the documentation, or is it necessary to have all the documentation in one language? If somebody wants to conceal something he or she can use the element of languages, because it is a recognised one under the Treaty.
I can put the Deputy's mind at rest in regard to this. Subsection (b) states that where a document, being a balance sheet, profit and loss account, or report, such as aforesaid is in a language other than the English language or the Irish language, there shall be annexed to each document a translation in the English language or the Irish language certified in the prescribed manner to be a correct translation. If a company are submitting accounts in a foreign language, there is a clear legal statutory responsibility on the company to provide an English or Irish translation.
This may seem to be a minor point but it may lead to some confusion in the office of the registrar. I should like to know if the registrar at this time has the competency within his staff to deal with returns made in languages other then English and Irish because the translation submitted might suit the purposes of the filing agency but might not be a true and correct interpretation of what the original document states. If the Minister gives an indication to provide that expertise, if it does not exist, that is fine. Will the Minister tell the House the form of certification that will be required in support of the translation? Are there set procedures for this or can the translation be done casually by any person with a knowledge of the alternative language used?
A mechanism was established in 1963 in relation to foreign accounts. The usual method of certifying translation into the English language is through the embassy of the country whose language is being used. That mechanism has been used and has not caused any difficulty.
Is the certification done by the Embassy?
Yes. There has not been any difficulty in the Companies Registration Office in regard to this.
The Minister will appreciate that I am concerned because of the disclosure elements and the fact that, in accordance with the directive, we will be getting much more involved with the language of other member states. I am particularly anxious about the Irish language involvement in so far as the Registrar's Office is concerned. I should like the Minister to assure us that facilities are available in the Registrar's Office for all those companies wishing to file accounts in the Irish language only, that they will be given the opportunity of doing so without interpretations and translations being sought from them in a language other than the first language of this country. That does not apply at present. I am making a plea here on behalf of Gaeilgeoirí na tíre seo ionas go mbeidh an eagraíocht ann chun deis a thabhairt do na comhaltaí atá sásta na rudaí seo a chur ar fáil as Gaeilge agus go mbeidh an cláraitheoir in ann an job ar fad a dhéanamh sa teanga dhúchaís.
There is a regulation in force whereby companies submitting accounts and so on in a foreign language have those accounts translated into the English or Irish language by a qualified interpreter and attested by the embassy here. However, in order to make doubly sure, I shall refer to this again on Report Stage to put the Deputy's mind at rest.
On section 7 ——
We have not yet come to the section. We are dealing with amendment No. 7 and, when we dispose of it, we will come to the section. Is amendment No. 7 agreed?
Amendment agreed to.
Question proposed: "That section 7, as amended, stand part of the Bill".
In subsection (1) (a) (ii) it is said:
...and each such copy shall be certified both by a director, and the secretary, of the company to be a true copy of such balance sheet, profit and loss account, or report, as the case may be, laid before the annual general meeting of the company held during the period to which the return relates, and...'
I note that there is no provision in the Bill for office holders, such as the secretary of a public limited company. Unlike the United Kingdom legislation which laid down specific qualifications required of the secretary of a public limited company, it is not stated in this section or else where in the Bill who should be qualified to hold the office of secretary. I can understand that, in the case of a private company, the office of secretary may well be held by the wife of the proprietor or some such person, but in the case of a public limited company, it is quite possible that an imbecile could be registered as secretary. Yet the secretary of a public limited company is required, by legislation, to discharge these duties as laid down in subsection (1) (a) (ii). The United Kingdom legislation laid down a schedule of persons qualified to act as secretaries of public limited companies. I would suggest that the Minister consider introducing an amendment to ensure similar provisions obtain here. Indeed I should like such provision to apply not only to public limited companies but also to State boards. After all if we give people this responsibility then we should specify exactly who is entitled to discharge that responsibility. It is possible to have a poor unfortunate appointed to a board acting as secretary and taking upon himself these responsibilities.
I know that the Minister has been advised that we may not need such restrictions for secretaries of public limited companies. I do not see why we should not have such restrictions. We have closely followed the English legislation since 1948. Indeed our 1963 Act was almost a replica of the 1948 United Kingdom Act and probably is the largest Act on our Statute Book. It specifies the qualifications required of such persons as auditors of companies. For instance, in the case of the ICI, had somebody been charged specifically with the responsibility of registering certain documentation or with keeping true copies, that company might not have got themselves into the mess they did. It might have been possible for the State to ascertain at an earlier stage the true position by asking the person whose duty it was to discharge those responsibilities, a qualified, identifiable person, if he had discharged those responsibilities. In the case of public limited companies and State boards I would ask the Minister to examine the relevant section of the United Kingdom Act relating to those qualifications necessary for persons holding the office of secretary with a view to introducing an amendment to this Bill on Report Stage.
The Companies Acts devolve quite an amount of responsibility on both the directors and secretary of any company. Indeed any person asked to undertake the duties and responsibilities of a director or secretary should be aware of the onus placed on them. I take the point being made by Deputy G. Mitchell. However, it is not appropriate to this Bill which specifically gives national effect to a directive, a Bill laying down the mechanisms by which documents being submitted to the Companies Office should be certified. We are saying here that each copy shall be certified by a director and the secretary of the company to be a true copy of the balance sheet, profit and loss account or report. The Deputy has referred to the qualifications he feels to be necessary on the part of a secretary or other officer of a company.
——of a public limited company.
Of a public limited company. I accept the thrust of the Deputy's remarks. Indeed one would hope that a public limited company would have the wit and intelligence to employ a qualified secretary. The question raised by Deputy Mitchell is of more relevance to a general Companies (Amendment) Bill rather than to this specific one giving effect to a directive. I am sure that, when another Companies (Amendment) Bill comes to be prepared this is a matter that will be given consideration.
I gather there is further legislation proposed in this area. Is that correct?
I am aware of a Bill in course of preparation. I am aware also of representations that have been made to my Department by the Institute of Secretaries in relation to the qualifications and recognition. It is a point with which I have sympathy but, in relation to this Bill, I must say it is not the appropriate one in which to effect such amendments.
Perhaps the Minister would consider it in the context of the further legislation.
Yes, I will, because I have sympathy with what the Deputy is saying. It is important, if we are going to specify proprietary activities of officers of companies, that they be qualified to carry out the functions assigned them. I would be more than sympathetic to what the Deputy has said.
Perhaps I am misreading the subsection but is there an inconsistency in subsection (1) (a) (i) where it is said that balance sheets and profit and loss accounts can be drawn up for certain companies in accordance with section 3, 4 and 5? Would it not be more accurate to say that they could be drawn up in accordance with sections 3, 4, 5 and 6? Why does the Minister not include section 6 as well seeing that a company can depart from the accounting principles in certain circumstances as long as they so state? Would that subsection not now preclude certain companies from utilising the provisions of section 6 in certain circumstances? Section 7 deals with the publication of accounts in some form or other by all public and private limited companies. This was the nub of considerable discussion on an earlier section dealing with the question of banks and what they must publish. It is set down clearly that under the Principal Act financial institutions will have to file profit and loss accounts and balance sheets. I am concerned about the omission of this from sections 6 and 7.
The Deputy will see that section 5 is subject to section 6. This section refers to section 5 in subsection (1) (a) (i) and therefore there is no need there to refer to section 6 in this section.
In other words, the flexibility in section 6 is available through section 5.
That is so. It is a fair drafting point which I will have examined. If there is the need the Deputy suggests, I will have section 6 referred to.
Question put and agreed to.
SECTION 8.
Amendments Nos. 8 to 13, inclusive, can be taken together, by agreement.
I move amendment No. 8:
In page 9, subsection (2) (a), line 45, to delete "£1,250,000" and substitute "£125,000".
This section is the nub of the Bill. Whether the Bill will be of any benefit at all with depend on the Minister's reaction to this series of amendments. If the section as it stands is accepted, the Bill will give major exemptions to the very companies the Bill is designed to get disclosures from. The purpose of the amendment is to bring more companies into the scope of the section. The Bill prescribes three criteria in relation to size, and some are excluded from the requirement to disclose information provided for under sections 11 and 12. The first three amendments relate to small companies and the second three to medium sized companies. The second subsection of section 8 states:
The qualifying conditions for a company to be treated as a small company in respect of any financial year are as follows:
(a) its balance sheet total for that year shall not exceed £1,250,000,
(b) the amount of its turnover for that year shall not exceed £2,500,000, and
(c) the average number of persons employed by the company in that year shall not exceed 50.
The first amendment proposes to reduce the figure of £1,250,000 to £125,000, in other words, to one-tenth of the figure now in the section. The second qualification in the subsection is in regard to the amount of turnover, the figure being £2,500,000. My proposal would reduce that to £250,000. The third qualification is in regard to the number of persons employed, on average, and my proposal would reduce the figure of 50 to five employees.
On Second Stage I referred to the IDA annual report for 1984 which indicated that 80 per cent of all manufacturing companies employed fewer than 50 people. There are thousands of small companies who employ two or three people. Under this clause in subsection (2), 80 per cent of the employees and companies would come within the category of "small companies". In 1984 the IDA grant-aided 2,600 small companies, employing approximately 29,500 persons and their annual report for that year stated that those companies had each fixed assets of less than £500,000. Therefore, none of these small IDA-aided companies had fixed assets of more than £500,000, but under the Bill the provision is for fixed assets of nearly three times that amount.
This means that a particularly high proportion of Irish companies could be described as small and the IDA state that all the emphasis in the past couple of years has been to grant-aid small companies with two, three, four or five employees and they have advanced public money to such companies — in 1984 £18 million of public money was put into such small industries by the IDA.
When public money is channelled into companies there should be full public disclosure of the financial implications. It is even more important that there should be a requirement in the Bill for information disclosure in such circumstances, and there should not be any exemptions. Under this section none of these companies will come within the scope of the Bill except in some limited instances and, therefore, there will not be full disclosure of information. Already, public companies are required to give full disclosure, and my proposals in these amendments would make private limited companies subject to the same conditions. This section excludes at least 80 per cent of companies from giving this information.
That is not true.
Taken from the top, companies which would qualify as large companies, required to adhere to the terms of this Bill with regard to disclosure of accounts, balance sheets and so forth, according to the Irish Congress of Trade Unions estimate amount to only 268 public and private companies, with a turnover in excess of £10 million.
Too many.
Approximately 137 of those employ more than 250 employees. That is another criterion for a large company. Fewer than 150 Irish companies, the Congress estimate, would be compelled under this Bill to give full disclosure of information and publish full accounts. Of those 150, approximately 40 per cent are public companies which already give that information. The Bill will require full disclosure of information and accounts in the case of approximately, or fewer than, 100 companies. Those are all that this large, complicated, highly technical Bill will affect. Deputy Flynn is very upset about the pressure on them to give such information.
And I continue to be upset about it.
He does not need to worry at all. There will be only a handful of companies involved, estimated at 75,000.
I wish that were true, but unfortunately it is not.
The Deputy will find that it is true. Nobody knows for certain, because companies which are examining this Bill and are already required to disclose information are already preparing the ground to become small or medium sized companies simply by use of the existing Companies Acts, by establishing one, two or three companies to share employees, assets and turnover as they wish, for the purpose of disclosure of accounts. This Bill is showing them how to do that, exactly the type of company which they should establish.
We have been hearing from the Government for three years about reform of company legislation in this field, to prevent the fly-by-night type of company operation. I had expected that this Bill would be designed to catch such operators, who were not alone not disclosing information or paying due taxes to the Revenue Commissioners, but were not even paying over the taxes and PRSI contributions which they were deducting from their employees. There was a case in the city last year which I had to watch through the whole of 1985 of a very well known firm sited in Dorset Street — the Crystal Glass Company. The firm have been in that location for many years. As I passed by regularly, I saw ever-decreasing amounts of glassware in the window and gradually the place was being run down. I discovered, on making inquiries, that this had been happening for a period of six or eight months, that a new company had been established in Crumlin under some other name and that all the transport from the Crystal Glass Company had already been transferred to the new company.
That is not appropriate here.
It is hardly appropriate, Deputy, to go into such details.
I am just giving it as an example.
The Deputy could give the example without identifying the company.
That is grossly unfair to trading.
I am sorry about that. However, companies can operate in this way for a small financial outlay, setting up any number of companies that they wish. I would prefer if there were no exemptions whatsoever in the Bill but under these amendments I am allowing exemptions of companies with five employees or fewer — a very substantial number of companies — with a turnover of £250,000 and assets of £125,000. If the Bill is allowed to go through in its present form, very few companies will come under its terms and it will be seen as the actual purpose of the Bill to bring in a Bill following the EC directive but exempting the vast majority of companies.
The next three amendments deal with medium sized companies which also have substantial exemptions, but somewhat less than the smaller companies. In amendment No. 11 I am moving that the assets of a medium sized company be reduced from £5 million to £500,000. In amendment No. 12 it is proposed that the £10 million turnover be reduced to £1 million. Amendment No. 13 proposes to amend the number of employees needed to qualify as a medium sized company from 250 to 25. A firm employing 250 people would be reckoned as a very major company in this country, although by EC standards and those of European industrial countries they would not count. If the IDA could bring in a company which would employ 250 that would be splashed all over the newspapers. This Bill exempts such companies from giving full disclosure of information or from publishing full accounts.
In the Irish situation, a firm employing 25 people is a medium sized company. There are a substantial number of such companies throughout the country, good, thriving businesses. If the small industries scheme of the IDA caused companies to increase employment from three to 25 people that would be spreading the good news. It would be marvellous to have 10,000 small industries established employing 25 people. That would total 250,000. Twenty-five is a substantial number but 250 is outrageous. It would appear from this section that the very purpose of the Bill is to ensure that the vast majority of private limited companies will not have to make full disclosure of their accounts and will be able to avail of all of these exemptions. Therefore, unless the Bill is amended it will be a joke. It must be brought within the context of private limited companies. Consequently, we propose these six amendments, three in relation to small companies and three in relation to medium sized companies.
I take the line that we could consider Deputy Mac Giolla's amendments at a future date after we have had experience of the legislation in operation. I consider it reasonable to set the thresholds as proposed in the Bill and then, if we find at some later date that it would be desirable to reduce those levels, the matter could be dealt with at that stage.
The difference between The Workers' Party and the other parties in this House is that The Workers Party are in favour of total State control.
I would not mind if we had that situation.
I did not interrupt the Deputy.
I am interrupting Deputy Mitchell.
The way those who espouse the Marxist philosophy go about achieving their objective is to endeavour to make most of the private business in the country so difficult to manage that the stage is reached where the State have virtually total control. If private companies are undermined, the public will not take the risk of engaging in private business. This would have the effect of bringing about a much higher unemployment rate and that, in turn, undermines the system. There are people who have a vested interest in bringing about that situation. We have enough legislation on hand already that contributes to unemployment without adding to that problem and making it impossible for private limited companies to trade as private limited companies. We should not forget that we are talking about private companies and that the people involved are not prepared to conduct their affairs in public, or in such a way that everyone else knows their position.
Deputy Mac Giolla is probably right when he says that perhaps 80 per cent of companies employ fewer than 50 people, but small companies are the backbone of our economy. We have made matters difficult enough already in many ways for small companies by way of our legislation. Many companies could employ more people but they decide not to do so because of the problems that might involve. The stage has been reached where, if an employer finds an employee with his hand in the till, the employee cannot be sacked without the employer ultimately having to face a Labour Court hearing and paying substantial compensation. If we were to legislate to compel very small companies to disclose all their business, not only to employees but to competitors, we would be making it impossible for people to engage in private business. The vast majority of the companies we are talking of are proprietary companies or what are known as proprietary limited companies in other countries.
The Chair would prefer that the Deputy did not extend his contribution into a Second Stage speech but would confine himself to the amendments.
There are six amendments before us.
I accept that.
Usually these companies operate on the basis of proprietors' guarantees to the banks. They are not operating on shareholdings that have been raised on the stock market. It is going a bit far to extend some of the arguments to companies with 25 employees because in that respect we would be talking of about 80 per cent of private companies. Even as the section stands, we are providing for a lot of business for accountants and lawyers but we would be increasing that business if the amendments were to be accepted. Acceptance of the amendments would result in people in those professions spending a lot of time advising companies on how to avoid the provisions as proposed in the amendments. Whatever about the larger companies, the smaller companies would not be in a position to pay for these services and this would make it impossible for them to continue in business.
However, if after we have had experience of the legislation in operation, we find that in one or two areas the thresholds ought to be reduced, we could deal with that matter then but the thresholds as proposed in the Bill seem to strike the right balance.
I cannot accept the amendments. What is being suggested in those amendments is that we reduce the thresholds for small and medium sized companies by a factor of ten and that we include companies with balance sheets not exceeding £125,000 or turnover not exceeding £250,000 and who are employing not more than five people. This would be placing an intolerable burden on very small companies and would not be a positive factor in the operation of the legislation. We have tried, and succeeded to a large extent, in keeping a balance in this Bill in the matter of the definition of small and medium sized companies. It is important that we maintain a balance. Both small and medium sized companies will be required to submit substantial information to the Companies Registration Office.
I reject Deputy Mac Giolla's sarcastic approach to these provisions. Information will have to be submitted to the Companies Registration Office for more than 70,000 registered companies. Small companies will be required to submit balance sheets. In the case of medium sized companies, profit and loss accounts, auditors' and directors' reports will also be required while in the case of the larger companies there is the additional requirement of the submission of details of turnover. The submission to the Companies Registration Office of this information will be of benefit to all who are trading. It will be of benefit to traders dealing with other traders in enabling them to form a good picture of a company's standing and creditworthiness. What we are requiring in this instance is in keeping with the directive and with the industrial policy objectives of the Government. The information which will be required will be onerous in relation to small, medium and large companies.
We must have regard also to the legislation in this area in respect of similar enterprises in other member states. The limits proposed by Deputy Mac Giolla are far below those that apply in most of the other member states and are very much below those required in the UK and Northern Ireland in particular. It is important to remember that in the context of our industrial policy and of what the IDA need to do to attract industry. Consequently, we have been very careful in our approach to this legislation. The requirements of this section are fair from the point of view of the information being required of all profit making limited companies. Charitable companies are to be the exception. The information we are requiring from our trading companies is sufficient for the purposes of the directive and is sufficient for what I would see as the need of traders and industry.
There is another dimension to this matter which needs attention and that is the objectives of industrial policy. Quite frankly, if we were to accede to the Deputy's amendments, in effect we would be placing Irish firms at a severe disadvantage. Far from creating jobs it could lead to a loss of jobs. If that is the Deputy's intention in moving the amendments, I decry it. I decry that type of approach which could do damage to the fabric of the industrial structure and which could do needless harm to the industrial objectives of the IDA and the Government. I will not stand up in this House and take any position which would endanger Irish industry or the industrial promotion policies of the Government and the IDA. I will not be put into a position of undoing the good work that has been done by various successive Governments in relation to the attraction of foreign industry to this country. It is hardly what we want at this juncture in our industrial development. Therefore, I cannot accede to the amendments. I am sorry the Deputy has moved them. I would suggest to him that the amendments, if accepted, would put Irish industry at a severe disadvantage and would damage the cause of Irish industrial policy as promoted by the IDA and the Government. I would temper what I have said because we have achieved a balance.
I will repeat, a Leas-Cheann Comhairle, all limited trading companies will have to submit documents to the Companies Registration Office which will give sufficient information for traders so that they will have a picture of the company they are dealing with. That is the central target of this directive and this legislation. It is difficult for creditors when they are suddenly faced with a loss because a company fails. We are trying to go down a road which will give sufficient information in respect of all limited trading companies to people who are trading with them, especially the ordinary, unsecured creditors who are at a disadvantage and who do not have security, who do not have a lien on property and who do not have mortgages or debentures. They are actually out there selling goods to other companies not knowing if they are going to be paid.
At this time they do not have access to the financial positions of these companies. What we are achieving in this Bill, in my considered opinion, is giving them a good picture of the companies they are dealing with. I will not introduce into this House an unnecessarily cumbersome system, especially in relation to small companies. In summary I want to say that what we are achieving in this Bill is a fair measure of revelation in regard to a company's financial position. We are at the same time ensuring, especially in the context of what our European partners are doing, that we are not putting creditors at a disadvantage. We are doing this within the confines and context of the directive which governs this Bill. What we have done, if we take the via media, is taken a reasonable role and we have achieved what I consider to be a balanced position and one which will not damage Irish industry as would these amendments if they were accepted.
The Minister of State has made a very strong case that the Bill is demanding full disclosure of information and that even with these exemptions there would still be ample information disclosed under this Bill for other traders. There are people other than traders who are interested in and have an interest in these companies. No one has a greater interest in the companies than the people employed in them. The Minister has not spoken of their need.
The exemption for small companies is that they do not have to publish profit and loss accounts. Publish does not mean just for all the public, it means that not one employee is entitled to know what the profit and loss account of the company is. That is what publishing means. In fact, the employees are not entitled to this information. Surely, the Minister is not saying, particularly at this time when there is all this great talk of participation and the need for participation of workers — the new Minister for Finance wants workers to be shareholders in industries — that they are not even entitled under this Bill to normal information of what is happening. If anything has hit home to people in the last four to six years it was the fact that when industry after industry closed down the first employees knew about it was when they went in one morning to be told that the company was closing down. There was no previous information of any kind given to them. In fact, the press knew before many of the employees did.
For that reason, workers in firms became more and more interested in what management were doing, whether the business was a success or failure and whether it was making a profit or a loss. As they saw other places closing down, they said to themselves, "How about us? How are we fixed?" Some of these employees would have been 30 to 40 years working in a business and have a great interest in it. They knew a lot about it and they knew all about what is being made and where it is being sold. They like to know whether it is going well or badly or whether a profit is being made They like to know whether the people at the top are creaming off from the company and putting it aside into houses or villas in Spain, as has been publicised in newspapers all over the country, and whether they are also creaming off their own deduction of PRSI and PAYE etc. These workers have no access to information. They just have to sit, have their deductions made and wait for the day when the gates are closed. They get nothing. Some people get redundancy of £2,000 or £3,000 which will have to last for the rest of their lives. They will get this lump sum after working for 20, 30 or 40 years in the company.
The Government say workers are entitled to information and that there is a need for more participation in the workforce and management. Surely that should be allowed in this Bill. Despite what the Minister says, small companies will have to publish a balance sheet which will not even give full disclosure of information. They will not have to publish a profit and loss account. There is no point in the Minister saying this Bill is doing something marvellous when it is not.
The Minister said amendments like this would endanger companies, would endanger people's jobs and would be damaging to Irish industry. These are all great sounding phrases. He did not give one instance of how this could be so, of what jobs would be endangered, how they would be endangered, what damage would be done to Irish industry or how it would be done. Under the present system jobs are being endangered daily. People are getting out of the country with case loads of loot and leaving their employees behind them with no information. I would like to ask the Minister how disclosure of information by what are called small and medium sized companies, but which I think are big substantial companies, would endanger jobs. The Minister said most EC countries would not have this information from the small companies referred to in the amendment. I do not know whether that is true. Our industry has a much lower level of employees, assets and turnover than the vast majority of companies in the more highly industrialised and developed companies in Europe. We need a different system to cover the type of company and the number of employees we have if it is to have any effect. How many companies will be covered for full disclosure of information in balance sheets, profit and loss accounts, and so on as outlined in this Bill?
If somebody publishes a balance sheet he states whether the company made a profit or a loss and what the amount of that profit or loss is. That figure is disclosed in the balance sheet. What it does not show is the breakdown of the profit or loss, the overheads, the administrative cost, the turnover or the trading cost. This is where Deputy Mac Giolla is in error. If we look at the 80 per cent of the companies which he says have fewer than 50 employees we will find that most of the owners of those companies live in small housing estates represented by Deputies like myself and Deputy Mac Giolla. They are not millionairies who own villas in Spain and who are flitting out of the country with suitcases full of money. They are people who are breaking their backs morning, noon and night trying to make a profit. In the early years they usually make losses and in the intervening years they occasionally make losses. They almost always have cash flow problems which would be added to by disclosure of information because it would be available to their opposition.
I have no objection to public limited companies or private limited companies on a certain level making available this information. On Deputy Mac Giolla's own admission 80 per cent of companies have fewer than 50 employees. He wants to bring in 80 per cent of companies by reducing from 250 to 25 the number of employees in a company before they must disclose this information. Like many of his colleagues in Eastern Europe, Deputy Mac Giolla does not like to hear anybody else putting forward a point of view. I was elected to this House and I intend to put forward that point of view no matter what harassment I get from Deputy Mac Giolla.
I do not hold any brief for people who are flitting the country with suitcases full of money. It is easy to recognise those people. It is like a comment from page 3 of the Star newspaper to come in here and titillate the records of the House by speculating or casting people of this kind as typical of the businessmen in this country. They are not. The typical profile of a businessman in this country is a man who is not earning a very large salary, who lives in a small housing estate and who breaks his back seven days a week trying to make ends meet. Even then he does not always succeed. This is the man who does not have redundancy or social welfare benefits. The picture which is being painted is very unfair. We have to be fair to everybody.
Employees should be given the maximum beneficial assistance. We are not giving the maximum beneficial assistance when we say we will go the whole hog and scrap all the rules. We get to the stage where the whole basis of employment is undermined and, therefore, employees themselves are undermined. In order to make a profit people must be businesslike. One of the essential ingredients of a business is not to disclose all of one's cards at the same time, particularly to one's opposite number. If we find, when this legislation is in operation, that some of these thresholds need to be reduced, or others need to be increased, it might be possible in hindsight to adjust the legislation. We do not want to introduce legislation which will further undermine employment potential. We have too much of that type legislation on the Statute Book already.
The Minister knows my attitude on this matter and no doubt Deputy Mac Giolla does too. My biggest regret is that these limits are not much bigger and for a very good reason. I understood that what we were trying to do was to attract business and companies, whether Irish or foreign. Unfortunately, the provisions as laid out in the Minister's Bill cannot be adjusted upwards at this time in that they are mandatory because of the EC directive. I do not know what Deputy Mac Giolla is talking about as it was people who follow his socialist philosophy and ideology who framed this legislation and directive. They have done nothing at all to protect what has been a very valuable asset. Anything that would hinder private company development would not be in the national interest.
Unfortunately these things are not negotiable now but they will be in the very near future. Under the directive these limits can be adjusted at least every five years. I would like the Minister to tell us when the next change is due. I would also like him to indicate if he and his Government would be supportive of the idea of adjusting them upwards to the limit allowed in any adjustment to the directive. When this directive was first published in 1978 the figures were somewhat lower. We have had one adjusting period already and we should now seek an early adjustment of the figures to take account of the economic and monetary trends in the Community, instead of going the way Deputy Mac Giolla would like where every newsagent and corner shop would have to go to considerable expense in preparing and filing accounts. I would like to see less disclosure of information being mandatory on businesses.
I do not accept Deputy Mac Giolla's argument so far as trade unions are concerned. It does not hold water. I know the trade unions have been pressing for greater transparency in company accounts, particularly so far as external companies are concerned. If trade unions require information that business people would like to regard as private and essential for the protection of their own assets — I am not talking about fixed assets — that is one thing, but information should not be available to the whole of industry and to the competitors of companies who are trying to maintain their market share and their solvency. It is not in their best interests to have that important information available to all and sundry because it would be used by the predators in industry who are always there looking for confidential information to help them to pinch the markets of companies set up in good faith and who worked hard during the years. Deputy Mac Giolla should admit it is not proper to seek such a concession. Disclosure of such information could be a disadvantage to existing business.
The trade unions can use the free collective bargaining system to seek what information they want from any individual company. That can be done in the bargaining process and that is what happens. I agree it is the right of employees to have certain information made available to them, but it is not a matter for company law to put it into statute to make such information available. It is a matter for the industrial relations process and this is conducted in the bargaining basis process on an individual company basis between the trade unions and the employers. Certainly it is not a matter for company law and it is not a matter that should be incorporated in the kind of law we are talking about here. I fail to see the rationale of Deputy Mac Giolla's argument.
Listening to the Deputy one would think that the vast majority of companies will have an easy way out of making any disclosures. That is not the case. Regrettably this legislation will mandate every company, large and small, to disclose certain information. The figures set out are very small in modern terms. We are talking about a balance sheet total of £1.25 million and a turnover of £2.5 million and in today's terms those figures are very small. To get an exemption it will be necessary to apply two of the three conditions and they will have to apply in a consecutive way over the trading activities for two years. Thus, it is obvious that few companies, if any, will be able to avail of exemption and there will be major disclosures for all small companies, which will be a pity. It will make life that much more difficult for companies so far as accounting practices are concerned and they will incur major expenditure in gearing their accounting arrangements to meet the demands of this legislation. It will have a considerable impact on business and on financial reporting, much more far-reaching than Deputy Mac Giolla suggests. He has been putting out this scare story for the past few months and it is time it was nailed. He is saying that companies are trying to avoid disclosure. With all respect to the Minister, it should be stated by him that all companies will have to prepare accounts.
I have stated that on a number of occasions.
It does not seem to have got through to Deputy Mac Giolla. I fail to understand why he does not accept that all companies will have to prepare a balance sheet and that there will be publication of information. Regrettably, much of that information will be sensitive and it will be of considerable importance to the predators and competitors. The result will be that business will have to train new staff. Nobody has yet evaluated what will be the impact on business.
Article 53 of the EC directive states that every five years the Council, acting on a proposal from the Commission, will examine and revise the amounts so far as the limits are concerned. I hope the Minister will make representations to the Commission to ensure that they do so. There is no doubt that the limits are minimal in today's world of business and we should take full advantage of them.
We need to have a balance between the interests of the users of the accounts and the need to avoid imposing burdens on small industry. This legislation will inflict a burden on small industry and will involve them in considerable extra expense. I hope the Minister will utilise his powers under this legislation to give them as much facility in delaying implementation of the legislation as is possible.
We must be careful we do not scare off small business people and entrepreneurs. Every day we hear Ministers asking small business people to set up their own enterprises and telling them they will have all kinds of assistance. If this legislation is implemented, certainly they will need assistance in one area, namely, in the costs of administration. This is often the one thing that deters people from risking their investment. I hope the paperwork will be limited further so far as this requirement is concerned.
On Second Stage I said that perhaps the time was now suitable and appropriate to recommend a further type of incorporation with regard to small business people that would satisfy Deputy Mitchell and myself. Regrettably it would not have the good wishes of Deputy Mac Giolla, but so be it. I am talking about the small family owned business or the enterprise employing a few people. The people involved in such enterprises do not want to get involved in the nitty-gritty of all this new administration and the costs attached to it. The Minister responded to my suggestion when he was replying to the debate and he said he was keeping the matter in mind and would give it further consideration. I am asking that a new form of incorporation be tried for small companies and businesses so that they will have the minimum of filing requirements. I was anxious that all that would be required was a solvency certificate signed by the auditor to be available each year rather than the detailed accounts that will be required from small companies under this legislation.
This was considered in Britain a few years ago but the idea died from lack of interest at that time. The position might be somewhat different there but not, perhaps in regard to the situation that exists in the registration office in the Department of Trade in Great Britain where, it is interesting to note, in 1984 49 per cent of the companies defaulted in filing their accounts, and 43 per cent of all companies in making their annual returns. I do not know what the situation is here but I sincerely hope it is better than that because, if not, all this talk is a waste of time. We can put all the legislation we like on the Statute Book but unless we have policing and suitable staff management and computerisation in the Companies Registration Office we are not going to achieve anything in so far as the implementation of that legislation is concerned.
On Second Stage I said that this arrangement would bring about a situation where very small companies would have simplified documentation leading to much better and more comprehensive registering and filing. The Minister was loth to take it on board. He did not want to make documentation attached to companies so simple and the classifications so wide that interlopers and cowboys would abuse the provisions. We do not want that. But I would have thought it was not beyond the powers of comprehension of the Minister to devise documentation, and restrictions on those entitled to it, which would allow that new form of incorporation and guarantee that the interlopers and cowboys would not be able to utilise this legislation.
The Minister was also anxious about the motivation or the status of the owner in any possible new types of incorporation. He said legislation would have to be drafted very carefully to avoid abuse. I agree with him. He seemed to be taking it on board. Then he dashed cold water on it and finally ended up saying he would keep it in mind for other days. I think I detected a note of support in the thrust of his remarks and that what he was saying was that he accepted the need for an amendment and tightening up of the existing legislation so far as small companies are concerned and that he would consider it further.
I am putting it to the Minister of State that now is the time to consider the formulation of new incorporation status for very small companies. I fail to see why a husband and wife company or a tiny company involving a family or just a few employees should be labelled as a small company in terms of this legislation and have to comply with the legislative processes with which, for example, the Smurfit organisation would have to comply. This is the legislation that is going to be applied to all and sundry. I do not see why we cannot have a different type of law to cater for what I would regard as a family concern — what could be loosely termed proprietary companies. We could have new law to deal with shareholder-managed or proprietary companies whereby they would have to file an annual declaration of solvency signed by an auditor. Apart from that I do not think any greater difficulty should be placed in their way.
With that in view, I would recommend that a new simplified form of incorporation should be established for shareholder-managed companies, and that existing private companies would be entitled and eligible to re-register under that new form of incorporation when making their annual return, and that private companies which failed to re-register — and this is an important aspect of my recommendation — would lose their limited liability status while they remained in default. That would be a big thing because limited liability status has served Irish business well since the 19th century. It was set up at that time to protect business and to allow business to develop, to differentiate between the owners of the company and those who controlled its activities, that is, the directors. That is the whole basis for limited liability in the first instance.
It is time to consider an alteration in that. Limited liability status is an essential ingredient of the whole business. I would like to see it applied to proprietary companies. I would also see it as possible that such companies would be able to give floating charges over their assets. We have to recognise that, unfortunately, nowadays limited liability is often undermined by insurance companies and banks seeking personal guarantees by directors. That strikes at the very heart of the old limited liability status that served this country so well. Banks and other institutions are seeking personal guarantees against directors and it minimises the whole limited liability status that we were used to. I ask the Minister again to reconsider it and to give an undertaking to have another look at a new form of incorporation for tiny companies that operate here.
We seem to have strayed off the amendment which was dealing with thresholds. However, I will take Deputy Flynn's contribution as being relevant to the section itself.
There are a number of points I want to make here. As far as I am concerned, we have achieved a balance in the information that would be required to be lodged in the Companies Registration Office by all limited companies under the Bill. Indeed, the small companies, as defined by the Bill, will have to submit a balance sheet and that balance sheet will give quite a clear picture of the financial health of the company and may be used by the employees and by other traders and creditors and so on to see the financial standing of the company. So I have to reject the thrust of Deputy Mac Giolla's arguments belittling the effects of this Bill. As Deputy Flynn rightly recognises, this Bill will have a serious impact on all companies in relation to the requirements to submit financial information to the Companies Registration Office.
Deputy Mac Giolla raised the question of information to employees. The balance sheet and the documents accompanying it will be of interest to the employees and will be available to them. The Deputy also referred to the Vredeling Directive. That is not under my aegis. It would be a matter for the Minister for Labour. It is social legislation so I would not wish to become involved in it. In relation to the matter of information, the ongoing industrial relations negotiations between trade unions and management should elicit the necessary information required by employees of the company as to the welfare of a company from the point of view of negotiations. The requirement on all companies especially on small companies, to submit this financial information would be sufficient to give a very good picture of their position.
In relation to thresholds, we have adopted what is necessary for the Irish economy in its present state of development where the object of industrial policy is to attract new industry. In this context it is important that we should not adopt thresholds which would put this country at a comparative disadvantage in relation to other countries when potential investors are looking at what is required to be submitted to the Companies Registration Office under this legislation. We would be very foolish to adopt thresholds that would put off potential investors. We do not wish to lose one job because of this directive. For that reason, like other countries, particularly the United Kingdom, the Netherlands, Luxembourg and Belgium, we have adopted the highest thresholds. That is a reasonable attitude to take from the point of view of encouraging investment and employment here. The effects of Deputy Mac Giolla's amendments would be to discourage investment and would jeopardise the potential for new job creation here.
If we were to adopt thresholds which were lower than those in other countries, existing competitors in other member states, and outside the EC, would have access to information which could seriously damage some of our companies in the market place. I will not be part to allowing that situation to arise for any ideological reasoning——
The Minister is laying it to him now.
I am trying to be reasonable. I will not take any action which will jeopardise employment or investment here. In this Bill I will not put Irish companies in a position where competitors in other countries would have an advantage over them. That would be to the detriment of those companies, and I will not allow it, but I will work within the directive as I am required to do. What has been suggested by Deputy Mac Giolla is nothing but an instrument of damage to the Irish economy, to industry and to employment. It is not acceptable to me or to my Government. I firmly believe that what we are doing is reasonable and will be of benefit to traders.
Deputy Flynn raised the question of the next review of the thresholds. The next review falls to be considered in 1988. It may have escaped Members' attention that the revision of the thresholds refers only to monetary, not employment, thresholds. I am pleased Deputy Flynn recognised that my Government will be negotiating this matter in 1988 and I can assure him that I will continue to protect the interests of Irish industry and commerce.
Now that I know the revision will take place in 1988, it makes a big difference because somebody other than the Minister of State will probably be negotiating——
That does not arise on the amendments.
It is very important.
The Deputy may rest easy, because I or my colleagues will be in full control of negotiations on behalf of Irish industry.
I believe the provisions in this Bill, as supported by Deputy Flynn's party, are reasonable and are necessary to protect Irish industry, commerce and employment while at the same time allowing sufficient information to be given to people who are trading here and, from a strategic, industrial and commercial point of view, we must not put this country and our economic units at a comparative disadvantage with our main competitors.
Is it appropriate to ask question on subsections (9), (11) and (12)?
We are dealing with the amendments.
There are a couple of points I want to make. First, I want to draw attention to Deputy Gay Mitchell's false accounting. He made the point that I said 80 per cent of companies would not be covered by the full disclosure directive. He said by my amendments I was removing 80 per cent of companies from the exemptions. That, of course, is not true. In my amendments we are reducing the thresholds, not deleting them entirely. Even with our thresholds of five employees, 250,000 turnover and £125,000 assets, between 25 and 30 per cent, or 75,000 companies, would be in that category.
I want to emphasise the position of the trade union movement. The Marxists in the Irish Congress of Trade Unionists, as Deputy Gay Mitchell would call them, or in the Irish Transport and General Workers' Union, take a much stronger position than we are taking. I will quote from the Irish Congress of Trade Unions' memorandum on the Companies (Amendment) Bill, 1985, issued in September 1985. On section 2 (2), scope of application to small and medium sized companies, they said:
Congress recommends that the exemptions for small and medium-sized companies be deleted from the Bill. All companies, regardless of size, should be required to publish full financial information. In the context of Ireland, where the vast majority of private companies are categorised as `small', it is essential to adapt the directive to reflect this.
That was the position of the ICTU.
The ITGWU in their memorandum to the Minister on the EC fourth directive and the reform of Irish company law on page 6 say: "For this reason, the ITGWU is strongly opposed to the inclusion in Irish law of the option which would permit small and medium-sized companies to prepare and publish abridged accounts only." They are totally against that option. That is the position of the largest trade union in this country and of the ICTU who reflect the opinion of the vast majority of the trade unions here. They want this section deleted entirely. They want no exemptions granted. In amendments which we have put forward we are reducing the thresholds but still allowing exemptions for what are regarded in Ireland as small companies. These thresholds would not cover every corner newsagent in the country, referred to by Deputy Flynn.
In view of the fact that Deputy Mitchell, Deputy Flynn and the Minister continued to emphasise that all companies would have to make major disclosures of information and that Deputy Mitchell made the point that they would still be disclosing their profit and loss. I must draw attention to the exclusion in section 10 (2) of the Bill on page 12 where it is provided that:
(2) A company treated as a small company pursuant to section 8 (1) of this Act may, in lieu of complying with the requirements in that behalf in section 7 of this Act, annex to the annual return in relation to the company referred to in that section a copy of the balance sheet of the company drawn up in accordance with subsection (1) of this section in respect of the period to which the return refers and, notwithstanding the said section 7, the company shall not be required to annex to the return of a copy of the profit and loss account of the company or the report of the directors accompanying the balance sheet of the company.
I want to place all that on the record because of Deputy Mitchell's reference to disclosure of the profit and loss account and the emphasis by Deputy Flynn and the Minister on the major disclosure of information which will be required from these companies. No major disclosure of information is required from them. That is what we are objecting to in these amendments. We believe that the record of companies here is so bad that this type of directive should apply to practically all of them.
Had the Government brought forward the new legislation on company law which we were told was ready three years ago by a previous Minister, Deputy Cluskey, who when leaving office had the heads ready, had these come forward, had company law been amended or had we even seen that it was being amended to prevent a whole series of anomalies in it, then possibly this would not be as bad as it is, because of a point I made at the outset, which the Minister did not refer to — the possibility under current company law of companies breaking themselves down to the level of thresholds which the Minister is talking about to ensure that they would not have to disclose information. That is a very serious anomaly in our company law which allows companies to evade a whole series of things, and it will allow them to drive a coach and four through the Minister's Bill here today. That is another reason why the thresholds must be lowered to the very minimum limit to ensure that this way out cannot be availed of.
I do not want to keep on repeating this, but again I must ask the Minister a question to which he did not reply. I asked him to refer to the possibility of companies under company law evading this legislation as they have evaded much other legislation by breaking themselves up into two, three or four different companies as they can do under present company law.
The other question I asked him to which he did not reply is whether he or his Department can give an estimate of the number of private limited companies who are now required to give full disclosure of information with no exemptions under this Bill.
Every company registered in the office now.
Every Government of the day must take into account the diverse opinions of interested groupings. The position about full disclosures suggested by Deputy Mac Giolla would be diametrically opposed by the CII, for instance, and by representatives of industry and commerce in general. In this Bill we are trying to enact what we are satisfied is reasonable, taking into account the present development of the Irish economy and the fact that we are a very open, competitive economy and are not disposed towards putting our economic units at any economic disadvantage either within or without our country or within or without the EC.
In relation to what Deputy Mac Giolla has stated on profits, it is correct that small companies do not have to publish their profit and loss accounts but, of course, an ongoing look at the balance sheet will reveal the accumulated profits or losses in any event, so there should be no major difficulty there and, on a continuing basis, the submission of the balance sheet will make the company quite transparent anyway. There is a fair argument in relation to competition that certain information should not be given in relation to small and medium companies which would be of benefit to large companies or their competitors, and we are trying to achieve that. We are giving sufficient detail in the requirements that must be deposited in the Companies Registration Office. The Deputy did not seem to wish to take on board the fact that all of the trading limited companies in this country will have to file these financial documents with the Companies Registration Office.
I do not wish to speculate on the division between small, medium and large. I have seen some figures and I can say that would fall into place quite quickly. A comprehensive amount of information will have to be given in respect of all companies to the Companies Registration Office under this Bill. I am satisfied that there are benefits in so doing, especially for traders, to ensure that companies are being run properly and are seen to be run properly. That is the objective of the directive. We are adhering to the directive but in so doing we are taking into account our present state of development.
Deputy Mac Giolla, are you pressing your amendment?
Yes.
Sir, before you put it let me say it is not normal for a member of the Opposition to come to the rescue of a Minister, but I think Deputy Mac Giolla is being unfair in pressing this matter. He refuses to accept that every company registered will have to disclose certain information. It will be considerably more than that disclosed at present. He is right in saying that a small company will not have to publish a profit and loss account or a directors' report but every company, especially small companies, will have to publish a balance sheet and give certain information in the notes to the account. The Minister should have pointed out the kind of information which will be available under the notes to the accounts. They will have to set down the accounting policies of the company and analyse the share capital. They will have to set out the provision which has been made by the company in regard to all questions of taxation and will have to give detailed information of the particulars of indebtedness. They will also have to give a breakdown of the translation of the foreign currencies which might be involved in the transactions of the business and give comparative figures. I regret that all this has to be done. The Minister should recognise that companies will now have to give an enormous amount of information which can be of great assistance to competitors and creditors in the industrial sense which will lead to a dislocation of business. I regret that it must be so.
In view of the tremendous amount of information which will be given, why not give the profit and loss account as well? Why bother with the exemption if they are giving such detailed information?
The directive allows the Minister to take the option but, regrettably, he is not taking the full option.
I am putting the question: "That the figure proposed to be deleted stand".
Vótáíl.
Will Deputies who are demanding a division please rise?
Deputies Tomás Mac Giolla and Proinsias De Rossa rose.
Amendment put and declared lost.
In accordance with Standing Orders the names of the Deputies dissenting will be recorded in the Journal of the Proceedings of the Dáil.
Amendments Nos. 9 to 13, inclusive, not moved.
Question proposed: "That section 8 stand part of the Bill".
I have a number of questions to put to the Minister on subsections (9), (11) and (12). Subsection (9) deals with the number of employees of companies and how that is established. That matter is also referred to in the Schedule. Will the Minister give a clear indication as to how the number of employees of a company seeking registration under the Bill is established? There is some confusion in the subsection and in the Schedule. Subsection (11) deals with the powers to be given to the Minister to substitute different amounts in so far as subsections (2) and (3) are concerned. It provides that the Minister can by order, without having to go before the House and introduce an amendment to the legislation, change the limitations at will. I should like to know if that is incorporated in the directive. If not, why did the Minister take the opportunity of incorporating in the Bill a provision that he would have to lay an order before the House if he wished to adjust downwards rather than doing it by the stroke of the pen?
In relation to the mechanism referred to in subsection (9) for determining the average number of employees of a company, I should like to tell the Deputy that the method is set out in paragraph 42 of the Schedule. The procedure involves adding up the numbers employed each week, or part of the week, and dividing them by 52 or a lesser figure if the financial year is less than a full year.
What about temporary employees?
They will be averaged out and the figure worked out mathematically:
Will the definition of a temporary employee, as understood in the Social Welfare (Consolidation) Act, apply in establishing the total number of employees under the Bill? A certain number of hours are laid out in statute as to what qualifies a person for temporary employment status.
It is an employee under a contract of service to the company. The definition of an employee is clearly laid out. The calculation is quite simple, one divides the number and the time they were with the company by the annual period.
I understand how simple the division is but I am trying to clear up another matter. If a company has 60 employees, which is just above the limit of 50 for getting exemption, and many of those employees are engaged in seasonal employment, doing fewer than the 15 hours per week which the Social Welfare Acts set down as the minimum requirement for temporary employment status, will they be accumulated and added in? They could put a company that would otherwise get small company status into the medium company status and that would mean a change in administration.
Temporary or seasonal employees would have to be included in the computation for calculating the number of employees of the company. Subsection (11) enables the Minister to alter the threshold levels specified in subsections (2) and (3). The directive provides for a review of the thresholds for balance sheet total and turnover and the rate of exchange used to translate into national currency the amount expressed in the directive in units of account. Indeed, there was one such review in October 1984. Directive 84/569 of the EC issued on 27 November 1984 provided for an increase in the balance sheet total and turnover amount of 55 per cent and 60 per cent respectively to allow for average EC inflation since 1978. The rate of exchange for the years was also changed in July 1978 and again on the date of the adoption of the directive, 25 July 1983. The changes overall allow Ireland to increase the figures in Irish currency by approximately 70 per cent to 75 per cent. Inflation in Ireland for the same period was 103 per cent. While the figure in respect of employment in the directive was not subject to a review at EC level at present it is considered prudent to include it in the powers being given to the Minister in case the position alters at some date. Earlier I said that the directive allows for a five years revision of the monetary figures. What we are doing in this section is allowing the Minister to have an enabling mechanism to review, if he wishes, at any date the numbers which will define a small or medium company. Of course, it will enable any Minister to have a look at it if he feels it is necessary.
The Deputy mentioned the question of an order. An order must be laid before the Houses of the Oireachtas. It cannot be made and not laid before the Houses.
I should like to thank the Minister for the information he has given. I understand that when the review comes along every five years, or by order of the Commission, the limitations can be increased to take note of inflation or whatever, but I am anxious to know if subsection (11) gives the Minister the power at any time to reduce the thresholds as indicated in the Bill between now and the next review date.
Yes, once we are working within the parameters of the directive we can amend the threshold. We are also taking into account the independent power of the Minister to change the employment threshold.
Will the limits as laid down in the legislation depend on the disposition of a Minister at any time? Is that latitude given to the Minister in the directive? What section of the directive states that the Minister can take that power? If that power is not in the directive, I do not see why the Minister is taking it.
The directive allows us to adopt either the maximum or have less than the maximum threshold levels. Today we are adopting the maximum threshold levels and if a Minister in the future wishes to reduce the threshold he may do so. Today we are adopting a threshold which is unlikely to be changed before the review at EC level.
I wish the Minister did not have that provision in the Bill.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.