Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Wednesday, 29 Aug 1934

Vol. 19 No. 4

Agricultural Co-operative Societies (Debentures) Bill, 1934—Committee Stage.

Section 1 agreed to.
(1) The following persons shall be authorised lenders for the purposes of this Act, that is to say:—
(a) any Minister, head of a Department of State;
(b) the Commissioners of Public Works in Ireland;
(c) the Agricultural Credit Corporation, Limited;
(d) the Industrial Credit Company, Limited;
(e) the Dairy Disposals Company, Limited;
(f) any corporate body lawfully carrying on banking business;
(g) any other corporate body approved of by the Minister either generally or in respect of a particular transaction.
(2) In this Act the expression "authorised lender" means a person who is by virtue of this section an authorised lender for the purposes of this Act.

I move amendment No. 1:—

Section 2, sub-section (1). After the word "body" in line 32 to insert the words "or person."

The Minister will remember that on the Second Reading of this Bill I raised the question of whether an individual should be eligible to obtain a debenture over co-operative societies. Under the Bill as proposed, such eligible lender must have the approval of the Minister, so that there is a very complete safeguard against any wrongdoing and, in the same way, any debenture in favour of an individual must be approved in the ordinary way under the rules by general meeting of the shareholders. The Minister said that there was an objection in principle to an individual obtaining a debenture, even under those safeguards. I have not got his exact words, but I think I am stating them correctly when I say that he said that such a practice would be against the whole principle of co-operation. It would be against the principle of co-operation to allow an individual to obtain control of a society, and he went on to say that there had been cases where guarantors had attempted to obtain control and the Government refused to grant a licence for the working of any creamery over which a guarantor obtains control.

It may be partly my fault that a misconception—and I suggest that there is a serious misconception—has arisen. In the first place, a guarantor is not the only form of creditor that a society might create. Anybody could come in—an individual if he so minded—and finance a society and in due course might say: "If I cannot get some better form of security I must put the society into liquidation," and if the society think fit, surely they should have the right to grant that individual a debenture, especially under the safeguards. Furthermore, the Minister, I think, misunderstood the position when he suggested that a debenture carried control. A debenture does not carry control, in the ordinary sense of the word at all. A debenture is a debt and as long as the interest is paid, a debenture holder, unless under the exceptional terms of his deed, has no power. It may be an irredeemable debenture and he certainly has no power at all if the interest is paid. If it is a redeemable debenture, he is just under contract like any other creditor, so that it is a complete misconception to say that a debenture holder has control.

Now, what is the position that may arise? An individual, either as a guarantor or simply as a direct lender, may find that a debenture is going to be created in front of him or he may become anxious about his security. He has always got his remedy at law. What is that remedy? That remedy is to put the society into liquidation. The shareholders might then say: "Sooner than have the society put into liquidation, we consider that it would be in our interest to sway this creditor to hold his hand." It is an ordinary business transaction—a free contract between the parties. Surely it is very unfair that any individual, whether a guarantor or simply a creditor, should be debarred from obtaining this form of security over a society? I have consulted a gentleman—the Minister knows who he is—who largely assisted the Minister in the preparation of this Bill and he sees no objection. I hope the Minister, on reconsideration, will not raise any objection either.

I must confess that I find it hard to put up very good arguments against Senator Sir John Keane on this point, but I cannot imagine that the amendment would ever become effective because both my predecessor, Mr. Hogan, and I have carried out an identical policy with regard to creamery development as far as the co-operative movement is concerned. We have tried to make all the creameries in the country co-operative and every attempt by a proprietor to get any foothold, or any hold whatever, on a co-operative society has been resisted as far as we could do so.

Senator Sir John Keane has, I think, explained my attitude very fairly. I did point out on the last occasion that if the Minister were to sanction an individual taking a debenture, it is a different matter from what is going on at present where an individual does, perhaps, become the creditor of a creamery with power to foreclose or to close down a creamery unless a debt is paid. If the Minister were to agree positively by sanctioning an individual as holder of a debenture, I feel that I would be departing somewhat, at any rate, from the spirit in which we have been administering the creamery business up to the present. If the amendment were accepted, I do feel that I would never be in a position in which I would think it advisable to sanction an individual as a debenture holder.

It is, I admit, very difficult to argue the case and to point out what is the difference between one of these corporate bodies we have mentioned here and an individual, but I feel that those corporate bodies have no interest whatever in lending money to a creamery for the purpose of getting hold of the creamery in order to work it. We know, however, from experience that individuals have come in and become creditors of creameries in the hope that they would some time be able to take over a creamery and work it as a proprietary concern. For the past six or seven years, the previous Minister and I always refused to issue a licence to such an individual to work a creamery. We have always given the reply that no licence will be given except to a co-operative body, and the only way out which an individual would have would be to get some co-operative society to take over the creamery, so that he might get what is due to him out of it. We would not, however, issue a licence to an individual. I do not want to resist the amendment further than that. I would like, however, if Senator Sir John Keane is particularly anxious to press this amendment, to assure him that so far as I am concerned, I will, as far as possible, see that it does not become effective in the administration of the Act. I may be wrong, of course; there may be cases I do not foresee in which an individual would be sanctioned as a debenture holder, but, at the moment I cannot see any case in which this amendment would become effective.

I take it that the corporate body in paragraph (g) would include any limited liability company——

As approved.

——and that a limited liability company is more likely to be the kind of organisation which could lend money for the ultimate purpose of taking over the business, so that everything depends I think, on the approval by the Minister, whether it is a corporate body or a person.

That is true.

I do not attach a very great deal of importance to the amendment but in view of what the Minister has said, I should like to point out to him that a refusal to accept this amendment will be simply restricting the avenues through which a co-operative creamery may borrow money. I have in mind a case in which a man was interested in the district from which he came, and I know as a fact that he gave financial accommodation to the co-operative creamery there which, since then, has become very successful indeed, on terms which no banker or corporate body working for profit would give. Considering that the amendment is restricted by the wording of the sub-section, by which a body or person must be approved by the Minister, and is further restricted by clause 13 of the Creamery Act, I cannot see any force whatever in refusing this. It cannot possibly do any harm because the Minister has discretion. Otherwise it may keep away from a society very valuable help at a critical time.

I think I must press the Committee to a vote on this amendment. I feel that the Minister was candid when he said it was a difficult thing on which to argue. Indeed, I felt sorry for him in trying to oppose such a reasonable amendment as this. After what the Minister said, he must realise that though, in the first place, he may have a personal objection to this provision and that he may never contemplate sanctioning an individual as a debenture holder, he may—I do not care to put it that way—not be always there. The Minister says he cannot foresee any occasion in which such a demand by an individual might be reasonable. I would point out to the Minister that the matter has become practically an issue under this Bill. Hitherto such societies were unable to raise debentures at all. And now that they are in a position to issue debentures, the case might be contemplated in which an individual lender might say to the society: "If you do so I will put the society into liquidation." There is nothing to stop him doing so. In such a case the Minister may decide that it would be better to allow the society to issue debentures to an individual than to break up the society. In their own interest the societies as autonomous bodies should have this power. If I were unreasonable I would object to giving the Minister power to sanction or to refuse sanction in the matter of a society which is an autonomous body. But we have moved a long way from that economic principle at present.

Amendment put and agreed to.
Section 2, as amended, agreed to.
Section 3 agreed to.

I move amendment No. 2:—

Section 4. To add at the end of the section a new sub-section as follows:—

(6) No issue of debentures shall be made by an agricultural co-operative society under this section unless and until a resolution approving the issue of such debentures shall have been passed by a special meeting of the shareholders of such society convened for the purpose of passing such resolution.

I am afraid I will have to trouble the House at some length with this amendment, because the matter was considered very carefully in the Dáil. The whole thing really centres on the amendment that was made in the Dáil where the Minister got the Dáil to cut out of the Bill, as originally drafted, a clause which is really the clause which I wish to have inserted. I would like the House to consider carefully Section 4, which is a terribly drastic section, not only for the societies that are being dealt with at present but for the fact that it may establish, and probably will establish, a precedent which if it were carried, dealing with the articles of association of other companies outside this Bill, would be a tremendous interference with the possibilities of carrying on companies in this country. Sub-section (1) of the section reads:—

(1) An agricultural co-operative society which is authorised by its rules to borrow money may at any time, with such consent of the Minister as is mentioned in this Act and whether the issue of debentures is or is not authorised, or is or is not forbidden by the rules of such society, issue debentures to any authorised lender for the purpose of securing to such lender the repayment, with or without interest, of any capital sum of money lent by such lender to such society before the issue of such debentures (whether before or after the passing of this Act) or intended to be so lent at or after such issue, or partly so lent and partly so intended to be lent.

That sub-section rides over articles of association of every type. There is no mention in it of the shareholders of the society having anything whatever to do with the issue of debentures by the societies. In the Bill as it originally came before the Dáil there were these words added in a little clause dealing with the Agricultural Credit Corporation: "If and when such charge can lawfully be made." The Minister got the Dáil to cut those words out. The Bill comes to this House without these words in it, and there is not in the Bill as it is before us anything to protect the shareholders of any of these associations except the consent of the Minister. There are various reasons why the Minister is rather a doubtful party in this case.

Dealing with the latter part of the Bill we must remember that this Corporation for whose benefit he has taken out that clause, is a Corporation in which the larger shareholders are, I believe, the Government themselves. The banks also have capital in that company. The strange thing is that we have a Government in power who are large shareholders in a Corporation in whose behalf they are now trying to strain the law so as to give them illegal leave to do certain things. I have read all through what the Minister said in the Dáil and I cannot find in any of his arguments any justification for the taking out that clause or any justification which would satisfy anyone that he was taking care of the rights of the shareholders. The Minister states quite plainly why he wants to get this power. It is because this Corporation found out themselves that if the Bill were left with that clause as it originally stood, they could not get this charge put on without the consent of the shareholders. The Minister cut out the clause to suit this particular Corporation who had lent money—a Corporation in which the Government hold a large amount of the capital. I do not think the House ought to let such a thing go through.

If we are to establish a principle that the directors can play ducks and drakes with the articles of association of a company, regardless of the interests of the shareholders, then we are establishing a principle which is far and away above and beyond this Bill. To talk more specifically, this Bill and what the Minister wants to get is not really demanded by the needs of the situation. If this company, having lent the money, want to get it back, the Government, as a matter of fact, ought to bring in a Private Bill and not do what they want to do in a Bill of this kind. If the Minister would bring in a Private Bill here the rights and the wrongs of the business could be looked into by the two Houses and the members of the Oireachtas could say what they thought fit about it. It should not be done in the way in which the Government is doing it in this Bill— asking the Oireachtas to over-ride the rights of the ordinary shareholders and establishing a principle that the shareholders should have no right to vote on such a matter. I have been making investigations about it and I find that none of the societies has put forward the demand that in effect is being made under this Bill.

As far as I can make out, none of the societies put forward a demand that it should be able to issue debentures without the consent of its shareholders. The banks outside this Corporation have lent a large amount of money to various societies, but I have not heard that any bank put forward the claim that it should be given the right to claim debentures or that the society should grant them, irrespective of the wishes of their ordinary shareholders. The Minister is doing this, as he admitted himself, simply to meet the pledge which his predecessor gave to that bank when it gave out the money. The money was given out in 1929—five years ago. They were given to believe that within seven years the Corporation would get their debts paid off. Five years of those seven have passed but we have no information that they have got any of this money. If the societies had met their obligations up to date, all but two-sevenths of the money should be repaid by now. If that were the case, I do not believe that the Minister would have brought in this Bill. Therefore, I take it for granted that the Corporation have not been able to secure the fulfilment of the terms of the agreement. They have not got back five-sevenths of their money.

What we should probably be asked, if the Bill came before us in the ordinary way, would be to sanction an arrangement whereby the shareholders would be burdened with the payment of the uncalled capital and the repayment of these loans to the Corporation, probably to the full amount. Yet, they are not to have a word to say to it. This is not a good time for agriculturists in the country. It is not a time when the Oireachtas or anybody else should be piling burdens on them. I wonder very much at the Minister not adopting some other course of settling this matter. It is very loyal on his part to carry out the arrangement made by his predecessors, but I doubt very much if he has weighed fully what it means for the Oireachtas to pass such a clause as Section 4 without some protection behind it for the ordinary shareholders. I have looked carefully through what the Minister told us the other day about it and I find that he did not tell us about the clause that had been deleted from the Bill, which made the Bill a reasonable one to bring into the Dáil. Without that clause, or a clause leaving the shareholders the right to say whether or not the societies should issue these debentures, I think the Bill is a very dangerous one indeed. I am, therefore, proposing as an amendment at the end of Section 4, the following:—

No issue of debentures shall be made by an agricultural co-operative society under this section unless and until a resolution approving the issue of such debentures shall have been passed by a special meeting of the shareholders of such society convened for the purpose of passing such resolution.

As far as I know, what the societies want is leave to issue debentures. They want the Oireachtas to give them leave by an Act to issue these debentures, but they never asked that their shareholders should not have a voice in it. Neither did the banks outside ever ask such a thing. There being no demand from anybody outside this Corporation, with which the Government is closely associated, I do not think that the Minister should ask the House to pass a section of this kind. I have really not much more to say in regard to the matter. We shall come later to the question of the Corporation itself and the understanding which Senator Comyn and Senator Johnson referred to in the last debate. The point of the whole matter is that if we do not insert an amendment such as I am suggesting, we are passing a Bill of an extremely dangerous kind, containing a principle which, if applied to other companies, would wreck a tremendous mass of business.

Senators might consider what would happen, say, in the case of insurance companies. I dare say a number of Senators hold shares in insurance companies. You will find insurance companies with shares on each of which only 5/- has been paid up, but these shares carry liabilities running practically to the whole of the debts of the insurance company. If you applied such a clause as we are debating here to such companies, you would create a state of affairs that would destroy the whole insurance business of the country. Yet, if you once pass this clause, what is there to prevent the Government's coming in here, saying that they are bound up with a certain insurance company in some way or other, and asking us that a clause such as this should be passed and applied to insurance companies? I have no brief for insurance companies, but I am a shareholder in an insurance company, and I can say that if such a clause were passed giving power to the company to issue debentures without my consent or the consent of other shareholders it would ruin us. For all we know, if we let this section through without giving the shareholders some means of protecting themselves, we may be passing a Bill which will ruin individual shareholders in these concerns amongst the agricultural community. I do not think we should do so. I have explained to the House why we should protect the ordinary shareholders of the societies and I think this amendment will do so.

I think that Senator Jameson is not correct in saying that the amendment which I moved in the Dáil had anything whatever to do with this clause. The amendment I moved in the Dáil, that the words "if and when such charge can lawfully be made" be deleted, had only to do with those particular societies that owed money to the Agricultural Credit Corporation. This particular clause has nothing to do with the Agricultural Credit Corporation. It has to do with debentures for any co-operative society. The Agricultural Credit Corporation does not propose to take debentures from the societies with which it is dealing, and Section 7, to which Senator Jameson refers, deals with the Agricultural Credit Corporation only. Therefore the words that were removed by the Dáil only dealt with the Agricultural Credit Corporation. This clause, dealing with the issue of debentures by agricultural co-operative societies, has nothing to do with the Agricultural Credit Corporation. If you like, these matters might have been dealt with in two Bills—one a Bill dealing with the ordinary powers we give to co-operative societies to issue debentures and a separate Bill dealing with the Agricultural Credit Corporation and their problem. The words that were removed by the Dáil, however, had nothing to do with the issue that we are discussing in this section at all. Even if they were left in without amendment they would in no way safeguard the position in the direction in which Senator Jameson wants to safeguard it. When we come to Section 7 we might deal with the reasons why these words were removed. There were very good reasons for removing them. I may have been wrong in my statement of the position on the Second Stage with regard to the safeguards that ordinary members have in a co-operative society. I think I stated here that the ordinary members would be acquainted of the fact, because the society could not issue debentures unless a general meeting were called.

Is that in the Bill?

No. I was wrong in that. The reason why the words "whether the issue of debentures is or is not authorised or is or is not forbidden by the rules of such society" are used is that when the rules were being framed, at any time up to this, no solicitor or barrister would have provided for power to the society to issue debentures. He would not have given these powers, because there was no legal way by which they could be used. Whether or not they have that power at present, this clause now gives them the power. The clause is necessary because, otherwise, they would have to go through the formality of changing their rules before they could do anything. These words are not so serious as they appear. A society may or may not give power to its committee to borrow. Some societies have given power to their committees to borrow; others have not. In the same way, some companies have given power to their boards of directors to borrow and some have not. If a society has not given power to its committee to borrow, then the committee will have to go to the society, irrespective of this Bill. On the other hand, if a society has given its committee power to borrow, then the committee can issue debentures without consulting the members.

I am quarrelling with the words of Section 4.

If Senator Jameson accepts what I say, that this has nothing to do with the Credit Corporation, I should prefer to deal with the other points when we come to Section 7. If he accepts what I say, then we can deal with this question of debentures solely. The position is that the amendment proposed by Senator Jameson would only be necessary where a society has given power to its committee to borrow. If it has not given that power, there will have to be a general meeting, in any event. I cannot say in what percentage of cases committees have power to borrow, but I know that there are such cases. If this Bill goes through, as drafted, these committees will be able to issue debentures without consulting their members. That may appear to be rather unfair to the members. On the other hand, some of the societies which have asked for this Bill are in rather a precarious position. So far as I have been advised as to the figures—I myself have not had time to go through them—the societies are quite solvent, if they get the chance to issue debentures. If they do not get that chance, they may go down. These is a danger that if these societies have to go through the formality of calling a meeting of members, they may find it rather difficult to get through. They will require some time to consult their members. They will have to explain the full position to them, and then they must go to their creditors and try to arrange with them about debentures. In some cases they will have to try to arrange with one creditor to take over the other debts and hold the debentures. These negotiations will take a long time, and I think that these societies should get a chance of doing that without coming before the public. It is a dangerous thing to force these societies to show their hands before the negotiations are finished. One creditor may jump in and say: "We are going to get our money now; we cannot allow the thing to go further." The publicity of the meeting may ruin some of these societies. If the Senator had suggested some sort of confirmation of the deal when it was through, his suggestion could be considered.

I do not know what the Minister means.

If the Senator had suggested that the society, having made arrangements with its creditors, should, before the deal was sanctioned, consult its members—that is, when everything was cut and dry for the purpose of confirmation, it could be considered.

Does not my amendment cover that? I have only provided that the members must meet before the issue is made.

I am not competent to judge but I was advised that the amendment would require some slight change to provide what I actually wanted.

Would the Minister like to leave the matter over for the present? We are, I think, largely on the same ground. I admit the necessity for the societies to get the money and the only point is to secure that the interests of the shareholders are properly safeguarded. The Minister seems to think that the arrangement of the matter would take some time but, if the shareholders are summoned before the issue, I shall be quite content.


Perhaps the Minister will bring up an amendment on the Report Stage.

I should like to draw attention to a point implied in what Senator Jameson has said, as it appears to me to be more important in a certain particular than the question raised by the Senator. The section reads "whether the issue of debentures is or is not authorised or is or is not forbidden by the rules of such society..." That means that there was agreement entered into between the members or shareholders and the society concerned. If we pass this section as it stands, or even if we amend it as proposed by Senator Jameson, we shall be coming between the society and its members in a way that is not desirable. The amendment would not meet what, I think, is the fault in the section. I think that the section should be amended in this way—that there should be authorisation by shareholders in the case of a society whose rules forbid the issue of debentures by the committee. That, I think, would meet what I regard as a point of criticism inasmuch as the section is interposing the law as between the shareholder and the society. The shareholder has, presumably, become a member of the society knowing that the committee could not enter into this compact with a money lender—that it was specifically forbidden to do so. I take the view that if the Legislature is coming in with a Bill to deal with such a case, at any rate where the rules forbid a society from issuing debentures, then in such a case the shareholders should first be consulted.

This amendment seems to me to be a most reasonable one. I would have thought that the Minister would have been able to offer stronger reasons than he has for refusing to accept it. With regard to these co-operative societies, I would like to know if the position is this: that two or three recalcitrant members are in a position to be able to hold up the issue of debentures? I would have thought that you would require a majority of the shareholders to do that. If we pass this Bill as it stands and as the Minister wants us to do, might not a majority of the shareholders who were opposed to the issuing of these debentures feel very strongly against us for enabling the committee to do what they did not want done with their property? That is the big point, I think, that Senators should consider. In my view the Minister's attitude is unreasonable.

As far as I can understand, the Minister has no objection to negotiations taking place for the issuing of debentures. His position is that he does not wish the shareholders of a society to be consulted on that matter until all the negotiations in connection with the issue have been completed. But when the negotiations are completed, is the Minister prepared to recommend that a society should then meet and have the power to veto any arrangements which had been made by its committee? I can quite understand the Minister's position when he says that it would be objectionable to have a general meeting of a society at the beginning of negotiations because of the fact that it might be in difficulties, and that if that were advertised it might lead to people coming in and result in putting the society into liquidation, while on the other hand if the debenture issue was arranged the society could be kept going. There is, however, one other point on which I am anxious to have information, because the Minister did not refer to it when he was speaking. The point is this: when the negotiations have been completed, privately if you like, and the result is submitted to the shareholders will they have the right and title to reject any arrangements that have been made by the Committee?

That, of course, would be the effect of Senator Jameson's amendment, if accepted.

I do not see the necessity for discussing the amendment further in view of the agreement that has been come to between the Minister and Senator Jameson to have its further consideration postponed for Report.

I cannot agree with the suggestion that has been made by Senator Counihan. This is a very complicated subject and one really which could be far better discussed by a Special Committee of the House. As Senators can only speak once on the next stage of the Bill, I think that those who are interested in the matter should take this opportunity of stating their views for the consideration of the Minister. I did not gather that Senator Jameson and the Minister were entirely agreed on this. Indeed there are certain aspects of the matter which have not been mentioned at all. The Minister said, in effect, that a society might be quite solvent and yet need power to issue debentures. I do not understand what that means. If a society is quite solvent it is quite solvent, and the power to issue debentures has nothing to do with it. A society might protect itself. It might have a potential solvency which the issue of debentures would safeguard, but only safeguard by placing one class of lender in preference over another. Apparently the Minister accepts the view that a society that at present has borrowing powers can quite safely be allowed to add to its borrowing powers and issue debentures. I do not think that is reasonable because a society will then have the power to give one class of creditors a preference over another. I do not think that is at all just to an ordinary trade creditor who may wake up one morning to find that debenture holders have been slipped in unknown to him. The only alternative for such a trade creditor would be to grin and bear it or put the society into liquidation. That, in my view, is a very serious objection to what is proposed here. I agree that that position does not apply only to what we are dealing with here. It applies, to a certain extent, in the case of all companies. There is the great danger in it that trade creditors may begin to issue writs and engage in a scramble to put the society into liquidation. That is a risk that we should be careful to guard against. I want to make this point: that to give the committee of the society simple borrowing powers such as they have at present, without any reference to the shareholders, is a totally different thing from giving a committee borrowing powers to create debentures, also without reference to the shareholders. The Minister should bear that in mind in any amendment that he may be prepared to accept on a later stage of the Bill.

What I am suggesting is that Senator Jameson should put down his amendment for Report. Possibly I may put down an alternative amendment myself, or if not I may be able to say on that stage of the Bill that this amendment is acceptable.

I am quite satisfied to have the amendment considered on Report.

Amendment postponed for Report Stage.

Question proposed: "That Section 4 stand part of the Bill."

On the section, I just want to refer to the suggestion that was thrown out by Senator Sir John Keane. I think it is one worthy of consideration by the Minister. The suggestion was that as this is a very complicated Bill it could be much better dealt with by a Special Committee of the House. It might be much more satisfactory to everyone concerned if it were discussed by a Special Committee rather than by a full House.

That is a matter for the Minister.

Question put and agreed to.
Sections 5 and 6 agreed to.
(1) Whenever the Minister is satisfied, on the application of the Agricultural Credit Corporation, Limited,—
(a) that money is owing to the said Corporation by a society registered under the Industrial and Provident Societies Act, 1893, in respect of a loan made by the said Corporation to such society before the passing of this Act ....

I move amendment No. 3:—

Section 7, sub-section (1). After the word "by" in line 12 to insert the words "one of the societies named in the Schedule to this Act, being".

If the amendment that the House was discussing a short time ago were accepted it would, of course, also apply to the Agricultural Credit Corporation. On the Report Stage of the Bill in the Dáil the Minister moved, and his amendment was agreed to, to delete from sub-section (1) of this section the words: "if and when such charge could lawfully be made". The Minister, in moving the amendment, said that the legal adviser to the Agricultural Credit Corporation considered that if these words were allowed to remain in the Bill there might be the possibility of the Corporation's right to loans granted by it being disputed. What that really meant was that the law agent to the Corporation was of opinion that they could not lawfully compel the companies concerned to issue these debentures. Apparently the Minister then agreed to take the words out at the wish of this Corporation. That is why I said that I thought all matters connected with this banking company, and its relations with societies to which it lent money, should not come up in a big public Bill like this, but should be dealt with in a Private Bill.

In taking out the words the Minister said he relied on the opinion of the Parliamentary draftsman, who told him he did not see why they should not be taken out. The Parliamentary draftsman is an excellent lawyer and an excellent draftsman, but he is not the law adviser of the Government. If asked the object of the Bill, to give the Corporation power to get a grip on the uncalled capital of the shareholders, he would agree to take the clause out, but that the Oireachtas or the Minister should act on the opinion of the draftsman is no reason for asking us to do such a thing. The Corporation should not be allowed to ride over everybody else in this matter. The main reason why I brought forward an amendment was in consequence of something Senator Johnson said when the Bill was last before the House. The Senator said that he believed the whole trouble in regard to the Corporation was the advances made to a small number of societies. I took the trouble to find out the reason given in the Dáil, and I believe the societies mentioned in my amendment are the principal societies to which the Corporation had lent money in consequence of representations made at the time, by the then Minister for Agriculture, that if they lent the money he would take care that a Bill would be passed to complete the charge. That Bill never came forward.

The Minister is now trying to fulfil the pledge that was given to the Corporation. If he had been debating the matter at that time, I do not think the Oireachtas would have agreed to back up the Minister's pledge. I wonder if any Minister has a right to say to such a society: "You lend the money and I will bring in a Bill which will take care that you get your money back." Really that is the state of affairs, as well as I can make out what was said. Undoubtedly the Corporation lent the money, and if Senators look at the amendment proposing to insert a schedule after Section 14, they will see that these creameries were started in parts of the country which were not accustomed to creamery work. Kildare and Leix are agricultural counties, but, as far as I know, not accustomed to creamery work. Edenderry is an agricultural country. Perhaps some Senator can tell me where Imokelly is. I understand it is in Wexford. The societies in these places are not in creamery districts, but I think this was an effort on the part of the Minister to establish creameries where they were not accustomed to such work. But we must consider the shareholders. We have not been told whether they are going to be allowed to have a say in the matter. If we pass the section without any alteration we are going to burden the ordinary shareholders of these five creameries—the number may be more—with an undoubted liability to pay the full amount due on the uncalled capital. I cannot say if many farmers or agriculturists would be able to submit to such a charge now. As the Corporation had five years to collect the debts, this is a wrong time to compel these societies to hand over to the Corporation the right to go to the ordinary shareholders for whatever balance remained due on the uncalled capital. That is the reason I am putting forward the amendment as I believe it would be far better to take such a provision out of the Bill.

The affairs of this Corporation in regard to these societies should be explained plainly and clearly, to let us see what amount of liability the Oireachtas would be willing to put on the ordinary shareholders of these five or six societies. The Minister will probably explain more about it. Outside of that I can see no reason for giving a preferential position to one amongst many banking corporations and companies. I know of no case in the banking community, except this Corporation, where any bank has put forward to the Minister a request of this nature, and I know of no case where creamery societies have said that they did not want to appeal to their shareholders. There must be something quite abnormal in this question, and I doubt very much if it is a position the Seanad should allow to be made part of a Bill of this nature.

With regard to the words to which Senator Jameson referred, which were deleted in the Dáil, I think it is fairly obvious that if they remained in the section would have no effect. What the Senator meant was that if this Bill is necessary the charge could not be lawfully made at that particular time. If it could, and if there was any doubt about it, this Bill would not be necessary at all. I do not know what reference the Senator has made about the draftsman. I did not say in the Dáil that I took the draftsman's advice, but I probably said that I consulted him on the effect of having these words removed, and that he agreed that the section was all right without them. That is the question I wished to consult him about. Senator Jameson says that I said the Corporation found out that they could not get this charge unless these words were removed. That is true. When the Bill was published the Corporation, like many others interested, got a copy of it and on going through it they objected to these words and asked me to have them removed. I am not giving the Credit Corporation any particular favours, and when Senator Jameson says that the Oireachtas probably would not have done this in 1929, I must point out that Senators would probably have done so then, I can only suggest that they did not use the microscope as well then as now, because in the Creamery Act, 1928, they did exactly what I am doing here. But, as the Creamery Act was brought in by another Government, I take it that the Seanad did not examine it as minutely as this Bill.

The Creamery Act of 1928 confirmed an agreement made between the Dairy Disposals Board and certain creameries, and confirmed agreements made between one society and another. That was done at the time on the promise of the Minister that the business would be legalised. The Minister carried out the promise between the creameries and the Dairy Disposals Board, which was a Government-owned institution, and brought his Bill to the Dáil and to the Seanad, and I do not think he had any great trouble in getting it through the Seanad at the time. When I come along to fulfil a further pledge of that Minister there is a microscope used on every line of my Bill.

Was that pledge that the Minister gave communicated to either House?

No. The pledge which he gave to the other societies or to the Dairy Disposals Board, which was formed in 1928, was not communicated to either House until the Bill came before them. The business had been done before that. The Minister had told these people in 1927 that he would make them right, and they went ahead on the promise of the Minister. The Minister came before the Dáil and the Seanad to make them right and I suggest that neither the Dáil nor the Seanad gave the Minister any great trouble about carrying out his promise. I suggest that the Seanad at the time did not examine his Bill in the same critical spirit that they have examined this Bill. I am only carrying out part of the pledge that the Minister gave at that time. The Minister gave a pledge to the Agricultural Credit Corporation at the time—that is admitted by my officials—that if they lent money to these particular creameries which were built in 1929, at the first available opportunity he would have that confirmed by a Bill. Since then the Agricultural Credit Corporation were waiting until some Bill was introduced amending the Agricultural Credit Corporation Act or some such Bill as this. This is the first opportunity that we had to confirm that legally.

I do not see why there should be any great anxiety about the shareholders or the members in this case. First of all, sub-section 1 (b) says "that when such loan was so made there was an arrangement or understanding between the said Corporation and such Society." I mean to bring in an amendment on the Report Stage to change the words "arrangement or understanding" to "agreement" to meet the objections made here on the Second Stage, so that it will read, if that is accepted, "that when such loan was so made there was an agreement between the said Corporation and such Society" about the loan. Secondly, paragraph (c) reads: "that when such loan was made the rules of such Society authorised the charging (whether generally or in favour of said Corporation) of the uncalled capital of such Society."

That was a very peculiar rule for any society to have—that they authorised the charging of the uncalled capital. As a matter of fact, no other society except those particular societies that owe money to the Agricultural Credit Corporation has that rule, and they put in that rule specially to meet the case. Correspondence can be produced by the Agricultural Credit Corporation to show that before issuing the loan at the time they compelled each society to change its rules to authorise the charging of the uncalled capital. Legally, however, the Agricultural Credit Corporation could not take such a charge until this Bill is passed. As far as the societies are concerned, they altered their rules specially to allow the Agricultural Credit Corporation to have a charge on the uncalled capital. They signed an agreement that as the capital was called in it could go to the Corporation in paying off the loan.

When the societies altered the rules had they not to call the shareholders together?

They had.

Then the shareholders must have known that at some future time a lien would be put on them?

There is no doubt about that. I want to go back to the position at the time. These societies were going to form creameries and the Agricultural Credit Corporation said: "If each shareholder puts down 2/6 per £1 share the Corporation will advance the remainder of the capital." That is, they were advancing 17/6 for every 2/6 put down by the members at the time. It was a very big advance for any lender to give; but it was on the understanding, of course, that it would be paid back at the rate of 2/6 per year over seven years. The societies, I need not say, were delighted to accept that arrangement. The shareholders or members could not possibly be consulted about this now. Could we really be so unjust to the Agricultural Credit Corporation as to say: "If these members object now to paying you, you cannot be paid?" Surely we could not give them that power? Surely they must be bound to pay whether they object or not? They agreed at that time.

What evidence have we that they did agree? I have not heard of any evidence, except some statement. We have not got before the House any evidence that the shareholders of any one of these societies gave their consent at a meeting.

As I say, on the Report Stage I propose to bring in an amendment to make it read "that when such loan was so made there was an agreement between the said Corporation and such society"; also, as it is fairly obvious that they did it for one purpose, that the rules must provide that they can charge the uncalled capital. These two points ought to be quite sufficient to show that they knew what they were doing at the time. Of course, they all knew what they were doing. The point is, however, that some of these societies have not paid over the capital as it was called in, because they got to know that the Agricultural Credit Corporation could not collect it legally. This is to give the Corporation power to enforce that and have the money collected. That is what the section is for. I think, in all justice, that the Corporation should be allowed to collect that money and that the members should not have any power whatever, by resolution or otherwise, to prevent the payment of that money. I think it would be very unjust if they got that power.

With regard to the amendment of Senator Jameson, instead of the Agricultural Credit Corporation applying to the Minister for Agriculture showing that these conditions have been fulfilled and asking for an order from the Minister that this money should be payable to them, Senator Jameson suggests a schedule. As far as I have been able to find out since I received these amendments, I think Senator Jameson has named the only societies concerned. It might not be altogether fair to the societies to have their names actually published in an Act. It might injure their credit somewhat. I have no very strong objection to it. The Agricultural Credit Corporation say, as far as they are concerned, that it does not matter to them. The societies, however, might object to having their names published. I think it would be better if Senator Jameson were satisfied with the amendment which I intend to bring in on the Report Stage to have the words "arrangement or understanding" changed to "agreement." That ought to make the thing fairly water-tight.

When the Bill came up for Second Reading, the only part to which I drew attention was Section 7 (1) (b). I suggested to the Minister that instead of the words "arrangement or understanding" he should put in the word "agreement." If the Minister on the Report Stage inserts the word "agreement" in paragraph (b), I think he will have answered every objection made by Senator Jameson. I think it is the better way of dealing with the points raised by Senator Jameson and that it does justice between the parties. Having regard to the fact that the Minister has promised on the Report Stage to insert the word "agreement," I think Senator Jameson ought not to press his amendment. Of course, I would point out to the Minister that if he does insert the word "agreement" it will be construed as a legal agreement. I would suggest to the House that what the Minister has now promised meets the situation.

The Minister is very much concerned about the Agricultural Credit Corporation being able to get back their money. He is not concerned about the unfortunate shareholders. This was done behind their backs; they did not commit themselves to this.

They did.

They did not. Without consulting them in the least, they may be called upon to pay up the money. The Minister knows that well. He shows his usual consideration for the ordinary farmer. He overlooks him in his anxiety to get back the money for the Agricultural Credit Corporation.

It is merely observing the sanctity of contracts.

The shareholders are called together under the rules before an agreement is made.

In view of what the Minister has said about those agreements come to, I think we have nothing to do but to honour the pledge given by the Minister. But, as Senator Sir John Keane has pointed out, at this stage it would be rather a hardship on some of the other creditors. It would seem to some of us to be doing what, in the ordinary way, would be regarded as giving a preference to the Agricultural Credit Corporation, but, all the same, I think we have nothing to do now but to honour the pledge given by the Minister. I suggest to the Minister that instead of having the Bill general in its application it should be confined to the societies that made those agreements with the Agricultural Credit Corporation.


That it should be confined to the four specified creameries!

That is the effect of my amendment; that it is not going to be general but only in order to cover certain specified societies of a particular form. There is this further point. As Senator Wilson has stated, we have no evidence of the shareholders having already given their agreement to the arrangements. That, I think, is a vital point.

It is a vital point.

I expect the Minister will tell us, on Report Stage, the facts in connection with these societies, and that the necessary meetings were held and that the shareholders were consulted when these loans were made and that they agreed to the conditions under which they were made. I ask the Committee to confine the Bill to certain societies specified. It would be a very bad Bill if it worked so that it could be applied to any or to an unlimited number of societies. But if it is made certain that it is to be applied only to a specified lot of societies I think the Minister has a right to get it after he has met these points on the Report Stage.

I do not agree that this Bill should be limited in its application to any particular number of societies such as have been mentioned. There must be a great number of co-operative societies in the country that would be relieved by such a Bill as this. I know some myself. I think the whole intention of the Bill would be destroyed if its operation was limited to a few co-operative societies. I have no great doubts about the shareholders being consulted as to the issuing of debentures such as these. I cannot believe there will be any difficulty about the matter. As far as I know, the shareholders can be easily consulted and debentures can be issued with their approval. I think it is a perfectly fair thing that the great number of shareholders in the various societies should be relieved by such a measure as this by getting permission to issue debentures under agreement with their shareholders and also under agreement with the lenders so that they can pay off those old debts if possible.

So long as the legislature is not giving a fraudulent preference to certain classes of shareholders.

I very much hope the House will insist upon limiting the Bill to those societies already named. There has already been publicity given in connection with the matter and everyone knows which are the societies intended. I gather from the Minister that these societies cover the ground. I am puzzled in regard to some of the proposals in the Bill and that is the reason why I suggested that the whole thing should be investigated by a committee. I know of cases where money has been advanced to societies, not by the Agricultural Credit Corporation, but by societies working on the same principle. Creameries were built and were financed from funds by the Government and there was some understanding that the uncalled capital should be available. In the case of one kind of uncalled capital where it is not specially earmarked for the liquidation of the debt, whether the lender is the Government or otherwise, they would have to take their chance. Another point is: is this claim on uncalled capital confined to capital created when the loan was made? In the case of the older societies there is an older capital created years ago. Is that earlier capital capital under this clause? I think it is most desirable to limit it. We have it now that in the case of the four societies named earlier, capital does not exist. I hope the Minister will consider that and that it will not only be by agreement but by agreement embodied in the society's rules. I do not challenge Senator Comyn upon the meaning of the word agreement or what agreement there must be. So far as we can see, any agreement that satisfies the Minister will be good. Who will challenge such an agreement when the whole interpretation of it is in the hands of the Minister?

Would the Minister clear this up: whether the societies mentioned in the proposed schedule were, in fact, started in the form and understanding that they were to be capitalised, as to a great part of their capital, by the Agricultural Credit Corporation? The whole proceedings were on the understanding that the capital would be provided by that Corporation. If any of these societies are to look for new money the shareholders were taken into consultation and the whole proceedings were conducted when the society was formed on the understanding that that would be the method of financing.

They were all new societies in that form. I would like to make one point. I do not know whether the four societies are the only ones to be considered. I think so, but I will find out.


All these points can be raised on Report.

Amendment, by leave, withdrawn.
Section 7 agreed to.
(2) Whenever any part of the called-up capital of a society registered under the Industrial and Provident Societies Act, 1893, is applied in contravention of this section, every member of the committee of such society shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding twenty-five pounds.

I move amendment No. 4:—

Section 8, sub-section (2). To delete the sub-section.

This is an amendment to delete sub-section (2). I raised the point on the Second Reading that it provided for punishment of every member of the committee of a society which contravened the section. I pointed out the possibility that a minority of the committee might be overborne by the majority, but that notwithstanding the minority protest the minority would also be liable to the £25 penalty. I thought that was unjust to the minority. I should like if the Minister could agree to make a proviso somewhat to this effect; that where a member of such committee proves, from the records of the minutes of the meetings of the committee at which the decision was taken, that he had opposed the resolution by his vote, such a penalty would not apply to such a person. That would meet my point in the matter, if it could be done.

But it would not meet the justice of the case, because, if a man is a member of a society, and if a resolution is passed, even by a majority of that society, to apply money wrongly, surely his duty is to call attention to the fact that money is wrongly applied. If he stands by, aiding and abetting it by his silence, I should say that he ought to be subjected to the penalty as well as the persons who actively do what is wrong.

The Senator exactly confirms my case. If the person has actively opposed the majority, he would be punished equally with the offending majority.

But it is not sufficient merely to actively oppose it in the council chamber if it is wrong; he should take action on the spot to prevent its being done.


What kind of action do you suggest, Senator?

There are various kinds of action that could be taken.

With regard to Senator Johnson's amendment, I think that something like that might be provided, but we would have to cover those indirectly responsible also; that is, the man who does not attend the meetings and also the committee that allows the manager to do what is wrong without objecting. I might almost say that I do not mind very much whether Senator Johnson's amendment is carried or not, but I am afraid that the penalties on the members of the committee would be even more drastic if that sub-section were removed, because with the sub-section in the maximum penalty would appear to be £25, whereas without it they could be taken up for the misappropriation of funds which might render them liable for any amount.

But the minority would be protected then. Perhaps that might be left over for the Report Stage.

Amendment postponed till Report Stage.

Section 8 agreed to.
Sections 9 and 10 agreed to.
Notwithstanding anything contained in any other enactment, the Registrar of Industrial and Provident Societies shall not register any alteration of the rules of an agricultural co-operative society which, in his opinion, effects any change of or variation in the objects of such society, unless such alteration has been approved of in writing by the Minister.

I move amendment No. 5:—

Section 11. To delete the section.

The Minister made a statement on the last occasion to the effect that this section, while it gives the Minister certain powers, was really provisional: that the Minister was to be supplanted by the Registrar. In those circumstances, I am prepared to withdraw this amendment with that understanding.

Amendment, by leave, withdrawn.
Sections 11, 12 and 13 agreed to.
Amendment No. 6 not moved.
Section 14 agreed to.
Bill reported with amendment; Report Stage ordered for Wednesday, 5th September, 1934.