Seanad Éireann díospóireacht -
Wednesday, 4 Jun 1958

Vol. 49 No. 6

Industrial Development (Encouragement of External Investment) Bill, 1957—Committee Stage.

Question proposed: "That Section 1 stand part of the Bill."

Professor Hayes

It seems to me the section, with its reference to the 1932 and 1934 Acts, discloses a certain lack of clarity. The Bill as originally brought in was a Bill to amend the Control of Manufactures Acts of 1932 and 1934. After it had a Second Reading, a great many amendments were brought into it, and the Title was amended, but this section to a large extent refers, not to industrial development or the encouragement of external investment, but to the Control of Manufactures Acts, 1932 and 1934.

I should like to repeat what I said on the Second Stage. If we accept the Minister's view that there is a real need for foreign investment in this country, if we have a genuine desire to encourage that investment, we should say what we have to say about it in some different way than that in which we are saying it here. We should make it clear in one document. In practice, a person who may be desirous of investing money in this country must read the 1932 and 1934 Acts, discover what "qualified persons" means in one Act, discover it means something different in the other Act, and finally discover it means something different again in this Bill, when it becomes an Act. This type of legislation by reference is extremely ill-advised and the procedure adopted in this Bill indicates a lack of clear thinking, a lack of really knowing where we want to go. It is most inadvisable in this instance, where it would appear by the Title of the Bill that we are aiming at encouraging foreign investment, that this kind of section should remain in the Bill and that we should legislate in this way— by reference—rather than that we should begin in 1958 and put what we have to say altogether into one Bill.

I think the section is very cumbersome, very objectionable and will tend to make difficult the achievement of the purposes which it is alleged the Bill seeks to gain.

Minister for Industry and Commerce (Mr. S. Lemass)

I do not think there is very much in that observation. As far as a foreign company is concerned, a company which at some time in the future wants to engage in manufacturing operations here, it can get all the information it wants in this Bill. The idea that it would be better to combine all the previous legislation in one Bill was considered and was rejected. It would be a most cumbersome measure, and I think it is a far better and simpler procedure to set out in this Bill the conditions which will apply in future in respect of external companies.

Professor Hayes

If the Minister tells me there is something simple about this, he must be very close to a simpleton himself and must think I am a simpleton, too. Nobody could agree it is simple. This section shows there are two things in the Bill. The first is the continuance of the Control of Manufactures Act, particularly in reference to certain Schedules which I will not be allowed to discuss now, and the second is the encouragement of external investment for certain purposes. If it was necessary, these two things could be divided. We could give continued protection to people who invested their money under certain conditions, people to whom the Minister feels and we all feel we have particular obligations, and then we could deal with the encouragement of foreign investment.

What is happening in this section? The two things are being mixed up— the control of manufactures, the preventing of foreigners coming in on the one hand, and inducement to foreigners to come in, on the other. If the Minister wants to argue that it is simple to put these two things together in one Bill, then words have no meaning.

Mr. S. Lemass

The Control of Manufactures Act was not for the purpose of preventing foreigners coming in. It was for the purpose of regulating their entry in relation to national policy. I do not see there is any point whatever in making this Bill, which the Senator thinks is complicated, still more complicated by cluttering it up with a lot of provisions which have very little reference to future conditions.

Professor Hayes

If they have no relation to future conditions they should be taken out altogether. I do not want to labour this point, but I have some experience of reading and understanding Bills. I have been compelled by the nature of my work to understand certain Bills, but this Bill is most difficult to understand. There is no doubt about that. The Minister is not in earnest when he says it is simple. I know it is not simple and I find difficulty in understanding it. I am not unintelligent about understanding legislation and I have a good deal of experience. There is no use in telling me that it is simple.

Not only is it difficult to understand, but it is repellent to the person who wants to invest money, the foreigner who is anxious to come in here. Legal people will find it very difficult to understand and, in fact, some legal people of repute find it difficult to understand in its present form. The Minister says he is doing this for the purpose of simplicity. The reason is that he changed his mind while the Bill was before the Dáil. Section 1 remains because it was meant to accomplish one set of things, and the Minister now wants another.

Mr. Baxter

In relation to a measure like this, on the principles of which both sides of the House agree, it ought to be possible to get the type of Bill that will enable the Minister to get the job done. I am quite satisfied that, when Senator Hayes says this Bill is difficult to understand, as many more people will take his word as will take any Minister's word, because he is as competent to understand the Bill as any executive in this country. He is not saying this merely for the purpose of making an argument and contesting the issue with the Minister.

Suppose you have a foreigner coming in here, not from America or Britain but from the Continent. He comes over here and asks what is the legal position before he invests his money. He cannot discover it for himself and he must go to a lawyer. He will get a lawyer to interpret the law, but no foreigner is going to put capital into an industry here, unless he understands the law and what is its basis. His lawyer will produce the legislative enactments which give the particular set-up. My opinion is, and I have some small experience in the matter, of which the Minister has some remote knowledge, too, that it is terribly hard to interpret our legislation to foreigners so that they will understand it and that it is terribly easy to scare them away, if they find something which is not perfectly clear to them. By devious processes, the Minister proposes to legislate to try to bring in capital here. I agree with Senator Hayes and I am quite satisfied that a simpler method ought to be found by the Minister, if he really wants to make his policy effective, and we all want that done.

I had contact with Dutch people and there is great difficulty in making them understand what is the legal set-up with regard to the introduction of capital to this country. Nobody questions the Minister's sincerity in trying to accomplish his policy, but his methods are not always the wisest, and the Minister would perhaps be the first to admit that he is very headstrong and difficult to convince. If he gets a notion that a thing is right, then he considers it is right, whether it is right or wrong. That, in my opinion, is a mistake. If it is not too late, the Minister should study the matter further.

Mr. S. Lemass

Whether this Bill is clear, or can be made clearer, is a matter which we can consider as we go through the sections. My point is that Senator Hayes's suggestion to have one Bill not merely incorporating the provisions of this Bill but continuing the provisions of the 1932 and 1934 Acts would not make it simpler. Legislation for the protection of companies in existence prior to 1932 and prior to 1934 can be of no interest to any new company starting up. It is necessary to keep those provisions but why should we double or treble this Bill merely to re-enact those provisions?

So far as new companies proposing to commence new operations here are concerned, they can, in this one Bill, get all the information they require. They do not need to go back to the earlier Acts. The only provisions of them which are continued are those relating to the protection of companies in existence prior to those enactments and the definition of what constitutes a completely Irish company. In the case of a foreign company, all the law they need to know is contained in this Bill.

Professor Hayes

Quite unwittingly, I am sure, the Minister has not said what I meant. I did not suggest that we should mix the 1932 and the 1934 Acts and the provisions for encouraging foreign investment. I said quite a different thing. The fault I find with this Bill is that it mixes the 1932 and 1934 Acts with the encouragement of foreign investment. The Minister stated that the situation is now different, not only different but indeed desperate from the point of view of employment, compared with 1932. The Minister wants to change his direction from that which he took in 1932 and 1934. We may all feel certain obligations towards those people who did certain things in the interval. He should put their position into one Bill, amend the 1932 and 1934 Acts, and put the new requirements into another Bill.

Let me quote the last sub-section of this section, which the Minister said is simple. It says:—

"This Act shall be construed as one with the Control of Manufactures Acts, 1932 and 1934."

Sub-section (3) states:—

"References in this Act to any enactment shall be construed as references to that enactment as amended by any subsequent enactment, including this Act."

What human being who is a native speaker of English could say that is simple? It is not.

Question put and agreed to.

Section 2 agreed to.

SECTION 3.

Question proposed: "That Section 3 stand part of the Bill."

Mr. O'Quigley

The Minister is empowered by this section by Order to except a particular commodity that is not being manufactured in the State, or manufactured to a substantial extent. Then sub-section (2) goes on to provide that where such an Order has been made, in any other section of the Act the section shall be construed as excluding the commodity to which the Order made under sub-section (1) relates. I do not quite follow what that means. I think it probably means that a person trying to construe the remaining sections of the Act, when particular Orders have been made under sub-section (1), would want to know what commodities had already been made the subject of an Order under sub-section (1). If that be the case, how are people to become aware of what Orders have been made under sub-section (1)? It seems to me to be extremely difficult to understand what the meaning of sub-section (2) is, but if I am right in my interpretation of it, there would want to be some machinery of procedure adopted to enable people to know what Orders had been made.

Mr. S. Lemass

If an Order should be made under sub-section (3) excluding any commodity, that commodity is excluded from the Act completely, and any firm who wants to engage in the production of that commodity is free to do so without any reference to this legislation. The wording of sub-section (2) is only a drafting device to simplify the wording of subsequent sections by making it clear that where the term "commodity" is used in any subsequent section, it is not meant to include any commodities excluded by Ministerial Order.

Mr. O'Quigley

Would these Orders be published in some way?

Mr. S. Lemass

Yes, they would be laid on the Table of the House.

Mr. O'Quigley

Will they come before the people interested?

Mr. S. Lemass

I already explained that I do not attach a great deal of importance to the section. I approached the preparation of this Bill with the idea that it might be possible to schedule in the Bill commodities to which the legislation would not apply, but I found that drafting difficulties were such that that approach was impossible. This section was the nearest I could go to meeting that idea. Drafting difficulties were anticipated, that is, to define the excluded commodities in such a precise form that they would cover the goods which it was intended to cover and no other goods. I should not like to suggest that this is an important section. I do not think it will prove to be so. I nevertheless felt it was desirable to include it in the Bill because it gave a method of dealing with a particular problem which would certainly be the best method if it could be applied, and I should like to have that means available, even though I recognise it will be only in very exceptional circumstances that it can be used.

Mr. O'Quigley

There is another point arising on the section. I do not know what range of commodities the section might apply to, but, in referring back to the 1934 Act, we find in Section 17 that where the Government were satisfied that a particular commodity was not being manufactured here to any substantial extent—that seems to be the same kind of situation that is envisaged here—the Government could then make an Order declaring such a commodity to be a reserved commodity. Furthermore, no Order under the section could become valid until it was approved by both Houses of the Oireachtas. What I am wondering is whether this type of commodity which is going to be an excepted commodity would be of the same order of importance.

Mr. S. Lemass

The effect of the reserved commodity Order was to confer a very definite advantage upon a particular firm. By that device, a firm got a monopoly situation, or at any rate a situation tantamount to a monopoly because all companies except those that were undertaking manufacturing in precisely the same area or under the same disadvantages were excluded. In this case, the aim is the reverse. It is to open the field to everybody to engage in a particular manufacture and, therefore, there is no question of anybody getting a precise advantage such as they would get under that other section of the Control of Manufactures Act.

Question put and agreed to.

SECTION 4.

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

Dr. Sheehy Skeffington

I should like to ask the Minister two questions. Sub-section (2) of Section 4 reads:—

"For the purposes of this Act, a company shall be an excluded company if and so long as it complies with the following conditions——"

The third condition, paragraph (c), of this sub-section, reads:—

"That its Memorandum of Association and every prospectus issued by it after the date of the passing of this Act provide that the carrying on of a manufacturing process in relation to a commodity intended for export is a principal object,"

What I want to ask the Minister is what exactly will the interpretation of "a principal object" be. May it be one of a half dozen "objects"? Will exports have to represent 30 per cent. or 40 per cent. of production? You could have as one of your principal objects the export of a product whose export represented 25 per cent. of production, which makes it a principal object, not the principal object. How is it intended that that should be interpreted?

The second question I should like to ask is in relation to paragraph (d), the fourth condition in sub-section (2) which reads:—

"that, of each class of shares carrying voting rights issued by it, not less than 50 per cent. have been bona fide issued for public subscription in the State and have been made available primarily to Irish citizens or Irish companies which are managed and controlled in the State,”

What is the official interpretation of that? This does not lay it down that at least 50 per cent. of the shares shall be held by Irish citizens but that they shall be made available primarily to them. I am afraid I do not follow what is intended there. Do I take it that if it can be shown that these shares were originally made available to Irish citizens who did not take them up, then the company can have its shares held by non-Irish citizens and still fulfil the requirements of this paragraph? All this paragraph asks is that the shares shall be originally, not "sold to" but "made available to" and not made available "exclusively" but "primarily" to Irish citizens.

Mr. S. Lemass

The Senator no doubt knows that the present law says that a company which has more than half its capital held by Irish citizens is entitled to manufacture freely any commodity it likes. We are going further than that. We are saying to a company that is financed by means of a public issue of shares that it will satisfy the requirements, if a reasonable and bona fide opportunity of investing in its shares is offered to Irish citizens, whether or not that offer is taken up at all.

There is no question of any Government supervision of the application of this section. Under this section the police are the Stock Exchange Committees. A company which considers that it has conformed with those requirements goes to a Stock Exchange Committee to get a quotation for its shares. If the Stock Exchange Committee accept that they have bona fide carried out the obligations, they give them a quotation. Once they have done that, there is no going back. Even if the quotation given by the Stock Exchange is given in error, it is still irrevocable. The assumption is that the type of people who will be engaged in manufacturing and seeking to finance their operations by means of a public issue can be trusted to put the facts plainly to the public and that in any event the Stock Exchange Committee will make sure they do. As far as paragraph (d) is concerned, the intention is that there shall be a bona fide offer of shares and that if Irish people do in fact subscribe for them, they will get the shares in priority. For example, if the issue should be over-subscribed, in allocating the shares Irish citizens will get preference.

Professor Hayes

In regard to the provision in paragraph (c) of sub-section (2) concerning commodities intended for export, is it sufficient to put in the articles of association that they intend to make articles for export?

Mr. S. Lemass

In so far as the objects of the company have to be published when there is a prospectus associated with an issue of shares, it is a condition that a principal object of the company shall be stated to be manufacture for export and that the company must so declare to those whom they are inviting to subscribe capital.

Professor Hayes

Is it possible to declare that and not to carry that out?

Mr. S. Lemass

Certainly. Indeed the company might find itself unable to do so.

Mr. Donegan

Surely this is merely lip-service? Companies put into their articles of association everything possible they might engage in.

Mr. S. Lemass

The term "principal object" has a special meaning.

Mr. Donegan

In that sense, all they have to say is that their principal objects are such and such, and include everything from shipbuilding to flour milling.

Mr. McGuire

I am inclined to agree with the point raised by Senator Donegan. The fault with the whole legislation is that it is preventing when it should be opening up. If this does not open up the way, it is merely giving lip-service to the principal object which is to attract people to come here and give employment.

Mr. S. Lemass

The aim is to liberalise this legislation we have had, as far as it is possible to do so, for two precise purposes. One is to facilitate manufacture for export. The other is to facilitate the manufacture of commodities not made here at the moment—some development which will add to the industrial organisation of the State. Quite definitely, it is not the intention to facilitate the incursion of foreign companies into industries which are already fully established here, when no export is intended.

A company that wants to avail of this section has to declare its intention to engage in export and to enter into that contract with those whom they ask to subscribe the capital to them by declaring that to be their intention. It is appreciated that circumstances might arise which might prevent them from doing so and that plans they made to that end might go wrong, but they would still be in existence and could carry on confined to the home market. The idea of putting it in there is to make it clear that the facility given in this section is primarily intended for companies that have export as their aim.

Mr. Baxter

Would the Minister, with all his experience behind him, say that he can visualise the establishment of an industry here that could make that declaration to produce goods for export and that would be competent to do so from the beginning? I cannot see how we can expect a new industry, having to train operatives and having to produce below the level of efficiency of old established businesses, to do so. I cannot see how such an industry could hope to compete in foreign markets, except with the aid of some policy of subsidisation, but that is not the declared policy of the Minister. It is inevitable that these people must get a share of the home market at the beginning. They must have that at the same time as they are attempting to capture part of the foreign market.

I should like to hear from the Minister what are his hopes and prospects in that regard. It is a delusion, an error of judgment on our part and wrong from the national point of view, to be making declarations about our plans for export, only to find out later, through experience, that we were not justified in being so optimistic. It is better to face the truth from the beginning.

Mr. S. Lemass

The company does not have to do this from the beginning. One of the considerations to be kept in mind is that very few companies do, in fact, in any country attempt a public issue of shares until they have already established their capacity to make profits. There has not been a company formed in this country for years in the way contemplated here by an initial issue of shares to raise capital. There have been shares issues undertaken by companies, but they were established companies already engaged in business and which could produce a number of balance sheets to show to prospective investors that the investment could be a profitable one. That is the way I contemplate this will happen in future. Companies will be financed from private sources, with the idea that at a later stage a public issue may be attempted if the undertaking is successful. I do not anticipate there will be many instances of companies attempting a public issue before commencing. It will be appreciated that this section relates primarily to external companies, many of which may have already an established reputation, so that they could proceed in this way if they wanted to do so.

Mr. Cole

In regard to paragraph (d), is the Minister completely satisfied he has gained his object under that paragraph? Take a foreign company wanting to start up here. They can issue a prospectus in a very unattractive manner.

Mr. S. Lemass

The wording there is bona fide. As I say, the policeman is the Stock Exchange Committee. They will satisfy themselves it is bona fide.

Mr. Cole

It could be bona fide, perfectly legal and yet very unattractive to a person going to invest in an unknown company. There is an obvious loophole there.

Mr. S. Lemass

I could fill pages of this Bill with sections giving the Minister power to do this and to do that, power to examine, power to regulate. The delay in producing this Bill and a lot of the problems connected with it arose out of my desire to devise in relation to this section a simple procedure in which the Minister would not be involved and which did not require elaborate precautions. Indeed, I think we were very happy when we found that the Stock Exchange Committee were prepared to act as policemen for us in relation to this section. Anybody who has any knowledge of their work knows we can rely on them not to sanction an issue or grant a quotation to a concern which has not meticulously fulfilled all its obligations to the public.

Mr. Cole

Supposing a company decided to raise capital by an issue of shares in the first instance. The chances are that very few Irish people would subscribe without knowing anything about the company. They are on the market for a certain time. They are not taken up by Irish citizens. Surely they can be bought by——

Mr. S. Lemass

The mere fact that they try to raise capital by an issue of shares does not mean they are qualified. They must get a quotation on the Stock Exchange. Only when they get that are they an excluded company under the section. It is the Stock Exchange Committee have the job of seeing that there is a bona fide issue of shares, and that there is nothing attached to the issue conditions designed to discourage people from investing. I think we can be sure that the Stock Exchange Committee will conscientiously discharge the duties they have undertaken to fulfil in this connection.

Professor Hayes

I should like to support the Minister on this. If we do intend to get people to come in here and invest money, we cannot adopt the attitude that Senator Cole adopts of trying to stop every loophole. This is not a Bill for stopping loopholes. This is a Bill for making entries. Is that not right?

Mr. S. Lemass

That is right.

Professor Hayes

The Minister in this instance is trying to do a difficult thing and the method adopted seems to me to be sound enough. It may not work perfectly, but, after all, very few human devices do work perfectly. If the Stock Exchange has a controlling voice in this matter, I do not know what better phrase one could get than bona fide. That gives the Stock Exchange Committees complete power to say: “This is not a genuine offer; we will not take it.” If they think it is a genuine offer, then they will stand over it. I realise that Senator Cole's anxiety is also bona fide, but, at the same time, those who are used to this kind of business and who act on Stock Exchange Committees will be the best judges of whether an issue is floated in such a manner that it is reasonably attractive in all circumstances. I do not know that the Minister could have got a better phrase than this. Anyway, the whole intention is to see whether we can get people to come in and, since that is the intention, this is a very good scheme.

Dr. Sheehy Skeffington

I should like to support what has been said by both Senator Hayes and Senator McGuire. I am quite satisfied—I raised this matter and I put the first question—with the Minister's reply in relation to this section. It seems to me that what the section aims at is to make it look as if we want these new companies (a) to work mainly for export, and (b) to be mainly under Irish control. In fact, what we really want is to let them come in pretty easily, and not to be as fussy as we used to be, not in fact to insist that they work for export mainly, and not to insist that they be mainly Irish. Consequently, I think the effect of this will be very good, both from the point of view of production and from the point of view of bringing a spirit of competition into various manufacturing circles in Ireland. If the Minister feels it is necessary to make it look as if we are being extremely fussy, when in fact we do not intend to be so, then I am quite satisfied.

Mr. McGuire

I would like to add to what I have already said. We seem to be confused in our discussion of this Bill. The Minister has told us this is a liberalising Bill. There are two grounds upon which one can criticise it: either one agrees it is a liberalising Bill, and is not sufficiently liberalising or it should be more restrictive. My own feeling about the Bill is that, as I said on Second Reading, I do not think the Bill is liberalising enough. The intention is not clear. The way in which the Bill is drafted does not make it clear to the ordinary businessman or the ordinary legal man what the degree of liberalisation is.

Senator Cole criticises the method of deciding whether or not people will be allowed to operate. We are trying to get away from the old 51 per cent. Irish condition of the past and the Minister is quite right in giving a reasonable degree of chance to Irish investors to invest in order to retain the spirit of the old Act, but, if Irish investors do not take up the shares in a reasonable way and reasonably quickly, then other people should be allowed to come in and do what we are not able to do ourselves.

We ought to clarify our minds now as to whether or not we are in favour, first of all, of the liberalisation intended in the Bill. Do we think it is liberal enough? Are we against liberalisation? I am in favour of liberalisation and in some ways I do not think the Bill goes far enough. Consequently, it is not clear enough and on this stage we could, perhaps, clarify the sections and the general drafting in such a way as to make it clear to anyone who wants to operate the conditions under which they can come in and the fact that conditions in future will be more liberal than they have been in the past.

Mr. O'Quigley

I know the Minister has been in consultation with the stock exchanges, but certain difficulties may arise in the case of firms which might have difficulty in getting quotations from the Stock Exchange. I do not know sufficient about the Stock Exchange to go into this matter in any great detail. There is a possibility that a dispute might arise between a company and the Stock Exchange in relation to obtaining a quotation for its shares. Has the Minister any procedure in mind through the medium of which such disputes may be resolved?

Mr. S. Lemass

No. If the Stock Exchange refuses a quotation and if the company still wants to go ahead, then it must come in under another section. I recognise that the refusal of a quotation on the Stock Exchange might arise on some ground other than those set out in the section. It may be thought that the undertaking is not such as to justify the grant of a quotation. There will also be a condition, I think, that there must be a sufficient number of shares to create a market in them. If a company cannot comply with these conditions, then it has to come in under some other condition. Section 5 sets out seriatim the different conditions under which manufacture can be carried on, and this is just one of the provisions of Section 5.

Mr. Cole

My answer to the criticism of sub-paragraph (c) is that the section tends, as Senator Sheehy Skeffington has said, to limit. I think it will leave it wide open for anybody to have shares.

What is the point in sub-section (3) (a) of Section 4:—

"the company shall in its application state whether it does or does not claim that it has in respect of that class of shares complied with the condition set out in paragraph of sub-section (2) of this section,"

If it does not claim, the application is null and void.

Mr. S. Lemass

I shall look into that. I take it that it is intended to make it clear that a company which is engaged in some business to which the Act does not apply can still apply to the Stock Exchange for a quotation for its shares. It is only in respect of companies which claim the advantages of the section that the Stock Exchange Committee will, in fact, carry out this policeman function for us. A fun fair, a retail shop or a transport undertaking could also apply to the Stock Exchange for a quotation and it would not have to claim to qualify under this section. It would not so claim.

Question put and agreed to.

NEW SECTION.

An Cathaoirleach

Would Senator Hayes be agreeable to the House taking certain other amendments, namely, Nos. 2, 3, 5 and 7, in connection with amendment No. 1?

Professor Hayes

I am quite agreeable. I move amendment No. 1:—

Before Section 5 to insert a new section as follows:—

(1) It shall not be lawful for any company which carries on a business by way of trade or for the purposes of gain, to carry on any manufacturing process.

(2) Every company which does any act which is a contravention of this section shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding £100 and, in the case of a continuing offence, a further fine not exceeding £50 for every day during which the offence is continued.

(3) Section 9 of the Act of 1934 is hereby repealed.

In endeavouring to understand this Bill, I found I had to refer to the Act of 1932 and then to the Act of 1934. I have already given my view as to the curious way in which the Bill is drafted, but when I came to Section 5, I found that it purported to amend Section 9 of the Act of 1934, and then at the end of Section 5 of this Bill, I found that almost the whole of Section 9 of the 1934 Act had been repealed. I then looked at the Act of 1934 and tried to write out for my own convenience what was left, and it seemed to me to be very curious; so I first put in an amendment to repeal Section 9 of the Act of 1934, my object being to put everything the Minister had to say about the matter into Section 5 of this Bill. Then it was pointed out that perhaps that might have some other effects which I did not intend, so therefore I took the method set out in the amendment standing in my name, that is to say, of putting into this Bill Section 9 of the 1934 Act as it will stand when, so to speak, the Minister is finished with it. It will be a very small, weedy and emasculated affair compared with what it is at present.

Section 9 of the Act of 1934 occupies a little more than six pages. In this Bill, it is proposed to take out more than five pages, and to leave nothing but six lines of the first sub-section and the concluding sub-section, and even that first sub-section is amended. In order to simplify it, I proposed in an amendment drafted as satisfactorily as I could in the circumstances of a layman to provide that we should insert a new section, and then I added the penalty sub-section which is the last one in Section 9 of the Act of 1934.

Section 5, as the Minister said, amends Section 9 in quite a number of ways, and it seems to me to make for greater clarity and ease of reading and understanding if we put Section 9 in its new form into this Bill and cut out in this Bill all references to Section 9 of the Act of 1934. Of course, I quite agree with the Chair that my other amendments dealing with Section 9 of the Act of 1934 are consequential upon this. It would be much simpler and make it easier for people who are proposing to come in under this if, instead of referring people to the remnant of Section 9 of the Act of 1934, we put that remnant into this Bill and then let the Minister say all that he has to say about Section 9 of 1934 in Section 5 of this Bill, that is to say, take something of this kind such as I am proposing now, and amend Section 5 in the way he pleases after that to get what he wants. It would be much simpler and therefore I move this amendment.

Mr. Cole

I supported Senator Hayes on the Second Stage on this matter and I do so again. Senator Hayes has told the House that he read Section 5 of this Bill through to find the reference to Section 9 and then at the end found that Section 9 was practically all repealed. I read it the other way. I started to read Section 5 of this Bill. I saw that it referred to Section 9 of the 1934 Act so I got the 1934 Act and waded through Section 9, and later found at the end of Section 5 that Section 9 did not apply at all. You would imagine that that is the way a stranger would probably look at the section. This is the sort of thing that is general in Bills and I have supported Senator Hayes on this point on other occasions. They could be far simpler if the amending Act or series of Acts were simply drafted for a person who had to deal with that Act alone.

Professor Stanford

I had to miss the Second Reading debate on this Bill and cannot quite follow what Senator Hayes intends by the first sub-section in this amendment. It reads in rather an alarming way seen in vacuo. I wonder if he would perhaps explain it a little for us.

Mr. S. Lemass

Perhaps if I were to intervene at this stage, I could remove some misunderstanding.

Professor Hayes

Only one person in the world can explain it.

Mr. S. Lemass

When this Bill emerged from the draftsman's office, it was in general accord with the directions which had been given to the draftsman by the Government, but I got it a week or ten days before the Dáil was due to meet and was rather upset by the legal form of it, because I felt that it did not look like the liberalising Bill it was intended to be. I decided, however, not to incur any further delay in getting it redrafted, but to circulate it to the Dáil and to make the changes I desired in the Committee there, which was done. One of the things that intimidated me was the fact that the parliamentary draftsman following the precedent of the 1934 Act started off the section by saying: "It shall not be lawful" to do certain things. I wanted the section to say: "It shall be lawful" to do all the stated things, and to get it in positive rather than in a negative form. The recasting of the section was solely for that purpose, to set out in a positive form all the conditions under which manufacturing operations could be carried on, and when I found that change had been made the only thing left of the original Section 9 was the penalty clause, and I decided that, having regard to my main objective, the penalty clause should be left in the original Act instead of transferring it into this Bill.

I still would urge that upon the House, that in so far as the purpose of the Bill is to indicate that a change of policy is taking place in this regard, with people being encouraged and invited to came in for manufacturing operations, that it is better to have it expressed positively in that way and to keep the penalty clause where it is now rather than bring it in here as evidence that we have sometimes to apply. I do not see how you could do that without referring again to the 1934 Act.

Professor Hayes

Will the Minister say if the form here in the proposed amendment is the form in which the section would appear when Section 5 has been passed into law?

Mr. S. Lemass

It is something like the form in which the original section of the Act would appear.

Professor Stanford

I am more interested in the substance than in the form. I have not had an explanation of what the substance is, but to me it appears rather terrifying and most restrictive. I do not see the necessity for it. Perhaps the Minister could help us on that?

Mr. S. Lemass

Senator Hayes has taken what is left of Section 9 of the 1934 Act and put it in here. It is true, as he has said, that there is nothing left of that section except the penalty clause, but I still urge that it is better to leave the penalty clause in Section 9 of the 1934 Act rather than, merely for the sake of tidying up, transferring it here. I do not see how you can do that either. Section 9 is in a negative form, and starts off by saying that it shall not be lawful to do things, and if you do you are subject to a penalty. I wanted the section to appear that it shall be lawful to do things without reference to a penalty, which is there in any event.

Professor Stanford

It seems to me that if we pass this, we are going to put considerable restriction on——

Mr. S. Lemass

I hope that the Seanad will not pass this amendment.

Professor Stanford

Are we not going to put an extraordinary amount of restriction on any manufacturing companies in this country? This is what it says: "It shall not be lawful for any company ..."—"any company": it is not hedged around in any way. I do not understand how that could pass into the statute without being a monstrous injustice to many companies.

Professor Hayes

May I dissociate myself from this monstrosity? It is not mine. It is a monstrosity begotten by the Minister, and is not mine at all. It is his in that precise form and with that precise meaning.

Mr. S. Lemass

The law is that it shall not be lawful for a company to carry on a manufacturing process, except in accordance with Section 5 of this Bill.

Professor Hayes

Would it not be better to put that into this Bill? You have to understand this old Section 9 of the 1934 Act. Some clever lawyer will have to tell a disturbed manufacturer: "Oh, no; we have to read Section 5 of the 1958 Act and Section 9 of the 1934 Act."

Mr. S. Lemass

Section 5 of this Bill covers every possible set of circumstances that can arise.

Professor Hayes

Why not take Section 9 out of the 1934 Act and put in the penalty clause here?

Mr. S. Lemass

Why should we do that?

Professor Hayes

For the sake of clarity.

Dr. Sheehy Skeffington

I find myself in sympathy with the spirit and with the research and industry which Senator Hayes has put into this amendment, but I am not in sympathy with the first section of it. He says it is not his——

Professor Hayes

It is not.

Dr. Sheehy Skeffington

We realise that. It derives from the original Act and does not derive from Senator Hayes. I would have preferred him to proffer something of which he himself approved rather than something which he took from the 1934 Act. We have had no explanation as to why it should be thought necessary that a company already in business for the purposes of trade should be prohibited from carrying on in manufacturing process, and we know that in fact a lot of such companies do exist. Theoretically, they are two or three companies, one for trade, one for manufacture, one for financing loans and so on, but to all intents and purposes, they are the one company. There may be some technical reason why it should be necessary to say that no company carrying on business for trade shall carry on a manufacturing process. That means, if I am correct, that a business already in existence for trade must start a fresh company if it wants to manufacture. Otherwise, it does not seem to me to have any justification. I am wondering if it is essential. I had sympathy with the spirit of the amendment, but I am not convinced that this portion of it remains necessary in present circumstances.

Mr. S. Lemass

It would be quite simple to take Section 5 and reproduce it in the form in which it was in the original Act, namely, "it shall not be lawful for a company to carry on a manufacturing operation unless——" and then set out the various paragraphs here. As it stands, it reads: "Notwithstanding anything in Section 9 of the Act of 1934 it shall be lawful for a company to carry on manufacturing, providing it complies with any one of the conditions set out." The only thing left in Section 9 is the penalty clause and there is no point in bandying that about to show that we have a stick with which to beat people.

Professor Hayes

As an ordinary Senator, I have not got a Department, an Attorney-General or a parliamentary draftsman at my disposal, but the Minister has all these at his disposal and, let me say quite frankly, I do not believe for a moment that, if the Minister wants to get this section drafted to begin "it shall be lawful", he could not get it done.

Mr. S. Lemass

I have got it done.

Professor Hayes

But you are leaving this thing still here. Why can it not be done so as to dispense with this whole business?

Mr. S. Lemass

It does. It sets out "Notwithstanding anything in Section 9——"

Professor Hayes

It is childish on the part of the Minister to deal with foreigners who have money, who ex hypothesi are not simpletons—people who have money are not simpletons, in my experience — in this way. He wants, as it were, to conceal this stick so that simple foreigners will not see it.

Mr. S. Lemass

I say why repeat it unnecessarily?

Professor Hayes

Why not tell them what you want? It seems to me that this whole system of drafting is lunacy and I put down this amendment purposely to demonstrate the strange thing we are doing. If the Minister wants to get rid of the whole of Section 9 and put everything he wants into Section 5 and begin it "It shall be lawful", I am certain that he could get legal advice to enable him to do that. The Minister has more experience of Government than I, and he knows that legal advisers are there not for the purpose of saying "No". They are there for the purpose of asking "What do you want to do?" and then doing it.

If he did that, he would not have this extraordinary position that there is in this legislation an amended, emasculated, very curious section, remaining in force from the 1934 Act. I do not see why it should be beyond the capacity of the parliamentary draftsman to do everything the Minister wants to do in Section 5. The idea that the penalty section should not appear in this Bill because the Minister wants to conceal from somebody the fact that there are penalties here is not up to the Minister's usual standard at all.

Mr. McGuire

We all know that the Minister is anxious to get this thing through in as clear a way as possible, but we also know that once the Minister—I do not say this in any offensive way — digs his heels in on an amendment, it is very hard to make him move off them. I would appeal to him, however, to do so.

The Minister admitted in his own words in introducing this legislation, and other legislation of a similar nature, that the main factor in preventing people from coming into this country to invest money has been the volume and complexity of legislation governing their entry. That has been the case. I could not make much of this Bill when it was introduced and I brought it to lawyers and to the heads of trade associations. They all told me: "It is the same thing. There is very little improvement here. It is still complex and it is difficult to see what it is all about."

Senator Hayes has produced an amendment which he does not say is perfect, which has been taken from the original Act, but I do suggest that the Minister, when he has a look at this again, in view of the fact that there is a genuine belief amongst all of us that this Bill could be improved, should consider redrafting the amendment in a way that would clarify the minds of business people coming in here. I should like him to have another look at it. It is not beyond the wit of man to turn any negative phrasing involved into positive phrasing.

Professor Stanford

Having heard the explanation, I think the Minister is absolutely right. He wants to put a positive statement before foreign manufacturers and, under Section 5 as it stands, they know where they stand until they read down to the very last section and then this King Charles' head of the 1934 Act comes in. I would appeal to the Minister to accept what Senator McGuire says and try to incorporate what Senator Hayes has suggested into the end of Section 5. I think a good draftsman could do that. I should like to see this amendment of Senator Hayes, which begins with the monstrous statement, "It shall not be lawful——"

Professor Hayes

It is not mine.

Professor Stanford

I know it is not, but it is still monstrous. But I think the Minister should consider this on Report Stage and perhaps a skilful draftsman could bring it into Section 5.

Mr. O'Reilly

Because so many teachers have spoken on this matter, it appears to me that there is a genuine attempt on the part of the Minister to hide the cane. That is a thing which should appeal to the people who are teachers. It is really a question of the Minister putting away the cane where it will not be seen; people may still know that it is in the teacher's press and may be brought out. In so far as the Minister is trying to hide the cane, it is a viewpoint that should be accepted by teachers, so many people who are teachers having spoken already.

Mr. S. Lemass

My aim was to get in one section a positive statement of all the conditions which apply to the carrying on of manufacturing operations. That is in Section 5. Anybody interested in establishing himself here can look at Section 5 and see, seriatim, the conditions set out, the fulfilment of any one of which entitles him to engage in manufacturing. It is true that in that section it does not say what happens to the person who tries to carry on without conforming to those conditions. You cannot do that without putting in another section which would begin —“It shall not be lawful to do this, unless these conditions are complied with.”

I do not want to bring into this Bill an unnecessary section, which will have that intimidating appearance, because the section is in the 1934 Act. Even though it offends against Senator Hayes's sense of appropriateness in the preparation of legislation, I say it is better to leave it this way. If anybody comes in here wishing to engage in manufacturing operations, you can say to them: "There is a list of conditions; if you meet any one of them, you are free to engage in manufacturing." It is better to have it that way than to have anywhere in the section the phraseeology: "You will be liable to penalties unless you do this, that or the other thing."

Professor Hayes

Sub-section (4) sends him to the 1934 Act.

Mr. S. Lemass

No, I do not think so.

Professor Hayes

Why not?

Mr. S. Lemass

The only effect that is consequential in Section 4 is to eliminate individuals and partnerships from the scope of the 1934 Act.

Dr. Sheehy Skeffington

I think the motives which prompted Senator Hayes to put down this amendment are very laudable, but from the discussion and from what the Minister says, it should be apparent that the Minister is right and Senator Hayes is wrong. Anybody wanting to use this Act will read sub-section (1) of Section 5 and will not have to bother referring to Section 9 of the 1934 Act. I believe as it stands at present the intention of this Act is quite clear in this section and in the circumstances I would vote against the amendment.

Professor Hayes

The amendment does not explain my view of what should be in any legislation. It was merely put down to show what should not be in legislation.

Amendment, by leave, withdrawn.

SECTION 5

Amendments Nos. 2 and 3 not moved.

Professor Hayes

I move amendment No. 4:—

In sub-section (2) (b), line 19, before "in" to insert "or any reasonable extension thereof".

Paragraph (b) of sub-section (2), Section 5, is a saver for existing companies and enables them, if they are in existence, whether they comply or not with the provisions of Section 5 or the provivsions of Schedule 1, to continue in business but only with such manufacturing processes as they are at present carrying on. Looking through the 1932 and 1934 Act which I had perforce to read in connection with this Bill, I find in these Acts a similar provision, but in these Acts there were the additional words which I am trying to insert "or any reasonable extension thereof." That is to say that a company now in existence, which is doing a particular line of manufacturing, may continue in that line whether or not they fulfil the conditions of Schedule I to this Act. I think they should also be allowed to continue in any reasonable extension of that business. It should be extended to give them the concession we extended to companies existing before 1932 and before the enactment of the 1934 Act. It seems to me to be analogous.

Mr. S. Lemass

I am afraid I could not agree to that. The fact we must recognise is that, by reason of defects in the framework of the 1934 Act, a number of companies did, in fact, commence manufacturing operations under circumstances in which it had been intended that they should not be allowed to do so and should be required to obtain a new manufacturing licence. How are we to deal with these companies in the future? It is quite clear that it is undesirable to apply any retrospective penalties to them.

My original proposal, when the Bill was circulated to the Dáil, was to give these companies a reasonable period of time in which to bring themselves into conformity with the requirements of the legislation. Objection was taken to that, reasonable objection, I think, and therefore I presented this amendment that these companies can continue in the future to do any manufacturing process which they are now doing, but they are limited to the process which they are now doing, unless they otherwise come into conformity with the conditions of the Act. It would be undesirable, having regard to the general aim of the legislation, to go further than that.

In the cases I have in mind, there is no question of export trade at all; there is no question of adding anything to the industrial organisation of the country. They are companies under foreign ownership which came into this market solely for the purpose of retaining certain market contacts they had and supplying the Irish market alone with certain products which were being produced by other Irish companies as well. While I agree they should be allowed to continue, if they want to extend to new business, they must either bring their capital structure into conformity with the legislation or get the necessary permit to do so.

Also, the term "reasonable extension" has a very doubtful interpretation, and indeed it has been held already that that term in the 1934 Act permitted a company which was engaged only in distribution to commence manufacture. That would not necessarily apply here, but the fact that that interpretation was put on the section in the 1934 Act creates doubt as to the interpretation which might be put on the phrase in the future.

I think it is fair to say to these companies: "If you are manufacturing now, you can continue whatever you are manufacturing now, but if you want to extend your operations and enter new fields, you must make the necessary changes to come into conformity with the legislation or come and get the licence which you would require." It will be appreciated that many of the companies concerned are quite small companies and the amendment of this Bill to exempt companies where the assets used are less than £5,000 in value will put most of them outside the scope of this legislation altogether.

Professor Hayes

If the legal definition of "a reasonable extension" for a person engaged in distribution is that he may engage in manufacturing, it shows how careful we ought to be about legislation.

Amendment, by leave, withdrawn.

Amendment No. 5 not moved.

Question proposed: "That Section 5 stand part of the Bill."

Professor O'Brien

I wish to raise a point for clarification in the interests of persons who may be adversely affected in this connection. A commodity is defined as follows: "‘commodity' includes any article, material or substance, and references to a commodity include references to part of that commodity." The reference in the sub-section to a particular commodity unduly narrows the freedom of people who are intended to be liberated under this sub-section. It could be construed possibly, without going against the spirit of the Act, that, if a person was manufacturing, for instance, some very narrow type of textile, owing to this adjective "particular", he would be confined under the section. I would suggest that, if a person is manufacturing some particular type of clothing or something of that kind, he should be allowed to manufacture other types inside the same general category or the same class. I suggest that the Minister should change "a particular commodity" to "a particular class of commodity", which would not, in my opinion, endanger the purposes he is aiming at in the sub-section.

On the section generally, there is another point in respect of which I did not put down an amendment, because I prefer to raise it in this way. It is in relation to the date mentioned in the same sub-section, (2) (b): "The 1st day of May, 1958, or within one month immediately preceding that date." May I suggest that that is unduly restrictive? There may be companies which are seasonal in their manufacturing and would not be manufacturing a commodity on the first day of May or in the month before that date. There are other companies which only manufacture to order and they might not have had an order during that month. A month seems to be an extraordinarily narrow period to which to confine them. If the Minister could consider widening that period it would eliminate these two possible injustices to persons dealing with seasonal production or persons engaged in production for particular contracts or orders.

Mr. S. Lemass

On the point regarding the term "particular commodity", I shall look at that. The word "particular" in that phrase may be unduly restrictive. The intention is, of course, that a company which is doing a manufacturing operation now can continue doing that manufacturing operation, and the purpose of the declaration is to ensure that there will be somewhere a record of the companies which under that dispensation are entitled to continue manufacturing operations here. One can see that, in eight, nine or ten years, there may be difficulty in determining the facts in some such instances, and therefore there is this requirement that there must be a declaration on record now and that this declaration gives that entitlement to continue manufacturing operations.

I do not know about the question of seasonal manufacturing, but I can look into that also. However, I should say that if the company is in existence — and that is the main thing — at this time for the purpose of this manufacturing operation, it is entitled to remain in existence. I shall look at the matter to see if there is any need to clarify or modify it in some way.

Professor Hayes

The section actually refers to carrying on the process.

Mr. S. Lemass

Yes.

Mr. O'Quigley

I wonder if I would be in order in referring to the First Schedule. In his speech on the Second Reading, the Minister referred to that. Under Section 5, companies who had evaded the provisions or the intentions of the 1932 and 1934 Acts, will be obliged to comply with them for the future, if they are to engage in manufacturing processes. I have no strong view as to whether these people should be compelled to comply, but my general view would be that if the law was in a particular condition and people complied with the law, they should not be penalised. I know the Minister's argument is that they will not be penalised, that they will be able to continue manufacturing but that they will not be able to extend their operations.

The thing I am disturbed about is this. The Minister stood out very strongly against Senator Hayes's amendment to Section 5, on the grounds of the psychological effect of having a positive declaration on certain things that would be lawful. The Bill was amended after it was circulated in order to achieve that psychological effect of positive declaration and to show the liberalisation that was intended. What I think about the provisions of paragraph (d) of sub-section (1) is that they will have the opposite effect to the general intention of the Minister. It is quite clear from what has been said already on Section 4 that there are certain ways and means of enabling manufacturers to state that export is a principal object and that a degree of liberalisation will tempt them to establish businesses here.

What I am afraid of is that, as a result of paragraph (d), people will say: "We thought we were entitled under the Act of 1958 to do certain things. We now find that the people who thought they were entitled to do certain things under the Acts of 1932 and 1934 are not able to extend their business." That may have a dampening effect on prospective manufacturers here. On the one hand, the Minister may be handing out inducements to foreign manufacturers, but, on the other, he may be preventing people from extending. I do not know whether or not I am right in this view, but that is the view I take from reading these sections.

Mr. S. Lemass

On the point the Senator has referred to, in so far as these £100 companies, as they are called, are concerned — companies that were formed in that particular manner in order to engage in production for the home market, even though they were effectively owned outside the country — their position will be that they can continue in any business they are engaged in now, but if they want to extend they will have to do one of two things: either become qualified companies within the provisions of the First Schedule, that is to say, get in Irish capital to the extent that will qualify them in a bona fide way; or, if they want to remain under effective external ownership, they will have to seek the necessary licence or authority to engage in the new business. Provided it is a new business and provided the country is gaining something by the extension, in the normal course they would be given that authority.

The purpose for which these companies were constituted was of a different kind. The fact is that most of them added nothing whatever to the industrial organisation of the State. Some one or more Irish companies started manufacturing some commodity here. At a much later date the foreign company previously supplying the market, realising it had lost its trade, decided to go into the market itself. Normally it was refused the licence on the basis of the 1934 Act policy, and it then proceeded, nevertheless, by this device to establish a legal right to engage in manufacture.

The only effect was to upset or sometimes destroy the previously established Irish company. If they were bringing something new into the State or supplementing an inadequate production or, particularly, contemplating export, they would have had no need to adopt that device at all. The necessary licence would have been given to them without any great argument in 99 cases out of 100.

They will be in that position in the future. If the extension they are proposing does in fact add to the industrial capacity of the State, then they will be facilitated. It would be only where the extension was in fact doing nothing except intensifying competition on the home market against existing Irish firms that the restriction would apply. Even in that case, the restriction would, perhaps, be less rigorously applied in the case of an existing organisation than in the case of a new organisation of the same kind coming in. It will be appreciated, as far as Part I of the First Schedule is concerned, that it does not fundamentally alter the definition of a qualified company operating from 1934. The same shareholding and directorate qualifications will apply. The only real changes are to deal with certain legal problems which arose during the past 25 years, and which have never been put right until now. These concern the operations of holding companies and such matters.

Mr. O'Quigley

I appreciated all the Minister has said. Assuming we have no sympathy whatever for these people who evaded the intentions of the 1932 and 1934 Acts, I think the very fact of their now being brought to heel will have an adverse effect on prospective manufacturers who may fear that, if they do certain things which they regard within the law now, by an enactment at some future date, they might be brought to heel.

Mr. S. Lemass

They are not being brought to heel; they are not being interfered with. They can continue their existing operations unchanged. It is only if they want to get into some new business that they will find themselves in the same position as everybody else.

Professor Hayes

They will be in the same position as everybody else outside?

Mr. S. Lemass

Inside or outside.

Professor Hayes

No.

Mr. O'Quigley

Assuming their present position is unchanged, they cannot improve on it. It is difficult to get across the point I am trying to make. My point is that the very fact that people who operated under the 1932 and 1934 Acts, within the law but contrary to its intentions and spirit, are now being deprived of the advantage of going ahead——

Mr. S. Lemass

No, they are not.

Mr. O'Quigley

I know the Minister will say they can qualify.

Mr. S. Lemass

On the same conditions as anybody else.

Professor Hayes

Surely not. Not on the same conditions as, say, Hayes, O'Quigley and Lemass?

Mr. S. Lemass

As I pointed out, in Section 5, there is set out a series of conditions. Companies that comply with any one of these conditions can engage in manufacturing operations.

Professor Hayes

But an Irish company can do what it likes.

Mr. S. Lemass

That is so.

Professor Hayes

This company is here, but it cannot do what it likes.

Mr. S. Lemass

It can apply for a licence and get it.

Mr. O'Quigley

In regard to paragraph 3 of the First Schedule, the companies we are now discussing will have to do certain things in relation to their share capital.

Mr. S. Lemass

Not to continue their present operations.

Mr. O'Quigley

I am aware of that. If this Bill had not been passed, they could extend their present operations under the existing structure. Now they are being prevented by this Bill from doing that. My point is that, reading this Bill, any prospective foreign investor might say to himself: "We are not too sure, if we do certain things we are advised by our legal adviser are within the law, that in 1968 there may not be another Bill which will prevent us from expanding."

Mr. S. Lemass

The fact that there is no retrospective application of this Bill is an assurance to everybody. While it is right to conclude that in ten or 20 years' time the Dáil may pass a measure completely altering the position — and I think we must contemplate that that is more likely than not — nevertheless, the position is that any company that conforms with any one of these conditions can engage in manufacture, including these companies. But if they want to extend into some new line, they either have to become an Irish company, qualified under the 1934 Act, or get a licence the same as anybody else.

Mr. O'Quigley

I want to deal with another aspect. Under either the Finance Act of 1957 or the new Finance Bill, there is a guarantee being given to companies that there will be certain exemptions from income-tax on profits over a period of 25 years—over a stated period. People looking at profits and reading this Bill are bound to compare the guarantee they are given in one connection with the fact that in this Bill people who did not comply with the intentions of previous legislation are now prevented from doing something.

Mr. S. Lemass

They are not prevented from doing anything.

Mr. O'Quigley

They have to take certain further steps in relation to their share capital, steps they would not have to take, were it not for the enactment of this legislation.

Mr. S. Lemass

As from the day on which this Bill becomes law, anybody can engage in a new manufacturing operation, including those people, provided they conform with the conditions set out. They are not in any sense put in a different position from anybody else. The particularly privileged position which they may have established for themselves — that is, to engage in manufacture here without a licence, even though they were effectively foreign-owned—will not apply, but this legislation will not interfere with their position.

Professor Hayes

Does that not mean that the position is being altered, but, because the Minister calls it a privileged position, he holds it is not being altered at all?

Mr. S. Lemass

It is a privileged position inasmuch as they are effectively foreign-owned, but they are nevertheless manufacturing here without a licence under the Control of Manufactures Act. One of the aims of this Bill is to prevent that happening in future. As far as these companies are concerned, they are in the position that, if in future they want to engage in some other business, they will either have to make their capital structure conform to the conditions to which everybody else has to conform or they will have to get a licence as a foreign company.

Professor Hayes

Without regard to the merits and merely on the facts, the position is that there is a company here now which is complying with the law, the law is interpreted by the courts and not as interpreted by the Minister. The Minister is now repairing — that is his own word — an omission or breach in the 1934 Act and these people will, therefore, find themselves in a worse position when this Bill is passed than they are in now. There is no doubt about that. The only argument the Minister used is that they ought not to be in their present position.

Mr. S. Lemass

I am not saying that at all. I am saying that in future they will be in no different position from anybody else.

Professor Hayes

At the moment they can do what they like. When this Bill is passed, they cannot.

Mr. S. Lemass

In future, a foreign-owned company must conform to the conditions of the law.

Professor Hayes

They are not in the position now of a foreign-owned company under law.

Mr. S. Lemass

They are.

Professor Hayes

Not under law.

Mr. Donegan

We here are all ex officio, if I may use that expression, Irish citizens. These people have been operating here for 30 years. If this is a liberalising Bill, should they not enjoy the same privileges as we get?

Mr. S. Lemass

Exactly, and no more.

Mr. Donegan

Unfortunately, they do not enjoy the same privileges because they are not, as we are, ex officio, Irish citizens; that lets us in. But they are not Irish citizens and therefore they must conform to one or other set of conditions with which we do not have to conform.

Mr. S. Lemass

A non-Irish company cannot in future engage in manufacturing operations, unless it gets the necessary authority under this Bill. In so far as these companies are foreign companies, in the sense that they cannot qualify as Irish, they are in no different position from any other foreign company.

Mr. Donegan

They are in no different position from any other foreign company — the Minister has put the position right — but they are in a different position from the Irish company. They have been here for 30 years and they would not in future find themselves in a different position, were it not for the provisions of this Bill. Therefore, it is no longer a liberalising Bill.

Mr. S. Lemass

The logic of that is not very obvious.

Mr. Donegan

I think it is quite obvious.

Question put and agreed to.

SECTION 6

Question proposed: "That Section 6 stand part of the Bill."

Professor Hayes

On sub-section (2) of this section, a point was raised by Senator O'Brien and the Minister agreed to look into the matter. It relates to "a particular manufacturing process relating to a particular commodity". That would call for definition.

Mr. S. Lemass

I presume there would have to be definition in the certificate of the process in respect of which they are exempted and it is clear that more than one process can be covered by the same certificate. I shall look into the wording and see if it is restrictive. Here, there has to be an attempt to draft a definition of the exempted processes and the definition has to be particularised.

Question put and agreed to.

Sections 7 to 10, inclusive, agreed to.

SECTION 11.

Question proposed: "That Section 11 stand part of the Bill."

Mr. Donegan

The process of milling wheat or adapting for sale at a mill is excluded from the 1932 Act, the 1934 Act and this Bill. The milling of wheat and flour is in a rather extraordinary position. Each mill has its quota. The practice of buying mills and bakeries by large milling combines has grown up. Here we find ourselves in a situation wherein this milling process is completely excluded from this Bill.

Mr. S. Lemass

It is not bakeries.

Mr. Donegan

But is it not true that, if a mill were baking, the adapting for sale at a mill does include baking?

Mr. S. Lemass

The reason why these are excluded is that there are separate Acts dealing with these industries. They are not under the Control of Manufactures Act. They are under a separate code of legislation applicable to themselves.

Mr. Donegan

Does the Minister not set up then a different situation in regard to milling? Does he not allow foreign combines to come in, purchase what is virtually a quota of wheat and mill it at the mill?

Mr. S. Lemass

No.

Mr. Donegan

I think he does.

Mr. S. Lemass

The Senator should look at the Act again. So far as a milling licence under the Cereal Acts is concerned, it cannot be transferred without the consent of the Minister.

Mr. Donegan

But if the Minister gives his consent——

Mr. S. Lemass

He can give a licence under this.

Mr. Donegan

In giving a licence, he is bound by certain conditions. In giving his consent, he is not so bound.

Mr. S. Lemass

That is not the position. There is quite a complicated code of legislation controlling the whole of the milling industry and the reason why they are excluded here is that there is separate legislation dealing with them.

Mr. Donegan

Nevertheless, the Minister has power to allow the transfer of milling licences, and that is not subject to any conditions.

Mr. S. Lemass

It is, indeed, subject to conditions.

Mr. Donegan

In this case, the granting of a licence for manufacture is subject to conditions. In the other case, the Minister is leaving a very big loophole in what is a completely controlled industry.

Mr. S. Lemass

There are much more onerous conditions attaching to a milling licence.

Mr. Donegan

I do not agree.

Professor Stanford

With regard to the sugar company, I just want to make sure that "any act or thing done" refers to it at the time of the passing of this Bill.

Mr. S. Lemass

Again, the reason is that there is a separate Act controlling the manufacture of sugar and the operations of the sugar company.

Professor Stanford

There is no risk that the sugar company might suddenly branch out into something else?

Mr. S. Lemass

No.

Professor Stanford

I am satisfied.

Question put and agreed to.

Sections 12 to 14, inclusive, agreed to.

FIRST SCHEDULE.

Professor Hayes

I move amendment No. 6:

In Part I, paragraph 3 (1), line 12, to delete the words "used in its business" and substitute "owned by the company."

We have had already on Section 5 a few words about the meaning of this First Schedule. We will be coming to that in general afterwards, but sub-section (3) of the First Schelule exceeds everything else in the Bill in complication. It is the most complicated section I have seen for a very long time. It provides for the most extraordinary and elaborate calculations. I asked the Minister on the Second Stage as to the meaning of a particular matter and he made no answer, so I have put down this amendment.

Sub-section (1) of Section 3 of the Schedule defines the method of calculating the share capital so as to enable a company to qualify. It provides that the share capital must not be less than half the value of the fixed assets used in its business. I do not know whether the expression "fixed assets used in the business" means the assets owned by the company or the assets leased by the company and being used in the business, such as buildings or machinery. I understand that there are in some cases machinery which cannot be bought but must be leased. If machinery and premises leased are included in the fixed assets used in the business, then the capital will have to be extraordinarily high in order to enable the company to qualify under this section. For the purpose of getting my mind clear on that in the first instance, I have put down this amendment, and I should like to know what is the meaning of "fixed assets used in the business".

Mr. S. Lemass

It means "used in the business", precisely. That is how this evasion of the conditions of the 1934 Act was brought about. Companies were formed with a nominal capital of £100 and then proceeded to acquire assets, machinery and plant, valued at several thousand pounds by the process of leasing them from the parent company which had promoted the whole operation. When we set out to consider what conditions we could impose which would prevent that type of operation in future and ensure that there would be a bona fide industrial organisation which would be a qualified company in accordance with the definition or have the necessary licence or authority to operate, it seemed that the only real test was to relate the value of the fixed assets used in the business with the share capital of the company. Therefore, the condition proposed here is that a company will not be regarded as qualified unless its share capital is not less than half the fixed assets.

But when coming to calculate the value of the fixed assets, allowance has to be made, of course, for Government grants under the Industrial Grants Acts or the Undeveloped Areas Act, genuine reserves reinvested in the undertaking, assets purchased under a hire purchase arrangement, and all the other things set out in the Schedule. The purpose is to ensure that there will be a recognisable relationship between the share capital and the fixed assets used by the company in manufacturing operations carried on by it.

Professor Hayes

Assets are regarded as something which the company uses but does not necessarily own.

Mr. S. Lemass

That is the device by which the £100 companies are operating, by using assets they do not own.

Professor Hayes

This provision is meant to apply to assets used but not owned?

Mr. S. Lemass

Exactly.

Professor Hayes

I see. What is the objection if employment is being given? Does this mean that the Minister intends now to get after people, who, in his own private judgment, have not been fulfilling the law?

Mr. S. Lemass

Employment is the acid test. The intervention into the home market of companies which are really branches of external concerns covered up, which had no intention of doing anything in the matter of export trade and whose sole purpose was to hold on to the market even if they put out of business Irish companies that had competed with them and which might at some time develop an export trade, did not increase employment. It is a question whether they were creating or destroying employment. In the majority of cases, I know of, the effect of the intervention of these foreign companies was to put people out of employment, not to bring them in. The effect was to undermine companies that were completely Irish owned and that could have developed at some stage into the export trade. The result was a diminution in employment rather than an increase.

Professor Hayes

Might not all this apply to an entirely Irish-owned company that had leased premises or machinery?

Mr. S. Lemass

The purpose of this section is to get a definition of an Irish-owned company.

Professor Hayes

Yes, but this provision may apply in fact to a completely Irish-owned company, apart from the companies the Minister has in mind. I am not able from my own experience to say whether in fact they have or have not added to employment. I am at one with the Minister in desiring an addition to the sum of employment, but does this First Schedule, on the face of it, not apply as much to a company which is Irish-owned, say, a company owned by Senator Ó Maoláin and myself, as to any other?

Mr. S. Lemass

Why should a company of that kind object to this provision? One cannot conceive of a bona fide company with share capital less than half its fixed assets when allowance is made for all the things set out in the Schedule. In the normal type of business operations, there will be that very obvious relationship between the subscribed capital and the fixed assets employed.

Professor Hayes

This could apply to an all-Irish company.

Mr. S. Lemass

Yes, but, even so, if you ask me for my opinion as to what our general company law might require, it could well include provision of that kind from the point of view of allowing people with business relations with a company to calculate its financial standing.

Mr. O'Quigley

I have already referred to this matter. I do not know what the Minister has in mind when he speaks about fixed assets. There are a whole number of things which might or might not be fixed assets, and as far as I know, there is no definition in our own Companies Acts. I do not think the Minister would take my word on a matter of law.

Mr. S. Lemass

I am prepared to do so on this occasion.

Mr. O'Quigley

I believe there is no definition of fixed assets in our company law, but there is some definition in the British Acts, so that it would appear to me that, unless there was some definition put into the Schedule here of what fixed assets are to be included, the section is one that might give rise to great difficulties for the Minister.

Mr. S. Lemass

If any question should arise in any individual case, only the courts will determine whether the conditions are being complied with.

Mr. O'Quigley

Even with the assistance of the courts, a question might arise of what is understood by fixed assets, because there is no definition. I imagine it would be most useful to have a definition in the Schedule.

Mr. S. Lemass

Everybody understands that if there were a question in any particular case of what were deemed to be fixed assets, if the matter were a serious one, the courts would have to determine it.

Amendment, by leave, withdrawn.

Professor Hayes

With regard to amendment No. 7 which seeks to delete paragraph 3 (1) (e), I put it down merely to draw attention to paragraph (e). Again, I think it is this monstrous Section 9 of the 1934 Act coming in, and I do not know what the section really means at all. For example, supposing an Irish company got a loan from an English insurance company, that would not be calculated?

Mr. S. Lemass

No. We are trying to deal with the situation of which we have experience, where companies became entitled under strict interpretation of the wording of the 1934 Act to carry on manufacturing operations, even though they were effectively externally-owned and, but for the device they adopted, would have required a licence. The most usual type of case was the establishment of a company here with a £100 capital, which borrowed the money required to engage in manufacturing and acquire fixed assets, that money being made available by the parent company. But, in calculating fixed assets in this section you can discount the amount of loans to a company from a qualified Irish source, so that a company could obtain a loan from an Irish company already set up, or from an Irish insurance company, and it would not disqualify itself as a qualified company by reason of having resort to that method of financing its operations.

Mr. McGuire

The difficulty is that we are trying to do two things. Under the Bill, we are trying to liberalise conditions under which foreign capital can come into the country and, at the same time, we are trying to stop the gaps in previous Acts.

Mr. S. Lemass

That is right.

Mr. McGuire

On the one hand, we are trying to lead people in and, on the other hand, we are trying to stop the gaps through which some of them got in previously.

Mr. S. Lemass

We had two purposes. One was to remove restriction over a wide field and, in so far as we would retain restrictions, to make them effective.

Professor Hayes

I tried to convince the Minister on the first section that he should have done this in a wholly different way. This whole business, and particularly this paragraph (e) of subsection (3) of the First Schedule, is an astonishing example of legislation by reference. It is, as Senator McGuire has just said, an effort to get after the people who found a way of getting in, whereas the whole purpose of the Bill, as defined in the Title and in the Minister's speech, is to let people in. The people who have got in are to be circumscribed and hedged around with conditions now, because they got in in a way of which the Minister did not approve.

Mr. S. Lemass

No, no. They are not being interfered with.

Professor Hayes

They are.

Mr. S. Lemass

In so far as they confine themselves to what they are doing now, they are not being interfered with.

Professor Hayes

This whole First Schedule, which one would need to be a statistician as well as a lawyer to understand, is just an elaborate effort by the Minister to repair a breach in the 1934 Act. Is that not all it is?

Mr. S. Lemass

That is right.

Mr. McGuire

What I said was that people did get in under the 1932 and 1934 Acts.

Mr. S. Lemass

I do not think we are penalising them now, but we are trying to prevent them coming in in the same way in the future.

Mr. McGuire

But at the same time it is very confusing because you are saying that anybody who comes in, in future must come in under a new set of regulations. We are saying to them: "We will let you in under these regulations, but we will not allow you to play tricks."

Mr. S. Lemass

If I had come in with a Bill other than one which attempted to close the gaps in the 1934 Act, everybody would say that was a waste of time. With these loopholes there, the only thing to do would be to repeal the Acts altogether. It seems to me essential that in any legislation dealing with the Control of Manufactures Acts, the gaps in the 1934 Act should be stopped.

Mr. McGuire

Undoubtedly, but it is confusing in this Bill.

Professor Hayes

We are opening a door and shutting a door at the same time.

Mr. S. Lemass

We are opening one door and shutting another.

Professor Hayes

That used to be one of my father's old proverbs, that God never shut one door but he opened another.

Mr. S. Lemass

That is right.

Professor Hayes

I think this is a most elaborate method of calculation, and it seems to me to apply to Irish companies and many of them are going to be worried about it. I do not understand it, but there has been an instance of an English insurance company giving money to Dublin Corporation when the banks refused it.

Mr. S. Lemass

Perhaps I should correct my statement. Outside money may be given in loans to Irish companies under the Trade Loans Act and under the Trade Guarantees Act, and these loans could also be regarded as Irish money if they were secured under these guarantee arrangements.

Professor Hayes

But not otherwise?

Mr. S. Lemass

No, not otherwise.

Professor Hayes

It is very confusing.

Amendment No. 7 not moved.

First Schedule agreed to.

Second and Third Schedules agreed to.

Title agreed to.

Bill reported without amendment.

Report Stage ordered for next sitting day.