Vol. 117 No. 10
I move amendment No. 16:
In page 34, subsection (7), lines 47 and 48, to delete "which is not a recognised bank."
The reason I put down this amendment is that I am not convinced of the Minister's need to make an exception in the case of banks or associated banks. If the Minister can give me an assurance that this does not leave any loopholes in the Bill I am prepared to withdraw the amendment. I would like to know the precise position and the thinking behind this section.
I have given the Senator's amendment some thought. I am aware of the arguments the Senator could make but I am not convinced about them at this stage. I take the view that, in general, a director should not regard his company as his own personal bank. I said so in so many words on Second Stage and the Minister for Industry and Commerce also made that point. When dealing with banks we have to be a bit more realistic as a bank is in the business of lending money. That is why a special regime is needed in this legislation which is covered in Part III of the Bill. In my view there is nothing wrong with the banks lending money to their directors or companies which they control provided such arrangements are not open to abuse whether by means of ridiculously low interest rates or any other unduly favourable terms. We specifically covered these matters in the Bill. These safeguards are provided in section 32 of the Bill. Section 32 (7) (a) and (b) provides, for example, that such loans or quasi loans can only be made on a normal commercial basis. There is no question of loans being made below the commercial rate.
Provided these conditions are met, we are safeguarding against abuse in this area by banks or their directors. I do not see any objection to allowing the banks to lend without limit in the light of these safeguards. We are recognising that a bank's business is lending money. We are saying it is perfectly acceptable for a bank to lend money to one of its directors or, indeed, to a company which he or she controls as it would to any other person of the same financial standing but unconnected with the bank, provided there were no special deals or soft loans for the bank director in question. I want to stress that as long as there were no special deals or no soft loans, it would not make sense to exclude money being loaned to bank directors because it is the bank's business to lend money, provided that the same rate of interest is charged and that the whole thing is at arms length. There are special procedures in the legislation for disclosure in regard to the whole business of loans. Senators can be assured that there are safeguards in the Bill which will make sure that there are no special deals or soft loans.
The Minister has responded with irrefutable logic and clarity of argument. I certainly accept his arguments which are well put and I have no hesitation in withdrawing the amendment.
This is a formal amendment which is intended to rectify an inadvertent error in the Bill. Section 32 (8) elaborates on the conditions specified in subsection 7 (b) and not 6 (b) as stated in the Bill in relation to loans to directors which money lending companies, including banks, are allowed to make up to an aggregate of £50,000.
I would like to draw the Minister's attention to section 32 (5) (c). I have been told by a number of business friends that the import of subsection (5) (c) in conjunction with subsection (6) (a) and (b) is that this could cause a situation where all expenses incurred by directors would need to be approved by the shareholders of the company.
According to my friends who move in these circles, this could mean that the marketing manager of a major Irish company like Waterford Glass, or Irish Distillers, or whatever, would be required to explain to a meeting of shareholders whom he had entertained on various trips to the United States, or Europe, and so forth, and how much he had spent on those trips. They feel this is unreasonable in a very competitive climate, as most companies will have their own built-in safeguards in this respect. The bigger companies involved in this type of activity would have their own fairly rigid accounting procedures and would be operating in that particular framework.
I may misunderstand the Bill, but certainly this point has also been made by the Consultative Council of Accountancy Bodies who also feel that the directors may incur significant expenditure when marketing products abroad on behalf of the company and this could impose detailed rules on directors while ignoring other significant costs. On the face of it, it seems to be a fairly draconian measure and I would like the Minister's views on it.
The Senator has raised a very interesting point which has also been made to me. There are two options for such a person. The first option is to get the prior approval of the shareholders. The second is dealt with in subsection (6)(b) which means that, provided the loan is paid back within six months of the AGM, prior approval would not be necessary. In practice that could give a person 12 months if the loan was paid back half way through the year. The intention is to ensure that it is short term and not a long term thing that remains on the balance sheet. The intention is to make sure that if someone has expenses arising out of their job as a marketing director they can, in fact, be put up for that person and provided they are cleared off within six months of the AGM of the company prior approval is not needed.
The point has been put that the six month period is too short. It seems to us to be a practical enough section.
Obviously this point of view has been expressed to the the Minister in the course of the past few months by people in business. Does the Minister feel he has satisfied the particular point? On a point of clarification, are we talking about something over and above the normal expenses which a marketing manager or official of a company may incur in the promotion of his or her job?
No, not necessarily. It depends on how it is undertaken. If a bulk sum is made available to a director in such circumstances that makes it a type of loan, these conditions very much apply to it. It is not meant to catch the ordinary day to day expenses of the average director but in circumstances where a lump sum is up front to carry a person through the months ahead, as it were, what we are trying to avoid is loans being called by another name in that, if a director is given £10,000 or £20,000 as future expenses, that is not just another way of getting around a loan provision. We are trying to make sure that does not happen. It is to avoid some creativity on the part of accountants.
I am still not fully happy with this section. The Minister began to spell out the purposes of this section in his last contribution. I am not sure whether the Minister is fully happy in his own mind that it is not unduly rigorous or cumbersome to go back to a board of directors. The major companies will undoubtedly have their own fairly rigorous internal accounting procedures and these companies do not have any particular interest in making themselves liable to abuse of the law or whatever. I certainly would not ask for an answer just now but I wonder if the procedure is not over-cumbersome and may have the effect of hindering people who are operating in a competitive environment that little bit more than is necessary — using a sledgehammer to crack a nut.
The Senator is reading me correctly. I am uneasy about certain aspects of it. I will have a very close look at it between now and Report Stage. I want to make it clear that in circumstances where we are saying loans cannot be made — and that is a major section of the Bill — it would not make sense if we were to allow them by a different name whereby the managing director could say to the marketing director: "Look, loans are forbidden as you know, so instead of that I will give you £7,000 or £8,000 and let us call it an advance on your expenses and that will get around the legislation." There is no point in legislating against loans if we allow them to be called something else.
I do not want to interfere with the efficiency of business and I do not want to lay down bureaucratic rules for business either, so from that point of view I will see if we can find a niftier way of doing the same thing. Very often it is not that easy because the most likely way to get around the loan provision would be to do precisely that, which is to say to an individual: "We will advance you expenses." Putting six months on it still allows that to happen. If a person is going abroad on a business trip and they have to get a £7,000 or £8,000 advance for the trip, we are covered there because that would come back within a six month period obviously. It is six months of the AGM, so it could give the person up to 12 months to pay it back. It really is an anti-avoidance measure as much as anything else. I will take a very close look at it. I will take on board the Senator's view that it might inhibit the free flow of business. I do not want to do that but I do not want to make meaningless all the sections we have already written up on the forbidding of loans by allowing a loophole.
I have a very open mind on this as well. I can see certain difficulties at the AGM of a company, where all the shareholders are entitled to attend. Somebody who is travelling abroad may very well incur very substantial expenses and they may well be in the form of a loan. This may be the subject of uninformed questioning at an AGM. I just wonder if there might be some way in the normal audited accounts of the company this sort of expenditure could be shown without the need to go to an AGM as indicated in the Bill. I will not push it any further than that.
If it is paid back, there is no need to go to the AGM. The idea is that it should be paid back within six months of the end of an AGM which means that you could have up to 12 months to pay it back if the advance is made at a strategic time. Anything after that is really a loan.
May I go back to page 33? As the owner of a small company I would like to speak again about section 31 (1) which limits the maximum loan——
I am sorry. We are discussing section 32 as amended.
It is section 32. It limits the amount of a loan to a director to £2,500. I spoke on this last week and I think it is a little bit restrictive. I believe that it should be linked to the net asset value of a company or maybe to say 10 per cent of the paid up share capital of a company because as it stands at the moment, as I read it, it would appear that a company with, say, two £1 shares paid up, could actually take a loan of £2,500 from that company and in these times of very difficult trading, where you have to trade with companies where you can get business, even though the loan is £2,500, in some instances it may be £2,500 too much. In other instances, it may be £10,000 too little. Perhaps before the Bill is finalised, the Minister would look at it.
We received a number of suggestions from the Members of the other House and the business community, all suggesting to us that the figure of £2,500 might be too low. We are looking at that. I would be interested in Senators' views as we go through the Bill as to their reasoning for that because it seemed to us to be a sensible figure. The Senator suggested linking up net assets and so on. Ideally that is the way we should do it, or link it to turnover, because £2,500 to a big company is different from £2,500 to a small company, but with the bureaucratic system you would set up you would be into a mini-audit on every situation and the amount of policing in that would just bog it all down.
It might be simpler to pick a figure and stick with it. Then it is clean cut and above board. I appreciate that makes life difficult perhaps for smaller companies over bigger companies. Bigger companies would want a higher figure. I think it is better to leave it at a definite figure in the legislation than to get into the business of trying to police what could turn out to be thousands of companies. We are having a think about the actual figure and that is something we will talk about as we go through the Bill. I want to point out also that the Minister can change the figure in the Bill under section 43. The Minister can actually change the amount in the Bill at any time by order if he feels it is the wrong figure. We will think about the £2,500 as we go through the debate.
I accept that it is a very technical Bill and I do not want to make it any more complicated than it already is, so I accept the Minister's guidance on it.
The discussion over the past few minutes has outlined the difficulties the Department had in drafting this Bill and it is not something that one would wish on anybody. Looking at it purely from a lay person's point of view, I would tend to feel that £2,500 is a low figure. I would be speaking from the other point of view. It is a low figure and perhaps the case made by Senator Mulroy is right. At the same time, in many companies it would be too high a figure. As a global figure it seems low to me in terms of comparing it with the cost of things, just on that basis. I certainly would not have a difficulty about increasing that amount, with perhaps some kind of fail safe clause.
I also accept that you cannot relate it to something like turnover or some figure within the company because it is not going to be available, and it would be an unfair condition to build into it. I accept that. But could there be some kind of fail safe clause, that somebody within the company would have to recommend. I am not sure how it could be done. I dislike putting forward suggestions that I cannot follow through but my gut feeling would be that £2,500 seems a bit low in that case.
I am coming to something like the same conclusion listening to the Senators on the last occasion and today. I am coming to somewhat the same conclusion. It is something which we should not do today but if the House is in agreement I will have a very close look at. I am now of a mind to increase that to a more realistic figure and I will have a look at how we might build in a safety value. That is not going to be that easy. If we decide £2,500 is too low, we should just come up with another figure and put it in there and allow the same safeguards to apply.
Amendments Nos. 19 and 20 are related and may be discussed together.
These two related amendments are essentially drafting amendments, the purpose of which is to make the meaning of section 33 (1) a little bit clearer.
That would be a help.
It would indeed. As such, they do not alter the meaning of the subsection in any way.
I may be somewhat dense on this one but I do not understand that paragraph even with the Minister's clarification. If it could be explained to me I would be very grateful.
I did not have the courage to say the same thing.
The Minister himself has only been learning it over the past couple of weeks. By way of background, subsection (1) of section 33 provides that the rules in the remainder of the section will apply for the purposes of determining the relevant amounts which decide whether a transaction is or is not exempted from section 32, from the basic general prohibitions which are in section 31. However, we do not think it is clear enough that the reference in line 21 which is, and I quote, "subsection (2)" is, in fact, to subsection (2) of the main section 33 rather than of section 32. Amendment No. 19 simply makes the meaning clearer. We are just trying to make it clear that the reference in line 21 is actually to subsection (2) of section 33. It does not change the meaning of the section. It is a drafting improvement.
It is as clear as mud.
That was not really my concern.
We are discussing amendments Nos. 19 and 20 before we move to the section.
Amendment No. 19 refers to this part of the Bill and was designed to clarify the meaning and it is on that point I rise. I really want to make the point which was made with great feeling here by Senator Harte and Senator O'Toole the last day about the type of language used. It obviously has to be precise and legal but if a message could go to the draftsman that language which reasonably intelligent people — the bald headed man in the back of the Clapham Omnibus — could understand, it would help our discussion of this enormously. I find great difficulty in seeing what that section is about in spite of the Minister's help.
Section 33 overall is laying down rules for determing whether a particular transaction falls within some of the exemptions in section 32. Section 32 lays down a number of exemptions to this whole business of loans. Section 33 then lays down technical rules for deciding whether a particular transaction is within those exceptions or not within those exceptions. That is the simplest way I can try to explain it whether the technical drafting actually does that is one for the Senators to decide.
I am reasonably happy that in drawing up rules as to what is and what is not an exception, the draftsmen tells me it is necessary to couch it in this kind of language to make sure that the thing is not got around. To an extent we have taken their view.
What nature of an offence would one have to commit? It says: "shall be guilty of an offence"?
Section 35 makes it an offence for a director to authorise or to permit the company to enter into a transaction or arrangement knowing or having reasonable cause to believe that the company was thereby contravening the prohibitions in section 31. Also guilty of an offence will be a person who procures a company to enter into any such transaction or arrangement knowing, or having reasonable cause to believe, that the company would thereby contravene the provision involved and the penalties for this are outlined in section 184. It deals with the criminal liability for contravention of the items that are prohibited in section 31. Section 31 lays down a number of areas that are prohibited and section 35 then deals with the criminal liability for that.
Section 184 is on page 141 and it deals with the penalties, on summary conviction, to a fine not exceeding £1,000, or at the discretion of the court to imprisonment for a term not exceeding 12 months or to both, or, on conviction on indictment, to a fine not exceeding £10,000 or, at the discretion of the court, to imprisonment for a term not exceeding three years or to both. That is really the intention of section 35.
I welcome this section very much. It is absolutely critical that criminal liability is included in this Bill. In one of the later sections I will be referring to the fact that I regret that on the responsibility of directors in a section further on it has not been given further scope. It is absolutely essential if this Bill is to have teeth that we build into it criminal liability.
Amendments Nos. 22, 23 and 24 are similar and may be discussed together.
This amendment has been prepared for the purpose of completeness. Section 36(1), as Senators can see, provides for disclosure requirements in a holding company's accounts in relation to loans by such a company to its directors while section 36(2) provides for such requirements in the case of loans to such directors by a company other than a holding company. There is a gap, however, in that while the disclosure requirements for an individual company require among other things, disclosure of a loan made to a director of the company's holding company, section 36(1) does not do this in the case of a holding company's holding company. By way of example, a holding company in a group can often merely be an intermediate parent and can itself have a further holding company.
The amendment proposed here would extend the requirements in section 36 (1) so as to require that a transaction between a director of a holding company, on the one hand, and that holding company's own holding company in turn, on the other hand, must also be disclosed. It is going further back up the chain. Senators will be aware of the complexity of company structures these days when very few companies have not at least one or two holding companies back up the tube. We had not gone far enough back the tube in the original drafting and we are now doing that.
I also welcome this. It is absolutely crucial. To put it into context, what is happening at the moment with companies changing names or changing premises and continuing to trade could actually be done by a sophisticated holding company structure. If this change had not been made in the legislation you could still have people setting up holding companies rather than different companies and moving back up and operating on the basis where they might be untouchable. It is critical that these links in the chain are included in the Bill.
I am very pleased that this has been included in the Bill. In this day and age it is very difficult to chase bad debts and to pin down who actually will pay you money that is owed. I must say I welcome this added protection in the Bill.
Section 39 sets out special disclosure arrangements for banks by virtue of section 36(6). The detailed disclosure we are requiring in this case of loans to directors of normal companies will not apply to banks. For banks the more limited requirement will be to disclose the total amount lent, the number of directors involved, and so on. However, to offset this less wide ranging regime for disclosure in the case of banks, section 39 sets out some further special arrangements for banks. The first of them in section 39(1) requires the banks to keep a register containing copies of all loans, quasi-loans and other relevant agreements for a period of ten years from the date of the loan and so on. It has been represented to me that the period of ten years proposed is unduly onerous and this amendment will reduce the period involved to five years. I think that is a practical amendment in this day and age.
Ten years is a far more reasonable period than five years. I disagree with a point the Minister has just made. It is not more onerous to keep it for ten years rather than five years. The transaction has to be noted. What we are saying here in this Bill is that after five years you can burn it. The original drafting which required the bank to keep a copy of any transactions with its directors coming under this section for ten years is far more fail safe from our point of view. I will put it this way to the Minister. Many a loan would not be paid back within five years. Five years would be a normal repayment for any kind of loan. You are really in many cases asking people to keep a record of it for a further couple of years after that. It seems that five years is a very short period of time. It is particularly short in relation to the amount of time it takes, say, the Fraud Squad of the Garda or some other crowd to investigate the workings of a company.
In the past five or six years attempts have been made to work out internal loans and movement of finance between holding companies within a group. This was impossible to do. I recall one infamous case of a very large company which went bust in connection with the construction industry. I remember the best known receiver in Ireland saying, when the Fraud Squad were called in: "If the best firm of accountants in this city could not get to the bottom of it in two years, good luck to the Fraud Squad." It seems that the time period we are talking about here is quite reasonable. We are not asking them to do something extra. That is why the argument about its being more onerous does not stand up. We are just saying: "Hold on to your records for another couple of years." The records are not very heavy. It is not as if we are talking about large files. We are just talking about something quite small because the number of directors in a bank is not going to be large, and the number of transactions involved is not going to be very large. I am not convinced at all by the argument that we need to change this from ten years to five years. I would like to hear more on that.
I agree fully with what Senator O'Toole has said. I think the Minister did not really make the case for reducing it to five years. He said it was felt that five years would be more in accordance with current practices, procedures, and so forth. Senator O'Toole has made a fairly compelling case. The extra problems for those concerned from the five to ten years would not be sufficiently onerous to merit change. We are talking about confidence coming from this Bill, confidence that all the proper procedures will be followed. We have seen how matters can be frustrated, held up and hidden for four, five, six, seven or eight years. I would like the Minister to think a little bit more about this section.
It seems that if the banks are exempt in the loans areas and they just keep the register rather than make the same disclosures as everyone else in the preceding section, I cannot see why they should continue to get exemptions and concessions. Therefore, what is relevant in trying to get hold of people in an earlier section should be applied where you have made an exception to the banks. The banks have been exempt on the question of loans except for the keeping of a register. If we are really trying to make sure that everyone complies with the law we should tie up the loopholes. Ten years is the period in which to do it in and not five.
Before the Minister replies there is one example I want to give which I would like the Minister to consider. I am not sure if I can refer to the best known bank in the smallest State in Europe, which is ensconced in the middle of a capital city of a Mediterranean country — I am talking about the Vatican bank. The investigations into the death of a director of that company have now continued for four years and they still have not got to the bottom of it. If under this kind of legislation the books could be closed in a year's time, or in less than that, and frustrate an investigation that would be totally wrong. That is a case in point. The financial structures are so complicated it can take a long period of time to find out what exactly has been happening and where exactly money is.
If, for instance, this was done through a system of loans or money transferred to holding companies in different States and back again, in other words to launder it through a series of holding companies, it could well take a couple of years before somebody would smell a rat and it would take a couple of more years before it was fully investigated. I think the Calvi example is a perfect one of how international finance can put down the shutters and make it almost impossible to get the bottom of things. It is in everybody's interest to keep it as open as possible. That is an example of where we might need ten years.
Yes, it depends on how you come at this Bill, by and large. On the one hand one could come at this Bill from the point of view of directors in general not being of good intent and therefore assume that everything might go wrong and try to catch everything that might go wrong. That is one way to come at it — to assume that most directors want to do the wrong things. The other way to come at it is to assume that directors, by and large, want to do the right thing and in that context not to place too onerous a burden on business.
I want to stress, from an overview of this Bill which is very important, that I am particularly keen that we catch the cowboys in this Bill. I am also determined that in this Bill we do not further stifle small business and business in general that we are desperately trying to get off the ground. Every time I look at a section of this Bill I have to remind myself that that is precisely what we want to achieve at the end of the day — to prevent the crooks and the cowboys but at the same time to ensure that people who genuinely want to run their business properly have nothing to fear from the legislation.
I also do not want to get them into the business of form filling. The small firms association and the exporters' associations and all the associations I deal with continually lay before me the thousands and thousands of bits of paper the State throws at them every year. As a general philosophy I am trying to reduce the onus on particularly small companies in dealing with the State, not increase the amount of bureaucracy and burden laid on them. That is a general philosophic point which I know Senators would agree with. Having said that, I am taken with the points made. Perhaps the volume might not be that great. I will agree to withdraw the amendment and let it stand at ten years.
Subsection (2) of the Bill provides that a bank has to make available at not less than 15 days notice transactions it has entered into for inspection by the members of the company. Is 15 days not a rather short time? Normally people go on holidays for 15 days and that could be the period people are away. I note it says not less than 15 days but certainly that would be interpreted as 15 days, would not less than 30 days or more be more suitable so as to give people an opportunity to examine the books of the company?
I do not feel strongly about that, but 15 days is a pretty normal time to allow for the inspection. Overall section 39(2) provides that the bank or its holding company must, before its AGM, make available for inspection by shareholders, a statement containing the particulars of transactions, arrangements and agreements which but for the fact that they are exempt from doing so, the banks would be required to disclose it in its annual accounts. The statement must, in addition, also be made available for inspection by the shareholders at the AGM itself. However, unlike the Companies Register provided for in subsection (1), the details which have to be disclosed before that AGM are those which the bank would be required to disclose only with respect to the last complete financial year preceding the meeting, that is, not the preceding ten financial years as in subsection (1).
This subsection is also subject to subsection 40 which means that any relevant transactions, arrangements and agreements which do not exceed £1,000 in value for any one person can be ignored. I take the point made by the Senator. I think 15 days would be about the right figure.
I understand amendment 35 has already been discussed.
Section 47 substitutes a new section 195 in the 1963 Act and has to do with the particulars to be contained in the Companies Register of Directors and Secretaries. As regards directors, subsection (2) would currently require particulars to be kept in the case of each director of any other directorships of companies registered in Ireland. Such information is obviously useful for anyone who is trying to establish a director's track record and the track record of any other companies that he or she may have been involved in. It has been suggested to us that those who are interested in establishing such a track record would find it useful if the Companies Register of Directors also contained information about offshore companies with which a particular director was associated. This is the intention behind the amendment.
I agree with the argument put forward but I have some difficulties. I am not speaking against the amendment. I support the idea of the amendment but I am unclear about a number of things. First of all — perhaps it is somewhere else in the Bill and I missed it in my reading of it — concerning particulars required under section 47, including this one concerning companies or holding companies or whatever incorporated outside the State — on whom is the onus to provide that information? This information must be kept.
Is it specified somewhere else in the Bill who, in fact, has to give the information? Are there penalties on a director for not disclosing that information? I remember reading in some section that there was a requirement on directors to provide certain information but I just want to be re-assured. First of all, on whom is the onus to get the information? On whom is the onus to provide it? Secondly, how can we look at the area of those companies incorporated offshore?
May I also raise another point on that? We are now in the European Community and in this Bill we have talked about keeping lists of directors, etc. I am wondering is there scope here for a pan-European or a Euro agreement where there would be a transfer of information on the directorships of companies? Given the type of international co-operation there is in other areas, the areas of law, of customs and various other places, it seems that it would be something we might look at, that our Companies Office might have access to information from other Companies Offices. Perhaps the Minister could respond to that particular point?
On the point of who is responsible, the legislation puts the responsibility on the company to get this information and maintain it on its register and to supply it to the Companies Office. The onus is being laid on the company as an incorporated body. With regard to its extension elsewhere to offshore companies — that is clearly the intention. While I am reasonably sure that it can be policed, I must confess that I am not certain because while it is legally required to get the information whether one gets it or not is obviously another day's work.
I am happy about what this section does. It is very important when dealing with directors that you can establish their track record with other companies. That is what the legislation says. What we are trying to do here is to extend that to companies of which they may be directors outside the State. I am satisfied they would actually get that information. I have to get information with regard to the EC situation. I do not have that at my finger tips.
I am still not clear about a particular point. The Minister made it clear that the onus is on the company to provide the information. I accept that. Take a particular situation where a company needs to be investigated. I also take the point that most company directors do not tend towards evil. In a sense trying to legislate always for the exceptions probably makes bad legislation. At the same time, I want to understand the position where I am a company director and an investigation of my company shows that the information which I have on a particular director is not complete. In other words, it has now come to light that this person is a director of another company which we were not aware of. I have now, as company secretary, not supplied the information required. It was not my fault that I did not do it, I attempted to find it, but I was not given the information. Under the legislation, the Minister said that the company is in breach of legislation at that point. What I want to know is, who do we move against and how do we move against them in that case?
The Senator could consider bringing in amendments to put the onus on each director to supply the information. I wonder if it is necessary to be that specific about it? What we are saying to each company is that you need to get this information from any director. Implied in that clearly is that the company should not take on board any director if they are not satisfied they have got the full information. We have to put the onus on somebody and we felt that in putting the onus on the actual company before they would take any director on board they would make sure they had got all the information required about that director. You could argue that further tightening is necessary and put an additional onus on the director. That, in some way, might take the pressure off the company. In the end, it is important that the legal entity of the company in putting together a board of directors should be obliged before they take any director on board to satisfy themselves that they have the information which this particular legislation would require.
I agree completely with the point of view the Minister is putting across. I agree with the amendment and I agree with what is being attempted in this case. I am worried about the situation where we are perhaps actually building in a loophole here. The company wants to do its best, is acting honourably and has been frustrated by one dishonest director. I cannot frame a particular amendment here because I do not want to make the Bill cumbersome. Perhaps there is a loophole here and the Minister could examine that point. I do not know what is the answer. I believe it is right to put the onus on the company to provide the information. That has to be done. I agree with that but it seems it would be unfair to hold the company responsible for the dishonesty of an individual over whom they did not have control. It seems there is something contradictory there. It would be difficult for a company to find themselves in that position.
I shall look at that. Again, the major argument is that if we lay it on each individual would be director to come forward with all this information, do we go beyond that delicate stage to where we are discouraging people from becoming directors of anything? That is a point I want to be very careful about. If some one comes up to you and says; "Would you like to be a director of a company? Here are the following 45 sheets; would you fill them in and send them back?" You might say; "I will be a consultant or something; I am not going to be a director because I cannot just get into that." We might just overdo it a little bit. The 1963 Act always laid the onus on the company. If the company have the legal responsibility of getting and supplying the information then we are being a bit more sensitive about discouraging directors. There is a view which I get from business at the moment that it is increasingly difficult to get people who are legitimate business people to come forward and take on the onus of being a company director.
There is increasing evidence of people supporting companies in other ways, becoming a consultant to a company, because the directorship is too onerous. That is very much a bit of business practice I have seen. If you make it overonerous on the individual director as opposed to the company, I think that would be the result. It is a matter of judgment. There is the risk of making it increasingly unattractive. By laying this section on the actual director you might be just up-front scaring off people whom you actually need to do a job in running the company. It is not a country that is coming down with directors who are ready to step forward to put their names in and take on all these onerous duties which we are proposing. The balance is probably just about right, particularly given our need to get more companies up and running.
Some might see it as a stress to any would-be director listening anywhere. We want directors in this country to come forward: we want them to establish businesses. Well-meaning, honest directors have nothing to fear from this legislation. It is not a witch hunt against directors. It is to enable us to weed out the cowboys. I have to say that at every possible opportunity. This is simply saying to the company through its company secretary the Companies Registration Office needs the following information on all your directors. I think for the moment that is enough.
I agree with the Minister very much. This hits the balance. It is more or less right in this section. It is a fairly delicate one and there are, in fact, later sections in the Bill dealing with directors where I think the Bill itself does the very thing the Minister is arguing against. I will leave that until we come to these sections later. The Minister has got it right in this one.
I also agree with what the Minister and Senator Manning have said. The last thing I want to do is to tie down companies especially small companies with tiers of bureaucracy and forms to be filled. I know in dealings with Departments how difficult it is to get through all the paper work. I certainly do not wish that on anyone. Perhaps the Minister might take away the idea and come back and assure us that somebody who was guilty of not disclosing relevant information would be covered as is done in other sections. I want to be assured that somebody who does not give clear information to the company is in some sense wrong or guilty or could be held to be wrong or guilty. This could well be done without changing this section at all. In the sections which deal with disclosure of information it could be implied that failure to provide relevant information would be an offence and that relevant information would be the type of information which we seek to put together in section 47.
I shall certainly think about it. I have listened very carefully, but I am very concerned about the balance of the legislation. It is a major concern of mine in this whole legislation to ensure that we continue to get people setting up businesses and becoming directors. I am genuinely worried that people may take a view of this Bill that it says, whatever else you do in business from now on, do not be a director. Be everything else, be a consultant, be an adviser, be a non-executive director, be a chairman, be in attendance at the board, be all those things but do not be a director. I really want to make sure that that message does not get out. For that reason I will think very much about what the Senator said but I am not disposed at this stage to go along with it.
I move amendment No. 37:
In page 46, subsection (3)(a), line 6, to delete "five" and substitute "ten".
This really is just a repeat of the arguments which I made some minutes back on the question of keeping records in the bank. This section requires the company to maintain on record a list of directorships held by each of its directors for the preceding period of time. The preceding period of time mentioned here is five years. I am saying it is too short a period. I think it is too short a period because of the experiences we are having of the length of time that it takes to investigate the affairs of a company. This is not something that puts an extra onus on the company. All we are saying to them is that they do not have to burn those records for another five years. We are not saying to them they have to do something extra each year. We are just telling them to hold on to the records.
I take it that there is no statute of limitations on this legislation here, that it can be followed back. If that is the case then it strengthens my argument for having the information for some longer period. It does not include further form filling. It is important to say that. It does not put any extra work on the company director, or the company secretary or anybody else. It is just a matter of holding on to the records. Neither does it make life more difficult for the Companies Office or for the Department. All it means really is that a list, a sheet of paper in effect, is held for some time longer than is stated in the Bill. I am not asking a lot and in all honesty I do not believe it is putting any extra work on the company; it is not putting any extra work on the Department and it could be very useful for the investigation of companies particularly when we know the kind of synergy companies have and the way they can interweave with holding companies, with companies incorporated offshore and the length of time it takes to carry out the investigation. I recall that one of our judges was sent out earlier this year to investigate the movement of moneys in particular banks through Europe and Central America and I think she spent something like two months out there and still has not got to the bottom of the matter, even with access to all relevant experts and experienced people.
We are talking of long periods of time here. I would like to feel that information could not be destroyed. It is one of the most important things in terms of investigation and in the guarding of rights and privileges et cetera that information would not be deliberately destroyed. What we are saying here really is that after five years you can take it out and burn it. What I am saying is just leave it there in the company; just maintain the records, hold on to them for a longer period of time. It is not any more difficult, surely, than holding the annual report of the company for a period of time. It is certainly not much more onerous than that.
I would like to consider what the implications are — as I read it, it says "particulars of any other directorships of bodies corporate incorporated in the State held by him or which have been held by him shall be kept on record for a period of five years". A particular person could have been involved in a number of companies that have failed, failed for legitimate reasons. It is a bit unfair. As the Minister said earlier we want to encourage people to become directors of companies. If a director has been involved in, say, three companies that have failed for legitimate reasons in years one to five and this information has to be entered into the register of a new company that he is being appointed to, that would be unfair. Certainly it would act as a deterrent to directors becoming involved in new companies. I believe that five years is adequate. We do not want to put any additional obstacles in the way of attracting directors to companies.
Before the Minister replies, I accept the point Senator Mulroy is making. I am not making the case here in terms of a hit list as it were. I will be talking about that later on in terms of the Companies Office legislation on another day. It is not intended here that people, because they happen to be in a company that has failed should be in any way excluded. We are only saying that when a director joins a company certain information is made available. As I understand it — and the Minister can respond to it — it does not have to be public information; it is information that is just there, not for the general public, I presume it is information that has to be available if an investigation should take place. It does not have to be published information, as far as I know. When a director joins a company I think this information is kept there. Information has to be put together anyway.
It may well be as Senator Mulroy says that a person joining a company today should not need to give information about where he or she was more than five years ago. I accept that argument. I am going a bit further. I am talking about somebody who joins today with a particular amount of information and this information is put on the records. Let us say it only goes back five years, I feel that that information should be kept for another five years which I know is a slightly different point. I accept Senator Mulroy's argument on the point he made.
The five-year information, of course, will be kept. There is no question about that and it will also be with the Companies Office. My problem is going to ten years. I have no objection to laying the extra five years on the banks because of the few transactions and the large resources, but in this case my real worry is the transition arrangement, not so much the overall principle. There are over 100,000 companies in Ireland. I would worry about laying it on them.
I accept your argument. The information that I am talking about would be kept in the Companies Office. I accept the argument made by Senator Mulroy that it is a bit unfair to go back before five years in a starting-up position.
Amendment No. 38 is consequential on amendment No. 39 and they may be discussed together.
The purpose of this amendment is to delete subsection (9) of section 47, the inclusion of which in the section is incorrect. It was first inserted into section 195 of the 1963 Act by way of an amendment to the Companies (Amendment) Act, 1982 but there was specific reason for its inclusion at that time. The 1982 Act introduced new requirements for notifying the Companies Office about a company's first directors. Such first directors from 1982 onwards now have to be notified to the Companies Registration Office before incorporation of the company. Therefore, the present subsection (9) of this Bill was in effect a transitional provision for the purposes of the 1982 Act only and as such is now redundant. We should omit it.
Did any of the submissions the Minister received over the summer indicate that this should not have been part of the Bill?
One particular submission did point it out to us.
Subsection (13) of section 47 is unnecessary in view of the provisions of section 26, subsection (1) which already applied all of part 3 of the Bill to shadow directors. There is, therefore, no need to apply this section now specifically to shadow directors and the amendment will, therefore, delete subsection (13) which is now unnecessary.
I agree, it is absolutely unnecessary.
This amendment is self-explanatory. Subsection (14) is clearly an interpretation provision in relation to both sections and not just for the purposes of subsection (14) itself. For that reason in page 47, line 28, we will want to delete "subsection" and substitute "section".
