Léim ar aghaidh chuig an bpríomhábhar
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Seanad Éireann díospóireacht -
Thursday, 25 Nov 1999

Vol. 161 No. 6

Companies (Amendment) (No. 2) Bill, 1999: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Is cúis áthais dom a bheith ar ais arís i Seanad Éireann chun labhairt ar an mBille seo agus tá súil agam go gcuirfidh sibh go léir spéis sa Bhille an-tábhachtach seo. Le bhur gcomhoibriú tá súil agam go mbeidh sé tríd an Teach seo go han-tapaidh.

I am very pleased to bring forward to the Seanad these proposals in the area of company law. This is the second time this year that I have brought proposed company law legislation before Seanad Éireann. As Senators will be aware, the Companies (Amendment) Act, 1999, which was enacted earlier this year, exempted price stabilisation actions in the context of the issue or offer of securities from the insider dealing provision of Part V of the Companies Act, 1990, and from certain of the disclosure requirements in Chapter 2 of Part IV of the same Act.

The proposals in the Companies (Amendment) (No. 2) Bill, as passed by the Dáil, provide for amendments to company law in a number of areas. The main amendments are in the following areas: amendment of the Companies (Amendment) Act, 1990, relating to examinership, which is dealt with in Part II of this Bill; amendment of Companies Acts, 1963 to 1990, and the European Communities (Accounts) Regulations, 1993, to provide for the removal of the statutory audit requirement for certain private limited companies and partnerships – Part III of this Bill covers this; additional requirements in company law to tackle the problems created by Irish registered non-resident companies; amendment of Part XIII of the Companies Act, 1990, which deals with investment companies; and amendment of section 21 of the Companies Act, 1990, which provides for the publication or disclosure of information that has been obtained under sections 19 and 20 of that Act.

The proposed changes in these areas are dealt with in Part IV of this Bill. A number of other changes are also being made in Part IV in relation to the timeframe within which summary prosecutions must be initiated, as well as amending section 16 of the Investment Limited Partnership Act, 1994.

It might assist the House if I briefly summarised the origins of the legislation in each of these areas. I will then go on to explain in somewhat more detail the content of some of the provisions themselves. Where relevant, I will draw the attention of Members to the important amendments introduced to this Bill during the various stages of its debate and subsequent passage through Dáil Éireann.

The proposals for the refinement of the examinership legislation and the removal of the statutory audit requirement, for certain private limited companies arise directly from the report of the company law review group, which reported to the then Minister in December 1994. The report was published in February 1995.

At an early stage, the decision was taken to implement, on a phased basis, those recommendations in the report which were considered appropriate, starting with those in relation to examinership and the removal of the statutory audit requirement. However, for various reasons, the proposals were not progressed to draft legislation until the present Bill was published some time ago. That is not to say that other legislation was not progressed in the company law area because, in the interim, regulations to provide for the uncertificated transfer of securities were made pursuant to section 239 of the Companies Act, 1990. The Irish Take-Over Panel Act, 1997, was also enacted. One European Union directive in the company law area, dealing with the application of the second EU company law directive to subsidiary companies, was transposed into Irish law. Two regulations were made consequential on the establishment of the Irish Stock Exchange Limited as a separate entity, from being the Irish unit of the International Stock Exchange of the United Kingdom and the Republic of Ireland. Furthermore, work on tack ling the problems created by Irish registered non-resident companies, to which I will refer shortly, also took up a very significant amount of time during this period.

The provisions in Part I of the Bill are standard to most legislation. The collective citation of the Bill was amended in the Dáil to take account of the enactment of the Companies (Amendment) Act, 1999, dealing with stabilisation – to which I referred earlier – and to include a reference to the Companies (Amendment) Act, 1990, which had been omitted from the Bill as published.

Turning to the proposals to refine the examinership process, it will be recalled that examinership was introduced into Irish company law in the Companies (Amendment) Act, 1990. The underlying rationale for the examinership process is to assist companies that are in difficulties to address those difficulties, if at all possible, rather than have the company either put into receivership or liquidation. The Company Law Review Group was representative of a wide range of interests. It concluded that the examinership process, which involves the impairment of the rights and interests of creditors and competitors of any company which avails of the process, might be justified in the case of ailing but potentially viable companies that have been unable to ensure their survival by voluntary arrangements with their creditors, but where the imposition of a scheme of arrangement might facilitate their survival without undue impairment of the interests of their creditors, their competitors or the commercial environment (paragraph 2.11 of the report).

Within the review group, and in many of the submissions made to the group, there was the belief that examinership, albeit in a modified form, is a useful mechanism which should be available in Irish company law (paragraph 2.8 of the CLRG report). The group took the view that there should be a greater focus on viable companies and more recognition for the position of creditors. In general, I have accepted both the conclusions and recommendations of the CLRG and the present Bill will implement most of its recommendations.

To achieve a better focus on viability the group recommended that the examinership process should be modified so as to provide that the court should not appoint an examiner to a company unless there is a reasonable prospect of survival of the company or the whole or part of its undertaking. Paragraph (b) of section 5 will now insert such a requirement into section 2 of the Examinership Act, 1990. To assist the court assess whether this is the case, the group recommended that a report of an independent accountant should be available when the petition for the appointment of an examiner is made. In this regard section 7 will in future require the submission of such a report and sets out the matters that must be contained in the report. This is the material that is compiled by an examiner under section 16 at present but would only be available 21 days after an examiner is appointed. A small number of additional matters have been added to what must be included in the report. For example, paragraph (j) requires details of the extent of the funding that is likely to be required during the course of the examinership.

It is recognised that in exceptional circumstances it may not always be possible to have the report of the independent accountant available to accompany a petition for the appointment of an examiner. Section 9 contains provisions to cater for this eventuality. A ten day period of interim examinership will be allowed during which such a report may be prepared, subject to meeting the specific terms contained in the provision.

Following discussions at Dáil Committee Stage two amendments to this section were agreed. They made it clear that when the ten day time limit expires on a Saturday, Sunday or public holiday, the deadline for submission of the independent accountant's report is extended to the next working day. Because of the changed requirements to demonstrate a reasonable prospect of survival and the preparation of the independent accountant's report a number of consequential amendments are necessary to the Examinership Act, 1990. These are contained in a number of sections. For instance, the amendments in sections 8 and 12 are directly consequential on the introduction of the reasonable prospect of survival requirement. Section 11 makes appropriate provision for the manner of making available copies of the independent accountant's report to the company and other interested parties.

Section 14(a) is consequential on the fact that the court will have the independent accountant's report available at the petition stage and reduces the period of examinership from three months to 70 days. The possibility of an extension of up to 30 days by the court contained in section 18(3) of the original Act will remain an option.

In relation to giving more weight to the position of creditors who have to bear the brunt of the pain in an examinership, by virtue of the amendment contained in section 10 of this Bill they will now have a statutory entitlement to be heard when the petition for the appointment of the examiner is being considered by the court.

While the expenses of an examiner will continue to be payable in priority to all creditors, secured and unsecured, any liabilities certified by an examiner under section 10 of the original Act will no longer rank in priority to secured creditors. However, such certified expenses will continue to have priority over floating and unsecured charge holders. The necessary provisions to effect this change are contained in section 28.

A number of the other changes are being made to the examinership process. Section 6 is designed to remove the requirement contained in the 1990 Act whereby any company, which is directly or indirectly supervised by the Central Bank, can have an examiner appointed to it only if the petition is presented by the Central Bank. By virtue of the amendment contained in section 6 this will remain the case in respect of credit institutions, whether they are banks, building societies or such like which operate as companies. However, in the case of other companies which are directly or indirectly supervised by the Central Bank, the company or its members, directors or other interested parties, or the Central Bank itself, may individually or collectively present a petition to the court for the appointment of an examiner to such a company.

In the light of the experience with cases which have come before the courts, and as recommended by the CLRG, a specific obligation is now being imposed by section 13 on all parties involved in the examinership process when dealing with the courts to disclose all material information to the court. They must also exercise utmost good faith at all times.

By virtue of the repeal of section 5(2)(h) of the original Act contained in section 14(b)(ii), banks will no longer be prohibited from exercising their right of "set off" when an examiner is appointed to a company. This provision will enable a bank to effectively establish its net position, whether positive or negative, in relation to a particular creditor to whom an examiner has been appointed. It is this net position that will then obtain as to whether moneys are owed or owing to the bank.

Section 15 introduces a restriction on what payments can be made during the examinership process in respect of liabilities incurred prior to the presentation of the petition. In future, but subject to the discretion given to the court in subsection (2), such payments can only be made where the independent accountant's report specifically recommends that this be done. The idea here is to ensure that all interests, including the court, will be aware of what is proposed and interested creditors who are opposed to such payments will have the opportunity to express their concerns to the court.

Sections 16 and 17 are designed to clarify the law in circumstances where a receiver or provisional liquidator has been appointed to a company which subsequently becomes the subject of a petition for the appointment of an examiner. Section 18 amends the circumstances under section 7(5) of the 1990 Act whereby an examiner can repudiate a contract. In future this will be limited to circumstances where the contract is entered into after the examiner is appointed to the company.

At Report Stage in the Dáil an additional provision was introduced to section 20 which amends section 12 of the 1990 Act so that the statement "In examination (under the Companies (Amendment) Act, 1990)" will in future have to be included on documents issues by a company following the appointment of an examiner. It was considered that the pre-existing wording "under the protection of the court" could mislead some creditors.

Arising from the repeal of section 17 of the original Act the court will have the independent accountant's report when considering the initial petition. Section 21 is designed to set out how the court can deal with matters that come to its attention which would previously have been dealt with under section 17(d). Section 22 makes adjustments to section 18 of the Examinership Act consequential on the fact that the court will already have decided to appoint an examiner. It also adjusts the applicable timeframes and arrangements that obtain in relation to the provision of an examiner's report to parties concerned.

In various ways sections 23 and 24 deal with adjustments in relation to matters to be considered by, and the timing of meetings of, members and creditors to consider an examiner's proposals. It will no longer be necessary for a class of members to approve the examiner's proposals before they can be confirmed by the court. In circumstances where a company has had to have an examiner appointed the CLRG were of the view that what was an effective veto on an examiner's proposals by members of the company was no longer appropriate.

A further provision was added to section 24 in the Dáil which inserted a new subsection 4A into the original Examinership Act, 1990. This was done in order to ensure that a scheme of arrangement, put together by an examiner in a group situation cannot deplete the assets of one company in a group to the detriment of its creditors in order to benefit the members or creditors of another related company or the main company.

Section 25 will put in place more specific provisions as to the manner in which the examinership process handles the position of a guarantor for the debts of a company which goes into examinership. First, it provides that a guarantee can be enforced but retains the prohibition on this happening during the examinership process. Where a creditor proposes to enforce the guarantee, any rights to vote attaching to the creditor by virtue of the debt must be passed to the guarantor by the creditor. Where a guarantor makes a payment to the creditor, his or her right of recovery, under the examiner's scheme of arrangement, is also provided for in this section. Substantial amendments were made on Committee Stage in the Dáil as a number of potential difficulties were identified which could arise in the operation of the some of the original subsections in the published Bill. However, these amendments to section 25 (A) (1) (c) did not change the general approach to guarantees in the section.

Section 26 contains specific provisions in respect of leases. There was considerable debate on the provisions of this particular section, on both Committee and Report Stages in Dáil Éireann. This section specifically prohibits an examiner's compromise or scheme of arrangement from containing proposals which would result in a lessor being made to accept a reduction in the amount of rent or other payments due in respect of a lease of land or property after the scheme of arrangement is approved. Similar pro visions are made in respect of property other than land where the value of such property is substantial. Of course, like all other creditors, a lessor will invariably have to accept a write down in respect of amounts owing to him or her prior to the scheme of arrangement being proposed and agreed.

There is guidance contained in this section which can be used by the court in determining whether a lease will be considered to be substantial. This was amended on Report Stage in the Dáil so that the guidance given to the court will now refer only to the length of the unexpired term of a lease or hiring agreement. The court will, of course, also be able to take account of any other matters which it considers relevant in the particular circumstances of any case with which it is dealing. This section was also amended on Report Stage in the Dáil so that, where a lessor agrees, a scheme of arrangement can include provision for the lessor accepting a reduced rent, post-examinership.

That covers most of the provisions in this Part of the Bill. The remaining provisions in this Part to which I have not specifically referred, make modifications or adjustments which were recommended by the Company Law Review Group or were consequential on other amendments being made.

In relation to the removal of the statutory audit requirement for certain small private limited companies contained in Part III of this Bill, this proposal was first recommended by the Task Force on Small Business and endorsed by the Company Law Review Group. More recently, this proposal has been included in Partnership 2000. It is important to understand that this provision will only be available to certain private limited companies and certain partnerships. The partnerships in question were brought within the requirement to have their accounts drawn up and audited by the European Communities (Accounts) Regulations, 1993 (S.I. No. 396 of 1993), and are partnerships where all the members have effective limited liability.

To avail of the exemption from audit, the company will have to satisfy the specific requirements set out in section 32. I would like to make a few comments at this point. One is that the exemption will only be available to a company to which the Companies (Amendment) Act, 1986, applies. The particular relevance of this provision is that a number of companies, particularly guarantee companies, are outside the scope of the 1986 Act and such companies will not be able to avail of the exemption. Following from the Second Stage discussion in the Dáil, the turnover threshold at which companies can avail of this exemption was raised from £100,000 to £250,000. The number of companies which avail of this exemption will be closely monitored by both the Companies Registration Office and the Department of Enterprise, Trade and Employment. I would draw attention to the fact that the exemption will not be capable of being availed of by a company which does not keep its returns to the Companies Registration Office up to date.

Section 33 contains a mechanism that will enable members of the company to insist on having the accounts audited. It also sets out supplemental requirements in relation to information that must be contained in the balance sheet, which the directors will still be obligated to prepare – specifically it must contain an acknowledgment by the directors of their obligations under the Companies Acts 1963-9 to keep proper books of accounts and to prepare accounts which give a true and fair view. This is very important.

Section 34 contains provisions in relation to the manner in which the appointment of the auditor is terminated consequent on a decision of a company to avail of the exemption. In particular, certain information which the auditor has may have to be brought to the attention of the members of the company. Section 35 obliges the directors of a company to appoint an auditor where an exemption ceases to have effect. Section 38 contains the necessary provisions for the manner in which the exemption can be availed of by partnerships which, pursuant to the European Community (Accounts) Regulations, 1993, were brought within the requirement to prepare accounts and have them audited. Such partnerships, which I must say are not very common in this jurisdiction, are made up of partners, all of whom have effective limited liability.

Part IV is the miscellaneous part of this Bill and, as the name suggests, a range of proposals dealing with different areas are included here. It was extensively expanded during the passage of this Bill through the Dáil, as I will explain in a moment. Section 40 amends the Investment Limited Partnership Act, 1994, while section 41 extends the timeframe within which summary prosecutions under the Companies Acts may be brought. Sections 42 to 48 represent the company law part of the package of company law and taxation measures, approved by our Government earlier this year and designed to address problems arising from the abuse of Irish registered non-resident companies, or IRNRs as they are more commonly known.

An IRNR is a company which is incorporated in Ireland under Irish company law but is not resident here for tax purposes because the company is both controlled and managed from abroad. Therefore, the concept of residency in this context is in fact a taxation concept. In terms of what the IRNR problem involves, the central issue arising is that a structure which is used in a legitimate and fully transparent manner by many multinationals with operations here, is also used for undesirable activities worldwide, such as fraud, money laundering and other illegal activities. It is no exaggeration to say that the problems created by these IRNRs over recent years rank as one of the greatest threats to the reputation of Ireland as a jurisdiction that is well regulated.

While the number of IRNR companies which have been actually convicted of engaging in illegal activity abroad may not be that great, the fact that Irish registered companies were embroiled in controversies from locations as far apart as Russia to Mexico and Australia to Israel, as well as a number of instances within the European Union, meant that the problem was very serious and needed to be tackled head on. The IRNR taxation measures were introduced in the Finance Act this year by the Minister for Finance, Deputy McCreevy, and apply to new companies with effect from 11 February 1999 and existing companies from 1 October 1999. However, it is necessary to recognise that even with the changes which have been introduced in the Finance Act, the necessity to be able to effectively police and enforce the provisions had to be addressed also.

The basic change made in the Finance Act this year to address the IRNR problem is that subject to limited exceptions, every Irish registered company will now be tax resident in this State. However, based on past experience, making that change alone, unless it is capable of being and is actually rigorously enforced, is likely to prove to be ineffective. The main reason for this is that parties who use these companies are prepared to ignore their obligations under both tax law and company law and essentially put it up to the authorities to come after them. For instance, in 1995, in an article written in an international magazine, it was suggested to various parties that they could ignore requests for information from the Revenue Commissioners on the basis that the chances that they would be the ones pursued by Revenue would be rather remote. We cannot tolerate that. Accordingly, the provisions in sections 42 to 48, inclusive, cover a variety of aspects of the activities of companies, ranging from the imposition of requirements at the time of incorporation to the introduction of ongoing requirements. Thus, when in future people wish to incorporate a company, under section 42 they will have to show that it will conduct or undertake some activity in this State. This is designed to establish a real link between the incorporation of the company and the State.

Pursuant to section 43, for new companies, the subscribers will also have to ensure that the company has a person who is resident in this State as a director while, for existing companies, a transitional period of 12 months is being allowed before such a requirement becomes mandatory. Alternatively, it provides that a bond to the value of £20,000 has to be maintained by the company. The objective here is to ensure that the Revenue authorities and the Companies Registration Office have a definite person within this State whom they can go after where a company fails to comply with its obligations. In this regard, section 84 of this year's Finance Act introduced changes to the main Taxes Consolidation Act, 1997, so that the person who is a resident director of a company is a person who can be pursued to ensure that the company complies with its tax ation obligations. These obligations, in the first instance, would entail the registration of the company for taxation purposes or satisfying the Revenue authorities that it meets one of the exemption clauses in the relevant tax provision.

Section 44 contains supplemental provisions to section 43. It is designed to provide that where a company can show that it has a real and continuous link with one or more economic activities that are being carried on in this State, the company in question can be exempted from the obligations in section 43 to have a resident director, or indeed the alternative, to have a bond to the value of £20,000. It will be noted that the Revenue authorities will provide a statement to an applicant and, on submission of this to the Registrar of Companies, a certificate will be given by the registrar effectively exempting the company from the requirements to which I referred.

Provision is also made for the withdrawal of such a certificate where information of changed circumstances comes to the attention of the Revenue authorities. The section also contains a definition of what is meant by "residency" in the context of the new obligation being imposed in section 43 to have a director who is resident in the State. Following changes made in the other House, this definition is now equivalent to that in the taxation area.

Section 45 introduces a limitation on the number of companies of which a person can be a director or a shadow director to a maximum of 25. This is designed to tackle the problem created particularly in the context of IRNRs where multiple nominee directors appear to be the order of the day. The prospect of a person being a director of many hundreds of companies cannot but bring the company law regime into disrepute.

Senators will note that this section contains reasonable grounds for exemption in respect of what might be termed legitimate multi-directorships and, in the case of group situations, such multiple directorships will be counted as one. For example, where there is prior screening of directors, as happens in the case of companies which operate in the regulated sectors, the holding of such directorships can be exempted from the prohibition on holding more than 25 directorships. The section contains a mechanism whereby applications can be made in the first instance to the Registrar of Companies and subsequently, in certain instances, appeals can be made to the Minister. The manner in which directorships are held when the provision is commenced is also addressed.

Section 46 substitutes new provisions for section 12 of the Companies (Amendment) Act, 1982, in relation to the striking off of companies which, inter alia, fail to make annual returns. In recent years, the compliance rate by companies with an obligation to file their annual returns has been nothing short of abysmal with only 13% of companies meeting their obligations on time in 1997. We will not tolerate this any further. While many of these companies are undoubtedly IRNRs, it does not solely involve IRNRs. Under the replacement provisions, the Registrar of Companies will be entitled to move to have a company struck off where it is behind for one year or more in the making of annual returns. A number of refinements are being made to streamline the whole procedure, including, for example, the fact that the Circuit Courts will be able to handle applications for restorations and the courts will also be able to impose personal liability on directors for the debts of the company in appropriate cases.

The new provisions being substituted by section 46 also provide that where the Revenue authorities find that their approaches to a company to get the necessary information to enable them register the company for taxation purposes are ignored or not responded to, the authorities will be able to notify the Registrar of Companies to this effect. On receipt of such notification, the Registrar of Companies will be able to write to the company informing it that if it does not comply with its obligations to provide the necessary information to the Revenue Commissioners, he or she will move to strike off the company. Where people ignore their obligations to respond and supply information to the Revenue authorities, as happened in the past, the company may be struck off and dissolved. This is to ensure that where people are prepared to ignore their responsibilities, effective action can then be taken against them.

In section 51 of the Companies Act, 1990, a revised section 195 was inserted into the Companies Act, 1963. Subsection (8) of the new section 195 would have permitted a director who had resigned from a company to notify that fact to the Companies Registration Office. Up to then, the company was obliged to make the notification. The onus is now being placed on the director. While the obligation remained on the company, the facility was introduced to cater for situations where a company failed to make the notification and the former director would now, as it were, be able to correct the public record.

However, various difficulties were seen with this provision, most notably that it could result in notifications being made to the CRO and no director would then be on the public record in respect of a company. Section 47 provides for the deletion of the subsection (8) and the substitution of a different mechanism to facilitate directors who have resigned to make the notification to the CRO. These are set out in new subsections 11(A) and 11(B) contained in section 47.

Section 48 is tied in with the amendments being made to section 47 and will cater for the situation where the records in the CRO end up showing that there is no person recorded as being a director of a company. In such circumstances, the Registrar of Companies will be able to move to have this company struck off. I emphasise, however, that by virtue of the detailed procedures contained in the previous section, the company will have had fair warning that a process had commenced that could result in the records in the CRO not showing any director being appointed in the company in question.

The purpose of the proposed amendment to section 311 of the 1963 Act in section 49 of this Bill is to provide a similar facility to make former directors personally liable, as contained in section 46, in the case of the strike off of a defunct company where the officers continued to operate as if the company had not been dissolved.

Section 50 provides for technical adjustments to take account of the amendments being made to section 12 of the Companies (Amendment) Act, 1982, in the amendments to section 46 of the Bill which, as I outlined, make provision for the striking off of companies for failure to file annual returns or to submit the necessary information to the Revenue Commissioners. Section 51 is also of a technical nature and reflects the changes made to section 311 of the 1963 Act to which I referred.

Under section 368 of the Companies Act, 1963, provision is made for the manner in which matters are to be done to or by the Registrar of Companies or, in his absence, to or by such person as a Minister may from time to time authorise. Up to recently, the assistant Secretary General in the Department of Enterprise, Trade and Employment was the Registrar of Companies. However, the office of registrar has been assigned to the principal officer in the Companies Registration Office. Some doubts have been raised in respect of actions that were done by the assistant registrars over the years in terms of whether in discharging their functions, for instance in signing certificates of incorporation or dealing with the registration of mortgages and charges, they were acting properly in the absence of the registrar. Section 52 addresses these issues.

Section 53 amends section 21 of the Companies Act, 1990, which provides for the publication or disclosure of information obtained under sections 19 or 20 of that Act. This arises under section 19 as a result of the Minister directly requesting or authorising an officer to obtain information from a company as a preliminary step to determine if any irregular activity may have been carried on in the company or under section 20 as a result of entry and search on foot of a warrant issued by a District Court judge. The sections contain specific details regarding the matters that may be examined and the procedures to be followed.

When section 53 was first introduced on Committee Stage in the other House, which was dealt with by the Select Committee on Enterprise and Small Business, the focus of the amendment was to extend the list of competent authorities defined in subsection (3) to which disclosure may be made, pursuant to subsection (1). However, arising from the debate on Committee Stage and the subsequent debate in the Dáil on 29 and 30 September last in relation to a motion on the Ansbacher investigation, section 21 was re-examined in detail and, arising from that investigation, I brought forward a comprehensive amendment to section 21 of the Companies Act, 1990, on Report Stage in the Dáil. This forms part of the Bill passed by the Dáil.

The primary purpose of that amendment is to identify specifically not only the parties to which information may be disclosed, but also to more clearly identify the reason for which the disclosure may take place to such parties. Section 53 now contains amendments not only to section 21(3) but also to subsection (1) of that section. The parties to whom information may now be given and the purposes for which it may be given are explicitly set out in the revised section 21(1). As I mentioned earlier, these represent important changes to the investigative provisions contained in Part II of the Companies Act, 1990.

Section 54 amends Part XIII of the Companies Act, 1990, which makes specific provision for investment companies. On the basis that such companies will be authorised and supervised by the Central Bank, certain basic provisions of company law are disapplied. The changes proposed in section 54 are, in large measure, in response to requests for further disapplications from the funds industry representing companies located in the International Financial Services Centre, the IFSC. The proposed changes have the support of the Central Bank.

International financial services have been a jewel in the crown of Ireland's economy over the past decade. The IFSC, which was set up in 1987, has been the driving force behind the development of the sector. It is largely responsible for the worldwide reputation Ireland now enjoys as a centre of excellence in the provision of financial services. The centre has provided a hub around which a world class support network has grown, encompassing software development, telecommunications, shared services centres and legal and accountancy skills. It has also served as a focus to attract the best and brightest of Ireland's young talent into the industry. We are very proud of everybody involved with the IFSC.

Earlier this year, the Government adopted a strategy to use the success of the IFSC as a springboard for the further development and expansion of international financial services in Ireland. The strategy, which was published in May last, seeks to maximise the level and quality of employment in the industry and to enhance links with related sectors. It sets out the opportunities and challenges which industry will face in the coming years and mandates Government Departments and agencies to provide the necessary support to meet these challenges. The strategy is a result of intensive consultation between the different sectors in industry and the relevant Government Departments and agencies.

The company law changes proposed in section 54 are in part fulfilment of one of the priority actions identified in the strategy document and will help towards ensuring that the funds industry in the IFSC remains competitive with its counterparts elsewhere in Europe. In so far as possible the proposals in company law to tackle the IRNR problem are designed not to have an unduly adverse impact on entrepreneurs who wish to use the company structure to progress their desired projects. Of necessity, some of the changes may result in a somewhat slower incorporation process, but it is not considered that they will add to any significant extent to the cost of incorporation. It is the Government's intention to ensure that the provisions are monitored and that their impact will be kept under close review, so that any unintended difficulties which arise for business can be addressed at the earliest opportunity.

That is a summary of the Companies (Amendment) (No. 2) Bill, 1999. I thank the Seanad for its co-operation in arranging this debate on the Bill. I look forward to hearing the contributions of all Senators. I commend the Bill to the House.

I welcome the Minister of State to the House. I also welcome the legislation and the opportunity to contribute to this debate. The purpose of the Bill is to amend the Companies (Amendment) Act, 1990, relating to examinerships, the removal of the statutory audit requirement for certain private limited companies and partnerships, to introduce provisions to tackle the problems created by Irish registered non-resident companies and to amend the Companies Act, 1990, in relation to the timeframe within which summary prosecutions must be initiated and to amend section 16 of the Investment Limited Partnership Act, 1994. The measures contained in the Bill are all very necessary.

The Minister of State and his Department have a very important public duty in ensuring that the State keeps its company law code up to date by initiating necessary changes in amending legislation such as this. In view of the many high profile company law abuse cases we have witnessed or read about in recent times, one wonders about the extent of bad practices that prevail and which have brought company law into disrepute. The Tánaiste has initiated a dozen or so different inquiries into the suspect practices of various companies where she had good reason to believe that directors and executives were involved in serious breaches of company law involving tax evasion, falsification of documentation and other offences. The directors apparently regarded themselves as being above or outside the law.

What sanctions are in place to ensure that such people are debarred from being allowed to be company directors? Sections 150 to 160 of the Companies Act relate to this issue. If the Tánaiste is serious in her intent regarding a clean-up of corporate Ireland, she will have to spell out how she will follow through on it and ensure that unworthy individuals are prevented from having access to limited liability through directorships of companies. It is obvious from what the Tánaiste has said that the individuals involved have no appreciation of the fact that a company is a separ ate entity in law. They acted as though they were the company, being above and beyond the law, and as if law would never catch up with them. An update from the Tánaiste on these matters would be helpful. There are serious matters, including the duties and responsibilities of directors, ethics and compliance involved.

The sad fact is that some semi-State companies have not been above reproach. No doubt the Minister for Public Enterprise will address this matter. There is no room for cowboyism, so to speak, in the conduct of Irish company law. I await with interest to hear from the Minister of State what immediate action is in prospect following on from the McDowell report on company law compliance and enforcement. Perhaps the Minister of State will comment on this in reply. I welcome the report of the Company Law Review Group of December 1994. The matters proposed in this amending legislation have resulted from that report.

It should always be preferable that companies would go into examinership rather than receivership or liquidation if the imposition of a scheme of arrangements would facilitate their survival. There is no doubt that examinership is a useful mechanism in company law. I agree with the review group that there should be recognition for the position of creditors because they suffer most. The requirement in section 7 for a report from an independent accountant to be submitted in assisting the court to decide there is a reasonable prospect of survival is an important and welcome feature. This will prevent abuse and examinerships being sought as a refuge from creditors. I am pleased that creditors will have a statutory right to be heard, as provided for in section 10, when the petition to the court is being made. The provisions in the Bill should assist in a proper assessment of an ailing company's potential to be viable.

The proposal to provide an exemption mechanism from the requirement to have accounts audited is useful, particularly where the number of shareholders is small and the company is in effect an individual or family-owned company. The only problem with the proposal is the £250,000 turnover limit. This figure was increased by the Minister of State from £100,000 but it is still far too low. The comparable figure in Northern Ireland is £350,000 sterling and given that we hope to be increasingly in line on a North-South basis, I appeal to the Minister of State to increase the limit to that which applies in the neighbouring jurisdiction.

The Minister of State must be concerned at the enormous amount of form filling required of companies. I am interested in the unfair way this impacts on small companies. He will no doubt have had representations on this issue from the Small Firms Association. The administration and paperwork involved is huge and this matter needs to be examined urgently with a view to simplification. The system must be streamlined.

Another area the Minister of State might examine and make appropriate recommendations to his colleague, the Minister for Finance, is the VAT registration requirement of just £40,000 per annum. This figure is totally unrealistic and should be increased to at least £100,000 per annum. He will have an early opportunity next week to address this matter.

Sections 42 to 45 are overdue in dealing with Irish registered non-resident companies. In view of what we have learned about recent events, it is very necessary to know that companies registered here carry on legitimate business or trade in the State and have a director who is resident in the State. I understand the possible legal requirement to provide for a bond as an alternative in some instances. However, £20,000, as with other sums mentioned in the Bill, is absolutely inadequate and should be considerably more.

In light of the overall requirements of company law, I have my doubts about the term "shadow director", although it is used and provided for in law in section 26 of the 1990 Act. Allowing such persons to lurk in the shadows, as they do, does not provide for transparency. These are usually puppet masters or persons pulling strings who deserve to be flushed out. All directors have equal duties and responsibilities in law and I agree with the introduction of a limit on the number of companies of which a person can be a director. I suggest, however, that the figure of 25 is somewhat generous.

These measures are necessary to improve and enhance our reputation and status and the registrar must strike off companies for non-compliance. It is proper that companies should file annual returns, even though their record in this regard has been poor to date. The Minister of State indicated that the level of return in 1997 was as low as 13 per cent. There are serious obligations being overlooked in this regard and the Companies Registration Office will have to become more effective in ensuring compliance. The word "shambles" has crept into the Irish vocabulary recently and it can be applied to more than the Government's asylum seeker/refugee policy. However, I understand that the registrar has, in the recent past, struck off a record number of former companies. I also understand that the Companies Registration Office is now as near as possible to being a state of the art operation. As a result, I hope there will be further significant improvements in this area.

I agree with the Minister of State's remarks in respect of Irish registered non-resident companies. The level of abuse in this area has been extremely high. The concept of residency being introduced in the Bill is correct and I welcome the fact that it will be tied in with the area of taxation. The extent to which this country has been affected by fraud, money-laundering and other illegal activities in recent years has damaged its reputation. By virtue of the measures taken in this year's Finance Act and the further measures now being introduced by the Minister of State, I hope we will put all that behind us. The problems to which I refer were serious and needed to be tackled.

The Minister of State referred to the limited exceptions where Irish registered companies will be exempt. To what exceptions was he referring? He also mentioned a "real and continuous link" but I wish to know who will be responsible for making decisions on these matters. It is alarming people operating in this area have managed to avoid the notice of the Revenue Commissioners, despite the risks they have taken. I also agree with the Minister of State's remarks regarding multiple nominee directors. Overall, however, the measures contained in that regard in the Bill are timely and welcome.

Section 47 is also timely in that it will allow persons who have ceased to be directors to notify the Companies Registration Office directly if the company fails to do so. I came across an interesting case recently where a company, for its own purposes, deliberately failed to notify the Companies Registration Office of the resignation of a director, even though the director had pointedly resigned on an issue and requested the company to notify the Companies Registration Office of his decision. To date, this has not happened. I accept that this is only one instance but companies are abusing their position in this area.

Section 48 is also a very necessary tool for the registrar because it will allow him to move against any company which appears to have no directors. Obviously, if a company has no directors it is not entitled to continue in business and must cease its operations.

I welcome the addition of sections 49 to 54 which contain a strike off provision, a consequential provision, a new power of delegation within the registrar's office, an amendment to sections 20 and 21 of the 1990 Act and a provision to facilitate investment companies under the supervision of the Central Bank. I am in broad agreement with the Minister of State in respect of the Bill and I look forward to his reply to the debate.

I welcome the introduction of the legislation which, in effect, will strengthen our competitive environment. This will prove increasingly important as we become further involved in the global economy. I commend the Minister of State on the clear way he explained the provisions of the Bill, particularly in respect of the changes that were made during its passage through the Dáil. The clear and unequivocal manner in which he outlined the contents of the Bill will no doubt assist its passage through the House.

I welcome the Bill's recognition of the importance to our economy of small and medium sized companies. There is a recognition abroad that our Celtic economy would not exist without these companies. Some smaller firms employ two, three or four people but their existence is vital to rural villages and towns. It is interesting to note that a large number of small businesses operate on a more regional and rural basis than many of the multinationals on which we often depend and to which more attention is given. Therefore, it is crucial that we are recognising their importance by relaxing some of the conditions that made life more difficult for them.

As Senator Coghlan stated, small and medium sized businesses face many problems which are not immediately apparent. For example, they often have difficulty raising finance because they have low turnovers and it is hard to convince a bank manager or financial institution that they are worth taking a risk on. During the debate in the Dáil, reference was made to the amount of paperwork the owners of small businesses must complete. These people can often be overburdened by the level of bureaucracy with which they are faced and the number of forms they are obliged to complete, particularly as they are more concerned with the daily operation of their firms and the need to make enough money to pay their employees.

While I accept that it does not come under the Bill before us, I recognise that a commitment has been made to making life easier for small businesses by removing the auditing requirement. I hope moves will also be made in this regard in respect of Revenue and the company law in order to simplify matters further.

As the Minister of State indicated, the Bill will implement many of the recommendations of the review group and the provisions of Partnership 2000. The relaxing of the audit requirement and the increase from its first introduction up to £250,000 of the turnover exemption limit are welcome developments. While I accept Senator Coghlan's point in respect of the Northern Ireland limit, he must recognise that this is merely a first step after which the position will be evaluated before we make whatever further changes are required. It is good that companies with less than £1.5 million on their balance sheet and fewer than 50 employees will be exempt from the auditing requirement.

I agree with the concept of tightening up our company law. We do not want Ireland to be regarded as a type of banana republic where anyone who wishes to establish a company which does not operate here may do so. I do not want Ireland to become a jurisdiction where money-laundering, fraud and other illegal activities of that nature are allowed to proceed unchecked.

I recognise the importance and the necessity of tightening the restrictions in this area. However, if our success is to continue, it is important that we do not establish an environment which is too restrictive. Those drafting the legislation and the Minister of State must always be conscious of that fact when considering what needs to be done. If we set up a regime which is too restrictive, we will dissuade people from establishing operations in Ireland. We will kill the entrepreneurial spirit which is vitally important to our continued success.

I direct my next point particularly at the media. We are reaching the stage where it is almost a crime to read a letter if that letter referred to tax evasion policies. How is one ever to know if one does not read a memorandum or a letter, that its contents may involve the subject of tax evasion? Regarding allegations made recently about memorandums being written, if there are no facts to back up allegations of wrongdoing, then creating stories out of nothing is fine for sensationalism but creates fear among people that restricts their ability to do their business in an appropriate manner. It is important and needs to be accepted that if one runs a business, it is legitimate to try to ensure that one pays the tax owed but in a manner where taxes are not overpaid. We all have a contribution to make to this State but anybody who is on PAYE, no more than anybody who is self-employed, is entitled to pay or to utilise their full allowances and to ensure they do not pay any more than they have to.

On the appointment of examinerships, I welcome the concept that examinerships should only be appointed if there is a continuing chance of viability of the company. Examinerships are a useful mechanism in company law. Very often companies, to which an examiner has been appointed, have been able to progress and sell on the business or attract new investors. At the point where the business may not have been working properly to date and may have had difficulties with cash flow or with sales targets not being met, the appointment of an examiner and the introduction of new expertise and new investors can sometimes take that company out of the doldrums and give it a useful or proper path to continued prosperity, profits and employment.

I ask the Minister to pay attention to the case I am making on the position of creditors. Company law to date recognises payment to the employees of the company. During the wind-up of the company they are the people who are first entitled to whatever money is available, to ensure that their wages are paid, that the tax is paid to the Revenue and that PRSI deductions are made and paid to the appropriate authorities. I draw the Minister's attention to the fact that many organisations are now using the services of recruitment agencies to provide contract and temporary workers. Many organisations are providing temporary assistance to companies over a period and in that relationship the recruitment agency is responsible for paying the wages and deducting tax and PRSI. Therefore, it has the responsibility to follow that payment on to the Revenue. When a company goes into liquidation and winds up, the recruitment agency is not a preferred creditor. Therefore, it may get as much as 5p, 6p or 7p in the pound on debts where the majority of the money they have paid out has been in wages to the people who worked in that company, in other words, it has been facilitating an additional payroll for the company. For example, an invoice that might have been sent into the company for £250 could be made up of almost £200 in wages. The additional amount would have been employer's PRSI, an amount of money to contribute to holiday entitlements to which every employee is entitled, and on top of that, the margin of profitability. I ask the Minister to talk to his officials and examine in his Department if there is any way we can guard against the daily exposure to this huge risk of many organisations in the recruitment agency sector. Could we allow even the wage portion of that invoice to be taken into account and to take the status of a preferred creditor? It may be possible, if it is in the remit of this particular legislation, to bring an amendment in the Seanad, and address this issue.

As someone who is involved in this business, this is of great concern to me and has caused many sleepless nights. Many organisations countrywide have lost enormous amounts of money by providing a very necessary service to organisations, particularly in the area of computer contractors, temporary workers in administration or even in manufacturing positions on the factory floor. It is important that when we have the opportunity to examine this, we see if there is anything we can do to make their lives easier. We should ensure that payment of wages is sacrosanct in law, not just the payment of wages in the company that has gone into liquidation but the payment of wages involved in an indirect contract for labour between that company and a recruitment agency.

I commend the Minister and his Department on the preparation of this legislation and for the many fine amendments to it as it passed through the House. For instance, some of the very practical amendments included the ten day limit which is moved onto the next working day if it expires on a Saturday, Sunday or bank holiday. Those are the sorts of practical amendments that are very useful and which improve the legislation.

I agree with Senator Coghlan that the issue with IRNR companies must be tackled. As I said earlier, we cannot have a jurisdiction where fraud, money laundering and other illegal activity can be taken on. I welcome the tightening of the regulations as outlined by the Minister. I also recognise the importance in this legislation of examining where we have consolidated or included similar definitions throughout legislation. There are definitions in the Finance Act that are also copied throughout this legislation.

The Minister has done a fine job, on which I commend him and on the work he has done to date. This legislation is strong and is a full working of the types of legislation in this area. It has improved regulation for the proper operation of companies and makes life much easier for them. I welcome the amendments in the Dáil and the Minister's attitude to them. The legislation is stronger for this and also for the time that he spent this morning outlining, in detail, the various amendments made in the Dáil. There have been significant changes made and he has treated this House with respect in explaining them to us in depth. I look forward to the following Stages of this Bill. I implore the Minister to take note of the points I made about recruitment agencies and see if anything can done. It may not be possible in this Bill but perhaps it can be a priority for the future.

I echo the comments of my colleagues and again acknowledge the role the Minister had in bringing forward this enlightened legislation. It is indicative of the maturity of the Irish economy that we are introducing legislation of this type. I often remember, in the bad old days of the 1970s and 1980s, reading references in The Economist to very mature economies such as Switzerland, where there were very stringent company regulations. We have come a long, long way when one looks at the vast body of legislation in this area that has passed through both Houses over the past five years. I reiterate my colleagues' comments on the Minister's role in that.

Specifically I welcome the exemptions introduced for small businesses relating to audits. As somebody who was involved in a small but sometimes questionably viable company in the record business, I found it very difficult sometimes to pay the huge sums of money for an annual audit. Sometimes the turnover and the net profit have not always been commensurate with the sum to be paid to the auditor. It is a very useful tool and will help many small to medium sized companies, within the limits laid down by the Minister in the legislation, to reduce and minimise their financial burdens.

In the context of examinership, this is a very vital area. Senator Cox referred to creditor's rights. Over 20 years ago I worked for a popular music magazine called Spotlight. It went into liquidation the week before Christmas 1977, even though the magazine had been printed. However, because it was part of a larger company, the Creation Group, which folded overnight, not only were and I several other youngsters deprived of our Christmas money, the Christmas club fund was also raided. The directors of the company walked away from their responsibilities, yet one or two are still prominent in business. It was remarked at the time that if it happened in any other country, they would have been put up against a wall, not necessarily to be shot but to ask them to return the money. There were absolutely no sanctions.

We have come a long way since then and the Companies Act, 1991, and subsequent legislation addressed many of these issues. However, it stayed with me and I often wondered whether people who used the law in such a manner had any conscience whatsoever, until somebody who was much less naive than myself in regard to business said that nobody in the business world had a conscience when it came to making money. That is a harsh judgment and I do not wish to tar everybody with the same brush, but some people are totally unscrupulous when it comes to their own interests and will take advantage of the law to the detriment of employees. I welcome any attempt to ensure that creditors and employees are not left high and dry.

I have been owed money by companies who subsequently went into liquidation but six months later the principals involved were back in business. Legislation has addressed this phoenix syndrome but unscrupulous people still exist. The Minister of State will agree that Government must be eternally vigilant to ensure that any loopholes availed of by such business people are sealed off and the reference in the Bill to Irish registered non-resident companies is a typical example.

I agree that there is a need to appoint examiners to reasonably viable companies, especially in areas where the Minister of State and I come from, where, as a result of the new entrepreneurial culture, an increasing number of risk ventures are started up. It is a welcome development in the economy that people are more inclined to take risks and, thereby, more indigenous industries are established. There is no embarrassment for people who get involved in companies that fail. Banks looked rather dubiously at business people in America who did not have at least one business failure behind them before they were given money. I hope that the proposals in the legislation for reasonably viable companies will be used judiciously and every attempt will be made to ensure that a more flexible approach will be adopted by the courts in regard to companies which provide employment in economically deprived areas.

From time to time accountancy firms which are brought in to act as examiners are mentioned. I do not wish to raise a hare but is the Minister of State satisfied that there is sufficient transparency in the appointment of such firms? My perception, which is based on anecdotal evidence, is that a golden circle seems to be operating among accountancy firms. The same firms pop up all the time, particularly in regard to Government contracts.

They are everywhere.

This issue came up during a casual conversation I had with an accountant some months ago who expressed the view that he would like his company to be considered. He did not ask me to do anything but he mused over the fact that the same names seemed to be coming up all the time. Is the Minister of State happy that there is sufficient transparency in the appointment of companies as examiners under this section? There should be a level playing field in this regard. If accountancy firms are credible, competent and have a track record, there should be a tendering process. There is openness and transparency with regard to the EU tendering process for various State contracts. Is the same not relevant to the appointment of accountancy firms as examiners? However, I welcome the initiative.

The Bill is yet another indication of our inexorable march towards being a fully blown, mature, prosperous economy. Such legislation is needed so that Government can be increasingly vigilant in regard to unscrupulous business people who are only too willing and able to take advantage of lax laws, particularly in countries such as Ireland which are becoming used to enhanced prosperity. This is good, solid legislation and I commend it to the House.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy): I thank all Senators for their interesting contributions on this important Bill. It will bring about changes in a number of areas of company law. Parts II and III deal respectively with the amendment of the examinership process and the removal of the statutory audit requirement for certain private limited companies and partnerships which arise directly from the recommendations made by the company law review group. The provisions in Part IV for Irish registered non-resident companies, on the other hand, are the result of a detailed examination of the problems created for the State by the phenomenon referred to as IRNRs.

Senators raised a number of specific issues and I will attempt to deal with these. Of course, when we reach Committee Stage they will be able to go into more detail on the issues about which they have concerns. I will be more than happy to explain further what the legislation is designed to achieve. Other issues were raised which are not pertinent to the legislation and, accordingly, I will respond directly to them. Senators will be aware that their contributions are on the record and my Department will examine them in the context of legislative proposals being brought forward in the specific areas to which their comments relate.

Senators Coghlan and Mooney asked what action could be taken against people who were directors of a company and engaged in undesirable activity. Under the legislation directors can be made personally liable for the debts of the company. For instance, under section 29(7)(a) a director can be held personally liable if he or she has engaged in fraudulent or reckless trading. However, if he or she can show that they acted honestly or responsibly, it is likely that the court will not hold them liable. Under the Companies Act, 1990, the disqualification provisions in respect of directors were expanded and a new provision under which a director can be restricted was introduced. In practice these provisions have not been availed of to any great extent.

However, arising from the recent report of the McDowell group into company law compliance and enforcement, the Government has approved the drafting of measures to implement the report. These include the establishment of a new office of director of corporate enforcement. Accordingly, when these provisions become law it is likely that there will be much more rigorous enforcement of company law. Senator Coghlan referred to this report. It was published earlier this year by the Minister, Deputy Harney, and made far reaching recommendations on changes in company law, including the establishment of the company law review group on a statutory basis. The Government has approved the preparation of the necessary legislation to give effect to the working group's recommendations. This will be treated as a priority by the Government and will be brought before the Houses of the Oireachtas as soon as it is ready.

Senator Coghlan referred to the turnover threshold. Section 32 sets out the specific requirements a company will have to meet if it is to be exempted from the requirement to have its accounts audited. Senators Cox and Mooney also referred to this matter. Having reflected on the Second Stage debate in the Dáil, I increased the turnover threshold to qualify for the exemption from audit from £100,000 to £250,000. In proposing this increase I took account of a number of factors. These include the fact that the company law review group made its recommendations five years ago in 1994, that the proposals contained in the present Bill will enhance the ability of the Companies Registration Office to take action against companies that do not observe their filing obligations, and that the exemption threshold in the UK and in Northern Ireland has been increased to £350,000 sterling.

In the absence of precise figures on the number of small companies which will be in a position to qualify for this exemption, I am satisfied that a turnover of £250,000 is the current appropriate threshold and I do not intend to increase it further at this stage as it is a completely new departure for us. The Companies Registration Office will be closely monitoring how this exemption is availed of by companies and if any further adjustments prove necessary we will bring these forward.

Senator Coghlan raised the issue of the bonds as an alternative to an Irish resident director and claimed that the amount should be increased from £20,000 to £40,000 or even higher. I will explain briefly the reasons we would be reluctant to do this. For European Union treaty reasons we must have an alternative to the resident director. This is the clear legal advice we have received. The alternative chosen was a bond and, again for European Union treaty reasons, this has to be a real alternative. In pitching the bond at £20,000, bearing in mind that the provisions of the Bill will apply to all companies currently operating and registered in Ireland and all companies that will be registered in Ireland, we were conscious of the need not to impose an undue burden on reputable business concerns. This would be particularly important in the case of a European Union resident who wished to set up a company here but did not wish to use the Irish resident director route. If the bond is pitched at too high a level they would more easily be able to argue that it constituted an undue discrimination under the relevant treaty requirements governing freedom of establishment, operations, etc.

In addressing the IRNR problem, it is important to focus on the overall package of measures which has been drawn up by us in assessing the effectiveness of the individual components of the package. It is important to bear in mind that the company law measures are designed to complement the very considerable changes already effected in the taxation area and that together these would constitute a powerful weapon against abuse of Irish company structures for undesirable purposes in the future.

In relation to the point raised by Senator Coghlan on the striking off of companies using existing provisions, the Registrar of Companies has been engaged in a process of strike off of companies. This is essentially directed at those companies which have failed to submit their annual returns for two years. Since September 1998 notices initiating the strike off process have been issued to 46,000 companies and some 31,000 companies have been struck off. The strike off regime is continuing and it is likely that a significant number of these companies will also be struck off unless they regularise their affairs in the immediate future. I salute the Companies Registration Office, its staff, its tremendous work, its assiduous attention to detail and the progress it has made. That we have provided much investment for the office in terms of modern facilities and IT services is of assistance in ensuring companies comply or else be struck off.

Section 46 will enhance the ability of the Companies Registration Office to pursue those companies that fail to comply with their filing obligations. On the point made by Senator Coghlan that too much form filling is required of companies, the task force on small businesses accepted that company law, per se, did not impose an onerous obligation in this regard. While primarily the requirement is to provide an annual report, forms where changes of directorships etc. occur will only be necessary as they arise and with modern technology they are being streamlined in the Companies Registration Office. I accept companies have many other forms to fill up in areas of taxation and elsewhere and that this can create a problem for them. We have looked at that issue and find there has been a huge reduction in the amount of bureaucracy and duplication that stifled efficiency in the past and, hopefully, with modern IT we can streamline that still further. That is the goal and we will always be ready to listen to and take advice from Members of this House, our elected members and others, including company operators, as to what changes may be necessary at any time.

On the question of the VAT registration limit of £40,000 on companies, this is a matter for the Minister for Finance. I will bring this matter to his attention and perhaps Senator Coghlan will do likewise for the next Finance Bill in the new year. On the point that there should be a real and continuous link between companies and the State, the Revenue authorities will determine if this is so. Section 44(5) refers to this matter. That information will be conveyed to the Companies Registration Office who will accept it from the Revenue Commissioners.

In regard to an issue raised by Senator Cox that burdens need to be lifted, we are conscious at all times of the need to strike the right balance between the burdens on companies and what is absolutely necessary. We are constantly trying to improve the environment in which companies can operate with a view to greater efficiency. Senator Cox raised also the position of recruitment agencies and urged that they be recognised in a winding up operation. While this issue is not covered in the Bill, I give a clear undertaking here to have the matter fullly examined in my Department and I will report to the Senator as soon as information comes to hand. I regard this as an important point and we will do our utmost to ensure there is linkage, transparency and positive action in this area, given that such companies do a great job in recruiting the right people for the corporate sector and in co-operating with State services and agencies. It is important that they are protected in the discharge of their professional obligations.

Senator Cox referred also to the importance of company law not being too restrictive. Company law is always kept under review and that will also apply to this Bill. I accept the importance of striking the right balance between facilitating business and ensuring those who deal with businesses have adequate protection.

I thank Senator Mooney for the welcome he gave to the exemptions from audit for small companies. This is a practical measure to assist small companies. I remember Spotlight was always vital reading to keep up with the many developments in the music scene during the exciting showband era. On the point that a golden circle exists, there is a requirement that the person be capable of being appointed an auditor, otherwise the marketplace prevails and decides who is best suited to discharge any professional obligation on behalf of the State rather than have duplication and triplication and a constant opportunity for a particular group of people. In most cases if a contract exceeds a certain figure we have no option, under our own domestic rules and regulations and under European law, but to go to tender. Obviously, certain companies specialise in that field and win many of the tender options.

I sincerely thank all Senators who contributed to the debate. I thank also the Leader of the House, the Opposition, the Cathaoirleach, Clerk and the excellent staff for facilitating this Stage of the Bill and I look forward to the debate on Committee Stage.

Question put and agreed to.

When is it proposed to take Committee Stage?

Next Tuesday at 2.30 p.m.

Committee Stage ordered for Tuesday, 30 November 1999.

When is it proposed to sit again?

Tomorrow at 10.30 a.m.

Question put: "That the House do now adjourn until 10.30 a.m. tomorrow."

Bohan, Eddie.Callanan, Peter.Cassidy, Donie.Cox, Margaret.Cregan, JohnDardis, John.Farrell, Willie.Fitzgerald, Liam.Fitzgerald, Tom.Fitzpatrick, Dermot.Gibbons, Jim.

Glynn, Camillus.Keogh, Helen.Kett, Tony.Lanigan, Mick.Leonard, Ann.Lydon, Don.Mooney, Paschal.Moylan, Pat.O'Brien, Francis.Ó Murchú, Labhrás.Ormonde, Ann.

Níl

Coghlan, Paul.Coogan, Fintan.Cosgrave, Liam T.Costello, Joe.Doyle, Joe.Henry, Mary.Norris, David.

O'Dowd, Fergus.O'Meara, Kathleen.O'Toole, Joe.Ridge, Thérèse.Ryan, Brendan.Taylor-Quinn, Madeleine.

Tellers: Tá, Senators T. Fitzgerald and Keogh; Níl, Senators Coghlan and Costello.
Question declared carried.

May I make a point of order?

No, the House has adjourned.

It is important to note that we are to meet on the day of the funeral of a former Cathaoirleach of this House. That is most extraordinary. Perhaps you, a Chathaoirligh, could rule on whether that is appropriate.

That is not a point of order. The House has taken a decision to adjourn until 10.30 a.m. tomorrow.

The House may not have realised that fact.

I am bound by the decision of the House.

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