I am very pleased to be given the opportunity to bring this Bill before the House on behalf of the Tánaiste and Minister for Enterprise, Trade and Employment. Enactment of the Company Law Enforcement Bill, 2000, will represent a landmark in the Government's drive to combat corporate crime and malpractice and should help restore public confidence in the manner in which business is conducted in Ireland. Revelations that have emerged from the various tribunals of inquiry established by the Government and from investigations under the Companies Acts initiated by the Tánaiste provide clear evidence that many people in business have an entirely insufficient regard for the requirements of company law.
The main provisions of the Bill flow directly from the recommendations in the report of the working group on company law compliance and enforcement, which was published in March 1999. The working group's report confirmed many of the worst fears as to the state of corporate governance in Ireland. It concluded that company law was greatly underenforced and that those who sought to deliberately subvert the system of company regulation had little reason to fear that they might be apprehended and punished. In regard to companies' statutory obligations to file returns with the Companies Registration Office, available data suggested a culture of widespread non-compliance and disregard for the law.
The working group made a number of substantive recommendations aimed at combating the culture of non-compliance. Most importantly, it recommended the establishment of an independent statutory officer, to be known as the Director of Corporate Enforcement, who would have general responsibility for the enforcement of company law in Ireland. The group recommended that the director be resourced with legal, accountancy, investigative and administrative expertise to investigate and prosecute offences under the Companies Acts. The establishment of the Office of the Director of Corporate Enforcement with the necessary powers and resources is seen as the best way to ensure the enforcement of company law on a consistent and independent basis.
The Company Law Enforcement Bill provides a range of powers for the director of corporate enforcement to support the performance of the functions assigned to him under the Bill. The director will have the function of investigating suspected offences under the Companies Acts and will assume the powers that are currently exercised by the Minister for Enterprise, Trade and Employment in relation to company investigations. The director will be given power to prosecute offences under the Companies Acts by way of summary proceedings and to refer cases for prosecution on indictment to the Director of Public Prosecutions. The director will be given the power to apply to the High Court for injunctions restraining companies or their officers from continuing to breach the Companies Acts, where the director can establish the breach to the satisfaction of the court. This will allow the director to take immediate action to prevent ongoing breaches of company law and, by so doing, protect the interests of creditors and others whose rights may be affected by such breaches.
The director will have the power to apply to the High Court for orders for the restriction or disqualification of company directors and other officers, where the conduct of the persons concerned in the management of companies warrants such action. This will prevent unscrupulous persons from continuing to use the vehicle of limited liability companies for reckless or illegal purposes to the detriment of their creditors and others.
The Bill also makes important changes to the arrangements for the filing of statutory returns with the Registrar of Companies. The registrar plays an important part in the ongoing supervision of companies' compliance with their statutory filing obligations under the Companies Acts. In recent years the registrar has made great strides in the enforcement of filing obligations. However, this work has been hampered by the absence of a satisfactory and enforceable system for determining the precise date in each year when a company is required to file its annual return. The Bill provides a remedy for this problem through the introduction of the concept of an annual return date specific to each company which will be used to calculate the exact date by which the company must file its annual return. This measure should provide a more transparent and enforceable regime for the filing of annual returns.
In addition to its recommendations in the area of ongoing company law enforcement, the working group recommended the establishment of a company law review group to advise the Minister on all matters relating to the implementation, amendment and consolidation of company law in Ireland. The establishment of such a group will ensure that the Companies Acts are kept under continual review with a view to maintaining a first class system of company law in the State. This will facilitate the operation of companies already established here and serve to attract more international companies to locate here.
The Bill provides for the establishment of such a company law review group on a statutory basis. In anticipation of the legislation, and in order to allow the review group to commence its work as quickly as possible, the Minister established the group on a non-statutory basis in February last year under the chairmanship of Mr. Tom Courtney, solicitor, and one of the country's most eminent experts in company law. The membership of the group combines company law experts and members of representative bodies to give the Minister the best possible advice on the ongoing refinement of the Companies Acts.
On the detail of the Bill, I propose to highlight some of the more important provisions of the Bill, and particularly to highlight some of the more significant changes made to it in its passage through the Dáil. Part 2 provides for the establishment of the Director of Corporate Enforcement, the appointment, terms and conditions of service of the director and the arrangements for reporting by the director to both the Minister and the Oireachtas.
Section 7 provides, among other things, that the director shall be appointed following the holding of a competition by the Civil Service Commissioners. In this regard, the Civil Service Commissioners have selected a person for appointment as director-designate on the basis that the person concerned will be appointed as Director of Corporate Enforcement following enactment of this Bill. Mr. Paul Appleby of the Department of Enterprise, Trade and Employment has been selected as director-designate. Mr. Appleby has extensive experience of the company law area and has been closely involved with company investigations being undertaken under Part 2 of the Companies Act, 1990.
Section 12 sets out the general functions of the Director of Corporate Enforcement. These include enforcing and encouraging compliance with the Companies Acts and investigating suspected offences under the Acts. The director is also given a general supervisory role in respect of liquidators and receivers. The section expressly provides that the director will be independent in the performance of his functions.
Section 16 sets out the director's reporting requirements. The director will be required to produce an annual report of his activities as well as being required to appear before committees of the Oireachtas to account for the overall performance of his or her functions subject to the proviso that this reporting and accountability should not prejudice the performance by the director of any of his or her functions.
This section was amended in the Dáil to assuage Members' concerns that following the establishment of the director the Oireachtas might have access to less information concerning company investigations than it has currently. Significantly, the provision at section 16(5) in the Bill, as initiated, whereby the director was exempted from the provisions of the Committees of the Oireachtas Compellability (Privileges and Immunities of Witnesses) Act, 1997, has been removed. Through this amendment, and a further amendment later in the Bill, the director will be required to attend before a committee with compellability powers and to provide relevant documentation.
Part 3 of the Bill relates to the function of the Director of Corporate Enforcement of investigating suspected offences under the Companies Acts. Section 28 of the Bill is a new section introduced during Dáil Committee Stage. It provides for the amendment of section 18 of the Companies Act, 1990, which deals with the admissibility in evidence of statements required to be made by persons pursuant to various provisions of the Companies Acts. Section 28 reflects judgments both of the Supreme Court and the European Court of Human Rights in relation to a person's privilege against self-incrimination. Section 28 now provides that statements made by persons under compulsion may not subsequently be used against them in criminal proceedings. Similar provisions have been provided for in sections 29, 44 and 49 of the Bill.
Section 29 repeals and replaces section 19 of the Companies Act, 1990. Section 19 provides for the examination of a company's books and documents. The replacement section 19 will give further scope to the Director of Corporate Enforcement to examine books and documents, including, in specific circumstances, the private papers of an individual whom the director believes to have documentation relevant to the books and documents of a company under investigation. This latter provision was introduced during the passage of the Bill through the Dáil. Section 29 also introduces a new provision whereby a person who knowingly conceals, destroys or falsifies documentary evidence relating to an investigation of an offence under the Companies Acts is guilty of an offence.
Section 31 amends section 21 of the Companies Act, 1990, which provides for the persons to whom, and the reasons for which, confidential information obtained under sections 19 and 20 of that Act may be disclosed. This section has been significantly amended arising from contributions of Members during Dáil Committee Stage. It now provides for disclosure of information by the director both to the Competition Authority and to a committee of the Oireachtas that has been granted powers under the Committees of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997.
Section 34 is a new section introduced during Committee Stage in the Dáil. It provides for the continued exercise by the Minister or an authorised officer of powers under section 19 of the Companies Act, 1990, in respect of particular companies, notwithstanding the transfer to the Director of Corporate Enforcement of the relevant powers. This is to allow the completion by the currently appointed authorised officer of certain examinations of books and documents that are at an advanced stage.
Part 4 of the Bill relates to the power of the court to order the restriction or disqualification of persons from acting as company directors or other officers or being involved in any way in the promotion, formation or management of companies. The powers to restrict and disqualify persons are central to maintaining the integrity of the system of company regulation.
Part 5 of the Bill contains provisions relating to the winding up of companies and, in particular, those companies that are wound up insolvent. The provisions of this Part are aimed at addressing the so-called "phoenix syndrome", whereby companies go out of business leaving debts unpaid and their members or directors immediately start up new companies without having to account for their previous failures and debts. This greatly undermines confidence in the system of company law and is one of the issues that the Director of Corporate Enforcement must seek to address urgently.
The director is given a range of powers in this Part of the Bill to intervene in company liquidations to ensure that persons responsible, through recklessness or otherwise, for company failures are brought before the courts to account for their actions. The director may seek to have such persons made liable for the debts of their companies or ordered to return assets wrongly transferred from those companies.
Part 8 of the Bill deals with company accounts and auditors. Since the Bill was published, the Report of the Review Group on Auditing has been completed and significant further changes will be made to company law in respect of auditors in a separate Bill later this year. These will be separate and distinct from the measures dealing with auditing and enforcement that are included in this Part of the Bill. These provisions, which derive from recommendations contained in the Report of the Working Group on Company Law compliance and enforcement, will allow the Director of Corporate Enforcement to ensure that auditors comply with their statutory obligations under the Companies Acts.
Sections 73 and 74 impose on auditors and on the recognised accountancy bodies an obligation to report to the director instances where they believe certain breaches of the Companies Acts may have occurred. Section 74 was amended in the Dáil to clarify the circumstance in which auditors will be required to report apparent offences under the Companies Acts on the part of their client companies and to remove the requirement on auditors to report instances of fraud both to the director and to the Garda. This latter requirement is adequately provided for in the Criminal Justice (Theft and Fraud Offences) Bill, 2000, which is currently before the Dáil.
Part 10 contains a number of miscellaneous provisions relating to this Bill, the Companies Acts generally and other enactments. Sections 93, 94 and 108 are all new sections introduced in the Dáil. They relate to investment companies provided for at Part 13 of the Companies Act, 1990. These are essentially collective investment or mutual funds products that use the company structure provided for under the Companies Acts. The effect of these sections is, first, to provide a mechanism whereby a trustee of such a company may resign and have the company wound up with the consent of the court and, second, to disapply certain prospectus provisions of the Companies Act, 1963, in respect of these companies. These changes are being made to support the Central Bank as regulator for such companies.
Section 96 amends section 371 of the Companies Act, 1963, and provides an important power to the Director of Corporate Enforcement. Under this section, the director will be given the power to seek orders of the High Court restraining companies or their officers from persisting with ongoing breaches of the Companies Act. This injunctive power will be a key weapon of the director in his efforts to ensure compliance with the Acts.
Section 109 provides a mechanism whereby the Director of Corporate Enforcement may impose on the spot fines in lieu of the institution of proceedings in respect of offences under the Companies Acts. Persons accused of offences will have the option of going to court but in so doing they will risk incurring a conviction. Section 110, which was introduced during Dáil Committee Stage, provides for the provision of certain documentation to a jury in a trial on indictment of an offence under the Companies Acts. The purpose of the section is to allow a trial judge to provide a jury with documentation, including transcripts of evidence, where the trial judge feels that such information may assist the jury in its deliberations.
Section 111 was also inserted in the Bill during its passage through the Dáil. It provides for an exemption from certain provisions of the Companies Acts that prohibit the purchase by a subsidiary of shares in its parent company. The exemptions will apply where the subsidiary is a professional dealer in securities and will need, in the course of its normal business, to purchase shares in other companies, including from time to time in its parent company.
The measures contained in the Company Law Enforcement Bill, 2000, represent a significant step on the road to addressing the deficiencies that have been identified in the enforcement of Ireland's company law regime. In particular, the Bill provides the powers necessary to the performance by the Director of Corporate Enforcement of the functions assigned to him. He will be resourced with a dedicated team of accountants, lawyers and gardaí who will bring their particular competencies to bear on the task of investigating and prosecuting offences under the Companies Acts.
The Government is providing the legislative framework within which the director will operate and the resources to allow him to operate effectively. On establishment, the challenge facing the director will be to use his powers effectively to make a telling impact on the Irish corporate landscape. I thank the House for its co-operation in arranging this debate on the Bill and I look forward to hearing the contributions of Members. I commend the Bill to the House.