I welcome the Minister of State, Deputy Kelleher.
Companies (Miscellaneous Provisions) Bill 2009: Committee and Remaining Stages.
Sections 1 and 2 agreed to.
SECTION 3.
As amendments Nos. 1 to 4, inclusive, are consequential on amendment No. 5, we will discuss amendments Nos. 1 to 5, inclusive, together, by agreement. Is that agreed? Agreed.
Government amendment No. 1:
In page 5, lines 6 and 7, to delete all words from and including "(as" in line 6 down to and including "2001)" in line 7.
Amendment No. 5, as published, is to allow the Minister to make recommendations to recognise stock exchanges outside the State so companies can make the equivalent of a market purchase of its own shares on those exchanges. Part 11 of the Companies Act 1990 provides that a market purchase occurs when a company purchases its own shares on a recognised stock exchange. Market purchases must be authorised by a company at a general meeting and this authorisation is sufficient for all contracts for purchase of own shares for the period of the authorisation. That period is usually 18 months. Subsequent to the purchase there are obligations on the company to register purchases with the Companies Registration Office and to notify the relevant exchange on which the purchase was made. The exchange may then publicise the purchase.
For the purchase of own shares on stock exchanges that are not recognised, the terms of each individual contract for purchase of the shares must be authorised in advance by a special resolution of the company. Currently, the Irish Stock Exchange is the only recognised exchange for market purchase of own shares. The recognition of other exchanges is being made to facilitate international groups that are relocating their parent undertaking to Ireland and that wish to make market purchases of their own shares which are not listed on the Irish Stock Exchange.
The proposed amendment creates a new type of purchase called an overseas market purchase. This type of purchase will require the same authorisation as a market purchase and notification to the Companies Registration Office but as the stock exchanges on which the purchase is made will be outside the jurisdiction, a new notification requirement is being introduced. This will be an obligation on the company to publicise its purchase of own shares on the company website for not less than 28 days.
Amendment No. 2 as published extends the definition of recognised stock exchange so that it can include exchanges outside the State as well as individual markets on an exchange. Amendments Nos. 1, 3, and 4 are consequential to the above amendments.
I want to make a broad point on this. These amendments are nearly as long as the legislation we discussed on Second Stage last week. The legislation before the House last week was about two particular points: the exemption of accounting standards for limited periods of time and the appointment of company inspectors and the liability to the State as a result. We are making changes in those two areas.
I would appreciate the Minister of State's clarification on this if I am wrong but, in effect, these amendments will introduce a new area in the Bill. It is not a huge change from the discussion we had in the House last week. It concerns the purchase of company shares, especially from overseas. I can understand the reason for the amendment but it is introducing a new part to the Bill. It is not just amending what was in place. It is new.
Why could something like this not have formed part of the original Bill which we discussed last week? These amendments constitute a new provision in the Bill and put a new capability on it that was not in place last week. It is a different Bill as a result of this amendment. It is ranging into a different area. It might only be a small area but it is still a different area of competence in regard to the Bill we debated last week. I would be interested to know why that is the case and why it could not have formed part of the original Bill we discussed.
I can agree with everything the Senator said. The difficulty is that these were not ready for drafting at the time the Bill was debated in the Seanad. That highlights the importance of the Seanad and our parliamentary system in that we can introduce amendments from time to time and have a discussion on them.
The reason behind this is to ensure the companies that will avail of the transition this legislation will allow need this measure quickly for accounting purposes. This legislation must be passed by the end of the year to allow them prepare their accounts on solid ground, so to speak, knowing what they have to comply with. For that reason it is critical we get this legislation through the House. Introducing this amendment is of key importance to ensure the companies that will avail of the changes in accounting practices will also be some of the companies that may avail of the proposal in this amendment. That is the reason for it. It was not ready at the time of drafting but we can now have the discussion on it in the context of Committee Stage.
Amendment agreed to.
Government amendment No. 2:
In page 5, between lines 7 and 8, to insert the following:
"(a) in section 3(2), by substituting the following for paragraph (a):
"(a) A recognised stock exchange for the purposes of any provision of the Companies Acts is an exchange or a market, whether within or outside the State, prescribed by the Minister for the purposes of that provision.”,”.
Amendment agreed to.
Government amendment No. 3:
In page 5, paragraph (a), line 9, to delete “£250,000,”, and” and substitute “£250,000,”,”.
I have a question on that. I may have missed it in the Minister of State's contribution, and apologies if I did——
I cannot let the Senator in at this stage but I will allow him speak on the section.
Amendment agreed to.
Government amendment No. 4:
In page 5, paragraph (b), line 13, to delete “£250,000.”.” and substitute “£250,000.”,”.
Amendment agreed to.
Government amendment No. 5:
In page 5, between lines 13 and 14, to insert the following:
"(c) in section 212—
(i) in subsection (1)(b), by inserting “within the State” after “exchange”,
(ii) by inserting the following subsection after subsection (1):
"(1A) For the purposes of sections 215, 226, 226A and 229, a purchase by a company that issues shares, or by a subsidiary of that company, of the first-mentioned company's shares, is an ‘overseas market purchase' if the shares are purchased on a recognised stock exchange outside the State and are subject to a marketing arrangement.",
and
(iii) in subsection (2), by deleting "subsection (1)" and substituting "subsections (1) and (1A)",
(d) in section 215(1), by inserting “or overseas market purchase” after “market purchase” in each place where it occurs,
(e) in section 226(1), by inserting “or, in the case of an overseas market purchase, within 3 working days,” after “28 days”,
(f) by inserting the following section after section 226:
226A.—(1) Whenever shares for which dealing facilities are provided on a recognised stock exchange are the subject of an overseas market purchase either by the company which issued the shares or by a company which is that company's subsidiary, the company which issued the shares shall publish, on its website for a continuous period of not less than 28 days beginning on the day that next follows the overseas market purchase concerned and is a day on which the recognised stock exchange concerned is open for business, or in any other prescribed manner, the following information:
(a) the date and time of the overseas market purchase;
(b) the price at which the shares were purchased;
(c) the number of shares which were purchased;
(d) the recognised stock exchange on which the shares were purchased.
(2) If default is made in complying with this section, the company and every officer of the company who is in default shall be guilty of an offence.",
and
(g) in section 229(1), by inserting “, other than when the purchase was an overseas market purchase,” after “subsidiary”.”.
Amendment agreed to.
Question proposed: "That section 3, as amended, stand part of the Bill."
I thank the Leas-Chathaoirleach for his forbearance. I may have missed it in the Minister of State's contribution, and apologies if I did, but could he explain the effect of amendments Nos. 3 and 4? What is the effect of deleting "£250,000,", and" in amendment No. 3 and "£250,000."." in amendment No. 4? It appears to me that it is being reinserted.
It is merely to correct the reading of the Bill. There are no significant changes other than that we are deleting an "and" after "£250,000" and also the comma in page 5, paragraph (b), line 13. It is a grammatical correcting of the Bill. They are technical amendments.
Question put and agreed to.
NEW SECTION.
Amendment No. 6 is a Government amendment. Amendment No. 7 is consequential on amendment No. 6. The amendments may be discussed together. Is that agreed? Agreed.
Government amendment No. 6:
In page 5, before section 4, to insert the following new section:
"4.—(1) Section 27 of the Companies (Auditing and Accounting) Act 2003 is amended—
(a) by substituting the following for subsection (1):
"(1) The Supervisory Authority may delegate some or all of its functions and powers under sections 23 to 26 to a committee established for that purpose and consisting of persons from one or more of the following categories of persons:
(a) persons who are, at the time the committee is established, directors of the Authority,
(b) other persons that the Authority considers appropriate.”,
and
(b) by inserting in subsection (4) “, including the determination of whether a matter should be referred to a committee established for a purpose referred to in subsection (1)” after “behalf”.
(2) For the avoidance of doubt, a committee that was established under subsection (1) of section 27 of the Companies (Auditing and Accounting) Act 2003 prior to the commencement ofsection 4 of the Companies (Miscellaneous Provisions) Act 2009 shall be deemed to have been properly constituted, and shall be deemed to have and to have had all the powers necessary to perform its functions notwithstanding that any of its members was a director when he or she was appointed to the committee but ceased to be such a director before the completion of the enquiry, investigation or review for which it was established.”.
This amendment is to ensure continuity of membership by directors of committees of inquiry established by the Irish Auditing and Accounting Supervisory Authority, IAASA. Section 27 of the Companies (Auditing and Accounting) Act sets out the manner in which committees of inquiry of IAASA are constituted. The proposed amendment No. 6 is necessary as the term of office of one of the current directors of IAASA is due to expire in January 2010. That director was a member of a committee of inquiry by virtue of being a director and the concern was that the work of the committee would continue beyond January 2010, the expiry date of the term of office of the director concerned. At the expiry of his term of office, the director would no longer have an entitlement to his place on the committee which would cause the membership of the committee to change during the inquiry. A change in the make-up of a committee during an inquiry could raise questions of due process and fair procedures and may leave the process open to challenge by way of judicial review.
The proposed amendment provides that a person who is a director at the time of the formation of such a committee will be entitled to continue on that committee until the inquiry is completed. This will ensure the membership of the committee does not change during an inquiry and, therefore, due process and fair procedures will be observed in this regard.
The amendment will also ensure staff of IAASA can make preliminary enquiries into matters that come to the attention of IAASA before deciding whether such matters should be submitted to the board for further inquiry. The amendment will also provide that enquiries already ongoing will not be affected by proposed changes. Amendment No. 7 is consequential and simply adds reference to the 2003 Act in the Long Title of the Bill.
I should declare an interest. I am the director involved in this situation as a member of an inquiry committee. The real issue for the supervisory authority is a critical one. These are very litigious times. There has not been a week in recent months where a Member of this House has not asked a question about who is carrying out the investigation into this or that latest scandal from banking areas. It is a very litigious area, as we have seen. We saw one court case go up and down the structures of the court and back again.
As a young authority the supervisory authority is concerned that were there to be a successful challenge against the authority, we would appear to be ineffective, not doing our duty, etc. Every care is being taken on the issues being dealt with here. One of them is the delegation of authority from the board to the sub-committee. Effectively, if we are examining something being done by the accountants or auditors of a stated bank or whatever, two sub-committees of the board are set up. One is the preliminary inquiry committee which establishes whether there is prima facie evidence to be examined in detail. It is completely separate from the board and its minutes are not available to it. That sub-committee can come back and call for an investigation. A new committee will then be set up under section 24 and go through the detailed investigation. The problem with all of this is that responsibility is being transferred twice to sub-committees of the board. There is no doubt that is the intention, but because the Act does not specifically state it, it could be argued it is silent on it and, therefore, the board is not empowered to do some of these things.
Some of these inquiries can last for some time. It will almost invariably happen that a director who is a member of one of these committees will run out of time by a couple of months. It could then be argued that the inquiry committee was not properly empowered in some way. This matter was of concern to all the members of the supervisory authority and was brought to the attention of the Minister of State. The board will be relieved this is being acted upon so quickly because there was a worry it might be held back until the main Bill was introduced. This gives certainty and allows for due process.
We are now opening a new argument where smart lawyers will say another section does not state the authority can do this. In this other situation about which we are talking the Act outlines the board's exact powers and how it can delegate authority. It could be argued, therefore, that it cannot do the other because it is not specifically mentioned in legislation, that it will be necessary to structure everything rather agreeing the intention of the Act — that the board, like any properly functioning board, will use its own judgment to ensure it is brought forward.
Section 9 of the primary legislation outlines the functions and authorities of the board, including any other powers required of it to fulfil the objectives contemplated by it. There is a catch-all provision, therefore, but our lawyers were worried that this was not strong enough and could be challenged. This will be a belt and braces approach that will give certainty to some of the investigations raised on both sides of the House related to accountants and auditors who were in the middle of decisions taken by well known banks.
I welcome this and emphasise to my colleagues how necessary it is. The issue I raised has been addressed, but it will arise again and again in the future. Therefore, it is important.
The Minister of State drew attention to the benefit of the Seanad, pointing out that it had covered some areas that could have been missed. This example is a reminder. It is a Seanad Bill, but Senator O'Toole's explanation is welcome, because it is a first-hand explanation of the work of a supervisory authority and how legalese is open to different interpretations.
We have visitors today who are students participating in the Mitchell scholarship programme. I can remember the legislation to establish that programme which was brought here from the Dáil and it was noted that there was an important flaw that had not been noticed in the Dáil. An amendment was tabled, the Minister accepted it and the Bill went back to the Dáil.
This is a good example of the importance of the Seanad. We should recognise that looking at all legislation a second time is valuable. Having people like Senator O'Toole in the House gives us the opportunity to avail of such expertise and amend legislation as a result. I am delighted the Minister of State has accepted the point made and I support the amendment.
We hope this will give confidence to take on any challenges or investigations required and that it will be seamless in the context of person staying on until an inquiry is complete.
My speaking notes pale into insignificance compared to Senator O'Toole's explanation of the need for the amendment. The work of the company law review group on the consolidation of company law is a huge undertaking. All of the companies Acts will be incorporated in the final company law Bill. We will set a calendar date when we believe publication will take place and the Bill will be ready to go through the Houses but that has slipped because we knew this would be a huge undertaking. There are 1,200 sections in the company law legislation being considered by the review group. The amendment is necessary and we hope it will comfort those involved in inquiries who are coming to the end of their term.
The last consolidation Bill was introduced in 1991 and dealt with in the Seanad for long periods. It would be of benefit if the new consolidation Bill could be introduced in this House where it could be taken more slowly. The people most affected by the Bill will not look at it until the discussion takes place; therefore, it is vital that we do this. We did it in 1991 and it took a lot of time to get through. One chapter had to be brought through as a section on its own because of the Goodman affair and we had to come back during the summer to deal with it. It was important legislation. I completely agree with the Minister of State. On Second Stage I talked about the delay in introducing the legislation, but I also said to the Tánaiste I did not believe it would be here in the spring, even though she insisted it would be. However, I do not want this legislation to be rushed because there is too much at stake. Issues dealt with in it need to be looked at and everyone must have an input. It should be introduced in this House and the time granted to go through it because it will take weeks to do it.
Amendment agreed to.
Section 4 agreed to.
TITLE.
Government amendment No. 7:
In page 3, line 12, after "1990" to insert the following:
"AND THE COMPANIES (AUDITING AND ACCOUNTING) ACT 2003,".
Amendment agreed to.
Title, as amended, agreed to.
Bill reported with amendments and received for final consideration.
Question proposed: "That the Bill do now pass."
I thank Senators for their co-operation with the Bill. This is the second company law Bill initiated in the Seanad in 2009; therefore, we are fond of introducing such legislation here. This is a Chamber that can help in broadening the knowledge and input into legislation. On an issue raised by Senator O'Toole in the context of the company law review, there has already been broad consultation, because a wide ranging body of interests has been involved in feeding the input into the consolidation of that Bill. Whichever Chamber in which the Bill is initiated, it will take a long time to go through the legislative procedure. It is possible we might need a dedicated committee, at some stage, to go through the proposed legislation in detail, in addition to the two Houses. That is for another day, however, and I assure Members it is continually being worked on and updated. This Bill will form part of that legislation as well, when it is finally published.
Again, I thank Senators and thank the officials, who have been working very diligently. I am grateful, too, for the co-operation of the House and the Clerk of the Seanad.
I wish to be associated with what the Minister of State has said. I know the work the officials have done on this legislation. I have argued with them over the years and seriously differed with them on many occasions, but I would never doubt their commitment, ability and effectiveness in this area of legislation. The Minister of State and his Department are lucky to have people of such quality. It has been a tradition in that Department through the years to dot the i's and cross t's. If we were subject to litigation we should still be caught out, but I want to be associated with what the Minister of State said and to thank the officials for their help in all of this.
Unlike Senator O'Toole, this is a new area for me and I found the debate on this Bill very interesting. It was brought home to me when I was preparing for Second Stage. I came across a company that reported its annual profits under one accounting regime and then under another, all being part of the same annual report, for some reason. There was a €300 million difference in terms of the profits being reported, so this is important stuff.
One point I should make to the Minister, which we made on Second Stage, is that given the number of companies seeking this exemption to be made, it should only be granted in a sparing, judicious and careful manner. At a time when across the world there is more and more consensus for trans-geographical common accounting standards, this appears to be a very recent acknowledgement, particularly within the United States. At such a time it is important we allow common accounting standards across all companies, regardless of where they are located, because this promotes the honest reporting of economic activity. The absence of this, as we know, has been a contributory factor to the economic difficulties all countries are now experiencing. My impulse is to say that when this is being used I hope it will be done sparingly for the right reasons. I am sure it will, given the explanation that was given here for the Bill.
That is a point I want to emphasise. I wish it well and look forward to seeing further developments in this area in the coming 12 months.
I compliment the Minister of State on putting this legislation through the House in his usual efficient manner. I join Senator O'Toole in complimenting the Department officials for the work they have done.
This is not a Bill that I have paid a great deal of attention to. However, as Senator Donohoe said, it is a new area for me and I was very impressed at the work put in by both the Minister of State and the officials in particular. In looking at two of the amendments, with their plethora of commas and full stops, I had to read them half a dozen times before realising what exactly was being indicated. This is a reminder of how important is such legislation. At a time when globalisation attracts such nasty epithets, we have done well in Ireland with our ability to be able to compete. We are going to need legislation such as this to ensure that what we have is in line with what is expected by international companies. This a step in the right direction.
Question put and agreed to.