SELECT COMMITTEE ON ENTERPRISE AND SMALL BUSINESS díospóireacht -
Wednesday, 21 Jul 1999

Vol. 2 No. 2

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

SECTION 1.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

I move amendment No. 1:

In page 5, lines 23 to 27, to delete subsections (2) and (3) and substitute the following:

"(2) The collective citation 'the Companies Acts, 1963 to 1999,' shall include this Act (other than section 40).

(3) The Companies Acts, 1963 to 1990, the Companies (Amendment) Act, 1999, and this Act (other than section 40) shall be construed together as one.".

This is a technical amendment to the collective citation of the Companies Acts. It is required by the fact that the Companies (Amendment)(No. 3) Bill, dealing with stabilisation, has been enacted since this Bill was first published. Consequently I would be grateful if the amendment was agreed to.

Mr. Rabbitte

I believe there is an error in the amendment. We should probably have noticed it earlier in that a number of Bills have been enacted since 1990. Subsection (3) provides that the Companies Acts, 1963 to 1990, the Companies (Amendment) Act, 1999 - which deals with Telecom Éireann or with stabilisation, as the Minister of State referred to it - and this Act shall be construed together as one. However, it does not make any reference to the Companies (Amendment) Act, 1990, the last section - section 37 - of which was rushed through the Dáil to rescue the Goodman group of companies. On this point of collective citation section 37 of that Act states: "This Act and the Companies Acts, 1963 to 1986, may be cited together as the Companies Acts 1963 to 1990." It went on to provide that the Companies Acts, 1963 to 1986, and that Act shall be construed together as one Act.

A couple of months later the Dáil considered the Companies Act, 1990, from which it had abstracted part to rush it through the House in August of that year. The beginning of the Act, which was correctly written but not correctly enacted, states: "This Act and the Companies Acts, 1963 to 1986, may be cited together as the Companies Acts, 1963 to 1990." It should have included the Companies (Amendment) Act, 1990.

Mr. Treacy

We have considered this matter and the advice available indicates that it does not present a difficulty. It is not necessary to regularise the matter. However, in view of the Deputy's remarks I will reconsider the matter for Report Stage because I do not wish there to be any doubt in law. It is important that both operative and interpretative law be at all times correct for legislative purposes.

Mr. Rabbitte

I am reasonably confident that my views are correct. It makes a compelling case for the consolidation of companies legislation. In view of the Attorney General's remarks on the record I hope he holds the same view.

Amendment agreed to.

Question proposed: "That section 1, as amended, stand part of the Bill."

Mrs. Owen

The question is agreed, subject to the Minister of State returning to the matter on Report Stage.

Mr. Treacy

On the question of consolidation, the first McDowell report referred to this matter. In view of this we will need to give it consideration. We will return to the matter.

Question put and agreed to.

Sections 2 to 6, inclusive, agreed to.

SECTION 7.

Question proposed: "That section 7 stand part of the Bill."

Mrs. Owen

It has been put to me by the consultative committee of the Accountancy Bodies of Ireland that all the information required to be put before the courts in the form of a petition might take such a length of time to compile that the company may have lost the opportunity to be saved. Section 21 allows for further information to be submitted to the court, while subsections (2) and (3) provide that, if directed by the court, the examiner shall prepare a report setting out matters which he considers will assist the court or shall supply a copy. Has the Minister of State considered the submission made by this organisation and does he consider the legislation presents a problem in this regard?

Mr. Treacy

We have considered this matter and are satisfied that what is proposed is reasonable and fair. Flexibility is provided for. In this regard, section 7(3B) provides that the report of the independent accountant shall contain a number of aspects, among them that provided for by paragraph (h), which states: "recommendations as to the course he thinks should be taken in relation to the company including, if warranted, draft proposals for a compromise or scheme of arrangement". We will have to keep this under constant review. If changes need to be made in the future they will be but. as of now, we believe what is proposed is satisfactory and reasonable.

Mrs. Owen

Does the Minister of State not consider that greater discretion should be provided in cases, for example, where all the details are not available? Is he indicating that the person preparing the petition to the court can say it is only a draft and not a final statement on information concerning the company? Will the courts not take a dim view if they do not have all the information to make a decision to appoint an examiner?

Mr. Treacy

Section 7(3B)(a) states: "the names and permanent addresses of the officers of the company and, in so far as the independent accountant can establish,. . . ". In as far as he can establish all the facts he must satisfy the court. Paragraph (c) contains the words: "in so far as it is reasonably possible to do so," while paragraph (d) contains the words: "whether in the opinion of the independent accountant". Such language allows for flexibility and, in so far as it is possible to do so, the court will have to be satisfied that all of the information is available. If further information becomes available it would have to be taken into account. There is a need to keep the matter under constant review and we will do so.

Mrs. Owen

Section 21 states:

The Act of 1990 is hereby amended by the insertion of the following section after section 13:

"13A. (1) Where, arising out of the presentation to it of the report of the independent accountant or otherwise, it appears to the court that there is evidence of the substantial disappearance of property of the company concerned that is not adequately accounted for, or of other serious irregularities in relation to the company's affairs having occurred, the court shall, as soon as it is practicable, hold a hearing to consider that evidence.

That gives the court the opportunity to act later. Is the Minister of State sure there is no discrepancy here, given that there may be a binding obligation under section 7? Does section 7 need to be slightly more discretionary to allow for the operation of section 21?

Mr. Treacy

Section 21 deals with irregularities. If any information comes to hand it would be brought to the attention of the court at that point. In so far as the independent accountant has information available to him, it would appear reasonable that a professional like him would be able to include it in a subsequent submission to the court under section 21. The court would be concerned at all times to get the maximum information to enable it make a conclusive decision.

Mrs. Owen

I will not oppose the section, but perhaps the Minister of State will reconsider the matter for Report Stage to ensure companies do not fail because too much time has elapsed.

Mr. Treacy

Ultimately we must see how the provisions operate. However, I will reconsider the matter for Report Stage.

Mr. Daly

There seems to be an assumption that the independent accountant is going to be a man because the term "his" appears six times in the section.

Mr. Treacy

There is a constitutional provision which covers that. The independent accountant can be a man or a woman.

Question put and agreed to.

Section 8 agreed to.

SECTION 9.

Mrs. Owen

I move amendment No. 2:

In page 10, line 18, after "days" to insert "which does not include Saturdays, Sundays or Public Holidays".

It is not made clear that the ten day period laid down in section 9 does not include Saturdays, Sundays or bank holidays and it is conceivable that the period could be considerably reduced. The amendment is designed to tidy up the position and ensure that the period comprises ten working days because people might not be able to work on Saturdays, Sundays and bank holidays. In certain instances there could be two Saturdays, two Sundays and a bank holiday in a ten day period which would reduce the time available to five days. I would like to know whether the Minister of State believes the amendment is necessary.

Mr. Treacy

Section 9 specifies when, in the absence of an independent accountant's report, interim protection may be provided to a company for a period not exceeding ten days. Interim protection can only apply, as stated in new subsection 3A(1), in exceptional circumstances for a limited timeframe. The Deputy will also note that in section 4(2) of the Companies Act, 1990, provision is made to discount a Saturday, Sunday or public holiday, but only where the period in question is six days or less. Therefore, I cannot accept the Deputy's amendment as tabled. However, before Report Stage, I am prepared to consider whether to include a proviso that where the ten day period expires on a Saturday, Sunday or public holiday, the deadline will be extended to the next working day.

I would like to ensure that this legislation remains consistent with the Companies Act, 1990, but the Deputy's proposal would not facilitate that. However, to take account of her request I am prepared to review the position before Report Stage and perhaps nominate as the deadline the first available working day after a Saturday, Sunday or public holiday.

Mrs. Owen

I thank the Minister of State for going some of the way toward recognising that there could be a problem with the length of the period under which a company can remain under the protection of the courts. I will not press the matter at this stage but I will do so on the next amendment tabled in my name which seeks to introduce further discretion in respect of the courts.

The Minister of State indicated that Saturdays, Sundays and bank holidays are excluded if the period is less than six days.

Mr. Treacy

That is stipulated under the 1990 Act .

Mrs. Owen

Given the workload in our courts, is a period of six days sufficient or should it be increased to ten with the exclusion of Saturdays, Sundays and bank holidays?

Mr. Treacy

We are dealing with very grave matters which make people focus on the seriousness of the situation. If the period were extended, many options would become available which would not be desirable.

Mrs. Owen

I realise that the Minister of State must keep the provision as tight as possible.

Mr. Perry

Would it not be left to the courts' discretion to decide on the length of the period, particularly under exceptional circumstances where evidence which might be forthcoming would affect a case? I believe the courts should have such discretion because the ten day period is too short, particularly in view of the scale and magnitude of certain cases and the preparation carried out before such cases are heard. Ten days is too short a period in which to arrive at a formula to solve a case.

Chairman

I wish to be of assistance to the committee. The Bill contains 48 sections and we have only reached section 9. We did agree to try to move through those sections as quickly as possible. Given that the proposer of the amendment indicated her intention to withdraw it, I believe we should move on to amendment No. 3. The Minister of State has given a commitment to return to the matter on Report Stage.

Amendment, by leave, withdrawn.

Mrs. Owen

I move amendment No. 3:

In page 10, line 20, after "report" to insert "and the court shall have discretion to extend the period where it considers this appropriate having regard to the rights and prospects of interested parties".

The section states that "by reason of exceptional circumstances outside the control of the petitioner" a company may be placed under the protection of the court for a period not exceeding ten days. That is too confined because, for the sake of argument, the report of the independent accountant might not be available because someone was seriously ill or absent on an extended business trip outside the country or because a major order or something relevant to saving the company was in the offing. The courts must be given discretion to place companies under their protection for 20 days, for example. An additional 24 or 48 hours might make a the difference.

Provisions of this kind are not unheard of in legislation, particularly in cases where exceptional circumstances arise. The ten day period laid down in the section might include a Saturday, Sunday and bank holiday and a company relying on an order from a country in another time-zone, such as Australia, might experience difficulties in terms of delays. Will the Minister of State consider including an element of discretion for the courts?

Mr. Boylan

Common sense indicates that the courts must have discretion because no two cases are the same. Courts should be able to decide on the day whether ten or more days should be set aside. We cannot draw the line at ten days and close the book on this subject.

Mr. Treacy

As already outlined in respect of the previous amendment, the interim protection provided for in section 9 is only intended for very exceptional circumstances where time is of the essence. If the report is not received within the specified period of ten days, the protection of the court shall cease but without prejudice to the presentation of a further petition at a later date. This means it is in the hands of the applicants to meet the deadlines set. I do not believe it is appropriate to extend the time limit or to give the courts discretion to extend the period of interim protection in the manner sought in this amendment.

If we are intent on introducing major changes to company law, creating the examinership situation and placing companies under the protection of the courts, it is vitally important that we are absolutely consistent in respect of all companies. Some of the larger companies which may have vast resources, access to powerful lawyers, etc., may be in a position to procrastinate and it is our responsibility as legislators to ensure that there is rigidity and that strict parameters are laid down within which all companies must operate. We must ensure that equity is maintained.

Mrs. Owen

If a petition is presented, I presume, to the High Court, is the Minister of State in a position to guarantee that it will be heard and can he indicate the speed with which it will be dealt? There could be a long delay before a case is heard or, following commencement, a hearing might be adjourned for ten days. Will the ten day period only come into play from the time the court reaches its decision? Will people be allowed to submit additional information in the interim? I am aware of court cases which were adjourned for between two to four weeks. How will the provision operate in practice?

Will the Minister of State consider granting the courts further discretion? I agree with Deputy Boylan that no two cases are not the same. The courts have already been provided with a certain amount of discretion because they may decide to only give someone two or three days protection or they may grant the full ten days. A certain amount of discretion is already provided for. It would be a good idea to provide extra discretion to the courts under these exceptional circumstances.

Mr. Treacy

The basic change we are making is in section 7(3A):

In addition to the matters specified in subsection (4), a petition presented under section 2 shall be accompanied by a report in relation to the company prepared by a person (in this Act referred to as the 'independent accountant'). . . .

Once that petition, which must include the independent accountant's report, is lodged in the Circuit or High Courts - the 1990 Act specifies both - the company is automatically under the protection of the court for ten days. It is still a matter for the court to hear the case.

Mrs. Owen

The ten days could have expired before the court hears the details of the case. If it is lodged in court on a Monday and the court already has a fixed full schedule and cannot hear it until the following Tuesday, is the company only under the protection of the court for the ten days from the Monday the case is lodged?

Mr. Treacy

No. Section 9(3A)(1)(a) provides that if, by reason of exceptional circumstances outside the control of the petitioner, the report of the independent accountant is not available in time to accompany the petition, ten days are available to submit that report. We are dealing with exceptional circumstances only.

Mrs. Owen

I will have to accept the Minister's bona fides that he is satisfied he will not be coming back to amend this when, because the courts are so busy, this ten day provision will not be met.

Mr. Treacy

I am satisfied that what we propose is sensible, reasonable and practical. However, we must always keep the law under review. I will look at this again on Report Stage. I am satisfied that what we propose to deal with here are exceptional circumstances. We are introducing the new measure of an independent accountant's report and this is the way to go.

Mr. Perry

Surely it does not go before the High Court if it goes before the Circuit Court.

Mr. Treacy

The Circuit or High Court - the 1990 Act allows both.

Mr. Ardagh

It is an important time for any company when it goes into examinership. It must focus on the report at that time. It is fine for professionals, whether lawyers or accountants, to have as long as they want to do it as for them it is a haymaking exercise. However, from the point of view of the creditor and thus the economy, it is vitally important that the time span be as short as possible. If one looks at the Goodman situation and the speed with which the 1990 Amendment Act was enacted, ten days is a reasonable period.

Mrs. Owen

That was in August when the courts came back and had no other agenda.

Mr. Treacy

On the question asked by Deputy Perry, where the gross liabilities do not exceed £250,000, it may go to the Circuit Court and any figure above that is obliged to go the High Court.

Amendment, by leave, withdrawn.

Section 9 agreed to.

SECTION 10.

Mrs. Owen

I move amendment No. 4:

In page 11, to delete line 6 and substitute the following:

" '3B. (1) The court shall not accept a petition presented under section 2 or an order appointing an examiner to a company unless the creditors by a majority of two-thirds have agreed to allow such a petition to be made to the courts.

(2) The court shall not make an order dismissing a pet--".

I know that in sumissions made to the Minister by the consultative group and IBEC concern was raised about the role of creditors. The effort being made to give creditors some input before an examiner is appointed to a company was welcomed. However, my amendment proposes to give them more input before a petition is sought and that there would have to be a meeting of creditors and a majority of two-thirds would have to agree to allow such a petition to be made to the courts. This is important for creditors as it is possible a company could divine a situation where it would allow itself to reach the point where it would have to be put into examinership and the main creditors, such as the bank and the Revenue Commissioners and smaller creditors would be disenfranchised. The consultative committee of the accountancy bodies raised this with the Minister, as did IBEC. Why did the Minister not go as far as they requested?

Mr. Treacy

The new subsection (3B)(1) is designed to afford each creditor the right to be heard during the hearing concerning the petition for the appointment of an examiner by the court. While the current legislation does not give creditors the right to be heard, the attendance of creditors is usual at the hearing for the appointment of the examiner. I agree that creditors should have the right to be heard at the petition hearing as their views would assist the court in deciding where there is a reasonable prospect of survival for the company. This may mean in practice that the court would not grant protection to a company if its creditors are opposed to such a course of action. Therefore, I consider the reasonable prospect criterion, giving creditors the right to be heard at the hearing for the appointment of an examiner, and that ultimately at least one class of creditor will have to approve the scheme of arrangement are sufficient safeguards to the interests of the creditors. However, we have a duty to strike a balance between the rights of the creditors and other interested parties. I would not accept that creditors, particularly the larger creditors, should be allowed frustrate the whole process from the outset which is what could happen as a result of this amendment. Therefore, I regret I am unable to accommodate the amendment.

Mrs. Owen

I accept the point that the Minister would not want to see one or two large creditors frustrating the process. However, my amendment deals with two-thirds of all creditors, and does not relate to their size. If a dozen small creditors - bakers, butchers, candlestick makers - are owed money by the company, on their own they would only make up one creditor and would all have to agree on the company going into examinership. It is correct to give them the right of a hearing. However, by that stage the die is almost cast and the petition for examinership is being lodged.

I should know every detail of the Bill by heart - the Minister does but I probably do not - but when the independent accountant is compiling his report, does he or she have an obligation to notify all the creditors there is a possibility the company will be put into examinership? As I said on Second Stage, it is possible a small creditor who is owed £5,000 - that may be a huge amount of money to a small creditor - might not know all this work is going on behind the scenes until suddenly the case in court. What obligation is there early on in the system for all creditors to be notified that an independent accountant's report is being prepared?

Mr. Perry

I agree with Deputy Owen. Creditors often want an examiner appointed to get some payment but more often than not they receive nothing. It often involves an amount of money which can make the difference between going out of business or not. It is imperative that creditors are fully informed of proceedings from the start. They should not have a greater right than other creditors, such as the Revenue Commissioners, but they should not be excluded. A company could still be conducting business while in receivership and it is important creditors are kept on side because the survival of the company could depend on them being looked after as future suppliers. Important creditors should be kept informed as this could be important to the survival of the company and the retention of jobs in the future.

Deputy Ardagh

Part of the reason for legislation on examinership is that it also affects employees and the local economy in which the business operates. The 1990 Companies (Amendment) Act was enacted to deal with a certain industry. I agree creditors should have certain rights. However, the amendment states a majority of two-thirds and does not say whether that means numbers, amount or both. What may be a very small item for the company may be very important for a small creditor. Such a creditor could be the local painter who has a contract for £5,000 and that could mean the difference between his business continuing or not. Such an amount might be insignificant to some companies but it would be very important to that creditor. The idea he can be heard in court is equitable, right and proper. The creditors alone should not decide whether a petition is put forward. It is important to the employees and the local economy within the area if examinership proceeds.

Mr. Boylan

A complaint I have regularly heard is that, when large creditors are dealt with, nothing is left for small creditors and it often frustrates them in following up their legitimate rights of seeking payments due to them. That is an anomaly which must be examined if we are to do our job properly and safeguard everyone's interest.

Mr. Treacy

Examinership is indicative of a serious situation. Under section 12 of the 1990 Act, there is a requirement for notification of the appointment of an examiner whereby the petitioner must notify the Registrar of Companies. The decision to appoint an examiner must also be published in Iris Oifigiúil and in at least two daily newspapers immediately on appointment.

The law is being changed to allow creditors to be heard for the first time at examinership hearings. This is a new departure which is fair and important. I agree with what people said about small creditors. They are often unaware of what is happening and are often the victims of decisions. They will now be heard and that is important. However, it would be a serious situation if they were to be notified in advance because creditors could then move to appoint a receiver. If a receiver is in office for three days, an examiner cannot then be appointed. This would rule out the option of trying to save the company. We are dealing with examinership, which is different from receivership. We must ensure there is no confusion between the two.

Mrs. Owen

Would the Minister of State prefer to keep everyone in the dark until matters were almost settled? It seems the horse has bolted by time creditors get a chance to make their case in court. I would have thought the independent accountant preparing the report to bring the petition to court would have to know what the implications for creditors, small ones especially, would be if the company were put into examinership.

The Minister of State's reason for not allowing creditors know in advance that they might do something to retrieve their money is weak. Surely it would be better for most creditors to save the company if they thought there was a chance to do so rather than put it into receivership. The new process of examinership is to try to prevent potentially viable companies being wound up as easily as those which are not. Not every creditor reads Iris Oifigiúil. I know of no constituent who regularly buys and reads it. It is not on their bedside table. Neither would many people read a notice in the turgid columns near the back of a newspaper.

I welcome what the Minister of State has done in the Bill in giving creditors a hearing for the first time but I would have preferred if he had gone further and given them more rights. However, he is obviously not willing to do that. I will not press the amendment.

Mr. Treacy

I certainly do not want to keep anyone in the dark and no horse has bolted as a result of what we propose, rather they will all be in the arena. For the first time we will allow creditors to make their case in court so that, before a decision is taken to appoint an examiner by the court, it knows the creditors' position. Along with but separate to that, the petitioner is obliged to ensure that the proposal is placed in newspapers specifying the date on which the hearing is to be held arising out of the report prepared for the petition. It is circulated as public information. Under the rules of court, but separate to that, the court may direct the petitioner to notify creditors, but that is a matter for the courts to decide. It is outside company law.

Mr. Perry

Is there any facility for the independent accountant to meet with creditors to promote goodwill and to ensure continued success for a business in examinership? It is important and makes sense to retain the goodwill of creditors. Examinership is completely different from receivership and the point is lost if the goodwill of creditors is not obtained because they are people who must be retained for the survival of the business. It makes no sense that there is not more dialogue with creditors who are the lifeline if a business is to survive.

Mr. Treacy

It is not possible to legislate for every eventuality and situation. Professional ethics, conduct and attitude mean the independent accountant may, if he or she so wishes, meet with creditors. There is nothing to stop him or her from so doing. The Bill does not say he or she must or should not.

Mr. Perry

There is no recommendation?

Mr. Treacy

No. We must allow for some flexibility because it is a serious situation when a company moves towards examinership.

Mr. Perry

What about including a clause stating that it would be desirable?

Mr. Treacy

It is probably not possible to do that and is probably also inadvisable.

Amendment, by leave, withdrawn.

Section 10 agreed to.

Sections 11 and 12 agreed to.

SECTION 13.

Question proposed: "That section 13 stand part of the Bill."

Mrs. Owen

This is a serious section which allows for a court to decline to hear a petition if a person has failed to disclose information. If it was found the information was withheld by the independent accountant, for example, is there any sanction built into this or the primary legislation to deal with that other than the court declining to hear the petition? Is it a criminal act or an act subject to follow-up if the independent accountant or someone associated with the company has failed to co-operate?

Mr. Treacy

It would be a matter for the court whether it would be treated as contempt of court if a person deliberately failed to disclose important material or information pertaining to the petition. It would be a matter for the court to decide what attitude would be adopted. The company or its directors might also be in a position to pursue the independent accountant or whoever is guilty for failing to disclose the information.

Mrs. Owen

The only sanction is that the petition would not be granted.

Mr. Treacy

It would be a matter for the court to decide whether it would sanction anyone for withholding the information.

Mrs. Owen

Under what Act?

Mr. Treacy

It depends on what is done.

Mrs. Owen

Is it under a Criminal Justice Act, for example? It is baldly stated in the Bill that the court will decline to hear a petition if information is withheld. Can such information be provided the next week? Is declining to hear the petition a slap on the wrist for withholding the information and does that preclude the information being provided on the next occasion?

Mr. Treacy

It would be a matter for the court to interpret and decide what law was broken and if there were sufficient grounds to make such a decision.

Mr. Perry

Is the independent accountant appointed solely by the courts?

Mr. Treacy

No. The accountant is the responsibility of the company seeking the petition. It should be an independent accountant. If they are to survive and get a decision from the court it would surely be in everyone's interest to ensure that all the material facts are available to the accountant before the application is made.

Question put and agreed to.

SECTION 14.

Chairman

Amendments Nos. 5 and 13 are to be taken together by agreement. Is that agreed? Agreed.

Mr. Treacy

I move amendment No. 5:

In page 12, paragraph (b)(i), line 45, to delete "charge, mortgage" and substitute "mortgage, charge, lien".

We propose taking amendments Nos. 5 and 13 to sections 14 and 28 together. They relate to securities and are designed to standardise the type of securities referred to in section 14(b)(i) to prevent any action to be taken against a company in examinership in respect of a security without the examiner's consent.

Section 28 refers to the priority of costs and remuneration and expenses for examiners. A lien has been added to section 14 and in section 28 a more comprehensive description of the various kinds of securities are substituted for fixed charge - those are a mortgage, charge, lien or other encumbrances of a fixed nature or a pledge. I hope these amendments are acceptable.

Amendment agreed to.

Section 14, as amended, agreed to.

SECTION 15.

Chairman

Amendments No. 7 is an alternative to amendment No. 6 and amendment No. 8 is related. Amendments Nos. 6, 7 and 8 are to be taken together by agreement.

Mr. Treacy

I move amendment No. 6:

In page 13, line 7, to delete "the examiner of".

There are similar amendments proposed to section 15. One is proposed to the new section 5A.(1) and the second to section 5A.(2) and it has been agreed to take these together. Deputy Owen has proposed a similar amendment to section 5A.(1).

Normally in examinership the examiner does not take over the running of the company or make payments. These two amendments remove these references to the examiner and thereby make it clear that the company rather than the examiner has to make the payments.

Amendment agreed to.

Amendment No. 7 not moved.

Mr. Treacy

I move amendment No. 8:

In page 13, line 17, to delete "the examiner" and substitute "the company concerned".

Amendment agreed to.

Section 15, as amended, agreed to.

Sections 16 and 17 agreed to.

SECTION 18.

Question proposed: "That section 18 stand part of the Bill."

Deputy Rabbitte

Will the Minister of State read out his note on this section? In respect of negative pledges, is the Minister of State happy that this takes into account the essence of the Supreme Court case on the Kentz Holdair case? An exception is being made here in respect of negative pledges. As I understand it, the discussion is left to the court to make a judgment on circumstances.

Mr. Treacy

Section 18 amends section 7 of the 1990 Act by inserting three new subsections, 5 (a), (b) and (c). The powers of an examiner under section 7 of the 1990 Act have been held by the courts in the Kentz Holdair Limited examinership to include the power to repudiate contracts even though they were entered into prior to the period of court protection. This is considered to undermine the reliability of contracts entered into with Irish companies and could pose serious problems for the financing of Irish industry. Accordingly, this section prohibits the examiner from repudiating a contract entered into by the company prior to the protection period. However, an exception is provided for in relation to so called negative pledges in contracts. Subject to the service of notice, such contracts may be set aside by an examiner for the period during which the company is under the protection of the court, given the opinion of the examiner that enforcement would prejudice the survival of the company. In essence we are protecting what was decided by that Supreme Court decision.

Question put and agreed to.

Section 19 agreed to.

SECTION 20.

Mrs. Owen

I move amendment No. 9:

In page 15, between lines 42 and 43, to insert the following subsection:

"(2) Section 12(4) of the Act of 1990 is hereby amended by the deletion of 'under the protection of the courts' and the substitution therefor of 'under examination'.".

This is meant to change the language in this part of the Bill. "Under the protection of the courts" may give the impression that the company is very safe and creditors looking at such a company might feel that nothing can happen until they are consulted. It has been put to us by the consultative group that "under examination" would be a better form of language. That group is concerned that "under the protection of the court", required under section 12(4) of the 1990 Act to be stated on documents issued by the company following the appointment of an examiner, has given rise in a number of cases to confusion in the minds of employees, suppliers and even the general public when dealing with a particular company. In their opinion an unwarranted degree of assurance is given by that phrase and we propose it be amended to read "under examination". We also believe that the rescue process should be entitled "examination" and not "examinership", though I am not arguing that.

What is the Minister of State's view that "under the protection of the court" suggests that the company will do nothing inimicable to suppliers and creditors?

Mr. Rabbitte

Is the point not that the signal "under the protection of the court" is out? I would be reluctant to do business with a company that has this message stamped across its forehead. "Under examinership" might be a more neutral term.

Mr. Boylan

I agree fully with Deputies Owen and Rabbitte. The impression would be given to the public and to businesspeople that "under the protection of the court" would mean that a company was fine. People would have a false assurance and people would be more alert if the business was in examinership. There is a difficulty with this term.

Mr. Treacy

I agree with Deputies. Once a company is under the protection of the courts there are doubts about the liability or liquidity of the company. That is obvious. Section 12(4) of the 1990 Act requires that "under the protection of the court" is stated on documents issued by the company following the appointment of the examiner. I do not think there is any reason for changing that statement at this stage as there is sufficient understanding and appreciation of what is involved in the examinership process and what this statement means. It is very important that anyone doing business understands that this means the company in question is under the protection of the court. If we removed this it would be very dangerous. I regret that I am unable to accept this amendment.

Mrs. Owen

The case Deputies Rabbitte, Boylan and I have made is that there are two possible interpretations of the wording. Some people might consider the term "under the protection of the court" as being very positive and they might feel the company and their jobs were safe. Everyone knows what it means for a company to be under examinership; it means everything is up for grabs. I do not think it is sufficient for the Minister to say this is merely a safeguard. It could either be interpreted as a safeguard or as a false safeguard. I urge the Minister to consider the meaning of the words used. Everyone understands the term "examinership" which would, at least, give a company's employees a better knowledge of what was actually happening. The words "protection of the court" are comforting in one instance and might equally be interpreted negatively in another instance by someone still doing business with a company. I will not push this to a vote at this Stage but I will reserve the right to do so on Report Stage if the Minister cannot come up with a better explanation.

Chairman

I note that Deputy Perry is indicating his wish to contribute. We have a number of sections to deal with; the Deputy may make a brief comment if he so wishes.

Mr. Perry

I am in agreement with previous speakers. The wording "under the protection of the courts" must be carefully considered especially with a view to a company's future survival.

Mr. Rabbitte

I do not think the Minister's note in this instance deals with the point being made. The Minister is having an each way bet here. He is saying he does not wish to mislead parties on either side. We are all in agreement with that. We do not wish to mislead prospective customers, nor do we wish to send out a signal that a company is hunky-dory and trading as normal. Customers should be made aware that a company is under the protection of the court.

As I understand it, the point being made is that the term "under examination" connotes precisely the same meaning as "under the protection of the courts" but is more neutral language. Why is it contended that the terms are not analogous? The Minister is correct in saying that, in 1999, everyone knows what the term "under examination" means. Why then is the term not being used? The idea behind this is to permit a company to trade out of its temporary difficulties and be restored to full health. Why should we do anything which would constrain a company's capacity to be restored to good health?

Chairman

Is the Minister having an each way bet on this issue?

Mr. Treacy

I like to bet on the Galway Races but not on this issue.

Mr. Rabbitte

Betting in Connacht is very dodgy.

Mr. Treacy

It was certainly dodgy for those who put all their money on one horse. I always felt I was an each way bet but the media and those around me did not.

Mr. Rabbitte

The Minister's county did not do too well last Sunday either.

Mr. Treacy

As a Mayo man, the Deputy will understand that we, in Galway, always brought science to the game and do not have any difficulty with those who copy us.

Mrs. Owen

I assume Galway is currently under examination.

Mr. Treacy

Just taking a short siesta.

I did not say that everyone understands the term "under examination". I said most people would understand the word "examinership". The Deputies are seeking to substitute the words "under examination" for the words "under the protection of the courts". What do the words "under examination" mean? Under examination by whom - the Revenue Commissioners, a VAT officer, the registrar of the Companies Office, the Registrar of Friendly Societies, the Central Bank or the new single financial regulator? The term would be confusing and unclear. We have taken legal advice on this issue and have been informed that we must continue to use the words "under the protection of the courts". A company could be examined by a number of statutory organisations and bodies and we would only create confusion if we were to go down that road.

Mr. Rabbitte

Would the Minister make the same point about the words "under examinership"?

Mr. Treacy

No, I would not.

Mr. Rabbitte

Would the Minister accept an amendment to substitute those words on Report Stage?

Mr. Treacy

No. While the term "examinership" has certain connotations, it is important that we realise that when a court takes a decision about a company, the company is under its protection. That is clear, different and extreme and we are only dealing with extreme and serious situations here.

Mrs. Owen

Perhaps the Minister would share the legal advice on this matter with us on Report Stage as I will probably resubmit this amendment using the word "examinership" instead of "examination" which the Minister thinks is too loose. We are merely trying to protect people who understand English usage.

Mr. Treacy

I will certainly consider this matter in advance of Report Stage and will provide as much information as possible to the committee. If Deputy Owen consults her notes she will see that CCABI stated we should not use the word "examinership".

Mrs. Owen

They did, but I am not obliged to accept everything they say.

Mr. Treacy

I am aware of that.

Amendment, by leave, withdrawn.

Section 20 agreed to.

Sections 21 to 23, inclusive, agreed to.

SECTION 24.

Mr. Treacy

I move amendment No. 10:

In page 19, between lines 40 and 41, to insert the following:

"(c) by the insertion of the following subsection after subsection (4):

'(4A) Without prejudice to subsection (4), the court shall not confirm any proposals in respect of a company to which an examiner has been appointed under section 4 if the proposals would have the effect of impairing the interests of the creditors of the company in such a manner as to favour the interests of the creditors or members of the company or, as the case may be, each company to which it is related, being a company to which that examiner has been appointed examiner under section 2, or as the case may be, 4.',".

This amendment proposes the insertion of a new subsection (4A) into section 24 of the original Examinership Act, 1990. The new subsection is designed to ensure that any 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 to benefit the members or creditors of another related company or the main company. While I am aware that, under section 24(4)(c) of the main Act, the court can refuse to accept a scheme of arrangement which might be unfairly prejudicial to any party, this amendment is intended to make specific provision for the position of related companies in examinership. I hope Members will accept the amendment which will take creditors' interests into account.

Mrs. Owen

I read this amendment and regret I am none the wiser after listening to the Minister's explanation. The amendment states that "Without prejudice to subsection (4), the court shall not confirm any proposals . . . if the proposals would have the effect of impairing the interests of the creditors of the company in such a manner as to favour the interests of the creditors . . . . I cannot understand the English here which seems to be somewhat contradictory. An examinership cannot be confirmed if it has the effect of impairing the interests of the creditors. If a full stop had been inserted after that clause I would understand it but it goes on to state "in such a manner as to favour the interests. . . ". Is that not a contradiction?

Mr. Rabbitte

It is an ongoing puzzle to most of us why we must use this type of language. I refer the Minister to what I term the "Goodman Act". In the "Goodman Act"——

Mr. Treacy

This is the 1990 Act?

Mr. Rabbitte

The Companies (Amendment) Act, 1990, states: "the proposals are not unfairly prejudicial to the interests of any interested party". It seems to me to be a general, all embracing, intelligible, lucid protection that the proposals are not unfairly prejudicial to the interests of any interested party. Why is it considered necessary to refine that in this particular provision and what does it mean?

Mr. Treacy

I understand that this might create confusion. I accept fully what the Deputies have said. However, Members will accept that I am in the hands of the draftsman who had to do a lot of work to achieve this amendment. The new subsection (4A) is designed to ensure that any 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 to benefit the members or creditors of another related company or the main company. In other words, it cannot deplete a company to the detriment of the entire group or any company within the group. The proposed amendment must be read in its totality for it to make sense.

Mr. Rabbitte

Does the fact that the proposals are not unfairly prejudicial to the interests of any interested party cover that situation?

Mrs. Owen

Or allied companies.

Mr. Treacy

The advice available was that it was a bit loose and that it needed to be absolutely specific in order to protect the interests of a group of companies vis-à-vis the management of one single company within the group.

Mrs. Owen

I understand what the Minister of State is saying, that is, that he cannot make a decision which would impair the interests of creditors in the company being put under examinership to favour the interests of creditors or members of the company. However, he still uses the word "the". I understand the amendment to be saying "if the proposals would have the effect of impairing the interests of the creditors of the company in such a manner as to favour the interests of the creditors or members of any other company that forms part of the group". However, the word "the" is the same as the word "the" before "the company". This is where the confusion lies. I thought the Minister was talking about "the company". The amendment should read, "or any other company that forms part of the group". It was extremely clever of the draftsman to come up with that set of words.

Mr. Treacy

I will ask the draftsman to have another look at the wording. The proposed amendment refers to "the company" - that is a section 4 company. The words "being a company to which that examiner has been appointed" refers to a company appointed under section 2 or, as the case may be, section 4. That would be another related company. In other words, we are being absolutely specific in the effects taking place as a result of the appointments being made and the companies to which we are referring. I understand what Deputy Rabbitte was trying to achieve by referring to the situation prior to 1990. The advice is that we must be absolutely specific; there can be no ambiguity. However, I will ask the draftsman to try to simplify and clarify the wording so that it will be transparent and lucid for everyone.

Amendment agreed to.

Section 24, as amended, agreed to.

SECTION 25.

Mr. Treacy

I move amendment No. 11:

In page 20, to delete lines 34 to 49, and in page 21, to delete lines 1 to 8, and substitute the following:

"(i) he shall——

(I) if 14 days' or more notice is given of such meeting, at least 14 days before the day on which the meeting concerned under section 23 to consider the proposals is held, or

(II) if less than 14 days' notice is given of such meeting, not more than 48 hours after he has received notice of such meeting,

serve a notice on the third person containing an offer in writing by the creditor to transfer to the third person (which the creditor is hereby empowered to do) any rights, so far as they relate to the debt, he may have under section 23 to vote in respect of proposals for a compromise or scheme of arrangement in relation to the company,

(ii) if the said offer is accepted by the third person, that offer shall, if the third person furnishes to the examiner at the meeting concerned a copy of the offer and informs the examiner of his having accepted it, operate, without the necessity for any assignment or the execution of any other instrument, to entitle the third person to exercise the said rights, but neither the said transfer nor any vote cast by the third person on foot of the transfer shall operate to prejudice the right of the creditor to object to the proposals under section 25,

(iii) if the creditor fails to make the said offer in accordance with subparagraph (ii), then, subject to subparagraph (iv), the creditor may not enforce by legal proceedings or otherwise the obligation of the third person in respect of the liability,".

Section 25 will introduce more specific provisions as to the manner in which the examinership process handles the position of a guarantor for the debts of a company in examinership. A number of potential difficulties have been identified which could arise in the operation of existing subsections 25A (1)(c)(i), (ii) and (iii). I now propose to delete and replace them with new subsections 25A (1)(c)(i), (ii) and (iii). It should be noted that the new subsections to 25A (1)(c) do not in any way affect the pre-existing objectives contained in the present section 25 relating to guarantees. The new subsection 25A (1)(c)(i)(I) will ensure that where more than 14 days' notice of a meeting is given, the offer to transfer any voting rights attaching to the creditor by virtue of the debt to be passed to the guarantor by the creditor 14 days before the meeting, however unlikely it may be in practice, it is still possible for an examiner to call a meeting under section 23 of the 1990 Act by giving less than 14 days' notice. Therefore, if a meeting is called at less than 14 days' notice, subsection 25A(1)(c)(i)(II) indicates that the offer by the creditor to the guarantor must be made not more than 48 hours after the creditor has received notice of such meeting.

The second change is to require that the offer by the creditor to the guarantor must be made in writing rather than going through the formalities of actually drawing up a formal assignment which could raise difficulties in relation to who is to draw it up, what is to be contained in it, who is to bear the cost and also raising the possibility of stamp duty being payable if it is an assignment under seal. The mechanism has been simplified by the proposal. The offer to transfer voting rights made by creditors, once accepted by the third party, can then operate without any further legalities and will be accepted by the liquidator at the meeting.

Mrs. Owen

The original legislation was printed in March and a whole new subsection is being added in July to simplify it. How was the error in the original Bill discovered and why is such a massive amendment needed?

Mr. Treacy

It was not wrong in the original proposal. However, we live in a very broad democracy and, as the Deputy will be aware, from the time legislation is published usually everyone affected by it has an interest therein. As a result of the publication of the proposed legislation, a number of financial institutions made submissions pointing out the deficiency. The issue was examined and this is the response.

Mrs. Owen

The Minister of State's Department should be more diligent in carrying out as much consultation as possible prior to the publication of legislation. He will be aware that recently there was no consultation regarding the proposed amendment on the issue of the Telecom shares and we were quite cross about that. In this instance there was some consultation, but not enough. When I rang IBEC regarding this Bill, they had not been consulted.

Mr. Treacy

This is the ninth Department in which I have served and I am working with some of the most diligent people I have ever encountered. We showed two drafts of the proposal to these people before we went to final print.

Mrs. Owen

Which people?

Mr. Treacy

The financial institutions. On the Telecom issue, we were responding to company law changes requested after long legal deliberation. There is no comparison.

Mrs. Owen

I would not like my comments to imply a lack of diligence on the part of the staff. I am merely stating that I know things are sometimes rushed and there is not always time to consult.

Mr. Treacy

Deputy Owen, having had ministerial experience in this area, will understand that the rush is not usually created by those charged with the responsibility of drafting the legislation. External people create such a rush.

Mrs. Owen

Does the Minister of State consider himself to be external?

Mr. Treacy

I merely respond to the demands of the day.

Amendment agreed to.

Section 25, as amended, agreed to.

SECTION 26.

Mr. Treacy

I move amendment No. 12:

In page 22, to delete lines 24 to 34 and substitute "which the court shall have regard shall include the length of the unexpired term of the lease or hiring agreement concerned.'.".

Section 26 contains specific provision in respect of leases and subsection (3) contains guidance which could be used by the courts in determining whether a lease should be considered to be substantial. It has been pointed out by a number of parties that section 26(3)(b) could have the unintended effect of leading to large ongoing levels of litigation and furthermore would give rise to discrimination as between different leasing companies. The meaning of "substantial" would be dependent on the extent to which the value of the property in question bears the total amount of property being leased by one company as opposed to another. I therefore consider that the specific guidance on whether the property should be considered substantial contained in paragraph (a) will be sufficient. Accordingly, the courts will be able to take into account the length of the unexpired term of a lease or hiring agreement. The court will, of course, be able to take account of any other matters which it considers relevant in the particular circumstances of the case.

Mr. Rabbitte

This is further refinement of section 26. I have a particular difficulty with this section. Will the Minister explain in layman's English why it is considered necessary to provide what is favourable treatment for banks and big ticket leasing operations as envisaged in this section? The scheme of arrangement very probably will involve some kind of hit for creditors and most parties involved by definition at least in the short-term. We are exempting banks in respect of big ticket leasing in business.

The Minister refers to the word "substantial". We have already heard a number of contributions about small creditors. There will also be very significant creditors who are very likely to take a hit yet we are exempting banks from that category by the inclusion of this provision. I have never been persuaded as to why we should exercise that positive discrimination in favour of banks. It is, I accept, a complex area. It presumably derives from the Kents case, an aspect of which could come under this category. I know the banks have been lobbying since the Kents case. I am not persuaded of the equity of or necessity for it. I do not believe this will mean the end of the IFSC as we know it.

Mr. Treacy

The position of lessors in relation to future payments due in respect of lease agreements undertaken with companies is somewhat uncertain under present legislation. The company law review group considered it unreasonable to require the lessor of an asset, particularly a substantial asset such as an office block, to be required by an examiner scheme of arrangement to accept reduced payments for a future period. Section 26 is designed to preclude this situation.

Mr. Rabbitte

Everyone else is suffering for an interim period. Why should the biggest financial institutions internationally be protected from taking some hit while the company is being restored to health?

Mr. Treacy

They can take a hit and may have to but what we are saying is that they have the right to be paid post-examinership at the level which they should have been paid prior to that. Obviously, they would be in arrears and may have to take a very big hit. It relates to the position once the examinership takes place. If there is an accumulation of arrears to the landlord prior to that, then that is a matter for the court, the examiner and the independent accountant to decide.

Chairman

They would not have a priority after the examinership takes place?

Mr. Treacy

They would have the same equity as before. If a hit is required to resolve the financial difficulties of the company then everybody must take it and this section does not preclude that being imposed.

Mr. Rabbitte

That is not right. The Minister is right until we reach this particular category which exempts them provided the court is satisfied it is substantial.

Mr. Perry

I agree with Deputy Rabbitte. If there is an accrual of arrears then people will have to take a hit but in certain cases the reason for the examinership can be excessive rent payments. For continuity of business they must be guaranteed similar rents by the courts once the examinership is in place or it would be very unfair to other creditors who will continue to take reductions in future years. The loss must be borne by everybody if the company is to survive. The developers and owners of such properties are the ones who will benefit most and that will be most unfair. If they have a vested interest in the survival of the business they should take a hit in the short-term.

Mr. Treacy

Part 237 of the Company Law Review Group's report in 1994 states:

The position of lessors in relation to future payments is somewhat uncertain under legislation. It would be unreasonable in our view to require the lessor of an asset, particularly a substantial asset such as an office block, to accept reduced payments for a future period. We believe that the legislation should be amended to preclude any possibility of a lessor being forced to take reduced payments in future in respect of a leased asset. The lessor should have the option to repossess the asset if the company cannot meet its obligations after the protection period.

This section refers to a future period, the period after the examination whereby it would be unfair to ask the owner of an office block to accept uneconomic rent for that property.

Mr. Rabbitte

I know that is what the Company Law Review Group says but I profoundly disagree. Let us look at the last sentence of what the Minister has just read: ". . . . .the lessor should have the option to repossess the asset if the company cannot meet its obligations. . . . ".

Mrs. Owen

And they would.

Mr. Rabbitte

Let us suppose Irish Ferries have just commissioned a new ferry called the St. Noel. Under the Minister's proposed amendment, the bank can repossess that ferry. Very often an arrangement is made whereby the bank purchases the ferry and the company leases it back from the bank. Under these proposals the bank could repossess the asset which is the means of trading and returning to health to protect the position of the bank.

Mr. D’Arcy

The Minister is protecting both sides.

Mr. Rabbitte

This the result of lobbying by the banks. We all know that is the way business is done. Certain people devoted their entire membership of that committee to ensuring the insertion of this section. I refused to legislate for it when I was in the Minister's position and I respectfully submit that the Minister ought to refuse to legislate for it now. It is discriminatory. I refer the Minister to the case of Mr. Justice Budd in the case of the Blaskett Islands.

Mr. Treacy

Is that the Callery case?

Mr. Rabbitte

I do not know. It concerned ownership of the Blaskett Islands and it prevented a situation in which one could discriminate between different categories of private property. That is what we are doing in this case - this is a powerful lobby getting its way which could leave a company, which otherwise has a good prospect of being restored to health, with its asset being taken out from under it. As a result the company is a goner by definition. That is what held up this Bill for so long - the dispute between the Minister's officials and me on this point. I have not changed my mind. It should be looked at again.

Chairman

For the benefit of those who made the case, I have an interest in this area. It would not just be large financial institutions, it could also be smaller lease companies with a shareholding or practical business arrangement which would lease equipment and assets to companies. We are not, however, asking the Minister to put legislation in place to ensure that companies which are about to go under would be given the protection of insuring to retain their assets, even if it be at the loss of a leasing or financial institution. Shareholders of that company may suffer a consequent loss.

Mr. Rabbitte

That is misunderstanding the point. The company is in examinership or under the protection of the courts but the biggest lessor will be able to swipe the company's main asset

Mrs. Owen

Which might be its only offer.

Chairman

The Minister said that it is protected while it is under examinership but not after examinership.

Mr. Rabbitte

No.

Mr. D’Arcy

That is the difficulty attached to this.

Chairman

It was my understanding that the Minister indicated that at the outset.

Mr. Rabbitte

That is not my understanding. The Minister and the Chairman may be right but I see it differently.

Chairman

Will the Minister clarify that point?

Mr. Treacy

We are on section 26. Section 25B(1)(a) provides that a compromise or scheme of arrangement will not contain any provision in respect of the lease of land which reduces the amount of rent or other periodic payment due after coming into effect at the compromise.

Mr. Rabbitte

Where is this?

Mr. Treacy

Section 26.

Mr. Rabbitte

Section 25 was mentioned.

Mr. Treacy

Section 26 inserts section 25B(1). Section 25B is contained in section 26.

Mrs. Owen

It is a subsection of section 26.

Mr. Treacy

Yes. It provides that a compromise or scheme of arrangement shall not contain any provision in respect of the lease of land which reduces the amount of any rent or other periodic payment due after the coming into effect of the compromise or scheme of arrangement or which cancels the right of the lessor to such payment. The effect of this is to protect the lessor from having to accept reduced rents into the future.

Mr. Rabbitte

Where does it say that?

Mrs. Owen

That is in the Minister's notes.

Mr. Treacy

It is my response.

Mr. Rabbitte

It is not in the legislation. The Minister told us he was reading section 25B. I was following it carefully until the Minister came to his addition. It is not in law.

Mr. Treacy

I am referring to that but I am responding to the Deputy while referring to it. I apologise for creating any confusion.

Mr. Rabbitte

The Minister is doing more than creating confusion. He is leading me up the garden path.

Mr. Treacy

I would never do that because I know the Deputy would not come with me. Like all creditors, if the lessor was owed money prior to the appointment of the examiner, he could be required by the examiner proposals to accept a write down or a write off on the debt. Like every other creditor, if there is to be a write off, reduction, compromise or new scheme of arrangement which requires this, everyone is obliged to accept it. If, however, the absolute survival of the company was dependent on the giving of an uneconomic rent to the landlord, the examiner could not do that, as we propose here. That would be unfair to the person who owned the property, who might not be able to maintain it from the rent being paid, and would be uncompetitive in that the company would be operating in an environment where its competitors would have to pay much greater rents. We have to absolutely equitable in all situations. The idea is to save the company.

Mr. Rabbitte

The whole purpose of this is to save the bank.

Mr. Treacy

No.

Chairman

Is it only for the period of the examinership?

Mr. D’Arcy

It is for after the examinership as well.

Mr. Treacy

During the period of examinership a scheme of arrangement is created. If the survival of the company thereafter was dependent on creating an uneconomic rent, that would be unfair to the landlord and to competitors. We cannot allow distortion.

Chairman

The Minister referred to section 25B. If one reads amendment No. 12 to section 26, it deletes page 22, lines 24 to 34, and substitutes "which the court shall have regard shall include the length of the unexpired term of the lease or hiring agreement concerned.".

Mrs. Owen

So the section 26(3) reads "In deciding for the purposes of subsection (2), whether the value of property concerned is substantial the matters to which the court shall have regard shall" and all that follows is deleted. What comes in? The same words?

Chairman

The words "which the court shall have regard shall include the length of the unexpired term of the lease or hiring agreement concerned.".

Mrs. Owen

That is already in the Bill.

Chairman

Will the Minister clarify that?

Mr. Treacy

We have dropped paragraph (b) totally and consequently paragraph (a) is irrelevant and no longer necessary.

Mrs. Owen

Is the whole subsection dropped?

Mr. Treacy

Yes. We firm it up by saying "shall include the length of the unexpired term of the lease or hiring agreement concerned.".

Mr. Ardagh

A lease agreement places a liability on a company. Taking Deputy Rabbitte's example of the "St. Noel"——

Mr. Treacy

I am glad I have his support for my canonisation.

Mr. Ardagh

——there would be a liability to pay £100,000 for ten years to a bank. That bank is effectively a creditor with an asset. Is there any way in the scheme of examinership or arrangement that, in the first year, in order for the company to get out of it, part of the scheme of arrangement would be that the bank would accept £50,000 a month for one year? Is that possible under these circumstances?

Mrs. Owen

Yes.

Mr. Ardagh

If there was agreement among sufficient creditors, could the court arrange this or would the bank have to accept that?

Mr. Treacy

I am informed that that would be prevented. The environment in which we operate should include a situation whereby if a scheme of arrangement is put forward which is progressively positive and the court agrees to it then everybody is bound by it.

Mr. Rabbitte

I agree.

Mr. Treacy

I know and in view of that I am prepared to take another detailed look at this before Report Stage.

Mr. Rabbitte

I appreciate that.

Mr. Treacy

It must be understood that we cannot create an uncompetitive environment.

Mr. Rabbitte

It is complex and I thank the Minister of State for his response. However, will he explain the mystery? He referred earlier to section 25B(1) and read the four lines contained in it faithfully, but he then read an entire section which stood that subsection on its head, and which is not in my Bill. I am totally bemused as to its origin.

Chairman

The amendment relates to section 26 which is on page 22, not page 21.

Mr. Rabbitte

I accept that, but we were discussing the section. The Minister of State referred to section 25B because we had some difficulty in tracing the subsection. We traced it and the Minister of State read it faithfully word for word and then read a section that is not in the Bill.

Chairman

When I brought you to the appropriate section and lines, it was corrected.

Mr. Rabbitte

We have not corrected it; perhaps others understand it but I do not.

Chairman

We are dealing with lines 24 to 34 on page 22, which are the subject of the amendment.

Mrs. Owen

The Minister referred back to section 25B.

Chairman

That is not the subject of the amendment.

Mrs. Owen

The Minister of State was trying to explain the purpose of the amendment.

Chairman

I am pointing out that the amendment is on page 22.

Mr. Rabbitte

But Deputy Owen is right.

Mrs. Owen

I propose that we do not discuss the amendment now and give the Minister of State the opportunity to come back to us on it. I am utterly confused. My understanding is that a scheme could be formulated by the examiner and be accepted. I thought that could include a reduction in rent in order to allow the company to have more liquid assets to make it viable but then the amendment states that no scheme can then allow for a future loss of rent or property value. The Minister of State is providing for only one element of the company's viability - protection - and nothing else. He said that the company would go down the Swanee if the only way it can be saved is to reduce the rent it pays. That is the one thing that courts cannot do. They can throw all the other creditors and everything else onto a heap to make the company viable but the one thing they cannot do is to tell the company that they will negotiate a lower rent with the owner of the building which it rents in order for the company to become viable. That is very special protectionism.

Mr. C. Lenihan

The Minister of State is trying to ensure that an individual's property rights are not disadvantaged in terms of the economic return from an asset.

Mrs. Owen

Is the Deputy referring to constitutional rights?

Mr. C. Lenihan

But it is slightly different to creditor rights because one cannot fall below the rent threshold. The scheme would then materially affect the rights of another individual, corporate or private.

Mr. Treacy

I may have created confusion in my opening remarks. I referred to the proposal in section 25B. My subsequent remarks referred to the amendment itself and the reason for the change. There is no doubt about the proposal in section 25B.

In response to Deputy Owen, there is nothing to stop the court during the examinership to direct the property owner, landlord, bank, institution or creditor to accept a reduction of any magnitude. Thereafter, the competitive element, fairness, property rights and economic gain come into account. The court takes everything into account, makes a final decision, draws a conclusion on the examinership, but it cannot allow the company to survive in examinership on the basis of paying uneconomic rents as that would be unfair to the property owner and the company's competitors.

Chairman

The commercial agreement between the bodies concerned could be dealt with outside the court and, therefore, the company couldretain its asset if agreement was reached on a lesser rent with the asset owner. However, that is outside the ambit of the court.

Mr. Treacy

And the examinership.

Chairman

Deputy Rabbitte has a concern in regard to the long-term viability of such an agreement, but it could be agreed between those concerned outside the ambit of the court.

Mr. Treacy

Of course.

Mr. Rabbitte

I am happy that the Minister of State will look at this again. If he wishes to summon all of us to persuade us in terms of the wider argument, that is a matter for him. I refer to Deputy Ardagh's question. The record will show that the answer was no. A reduced rent of £50,000 in the example he gave would not be permissible under this proposition. Will the Minister of State stand over that reply? It is not a trick question.

Mr. Treacy

The answer is still no according to the proposal in the amendment.

Mr. Rabbitte

Is that not the point? Deputy Lenihan raised an interesting point about invidious discrimination between property rights and creditor entitlements and I agree that needs to be examined. However, every other body is taking a hit.

Mr. Treacy

Deputy Ardagh's question related to the position post-examinership. He asked if it would be acceptable for a company to propose a £50,000 once off payment to the property owner for the first year following examinership.

Mrs. Owen

That is not what the Deputy asked.

Mr. Ardagh

The bank would be the long-term creditor as it would be owed money over ten years at a rate of £100,000 per year. This money would not relate to the property. Could the repayments be reduced for the first year to help the company in a scheme of arrangement?

Mr. Treacy

If it fell within the scope of the amendment it might be possible to accept that, but it would not be acceptable if it related to the property rental.

Mr. Rabbitte

If I were the judge seized of this question, and the banks will undoubtedly signal its view on that matter, I would be reluctant to grant examinership. The point of examinership would be defeated if immediately following the expiration of examinership the company were faced with the prospect of the asset being taken back because the lessor considered the rent uneconomic. There would be a work out arrangement and sacrifices would be made.

Mrs. Owen

That is allowed.

Mr. Rabbitte

The lessor is protected.

Mrs. Owen

He has carte blanche all the time.

Mr. Treacy

There is confusion about this.

Mr. C. Lenihan

Is a distinction made under the scheme of arrangements between those who have normal credit, loans or moneys for goods provided due to them on the one hand, and property owners? In other words, if the main business is being conducted, for example, in a factory, under the scheme of arrangements, is there a distinction between someone who owes money to the factory and someone who rents the building to the factory owners for the conduct of their business? Is that the point that is being made in this amendment; that someone who is renting the factory cannot be forced to rent it at such a reduced rate that it gives the company a competitive advantage over other companies in the same situation facing commercial rates of rent?

Mr. Treacy

Let us say the company goes into examinership, it is in serious trouble. A scheme of arrangements has to be drawn up to take the company out of trouble. Everyone must be treated the same in that scheme of arrangements and whatever arrears have to be written off, everyone has to write them off at the same rate.

Mrs. Owen

Does that include a reduction of rent during that period?

Mr. Treacy

Of course it does.

Mrs. Owen

The Minister said No to Deputy Ardagh's question.

Mr. Treacy

I may have misinterpreted his question. Please let me finish and members may then ask me all the questions they like.

When in examinership everyone must take the same write-off to get out of examinership. Post-examinership, all creditors would be entitled to the same rate of payment for the goods, services or properties supplied. One outfit supplying telecommunications or parts to a company would not have to supply them at a lower rate. They would not do that, it would be economic madness. Instead they may withdraw from that situation; they are under no obligation to continue to supply those parts. This company, however, is leasing a property and what we are saying is that the survival of the company cannot be dependent on forcing the landlord to allow the company to stay in that property at an uneconomic rent in future. That would be unfair to the property owner and to competitors because the others have the right to withdraw. The only one caught in the net is the one with the property - the others can supply services ad hoc and can come and go as they wish. They can apologise and explain that they are not dealing with the primary company anymore because, while it went into examinership, the supply company was waiting six months or three years for payment. The supply company will then refuse to deal with them anymore.

Mr. Perry

In regard to section 23 which deals with commercial property for which there is a capital allowance for development, if there is a tenant in that company and the developer has availed of the tax benefits, is there an exception where, under examinership, a different rule would apply given that the developer received the tax benefits to develop?

Mr. Treacy

Section 23 is a clear instrument which has to be adhered to in totality. The court would have to take the situation into account. This does not have any bearing on that whatsoever.

Mr. Perry

The developer would have received the allowance——

Mr. Treacy

That was to the benefit of the developer on the day, it would not be relevant in the case of examinership.

Mr. Rabbitte

This amendment should not be pushed through. The Minister earlier offered to look at it and——

Mr. Treacy

I am prepared to allow the amendment to go through but to come back to it on Report Stage.

Mr. Rabbitte

That is not what the Minister said.

Mr. Treacy

I said I am prepared to look at it for Report Stage.

Mr. Rabbitte

No, the record will show that the Minister was prepared to go back and examine these questions. For example——

Mr. Treacy

I did not, however, expect that we were not going to accept the amendment——

Mr. Rabbitte

I urge the Minister not to say anymore because it is on the record and that is not what he said. He said that he would go back and discuss this matter. In some of the examinerships that we have seen so far a work-out is agreed and the terms of that work-out go on after the period of formal examinership is terminated by the court. This comes back to Deputy Ardagh's question. Why ought the terms of that work-out apply to every other body, except the lessor, in the kind of case we are talking about?

Mr. Treacy

I thought I had clarified that matter. That can be accommodated. In the work-out everyone is supposed to co-operate to get the company out of examinership. That may mean waiting for a certain period of time for money to be paid for goods and services.

Mr. Rabbitte

The work-out may not necessarily be for the period of examinership. The work-out is a restoration to health plan and may go on after the formal examinership is lifted.

Mr. Treacy

That may be a scheme of arrangements to achieve a positive conclusion. Once the court accepts that scheme of arrangements those participating in the initial proposal to get the scheme of arrangements in position are bound to live with it.

Mrs. Owen

Yes, but they are not allowed to do what——

Mr. Treacy

What we are saying is that if a company is supplying goods and services we do not expect the company to continue to supply goods and services at a reduced rate or put them into a position where they are not sure of payment. They will not do that, they can withdraw. There is no obligation on them to continue to supply the goods and services to the company.

Chairman

There is an issue here that I would clarify for Deputy Rabbitte. Deputy Rabbitte's concern is the work-out after the period of examinership, and there may be what could be perceived to be preferential treatment with regard to the lessor. Do I take it the Minister has indicated that the work-out, whatever it is, could continue after the period of examinership, once it has been worked out between the contracting bodies?

Mr. Treacy

And agreed by all the parties.

Chairman

Yes.

Mr. Treacy

There is no difficulty with that.

Chairman

We must not get lost on this point. Deputy Rabbitte is deeply concerned about it and I would like to have it clarified. The Minister is saying that during the period of examinership, if there is a work-out in relation to the lessors, that would continue, if it has been agreed by all concerned, after the period of examinership. That work-out should continue if agreement has been reached.

Mr. C. Lenihan

I am also interested in this but the point that we are trying to get to grips with from the Minister's point-of-view - the question may be framed incorrectly here - is that if people are party to work-out arrangements they are legally obliged to fulfil the terms of those. That is quite clear. If you are a creditor, you take 60p in the pound, 20p in the pound or whatever. If there is a stock of goods actively in supply to the factory and there is an arrangement to supply for a few months at a certain rate, certain arrears or debts due on those goods are written off. I may be wrong but this seems to suggest that someone leasing the factory to the business cannot, after the work-out, even if they decide to write off certain arrears of rent that may have been due, be forced to live with that situation in the same way as a creditor. In other words, a creditor may opt to take 20p in the pound, but it would not be fair to someone who is leasing to a factory that is now an on-going business and out of examinership to require them to take 20p in the pound on their rent.

Chairman

We are talking about the difference between a company under examinership and its directive compared with a work-out arrangement in relation to contracting bodies and a lessor who could agree to a work-out arrangement after the period of examinership.

Mrs. Owen

My interpretation of section 25B(1) precludes what the Minister is implying, which is that you can have some kind of arrangement, because it says proposals for a compromise shall not contain, nor shall any modification by the court under section 24 of such proposals result in their containing, a provision providing for either or both, a reduction in the amount. That precludes a deal being done by a lessor by saying, 'We are willing, for the next 20 years, to forgo a certain amount of our rent because we would prefer to see this lovely company continue". There is a section here to preclude that kind of deal.

That kind of deal may be done with Telecom Éireann. It may offer to reduce telephone bills for the following ten years to assist with the company's liquidity, but the group which has protection under the law are the lessors. They can take a hit for the period of examinership if it is 12 months, but one cannot build that into an ongoing reduction in the rent. Am I right in thinking that?

Chairman

What about the actual amendment on page 22? The last line which we will be putting in is: "In deciding, for the purposes of subsection (2), whether the value of the property concerned is substantial the matters to which the court shall have regard shall include - (a) the length of the unexpired term of the lease or hiring agreement."

Mr. Treacy

I will return to what Deputy Owen has said. First, the examinership can only be for a maximum of three months. During the examinership a scheme of arrangement may be drawn up, one which is acceptable to everybody, including the court, and business proceeds as usual, ad infinitum, all going well. If the landlord is not satisfied to take a lower rent for the property in the future in order to ensure that the scheme of arrangement is agreed, one cannot force him to do so.

Mr. Rabbitte

That goes back to my original point. We are talking about not just the landlord but, for example, the release of aircraft, shipping or whatever. If that position is represented to the court it will sink the company because no judge will give someone an examinership if that is the indication from the lessor.

Mr. Treacy

If the company or the people involved agree there is no problem.

Mr. C. Lenihan

Let us take the example where the lessor is renting aircraft to a company.

Chairman

Sorry, Deputy Lenihan, we have discussed this at some length and the Minister has clarified it as best he can. The Minister clearly indicated that there can be agreement between the consenting contractors after the period of examinership. Is that correct?

Mr. Treacy

That is totally outside the ambit of the court.

Mrs. Owen

What does section 25B(1) mean then? It clearly says it excludes, no matter how friendly they are, any scheme of arrangement being devised that includes in it an ongoing loss of rent, so there is a kind of embargo. The door is closed before they even get to that point.

Mr. Treacy

We are talking about the future post-examinership.

Mrs. Owen

Yes, I know.

Mr. Treacy

The scheme of arrangement to get the company into a trading position post-examinership cannot force the landlord to take an economic rent thereafter. Of course they can take a write-off for the previous arrears during the period that the company was in trouble. In the future, however, the court cannot say that the company proceeds on the basis that the landlord is being ordered to take an uneconomic rent or a lower rent than that which was being paid.

Mrs. Owen

The Minister has implied that if the landlord actually personally agreed to take an uneconomic rent it would be possible, but the law precludes him from doing so.

Mr. Treacy

No, it does not preclude him. If the scheme of arrangement is agreed and satisfactory to the court there is no difficulty. The difficulty arises only when there is a failure to get a scheme of arrangement agreed. It says, "Proposals for a compromise or scheme of arrangement. . .".

Mrs. Owen

. . . "shall not contain". I am sorry, the Minister is not reading his own legislation.

Mr. C. Lenihan

No scheme of arrangements by its nature or design can be framed in such a way that it creates a supplier or lessor to a company who is at a disadvantaged position relative to the normal rent he or she could accrue should the asset be rented to somebody else. A plane is a perfect example of this. No scheme of arrangements could require GPA or whoever to lease an aircraft at a sub-economic rent. If they were prepared to do that they could, but the Bill states that it cannot be done.

Mr. Treacy

It cannot be done.

Mr. Boylan

We are getting carried away with large debts etc. Let us come down to the Border region, for example, where the present and previous Governments have encouraged people with money to build factory units to attract industry. There is a group of people in Cavan town who have put up a factory unit and are actively looking for a tenant. Hopefully they will get a tenant but if that tenant is not successful are we saying that those people should be compelled to take a reduced rent for their investment in order to keep that factory viable? It was in difficulties from the early stages. That would not encourage people.

Mr. Treacy

No.

Mr. Boylan

We would want to be careful in what we are doing here. That would not encourage people to make this type of investment. I appreciate the point made by Deputy Rabbitte that creditors are creditors whether they are supplying goods or the shell of the industry. People have to get a return on their investment and if there is a problem over a small period there could be some help, but I certainly would not support that over 12 months or two years.

Mr. Treacy

What Deputy Boylan has said is correct indeed. Those people could not be forced to take an uneconomic rent or a lower rent that that which they were getting prior to the examinership. They could write off all the arrears they liked. If they agree on the scheme that is their business, but we cannot force them.

Mr. Rabbitte

The Minister knows, as I do, that the category of industrial unit that Deputy Boylan referred to would not be included in the big ticket leasing. It has no impact on it, good, bad or indifferent. There is no point in us adding further confusion. We have some indication of the Minister's thinking since we started this discussion. This is Committee Stage and it was not possible on Second Stage to tease out some of the questions that are being dealt with. The committee is due to rise and we should adjourn the debate. The Minister will have an opportunity to look at some of the questions he said he would look at and similarly we will have an opportunity to examine what the Minister has said. The Minister keeps coming back to the amendment but we are discussing the section as well as the amendment.

Mr. Treacy

That is what I was trying to do when the initial confusion started.

Chairman

I am happy to accept that proposal with the agreement of the committee. The committee will adjourn now without putting the amendment and will resume at 3.30 p.m. and conclude the rest of the Bill. Thank you for your co-operation.

Sitting suspended at 1.45 p.m. and resumed at 3.30 p.m.

Chairman

The members involved in the previous part of the debate on amendment No. 12 are not present. I understand that we cannot skip the amendment.

Mr. Boylan

We have agreement that we will return to it.

Mr. Treacy

Yes, on Report Stage. I am prepared to make a statement in trust. Section 26 is before us as printed. I have proposed to amend it and am prepared to leave the section before the select committee without amendment. I will withdraw the amendment and give an absolute commitment that I will review it in detail and come back on Report Stage with either this section, with the right of others to amend it, or my amendments. Everyone will have the right to table their amendments. We will leave it as it stands, examine it in critical detail, take on board all the points made and return with what we believe to be a consensus as a result of that discussion.

Mr. Boylan

That is very fair and acceptable.

Amendment, by leave, withdrawn.

Section 26 agreed to.

Section 27 agreed to.

SECTION 28.

Mr. Treacy

I move amendment No. 13:

In page 23, line 19, to delete "fixed charge" and substitute "mortgage, charge, lien or other encumbrance of a fixed nature or a pledge".

Amendment agreed to.

Section 28, as amended, agreed to.

Sections 29 to 31, inclusive, agreed to.

SECTION 32.

Chairman

Amendment No. 15 is an alternative to amendment No. 14 and both may be discussed together by agreement.

Mr. Treacy

I move amendment No. 14:

In page 25, subsection (3)(a)(ii), line 2, to delete "£100,000" and substitute "£250,000".

Section 32 sets out the specific requirements a company will have to meet if it is to be exempted from having its accounts audited. Having reflected on the arguments made by Deputies who made contributions on Second Stage in the Dáil, I propose to increase the turnover threshold to qualify for exemption from audit from £100,000 as originally proposed to the new amended figure of £250,000. In proposing this increase, I took account of a number of factors. These included that the Company Law Review Group made its recommendations five years ago, that the other proposals contained in the Bill will enhance the ability of the Companies Registration Office to take action against companies which do not observe their filing obligations and that the exemption threshold in the United Kingdom and Northern Ireland has been increased to £350,000 sterling.

In the absence of precise figures of 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 appropriate threshold and I do not intend to increase it further at this stage. The Department and the Companies Registration Office will closely monitor how this exemption is availed of by companies and, if any further adjustments prove necessary, I will bring these forward.

Mrs. Owen

My amendment is along the same lines as that of the Minister of State but it sets the limit at £300,000. As the Minister of State said, the figure in Northern Ireland, our nearest neighbour, is £350,000 sterling, and I understand the Minister responsible for industry there is preparing legislation to place that limit at £4 million. I welcome that the Minister of State took note of what I and others said on Second Stage, that £100,000 was the recommended figure four years ago in December 1994 when the Company Law Review Group report was published. I was surprised the Department had not updated that figure to reflect the current position. I gave the example that a hairdresser with no staff would have a turnover of £2,000 per week which meant it would be liable for audit. I will not quibble with the amendment. I assume the Minister of State will not accept my figure of £300,000. I am happy he accepted the principle of raising the figure and I withdraw my amendment accordingly.

Amendment agreed to.

Amendment No. 15 not moved.

Mrs. Owen

I move amendment No. 16:

In page 25, subsection (3)(a)(iii), line 4, to delete "£1,500,000" and substitute "£2,000,000".

In raising the limit of turnover for a company, I thought it appropriate to amend the balance sheet total of the company and I increased that to £2 million. I have no great purpose in doing so other than, if the turnover limit of a company is being raised, there is a need to raise the balance sheet limit and I wonder why both figures were not increased together. Perhaps the Minister of State will explain why, in increasing the £100,000 limit, he did not deem it necessary to increase the £1.5 million limit to £1.65 million or something similar.

Mr. Treacy

As I already outlined on the previous amendment, section 32 sets out the conditions companies must meet if they are to be exempted from the requirement of having their accounts audited. One of the conditions is that the balance sheet total of the company does not exceed £1.5 million. This is in line with the definition of small companies in section 8 of the 1986 Act which will be reviewed soon in light of existing and proposed European Union directives dealing with the threshold relating to smaller companies for disclosure purposes. This then will be the appropriate time to review this threshold for the exemption from having accounts audited. Legislation should be maintained in a consistent way and I would be grateful if that could be agreed to. Regrettably, I am not able to accept Deputy Owen's amendment.

Mrs. Owen

Do I take it my amendment is not far off the thinking of the Department that there will be a need to raise——

Mr. Treacy

It is not, nor that of the European Union.

Mrs. Owen

The committee sent some members to San Jose in the United States in January to examine industry there. It is interesting to see what they call small companies, which is any company with up to 500 employees. We consider companies small if they have up to 50 or 100 employees.

Mr. Treacy

Fifty.

Mrs. Owen

I welcome that the Minister said the balance sheet total may well be amended in line with EU law. Under those circumstances, I will not press the amendment.

Mr. Treacy

I thank the Deputy.

Amendment, by leave, withdrawn.

Mr. Treacy

I move amendment No. 17:

In page 25, subsection (3)(a)(v), between lines 7 and 8, to insert the following:

"(I) a parent undertaking or a subsidiary undertaking (within the meaning of the European Communities (Companies: Group Accounts) Regulations, 1992 (S.I. No. 201 of 1992)),".

The second amendment proposed to section 32 is the insertion of a subsection 3(a)(v)(I) outlining that the exemption from audit cannot be availed of by companies which are part of a group. This was recommended by the Company Law Review Group but was not specifically included in the Bill as published. The reason for the provision is that people, directors, creators of companies or managers could operate a series of companies and, by keeping them at the maximum threshold of turnover, would be able to exempt themselves on that basis. We are inserting this amendment so that that cannot happen. I would be grateful if the committee would agree to it.

Amendment agreed to.

Mr. Treacy

I move amendment No. 18:

In page 25, subsection (3), lines 19 to 23, to delete paragraph (b) and substitute the following:

"(b) a failure to comply with the requirement of section 127(1) of the Principal Act as regards the forwarding, to the registrar of companies, of an annual return in respect of the company does not occur in the year concerned.".

This amendment to section 32 is a rewording of section 32(3)(b) by deleting the phrase "in relation to the previous financial year" as it is incorrect to say that returns relate to the previous financial year. This amendment makes clear that the annual return in question is the annual return made during the financial year during which the exemption will be sought and which more clearly reflects the actual legal position.

Amendment agreed to.

Section 32, as amended, agreed to.

Section 33 agreed to.

SECTION 34.

Question proposed: "That section 34 stand part of the Bill."

Mrs. Owen

This is about the removal of the auditor consequent on exemption being availed of. I take it the person referred to in this section is not the independent inspector? Is the person referred to as the special auditor appointed to prepare a special independent report?

Mr. Treacy

No.

Mrs. Owen

The section states that "the appointment of a person as auditor to the company should not be continued during the whole or part of a financial year in which the exemption is being availed of in relation to the company." Has the Minister of State a short note on this section?

Mr. Treacy

Section 34 imposes certain obligations on an auditor following the decision by the company to avail of the exemption from audit. The purpose is to ensure that the auditor brings to the attention of the company and its members and, indirectly through notifying the Companies Registration Office, its creditors any information which he or she feels they should be aware of in relation to the activities of the company. This would allow the members to consider whether they need to request an audit even if the company meets the requirements and intends to avail of an exemption as allowed under section 33(1). If there is no such information the auditor will still be obliged to notify the company and the Companies Registration Office that this is the case. This section is based on section 185 of the Companies Act, 1990, which imposes similar obligations on an auditor who is resigning from a company. This section maintains that consistency.

Mrs. Owen

I wanted clarification of that section.

Question put and agreed to.

Sections 35 and 36, inclusive, agreed to.

SECTION 37.

Question proposed: "That section 37 stand part of the Bill."

Mrs. Owen

This section provides for the imposition of sanctions in respect of a person who "wilfully makes a statement, false in any material . . . ". The section provides that "A person guilty of an offence under this section shall be liable- (a) on summary conviction, to a fine not exceeding £1,000 or imprisonment for a term not exceeding 12 months. . . . ". The imposition of a fine of £1,000 is a very small penalty compared to a 12 month prison term. The two forms of punishment do not appear to be equal. I would have thought that a larger fine should be imposed instead of a 12 month prison term, although I note that a person guilty of an offence under this section would be liable on conviction to a fine not exceeding £10,000, but nowadays even that level of fine is not a great deal of money. We are beginning to put in place more realistic fines in justice legislation. Where a judge has an option to impose a fine or hand down a jail sentence for this type of offence, he or she will often opt to impose a fine rather than send people to jail. I would much prefer to pay a fine of £1,000 than spend 12 months in Mountjoy.

Mr. Boylan

Loughan House has its attractions.

Mr. Treacy

There is a constitutional aspect to this matter. The summary aspect relates to the District Court. The maximum figure that can be applied in this regard is £1,500 and the usual figure provided in legislation is £1,000. On conviction or indictment a person found guilty of an offence under this section would be liable to a fine of up to a maximum of £10,000 or three years' imprisonment or both in respect of the higher courts. We are obliged to operate within those parameters.

Mr. C. Lenihan

Is there an obligation to offer the two options? I am not sure of the legal position of giving a person the option to pay a fine of £1,000 or serve a 12 months' prison sentence. Would it be desirable to remove the option to pay a £1,000 fine and to require a person guilty of such an offence to serve a 12 months' prison sentence?

Mr. Treacy

I am not certain about that but I think there is an obligation to provide the two options.

Mr. C. Lenihan

Does that have to be reserved to the court?

Mr. Treacy

The wording is "a term not exceeding 12 months" and the term of imprisonment could be 12 months or less.

Mr. C. Lenihan

As Deputy Owen said, a fine of £1,000 is not a great deal of money. Given that we are imposing a penalty in respect of a person who wilfully makes a false statement, it might be desirable to remove the fine and impose a straight prison sentence.

Mr. Rabbitte

We could have a picket on the committee by the institute of auditors.

Mr. Treacy

I think the courts would prefer that we would leave the two options in the section. If we want to enact good legislation, it is important to leave these options in place. The penalty in subsection 2(b) would not be an exciting or inviting one to face. What is proposed in this section is consistent with the penalties in section 240 of the Companies Act, 1990. We should maintain consistency.

Mrs. Owen

It is now nine years later.

Mr. Treacy

I take that point.

Chairman

We should move on or we could be here for another nine years.

Question put and agreed to.

Sections 38 and 39, inclusive, agreed to.

NEW SECTION.

Mr. Rabbitte

I move amendment No. 19:

In page 29, before section 40, but in Part IV, to insert the following new section:

"40.-Section 297A of the Principal Act (inserted by section 138 of the Companies Act, 1990) is hereby amended by the insertion after subsection (2)(a) of the following-

'(aa) he was responsible for the failure by the company to have adequate employers' liability insurance in respect of any personal injury caused to any or all of its employees and for which the company has been or would have been held liable in damages; or'.".

Section 297A of the Principal Act relates to reckless trading. The effect of this amendment would be that it would amend the definition of reckless trading to include failing to provide adequate insurance for personal injury caused to employees. Under this amendment, a director who is responsible for failing to ensure adequate insurance cover would become personally liable.

I refer the Minister of State to the case of Sweeney and Duggan. A mine worker who was seriously personally injured took an action against the directors and the Supreme Court, or perhaps it was the High Court, held that they were not so liable. The purpose of this amendment would be to reverse that decision. As the law stands, presumably the Supreme Court had no choice. The worker concerned was seriously injured. The company was not in a position to recompense that mine worker and he failed. There have been twice the number of fatalities in the building industry than there have been in any year up to now and the number of accidents have been far greater. I am advised adequate provision is not made for insurance cover for personal injuries for some of those workers who are cutting corners and taking chances with health and safety elements because of the nature of the industry at present, the demand in it and so on. The effect of this amendment would be to amend the definition of reckless trading to include the circumstances I described where directors would knowingly trade without due provision being made for insurance cover for the personal safety of their workers.

Mr. Treacy

Deputy Rabbitte's proposal seems to isolate one particular aspect of the operation of a company and failure to comply with this aspect would render the officers of the company guilty of reckless trading. The immediate question this raises is why we should focus on this specific area as opposed to any other of many areas. The consequence of making this change would be to place the officers of the company in a winding up situation on hazard or held by the court to be personally liable for the debts of the company. This would be a very major burden to impose and is not one that we could agree to. If what Deputy Rabbitte has in mind is that employers' liability insurance should be made compulsory anyway, this would be a matter more appropriate to labour law. I imagine this would be an issue for consideration in the first instance in the context of a successor to Partnership 2000. It is perhaps desirable that we should have mandatory employers' liability insurance but it is a matter we will have to bring through the various negotiating channels before we could consider going down that road.

Mr. Rabbitte

It is interesting to note the matters that we consider constitute reckless trading but we not consider playing around with the personal safety of one's employees to be reckless trading. I have some difficulty with that proposition. The trade union movement has represented to me that this is a current, real, live issue. I instanced, in particular, the building industry, although the Sweeney and Duggan case, which concerned a mining accident, shows it is not confined to the building industry. Ought it not be a normal, prudent precaution in 1999 to have insurance cover in situations where the normal day-to-day work is dangerous? If someone is grievously injured they have no come-back.

Mrs. Owen

I support Deputy Rabbitte in this regard. We can all cite instances where people, in order to make a decent wage, must engage in activities, either as overtime or as part of their normal day, which require a certain lack of safety. Part IV of the Bill is headed "Miscellaneous" and I assume the Minister included it in order to fill some of the lacunae which exist. He has already amended the Bill to include aspects which he had told us would be included in the next legislation. However, because people lobbied him, he has included a few of them in this Bill, which is why there are 12 pages of ministerial amendments. It is always good policy to address any problems which emerge in legislation.

The lack of employers' liability insurance has left people with families in bad situations. I am at the moment investigating a case where it appears there was a gap in how an employer was paying people's pensions and was stifling their pension rights after a certain length of time. Those people thought they would have pensions until they died but they now find there are gaps in their pensions. We should avail of opportunities such as this to fill in gaps in legislation.

Mr. Boylan

Safety may come under the health and safety regulations but adequate cover should be the remit of this committee. We must ensure workers are covered from the time they enter the workplace until they leave and that their families are also comfortably provided for. There have been many cases where workers were left high and dry after being seriously injured and maimed for life. We cannot just gloss over it and say it is someone else's business. We must take in on board here. I support Deputy Rabbitte wholeheartedly in that regard.

Mr. Treacy

The Deputies have made their points very well and I concur with them. However, insurance is a very broad area and we are looking here at one particular aspect of it. While I would love to be able to say we should include it in this legislation, it is a health and safety issue which is more appropriate to labour law. I will ask the Department to look at it in that context but I do not think we can include it in this legislation.

Mr. Rabbitte

Deputy Owen made an interesting point when she said we have finished the main business of the Bill and have moved on to the miscellaneous sections that deal with a number of matters, including one on which I published a Private Members' Bill relating to the raw data from inquiries that are under way, sections of the Companies Acts being referred to tribunals of inquiry and so on. I welcome that. However, Deputy Owen's point is interesting in that if we are tidying up the legislation and identifying lacunae in it, this is a perfectly legitimate concern at a time when the economy is powering ahead and the rate of accidents has increased. In the case of Sweeney and Duggan, a young man was left crippled with no recourse to compensation.

As Deputy Boylan said, this matter is properly encompassed by this legislation. It would be a powerful incentive to directors to include the provision I am suggesting in the Bill because they would not want to lay themselves open to implications of reckless trading. They are free to enter into discussions with their trade unions in terms of funding of insurance cover and so on. It is a return to the early days of the century to have a situation where, if an accident occurs in a mine or on a building site, the unfortunate worker concerned has no resort to any remedy.

As colleagues have said, I am disappointed with the Minister of State's response. I do not want to delay the session this afternoon. However, I want to give notice that I will resubmit the amendment on Report Stage. The Minister of State insists this is not his direct remit although, like Deputy Boylan, I am not sure I accept his division of responsibilities and his assertion that this is a health and safety matter to be dealt with under labour law rather than company law. He can speak to his colleagues in the Department and return on Report Stage with a more considered view on the matter.

If the trade union movement was aware this opportunity had been presented, having failed to establish certain matters in respect of the Health and Safety Authority earlier this year, I think it would push it to the top of its agenda, in terms of the prospective negotiations for a new social contract. I ask the Minister of State, in that context, to look at it and to consult with both congress and IBEC on what is involved in this. When we return to this on Report Stage, he might feel able to make a harder commitment to address it than he felt able to today.

Chairman

Is the amendment withdrawn, with leave to re-enter?

Mr. Rabbitte

I would like the Minister of State to commit himself to look at it. Having had the benefit of discussing it with his fellow defeated Galwayman - I am not referring to the electionbut to the match last Sunday - he might return the next day——

Chairman

If the Deputy wants a favourable reaction, I suggest he forget about rubbing salt into the wound. The first half looked very rosy on Sunday, it was only the second half——

Mr. Treacy

I cherish these opportunities.

Chairman

The boys from Mayo crept up with their few points.

Mr. Perry

I agree with Deputies Rabbitte and Owen that, if we are amending company law and procedures, provisions on reckless trading by a company which puts employees at risk should be enshrined in it. It should be made clear to every employee exactly where he or she stands in regard to safety practices in a company and they should have access to compensation if they are injured in an accident. This may not be part of the Minister of State's area but it should be incorporated into any new company regulations.

Mr. Treacy

As I said earlier, the Deputies have made their points well and I can easily concur with them and understand their desire to achieve this. Based on what has been said and the requests that have been made, I will look again at the situation for Report Stage.

Mr. Rabbitte

Thank you. I will resubmit the amendment on Report Stage.

Amendment, by leave, withdrawn.

Section 40 agreed to.

SECTION 41.

Mr. Rabbitte

I move amendment No. 20:

In page 29, line 24, after "later" to insert "but not later than 5 years from the date of the offence".

Section 41 essentially amends section 240 of the Companies Act, 1990, to provide that summary proceedings may be taken within three years of the discovery as distinct from the commission of the offence. That is fair enough. I am advised that the normal practice is six months in the District Court; perhaps practice is now stretching that a little to nine months or whatever. Presumably this section deals with a situation where the Companies Registration Office, in taking action, might not know immediately of the commission of the offence and may only discover it later. The amendment seeks to provide for a cut-off point of five years for a summary proceeding at District Court level. At present it is open ended.

Mr. Treacy

Under existing legislation summary proceedings for an offence under the Companies Acts may be instituted within three years from the date of the offence. In practice it has been found that many breaches of the Companies Acts which may be prosecuted summarily do not come to light within three years of their commission. This is a big difficulty. The effect of Deputy Rabbitte's amendment would be to replace the existing three year limit with five years. I would have thought the Deputy would want to have the maximum flexibility possible to enable breaches of the Companies Act to be prosecuted summarily. That is the intention of the present provision. I do not, therefore, propose to accede to the Deputy's request in this instance.

Mr. Rabbitte

Given the changes that have occurred in this area, the investment in technology and the capacity of technology to track down the kind of offences envisaged here, will the Minister provide examples of why a limit of five years would be inadequate? Is the Companies Registration Office not to be allowed finally to come into the 20th century? I choose my words carefully because I do not blame the staff of the office for being allowed to languish in the manner they have over the years. Due to the heroic efforts of a predecessor of the Minster of State that situation has changed. The office now has new facilities, new premises, additional staff and has undertaken a major investment in IT. Why is a limit of five years not reasonable for the office to ensure whatever compliance might be envisaged by this section?

Chairman

Given what the Deputy has said, the Minister of State has overseen big improvements in this area. Is it agreed that Deputy Conor Lenihan take the Chair as I wish to make a call? Agreed.

Deputy C. Lenihan took the Chair.

Mr. Treacy

I have paid tribute to Deputy Rabbitte for his stunning work while Minister of State to ensure that the Companies Registration Office was upgraded. He secured the necessary investment, IT and environment vital to the office. I was delighted to continue his work to its conclusion. We have no difficulty with the office and we are confident that it can act immediately or quickly on any transgression or otherwise it finds.

Section 41(5)(c) proposes to change the law to the effect that when officers and inspectors are appointed and such persons have evidence to enable them form the opinion that a transgression occurred and they are able to pinpoint it within three years of that information or evidence coming to hand, proceedings can be taken. Heretofore it had to be three years from the commission of the offence.

Mr. Rabbitte

The change to three years from discovery rather than the commission of the offence is valuable. Why not put an upper limit on that? What would be the excuse if, within five years of discovery, no summary proceedings were brought?

Mr. Treacy

The reason for a five year provision is that one could be dealing with exceptional companies or people to the point where they may not be there when five years have elapsed. Consequently we believe that three years is an appropriate period in that it gives an opportunity to those who have made discoveries which enable them form the opinion that something has happened to investigate matters further, take legal advice and decide to proceed or otherwise. Doing that within a three year period provides a focus in which to proceed. A five year provision may mean procrastination or may give rise to doubt. It is important to be consistent. We are concerned with three years from the date of discovery, whereas the Deputy is concerned with five years from the date of the offence.

Mrs. Owen

Is that what the law says?

Mr. Rabbitte

I am in favour of the three year provision but my amendment provides for a time limit of not later than five years from the date of the offence.

Mr. Treacy

The offence could have happened ten years ago.

Mr. Rabbitte

We are not concerned here with a Circuit Court offence but summary proceedings and minor offences at District Court level. Is it the expectation that such offences would not be discovered within five years notwithstanding the improvements that have been made?

Mr. Treacy

As the law stands we could not proceed with or prosecute current investigations. If a company broke the law in 1990 but it was not discovered until 1997 this provision allows the prosecution to take place at any time within three years thereafter.

Mrs. Owen

After the finding of the evidence?

Mr. Treacy

Yes and even though the commission of the offence took place seven, eight, nine of ten years previously.

Mr. Rabbitte

It is not my intention to diminish that freedom. However, while matters may have been as outlined by the Minister of State, I do not believe there is any excuse today for that kind of passage of time during which proceedings may be brought, especially if our surveillance system is working in a modern and efficient manner. However, I do not propose to press the amendment because I do not wish to diminish the effectiveness of what the Minister of State is trying to do.

Mr. Treacy

I believe the recent recommendations on company law enforcement and the proposed appointment of a directorate of corporate enforcement will change the environment. However, it is important we maintain these proposals to ensure that every opportunity is available when necessary.

Amendment, by leave, withdrawn.

Section 41 agreed to.

SECTION 42.

Question proposed: "That section 42 stand part of the Bill."

Mr. Higgins (Dublin West)

This section refers to Irish registered non-resident companies. Why does it relate only to companies established after the passage of the Bill and why has legislation not been introduced to oblige existing companies to comply with the requirement prescribed in section 42?

The section states that a company shall not be formed and registered unless it carries on an activity in the State "being an activity that is mentioned in its memorandum". However, it appears that the level of activity necessary to satisfy the provisions in the Bill is quite low. Why was it not appropriate the prescribe the level of activity in which a company must engage, particularly in light of the fact that, under the Bill, a company with a very low level of activity or purported activity can be registered?

As the Minister of State is aware, when they attempted to investigate companies and corporate bodies based outside Ireland - I refer to the Ansbacher odyssey - the State and its agencies were given enormous grief and informed that their investigations would not be facilitated. The State has a responsibility to other jurisdictions to ensure that people are not allowed to use it as a shelter for any purpose. It seems that companies engaged in very low levels of activity will be able to continue to register here and I would like the Minister of State to indicate the exact position.

Mrs. Owen

Even though this section comes under the Part of the Bill entitled "Miscellaneous", it is extremely important. The section is also topical, particularly in light of the report published yesterday which clearly shows that a number of the financial institutions of the State, the Revenue Commissioners, the banks, etc., had a good idea that many of the Irish registered non-resident companies were bogus. I provided a graphic example of this on Second Stage when I stated that I saw a crime examination at the Europol office in the Hague which showed over 50 companies listed as shelters.

I share Deputy Higgins's concern about this issue. I accept that the registrar, through a statutory declaration, must decide the nature of an activity but there are no penalties included in the legislation. There have been instances where companies were established for certain purposes but it was later discovered that they were involved in accepting support payments, etc. Will the Minister of State indicate whether the existing legislation includes penalties in respect of companies established for particular activities but which are left to lie dormant for the purpose of providing tax shelters?

Mr. Rabbitte

Like Deputies Higgins and Owen I would like the Minister of State to comment on this matter. The problem is, however, that it is difficult to discuss this issue only in the context of section 42 because it is relevant to other sections, for example, section 43 which requires a director to be resident in the State and the section makes this provision applicable to existing companies. However, I believe there is a time lag from the time the Act comes into operation.

It might assist the debate if the Minister of State commented on these measures. As has been stated, this is important because of the subject of Irish registered non-resident companies is controversial. Such companies have blossomed in Ireland since the imposition of certain restrictive measures in Britain which encouraged a number of people to flee across the Irish Sea. To date, they have found the going here easy.

Mr. Treacy

The package of measures, approved by the Government, aimed at addressing the problem of Irish registered non-resident companies, provided for a range of measures in company and tax law. The company law measures are designed to compliment the tax measures which were put in place by the Finance Act, 1999. This package of measures was arrived at following extensive discussions over a protracted period which involved the Departments of Finance and Enterprise, Trade and Employment, the Revenue Commissioners, representatives of industry and the Attorney General's office.

The measures taken are designed to target, as far as possible, those companies which have no economic connections with Ireland and which are likely to be used for tax evasion or criminal activity; minimise any adverse effect on legitimate business; be enforceable and not easily circumvented in order to ensure their credibility as an effective deterrent; not be administratively costly or cumbersome and be compatible with European Union state aid provisions, the code of conduct on business taxation and European Union Treaties. The company law measures will provide, as a precondition of incorporation, that every application for registration will be required to demonstrate that the proposed company intends to carry on an activity in this State. This provision is designed to prevent the use of Irish registered companies for exclusively foreign activities without any connection whatever with this State.

Every company will be required to either have an Irish resident director or provide a bond to the value of £20,000 as surety in the event of the company failing to comply with certain company law and tax requirements. This will apply to new companies as a prerequisite to incorporation and to existing companies after a transitional period of 12 months.

The number of directorships any one person can hold will be limited to 25 in total, subject to certain exemptions. The aim of this provision is to curb the issue of nominee directors as a means of disguising beneficial ownership or control. Enhanced strike-off provisions will be introduced where companies fail to make the strategy annual return to the Companies Registration Office or fail to register with the Revenue Commissioners for tax purposes. There will be enhanced notification to the Companies Registration Office where directors have resigned, including strike-off provisions where a company appears to have no director. This provision will ensure more up to date information in the Companies Registration Office in relation to directors.

Sections 82, 83 and 84 contain a number of measures which are designed in tandem with the measures proposed in company law to address the problems posed by Irish registered non-resident companies.

Mrs. Owen

There is no section 82 in this Bill.

Mr. Treacy

I apologise I was referring to section 82 of the Finance Act. As already stated, sections 82, 83 and 84 contain a number of measures which are designed in tandem with the measures proposed in company law to address the problems posed by Irish registered non-resident companies. The essence of the taxation proposals provide that a company which is incorporated in the State will be treated as resident in this State for tax purposes.

Prior to the making of this amendment, under existing case law the place of residence was determined by the location of the management in control of the company. Even where management in control may be located outside the State, incorporation in this State will be sufficient for the company to be regarded as resident in the State. There are two exceptions to this rule. If a double taxation treaty provides, under the tie-break rules where a company is resident in both countries, that a company is not resident in Ireland and is resident in another territory, the company will be regarded as not resident in Ireland. If the company is a relevant company, that is, a company ultimately controlled by residents of treaty or EU countries or a company whose shares are dealt in a recognised stock exchange in a relevant territory, and either the company or a related company carries on a trade in the State. The provisions apply to all new companies incorporated on or after 11 February 1999.

In the case of existing companies, the provisions will apply from 1 October 1999. Under section 88(2) of the Taxes Consolidation Act, 1977, as amended by section 83 of the Finance Act, 1999, a company which is incorporated but not tax resident in this State will be required to identify the territory in which it is tax resident to say whether a company or related company is trading in this State and to identify the ultimate beneficial owners of the company where the company is claiming non-residence because of treaty provisions. Moreover, the Revenue Commissioners may give notice in writing to the Registrar of Companies that a company has failed to deliver a statement of information sought under section 88(2) of the Taxes Consolidation Act.

By virtue of section 84 of the Finance Act, 1999, the definition of secretary used in the specific sections of the Taxes Consolidation Act, 1997, have been extended to include an individual resident in the State who is a director of a company. This ties in with the requirement in section 43 of the Companies (Amendment) (No. 2) Bill, 1999, that every company must have at least one director who is resident in this State.

Section 42 is the first of the sections to address the problems created by Irish registered non-resident companies in company law, as Deputy Rabbitte pointed out. Essentially it will now be necessary to satisfy the Registrar of Companies that a company, when registered, will carry on an activity in the State before the company will be formed and registered. It will be necessary to submit the information by way of a statutory declaration which will give an indication of the activity or main activity that the company will engage in by reference to the NACE Rev.1, which is the common basis for statistical classification of economic activities in the European Community or, where the activity does not fall into one of the classifications, more precise details of the activity will have to be given.

Details of administrative arrangements are also set out in the section as to the manner in which the information is to be given to the Registrar of Companies. Subsection (1) contains the basic requirements and provides that a company cannot be formed or registered under the Companies Acts unless it appears to the Registrar of Companies that the company, when registered, will carry on an activity in this State. It is further qualified that the activity must be one which is mentioned in the memorandum of the company. This is in any event a requirement of all companies, that they must have the power to carry out whatever activity they propose to engage in - the ultra vires rule. The manner in which the Registrar of Companies may be satisfied is set out in subsequent sections and subsections. It is not proposed to extend this requirement to existing companies. The main elements of the package will operate to address the continuing use of Irish registered non-resident companies.

Mr. Higgins (Dublin West)

The problem with this is that the memorandum of a company can be quite general. It can relate to specific activities but it could also be quite general in that it could advise on economic or climatic conditions and, therefore, would not have to show it has a substantial interest in this jurisdiction. By using a general catch-all phrase, it seems to me that a company could get by the Registrar of Companies. The Minister of State is saying, if I understand him correctly, that there are other provisions in tax legislation which he has mentioned whereby companies can be trapped. He referred to an enormous amount of legislation which I have not had the benefit of reading. Deputy Owen referred to seeing 50 companies, which I presume were Irish registered, non-resident companies——

Mrs. Owen

Yes.

Mr. Higgins (Dublin West)

— featured in an Interpol investigation. Is the Minister of State saying that because of the changes in tax law and this legislation that could not happen again? Would these companies, which were perhaps set up for tax evasion, money laundering or drug trading, be caught in the net?

Mr. Treacy

That is our expectation and our hope.

Mr. Perry

I agree with Deputy Higgins that the memorandum of a company can be very vague. If a new company is set up - it could be set up by an accountant or a nominee - or if a company changes its base or a director leaves the company, is there a provision that the company must inform the Companies Registration Office because in certain they do not do so.

Mr. C. Lenihan

It is my understanding that the directorship requirement was introduced in the Finance Bill or this Bill.

Mrs. Owen

This one.

Mr. C. Lenihan

Is it the case that if a director, an alleged criminal, is an Irish resident they can be, in a sense, caught?

Mr. Rabbitte

When the Minister of State replies, will he deal with the company formation agent? What is the imposition on that person or, to put it another way, are there any additional requirements on the company formation agent when asked to set up a new company in Ireland as a result of this legislation? Is he or she required to advise the Revenue Commissioners? Are there any additional requirements other than those in the circumstances described by Deputy Owen in previous abuses of this system?

Mrs. Owen

Given the Minister of State has read his speaking note for sections 42 and 43, would it speed matters up if I moved my amendments?

Chairman

No. I am advised we cannot.

Mrs. Owen

I am concerned that the extra obligations being placed on those setting up these companies are not strong enough.

Mr. C. Lenihan

Might it be possible to agree section 42 and move to section 43?

Mr. Treacy

Before we move on, I wish to state that of course our goal is to ensure that these companies cannot carry on with the illegal operations that have been going on for so long. As Deputy Rabbitte said, obviously when the laws in the UK were tightened a host of companies moved here. We have given this a lot of thought and effort and to go back to Deputy Higgins' point about a company being set up to do something that might not be what it intends to do, section 42(7) defines activity as any activity that a company may be lawfully formed to carry on and includes the holding, acquisition or disposal of property of whatsoever kind. In other words, whatever they put down will be deemed to be the activity they are supposed to be doing. If they are not carrying out that activity they will be in serious difficulties.

Mrs. Owen

It might mean nothing.

Mr. Treacy

Section 42(2) makes our requirements clear. Deputy Rabbitte asked about company formation agents. They will be expected to adhere to the requirements of both changes made in this year's Finance Act and this Bill. They would obviously have to produce certifying documentation prior to the company's formation. Thereafter, they would not be obliged to notify the Revenue Commissioners. It would be a matter for the Revenue Commissioners to take account of the companies formed, communicate with them and, if they did not co-operate, inform the Companies Registration Office, the registrar of which would then take appropriate action.

Question put and agreed to.

SECTION 43.

Mrs. Owen

I move amendment No. 21:

In page 31, subsection (1), line 6, after "State" to insert "and shall not be an employee of any agent of the company being established".

There is a great deal of interest in this section which was probably written at a time when certain suspicions existed and allegations were made about Irish registered, non-resident companies. Even since the legislation was written, we have seen incontrovertible evidence that many of these companies were mere shelters for tax evasion, money laundering, etc. I wonder whether the Minister might revisit these sections between now and Report Stage to ensure we have tightened up on this area.

The entire raison d’être of some solicitors, accountants and others involved in this area is to inform foreigners of ways in which they can set up companies in Ireland. For instance, a solicitor or accountant might tell a foreigner that he or she could set up 15 or 20 companies and list their secretary as a director. The unfortunate secretary might not even be aware that his or her name has been used.

This section attempts to regularise these companies and ensure there is an Irish director but it does not go far enough. The section is weakened by the either/or elements contained therein. I cannot understand why we cannot stipulate that any company registered in Ireland must have an Irish director. Why is the option to pay a bond made available? In my view, that is how most people will proceed and the advantage of having an Irish director who can be called to account if the company is found to be carrying on business illegally is lost.

A sum of £20,000 is only the cost of a big meal for some people. We know of one person who can spend that amount on a few bottles of wine and a good meal. What is a sum of £20,000 nowadays? I would agree with the £20,000 figure if provision were to be made for both a director and a bond. My amendment is an attempt to tighten up on the manner in which an employee of an agent of someone attempting to set up a non-resident Irish company cannot be used without their knowledge. I would like to hear whether the Minister feels this is the appropriate place to tighten up on who can be the named Irish director of a company. The entire emphasis of my amendments is to make it the norm for a company to have an Irish director rather than the current norm where the bond system is used. That is why I am proposing the amendment of subsection (3) to read that subsections (1) and (2) in regard to the appointment of an Irish director shall apply in all cases except in very rare circumstances. The current wording implies that we hope people will use the bond mechanism in order that we will receive this extra money and that we do not want a plethora of named Irish directors.

The Minister is failing to recognise that Ireland has a reputation as a country in which it is easy to set up companies which can be used as shelters for criminal activity. If a person or a company wants to buy a property in Greece, for example, it is necessary to have a Greek director who would own 51 per cent as it is not possible for a non-national to be a majority owner. Why do we have to make it so attractive for companies to set up here? We are attracting investment in Ireland anyway. I can understand that there was perhaps a time when we could not attract that investment but I do not think we need to make ourselves so open now.

I am not satisfied that this section is really tackling the problem which exists. I would like the Minister to accept the necessity to tighten up on the provision in regard to the identity of those who can be company directors. In some instances, people who have a very minimal role in the running of a company - even people who only work there occasionally - can find themselves listed as company directors.

Mr. Perry

I agree with Deputy Owen. It is very important that we get things right in regard to the role of the Irish director. Agents will use this section to their best advantage and one employee might be named as a director of 25 different companies. I feel that the Irish director should have a role in the company's activity and assume responsibility accordingly. This provision will be exploited. A sum of £20,000 is insignificant. The bond could be easily obtained through an insurance company rather than literally paying £20,000 cash up-front. It might only cost people a premium of £500 or £600 to obtain a bond.

Deputy Owen has correctly stated that Ireland has been a haven for foreign investors. This section is a mere cop out. Company regulation and formation must be controlled. Before directors sign forms in regard to company formation, they should know exactly what they are signing.

Mr. Higgins (Dublin West)

A sum of £20,000 in the context of the situations which the Bill is designed to address is minuscule. Any individuals looking at this this country in regard to setting up some kind of operation to evade tax or for some other nefarious reasons will first carry out a cost-benefit analysis. We have the recent example of an automobile company in the United States which knew its cars were fatally flawed and knew that if crashes occurred in a certain manner, the cars' occupants would be incinerated. A secret decision was made not to correct the fault because it would be too expensive to do so. Happily, the company subsequently paid for its criminal decision in the courts.

Companies can carry on whatever activity they wish to - even for a short period - without any kind of supervision. The issue of having an Irish-resident director is not a Nationalistic one; rather it is an issue of accountability. There must be someone who can be nabbed within this jurisdiction in the event of shady or suspicious activities.

Mr. C. Lenihan

If I am reading the Bill correctly, there is a requirement for an Irish director. The bond only comes into play for a period of 12 months, after which period there is a requirement for a director.

Mr. Higgins (Dublin West)

Existing companies must have a resident director within 12 months but I understand there is no requirement to do this.

Mrs. Owen

It can be either/or. The Minister said this on Second Stage.

Mr. C. Lenihan

The explanatory memorandum says that existing companies must have a bond within 12 months.

Mrs. Owen

It goes on to say that an alternative company may provide a bond.

Mr. C. Lenihan

I presume that is an alternative within the 12 month period.

Mr. Treacy

It is either/or at all times. I assure Members that this issue has received a lot of consideration. I agree that any one element will not solve the issue. However, a package of measures has been put together which I believe will eliminate this situation.

Regarding Deputy Higgins's point on the non-payment of taxes, as and from 11 February 1999 every company registered in Ireland must pay tax. Once a company registers, it is liable to tax in this country. There are only two exceptions under the Treaty obligations to which I referred earlier.

In providing for a resident director, we had to be mindful of the need not to infringe relevant European Union Treaty requirements to which we are signatories, such as the freedom to provide services. We cannot discriminate on grounds of nationality. In light of these considerations, our objective was to allow for maximum flexibility. Consequently, we have not sought to exclude any category of persons from being appointed as resident director. While some companies might not be too comfortable appointing resident directors from the category of persons referred to in the Deputy's proposal, they may have no choice if they wish to opt for a resident director as opposed to the alternative of a bond.

Members have made very good points which I assure them I have taken on board. We have tried to allow for maximum flexibility with a package of measures that we believe will address the issue. I accept that one single measure will not solve the problem but a package of measures will make a major contribution to eliminating it. Consequently, I regret that I cannot accept the Deputy's amendment.

Mrs. Owen

Is the Minister of State saying that under EU law no European member state can lay down in national law that if one is setting up a company or buying a property they must appoint a resident French, German or Belgian director of that company? Is he saying this categorically? Has every EU member state fulfilled this requirement? Is he saying that if I wish to set up a company in France, I can do so without being resident under this system of a non-resident French registered company? My understanding is that this is not the case.

Mr. Treacy

The advice and information available to me is as follows. Once a company is registered in a member state of the European Union, that company is free to trade in any member state within the European Union. This legislation had to be framed to include certain restrictions but not to discriminate against an existing company in any other part of the European Union. What exactly the rules or regulations which apply in other member states are I cannot say. My advice is that within European law, once a company trades in any part of Europe, it must be allowed to trade in all parts of Europe within the European Union functional area. The only opportunity we had to rectify that situation was to include the option of the bond. The bond is included to ensure the legislation is as tight as possible and to make it as difficult as possible for one to circumvent the law by registering a company in some other European Union country and not have a resident director here. This option was included following long, careful and due consideration.

Mrs. Owen

May I clarify this again because I am still not absolutely satisfied? The Minister of State is saying that we cannot restrict a company from trading here. I can understand that a protection cannot be built into the legislation whereby a French company making yogurt and wishing to trade and sell their product in this country can be prohibited from doing so. Is the Minister of State saying that if I wish to set up a company and get in touch with the Registrar of Companies in Paris, or wherever he or she is based, I as an Irish and EU citizen need have no reference to anyone French in order to register a company in my name even though I do not live in France? This was not the case in the past.

Mr. Treacy

My interpretation and information is that if Yogurt France has a company in France, with French or European directors trading in France, and it wants to trade and set up a trading company, Yogurt Ireland Limited, in Ireland, we cannot impose on that European registered company a resident director because it already trades within the European Union and is registered therein. The only impediment we can create is to include the bond as an alternative.

Mr. C. Lenihan

Can we place restrictions in terms of employment in the case of a non-resident company? Surely if we can place restrictions on companies that avail of an IFSC licence in terms of a real activity and not a brass plate, is there an argument that non-resident companies——

Mr. Treacy

That is a different regulation.

Mr. C. Lenihan

It is an analogous situation. Is the Minister of State saying that a requirement for a resident director is a restriction on a company's right to trade freely within the European Union?

Mr. Treacy

That is correct.

Mr. C. Lenihan

Is there case law?

Mr. Treacy

We are dealing here with taxation. We must make it as difficult as possible for these people, therefore we have included the bond as an alternative to the director.

Mrs. Owen

But you still collect tax from the company?

Mr. Treacy

They are liable to tax here once registered in Ireland as and from 11 February 1999. This is a major change.

Mrs. Owen

My argument is that the legislation is more positive towards encouraging bonds than towards encouraging Irish resident directors. Section 43(3) states, "Subsection (1) or (2), as the case may be, shall not apply in relation to. . . . .", in other words, it is a positive statement that it shall not apply. I thought the legislation would have been more forceful in trying to get a director. My amendment proposes to include the words "shall apply in all cases except in limited circumstances". In other words, our preference as a country is that we want directors who are resident in this country.

Mr. Treacy

That is our preference. We hope that will be the preference of those registering the companies.

Mrs. Owen

That is not how it reads.

Mr. Treacy

The problem is that we must provide an alternative option.

Chairman

In line with EU regulations?

Mr. Treacy

Yes.

Mr. C. Lenihan

Is there an established case law in relation to the restriction of a resident director?

Mr. Treacy

We are talking about Articles 52, 56 and 58 of the Treaty.

Mrs. Owen

Are they directives?

Mr. Treacy

They are part of the establishing Treaty.

Mrs. Owen

Is there an obligation on us?

Mr. Treacy

There is freedom to establish and freedom of movement of goods, services and people.

Mrs. Owen

Is it obligatory on us now or will it be in the future?

Mr. Treacy

It is obligatory now.

Mrs. Owen

Very often the articles do not have to be implemented until a directive is introduced.

Mr. Treacy

These are the basic provisions. We had huge consultations on this to see how we could pitch it in a way that would stick. The advice available is this is the maximum we can go.

Mrs. Owen

Does every other EU country permit this kind of non-resident registered company? It is my understanding that we are unique in this and that all other countries have tightened up this area. As Deputy Rabbitte said earlier, we had the setting up of a plethora of companies here because the UK tightened up their legislation and made it much more restrictive. Are we to become the dustbin of Europe vis-à-vis anybody who wants to hide nefarious activities?

Mr. Treacy

We were the only country to permit non-residency. We changed that in the Finance Act on 11 February last. We have done that for tax purposes.

Mrs. Owen

Yes, but it was not done for company set-up purposes. One can come into this country and set up a company by waving a bond of £20,000.

Mr. Treacy

By lodging a bond.

Mrs. Owen

Yes, by lodging a bond which will cost about £400 or £500.

Mr. Ardagh

It must also register in this country or state a country in which it is resident for tax purposes. At present there is no obligation to state where the company is resident for tax purposes.

Mrs. Owen

That is right.

Mr. Ardagh

That is the big change being made.

Mr. Treacy

We have put in many impediments.

Chairman

Is the amendment being pressed?

Mrs. Owen

I did not get a very satisfactory answer from the Minister of State about whether we will be able to put an end to the secretary or cleaning lady being a director of 25 companies without any real involvement in them. He has not given us an assurance that this will end nominee directors. There is no real obligation on them to know the slightest thing about what the company is doing other than that they could be left holding the baby if the company was taken to court. Is that right?

Mr. Treacy

There is a total change. As and from 11 February, once the company is registered in Ireland it is registered here for tax purposes. That is a major departure. Once a company is to be formed it must have a resident Irish director and that director has to sign a document which makes him responsible for new company law. If they do not do that they are obliged to provide a bond for £20,000, certify the country in which they are tax resident and showing where they are paying their taxes. That is a major new departure also.

Mr. Perry

Is there consultation with Revenue and the company?

Mr. Treacy

Revenue deal directly with the company and are obliged to do so. If the company does not co-operate, Revenue as a result of this legislation will be obliged to notify the Companies Registration Office. The Registrar can then take the appropriate action.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 22, 23 and 24 form a composite proposal. Are the amendments being pressed?

Amendments Nos. 22 and 23 not moved.

Mrs. Owen

I move amendment No. 24:

In page 31, subsection (3), lines 18 to 20, to delete, if the company for the time being holds a bond, in the prescribed form, in force to the value of £20,000 and which" and substitute "except in limited circumstances where a bond in the prescribed form to the value of £40,000 can substitute for a director who is resident in the State and where that bond".

This amendment also covers the point I was trying to highlight earlier. I now realise from the Minister of State's explanation that we cannot do both. I was hoping to include the preference that a person be an Irish director and only in very exceptional circumstances could somebody substitute a live warm body for money. I am even more concerned now. I will be retabling this amendment on Report Stage. I want the Minister of State to consider the comments made here about the £20,000 which has had some bearing on the 24,000 euro figure. That is a farce. It is like fining somebody £5 for cruelty to animals. A bond to the value of £20,000 in place of a warm Irish body who can be prosecuted if something goes wrong is a pittance.

Deputy Ardagh

Not if she is a cleaning lady.

Mrs. Owen

She will not be given the Minister of State's explanation that the person will have to sign a document. The more I think about it, even £40,000 is not enough; it should be put in the region of £100,000. With a commitment from the Minister of State to reconsider that figure I am happy to withdraw this amendment.

Mr. Treacy

I will certainly take another look at it.

Mr. Higgins (Dublin West)

The sum of £20,000 should be substantially increased if the Minister of State is serious about this. On the question of EU law, the Minister of State said a company has to be allowed to trade freely in all states.

Mr. Treacy

The company has to be allowed totrade freely once registered in a member state of the European Union.

Mr. Higgins (Dublin West)

That is different to having a requirement when a company is seeking registration in this jurisdiction to say that when it is in the process of formation it should have a resident director.

Mr. Treacy

That is correct. We included that to make sure there is a difference.

Mr. Higgins (Dublin West)

Once a company is established in any state it has to be allowed to trade in every state. Is the Minister saying it is forbidden by EU law that we can say if a company wants to register in our state it must have a resident director?

Mr. Treacy

Under the freedom of establishment, we cannot curtail the right to establish a company, a business in operation, in a member state. The only curtailment we can enforce is that which we have included in this legislation.

Mrs. Owen

It is not unlike the Bosman judgment.

Mr. Treacy

Yes, it is the same situation.

Chairman

Is the amendment being pressed?

Mrs. Owen

No, but I will be resubmitting it for Report Stage.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 25, 26, 27 and 28 form part of a composite proposal and may be taken together by agreement. Agreed.

Mr. Treacy

I move amendment No. 25:

In page 33, to delete lines 21 and 22, and substitute the following:

"(14) The provisions of section 311 of the Principal Act shall apply for the purposes of this section as they apply for the purposes of that section 311, subject to the following modifications-".

A number of parties have read subsection 43(14) as effectively substituting two new subsections (1) and (2) in section 311 of the Companies Act, 1963, as if the change to subsection (8) were made. This is not the intention. What is intended is that section 311 remains as is but for the purposes of section 43 of the present Bill the said section 311 is to be read as if two different subsections (1) and (2) were included and the change to subsection (8) of the said section were made. The purpose of amendment No. 25 and subsequent amendments Nos. 26, 27 and 28 which are consequential on amendment No. 25 is to make this position absolutely clear. Amendments Nos. 26, 27 and 28 are essentially grammatical changes. I hope members can accept the amendments.

Amendment agreed to.

Mr. Treacy

I move amendment No. 26:

In page 33, subsection (14)(a), line 24, to delete "there were substituted" and substitute "there shall be substituted".

Amendment agreed to.

Mr. Treacy

I move amendment No. 27:

In page 33, subsection (14)(b), line 49, to delete "there were substituted" and substitute "there shall be substituted".

Amendment agreed to.

Mr. Treacy

I move amendment No. 28:

In page 33, subsection (14)(b), line 51, to delete "on business' of" and substitute "on business',".

Amendment agreed to.

Section 43, as amended, agreed to.

SECTION 44.

Question proposed: "That section 44 stand part of the Bill."

Mr. Treacy

Section 44(8) contains a definition of when a person is to be regarded as resident in the State for the purposes of section 43. This is based on the corresponding definition in taxation law. A difficulty may arise in the first year if a person falls within the scope of section 43. I am not certain to what extent this may be a real difficulty but I will have the matter examined between now and Report Stage and, if it proves necessary, I will table an appropriate amendment on Report Stage to address the issues arising. I would be grateful for the committee's co-operation on this issue.

Question put and agreed to.

SECTION 45.

Mr. Rabbitte

I move amendment No. 29:

In page 38, between lines 13 and 14, to insert the following subsection:

"(14) In this section 'appointment' includes a purported appointment and cognate words shall be construed accordingly.".

This is a drafting point. Since the excessive appointment is void it does not happen. For that reason we need a definition of appointment which includes a purported appointment. I recommend that we take the issue to the new Attorney General. If he looks at the Bill the Minister will see that he cannot make the 26th appointment because it states that an excessive appointment is void. If it is void, it is not an appointment and there must be provision for a purported appointment.

Mr. Treacy

I do not know what the Deputy has in mind but I will reflect on the proposal and if that requires consultation with the new Attorney General I will be happy to do so.

Mrs. Owen

It is clear in the explanatory memorandum where it states that appointments held in excess of the limit are declared to be void. There will not be an appointment if it goes above the limit.

Mr. Treacy

No, it is the appointments above the limit which are void, not the ones beneath the limit. Appointments can be held up to the maximum but it is those above that maximum which cannot be held.

Mr. Rabbitte

That is right but it does not change the point that the 26th appointment is not an appointment, it is a purported appointment.

Mrs. Owen

Who polices the 25 appointees? Is there an alarm bell which will ring if my name or Deputy Perry's name comes up the 26th time?

Mr. Treacy

We do not expect to hear either of those names. The Companies Registration Office will look after that.

Mrs. Owen

Will it have a register?

Mr. Treacy

The Companies Registration Office will observe and take all the information on board. People who find themselves in the 26th position will make themselves void of that appointment once they accept that position.

Mrs. Owen

What if they continue as company directors without declaring themselves void and no one spots it?

Mr. Treacy

They could then be deemed unsuitable to hold such a position.

Mrs. Owen

But someone has to find them. Is there a built-in mechanism will which alert the Companies Registration Office to the fact that someone is being made a director of a 26th company?

Mr. Treacy

This is new legislation. There is no built-in mechanism yet. We hope to keep the legislation under constant review. Between the Companies Registration Office and the director of corporate enforcement, we should be able to keep a close eye on the situation but it will not be an easy task.

Mr. Ardagh

I note the Companies Registration Office is looking at directors currently. I have seen a director being informed that she gave an address as 26 Jones Road and in another case as 25 Jones Road. She was asked which was correct. The office can see the number of companies of which one person is a director.

Mr. Treacy

There is no doubt that there have been major changes and new measures have been well implemented. Deputy Rabbitte played a key role in that and we have now put in place the final resources.

Mr. Ardagh

Well done, Deputies Rabbitte and Treacy.

Mr. Treacy

I will examine the issue before Report Stage.

Amendment, by leave, withdrawn.

Section 45 agreed to.

SECTION 46.

Chairman

Amendments Nos. 32, 33, 34 and 35 are related to amendment No. 30 and amendment No. 36 is consequential to amendment No. 34; amendments Nos. 30 and 32 to 36, inclusive, will be taken together by agreement.

Mr. Treacy

I move amendment No. 30:

In page 38, line 20, to delete "following section" and substitute "following sections".

Section 46 proposed to substitute an enhanced provision dealing with the power of the Registrar of Companies to strike companies from the register for failing to make annual returns. I indicated in my speech on Second Stage that I will be bringing forward proposals to enable the Registrar of Companies to move to strike companies from the register where they fail to provide the requisite information to the Revenue authorities.

The purpose of amendments Nos. 30 and 32 is to foreshadow the fact that it is proposed to substitute a number of provisions dealing with the various aspects of strike off and what happens to a company after it has been struck off. Amendment No. 33 is a substantive restructuring of section 12 of the Companies (Amendment) Act, 1982, which is proposed in relation to the striking off companies from the register of companies maintained at the Companies Registration Office.

As a result of the revised proposals there will now be two separate circumstances in which a company can be struck off in addition to that contained in section 311 of the 1963 Act in respect of defunct companies. The first will be in accordance with section 12(1) to section 12(3) as contained in section 46. This is where a company does not file its annual return in any given year. New section 12A provides for the striking off of a company where the Revenue Commissioners notify the Registrar of Companies that the company has failed to deliver the requisite information under the Taxes Consolidation Act, 1997. New section 12B mirrors subsections (4) to (13) of the revised section 12 which was originally substituted by section 46. The necessary changes have been made, however, to reflect the fact that a company may have been struck off for failure to provide an annual return or for failure to supply the requisite information to the Revenue Commissioners.

The other change made is that a new subsection (4) has been included in the new section 12B. This is designed to make it clear that where the court decides to exercise its powers in subsections (3) or (7) to make any other order such an order may provide that the officers of the company may be made liable in respect of any debt or liability incurred during the period after the company has been struck off and before the court decides to restore it to the register. This approach is recommended in paragraphs 329 and 330 of the McDowell report on company law compliance and enforcement.

The proposed new section 12C is designed to mirror the ability of the Registrar of Companies pursuant to section 311A of the Companies Act, 1963, as amended by the following amendment No. 35, to restore to the register a company struck off for failure to file an annual return provided certain requirements are complied with, this time in circumstances where the registrar receives confirmation from the Revenue Commissioners that all outstanding statements required by the Revenue Commissioners pursuant to section 882 of the Taxes Consolidation Act, 1997, have been complied with.

To avail of the section, the application must be made within 12 months of the company having been struck off under the proposed new section 12A(3). This could be described as a quicker and cheaper mechanism for having a company restored to the register but it will only be available if the application is made within 12 months and the necessary information is submitted to the Revenue Commissioners.

The proposed new section 12B is designed to ensure the Revenue Commissioners have the necessary authority to communicate information which it has in relation to failure to make returns under the Taxes Consolidation Act to the Registrar of Companies without breaching its obligations to confidentiality contained in other legislation. This mirrors section 882(3) as inserted by section 83 of the Finance Act, 1999, for the original ability of the Revenue Commissioners to communicate information to the Registrar of Companies in relation to the striking off of a company.

The original provision did not contain sufficient scope to enable the Revenue Commissioners to communicate information to the Registrar of Companies in respect of subsequent actions by companies. Due to the changes to section 46, dealt with under amendment No. 33 which inserts new sections 12A, 12B, 12C and 12D into the Companies (Amendment) Act, 1982, there will be three circumstances in which a company can be struck from the register. These are for failing to file an annual return, for failing to give information to the Revenue Commissioners as required under the Taxes Consolidation Act and under section 311 of the Companies Act, 1963, where the registrar believes a company is not carrying on a business.

In making the changes to section 12 under amendment No. 33, provision is specifically made in the new section 12B (4) that the court may, if it considers it appropriate, make an officer of the company liable for the whole or part of the debt incurred during the period when a company continues to trade after it has been struck off.

The purpose of amendment No. 34 is to provide similarly in the case of a strike-off of a defunct company where the officers continue to operate as if the company had not been dissolved.

Amendment No. 35 is simply a technical adjustment to take account of the changes being made to section 12 of the Companies (Amendment) Act, 1982, by virtue of the amendments to section 46 of the present Act. Again amendment No. 36 is of a technical nature and reflects the changes made to section 311 to which I have already referred. I trust this is of some assistance to the committee in its concluding deliberations.

Mr. Rabbitte

Will the Minister repeat that?

Mr. Treacy

I am prepared to do that.

Chairman

That has been very helpful.

Amendment agreed to.

Mrs. Owen

I move amendment No. 31:

In page 38, line 33, after "letter" to insert ", where he is satisfied that the letter has been received,".

I do not know whether the Minister has changed the powers but I tabled this amendment because I was concerned when I read that the Registrar of Companies can send a letter by registered post and unless the annual returns are delivered to him within one month, the company will be struck off. I feel that is very arbitrary. Given the possibility of a letter not being received in spite of all the new regulations about companies notifying the companies office about changes of address and other matters, I would have thought it necessary for the Registrar of Companies to satisfy himself that the letter had been received. Suppose the letter is lying on the doormat of some office.

I know a registered letter must be signed for but it could be signed for by a general receptionist of an area. I wanted to clarify that the registrar must be satisfied the letter has been received before the axe falls on the company. It would be a minor protection and it may not be relevant now if the Minister has done all sorts of other wonderful things in the new section.

Mr. Treacy

We have done other wonderful things but it may still be relevant. The registrar's letter must be sent. If it is a registered letter the registrar would be satisfied it has duly been delivered as there would be receipt of acceptance on behalf of the company or the person. After that the registrar can only publish his proposals in Iris Oifigiúil to strike off the company. As he has not yet struck the company off there is a second opportunity to adhere. After one month from the date of that notice, the company will be dissolved. There is another month.

Mrs. Owen

It is only a protection against an injustice. I realise it is up to a company to ensure the right address is on the register but there could be gap, for example, a fire, etc.

Mr. Treacy

In all fairness to the Companies Registration Office, humane, decent and efficient people send the documentation and there would always be more follow-up.

Mrs. Owen

The law is very specific. It does not say there is any discretion. There is exactly one month.

Mr. Treacy

That is one month and one month.

Mrs. Owen

The Bill states "at the expiration of 1 month from the date of that notice, the name of the company mentioned therein will, unless all outstanding returns are delivered to the registrar, be struck off the register". If a registered letter is not delivered, the post office delivers a note stating that the registered package is waiting in the post office to be collected. The Minister stated the registrar is very humane and will know if the letter has been delivered.

Mr. Treacy

I referred to the registrar and his or her staff.

Mrs. Owen

What if they do not know whether the letter has been delivered? The note stating there is a registered package in the local post office could be sitting on a mat.

Mr. Treacy

It would be a long holiday if the mat was untouched for two months.

Mrs. Owen

It is one month.

Mr. Treacy

No, one month after registration the notice goes into Iris Oifigiúil. One month after publication of the notice in Iris Oifigiúil, the registrar shall then dissolve the company.

Mr. C. Lenihan

There is a two month time frame.

Mr. Treacy

Under section 311A, the company still has another month to send for restoration.

Mrs. Owen

The post is not always as it should be.

Mr. Treacy

We cannot make it too easy for them.

Mrs. Owen

I realise that. Is the Minister satisfied the company will have an opportunity——

Mr. Treacy

We have to find a balance between the exigencies and parameters we place on the Companies Registration Office to ensure the registrar is in a position to take relevant action regarding the companies about which we have talked and which we abhor. That obviously imposes the same criteria for domestic operations on companies registered here. We must ensure there is equity within the law.

Mrs. Owen

I will not press the amendment.

Mr. Treacy

I am very grateful.

Mr. Perry

Some companies might hope to avail of the system to be struck off for the wrong reasons. It might suit them to be struck off and they might choose that law not to comply with the time frame. They might form another company with liability in the company being struck off. Some companies might use this to their advantage. They might wish to get struck off and do it through a back door method which is what this would be.

Mr. Ardagh

On the issue of being restored to the register, many companies, particularly community development companies, residents' associations and companies which have recently formed because of the liability situation, often get to the stage where annual returns are not made because of lack of knowledge or other reasons as they are voluntary organisations. Suddenly they get a notice stating they are struck off and must go the Circuit Court to get reinstated. This costs money. Is there some way a company or voluntary body could get reinstated onto the register using the same fast-tracking method as the 12 month gap here?

Mr. Treacy

They may apply to the registrar of companies for restoration under section 311A of the 1963 Act, but they must do so within 12 months. They have the right to reapply for restoration to the registrar——

Mr. Ardagh

Would the registrar normally allow it without going through the Circuit Court?

Mr. Treacy

They do not have to go near the court. If the criteria laid down for company registration and reformation are met, the company can be restored. I have seen it happen. Provided the registrar has received all annual returns outstanding, if any, from the company, he may restore the name of the company to the register. There is a fee of approximately £250.

Amendment, by leave, withdrawn.

Mr. Treacy

I move amendment No. 32:

In page 38, line 39, to delete "subsections (4) and (5) of this section" and substitute "subsections (1) and (2) of section 12B of this Act".

Amendment agreed to.

Mr. Treacy

I move amendment No. 33:

In page 38, to delete lines 45 to 50, in page 39, to delete lines 1 to 57 and in page 40, to delete lines 1 to 10 and substitute the following:

"12A. (1) Where the Revenue Commissioners give a notice in writing under subsection (3) of section 882 (inserted by the Finance Act, 1999) of the Taxes Consolidation Act, 1997, to the registrar of companies stating that a company has failed to deliver a statement which it is required to deliver under that section, then, without prejudice to section 311 of the Principal Act or section 12 of this Act, the registrar may send to the company by post a registered letter stating that, unless the company delivers to the Revenue Commissioners the said statement within 1 month of the date of the letter, a notice will be published in Iris Oifigiúil with a view to striking the name of the company off the register.

(2) If the statement referred to in subsection (1) of this section is not delivered by the company concerned to the Revenue Commissioners within 1 month after the sending of the letter referred to in that subsection, the registrar of companies may publish in Iris Oifigiúil a notice stating that, at the expiration of 1 month from the date of that notice, the name of the company mentioned therein will, unless the said statement is delivered to the Revenue Commissioners, be struck off the register, and the company will be dissolved.

(3) Subject to subsections (1) and (2) of section 12B of this Act, at the expiration of the time mentioned in the notice, the registrar of companies may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in Iris Oifigiúil and on the publication in Iris Oifigiúil of this notice, the company shall be dissolved.

12B. (1) The liability, if any, of every director, officer and member of a company the name of which has been struck off the register under section 12(3) or 12A(3) of this Act shall continue and may be enforced as if the company had not been dissolved.

(2) Nothing in subsection (1) of this section or section 12(3) or 12A(3) of this Act shall affect the power of the court to wind up a company the name of which has been struck off the register.

(3) If any member, officer or creditor of a company is aggrieved by the fact of the company's having been struck off the register under section 12(3) or 12A(3) of this Act, the court, on an application made (on notice to the registrar of companies, the Revenue Commissioners and the Minister for Finance) by the member, officer or creditor, before the expiration of 20 years from the publication in Iris Oifigiúil of the notice referred to in section 12(3) or, as the case may be, 12A(3) of this Act, may, if satisfied that it is just that the company be restored to the register, order that the name of the company be restored to the register, and, subject to subsection (4) of this section, upon an office copy of the order being delivered to the registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off or make such other order as seems just (and such other order is referred to in subsection (4) of this section as an ’alternative order’).

(4) An alternative order may, if the court considers it appropriate that it should do so, include a provision that, as respects a debt or liability incurred by, or on behalf of, the company during the period when it stood struck off the register, the officers of the company or such one or more of them as is or are specified in the order shall be liable for the whole or a part (as the court thinks just) of the debt or liability.

(5) The court shall, unless cause is shown to the contrary, include in an order under subsection (3) of this section, being an order made on the application of a member or officer of the company, a provision that the order shall not have effect unless, within 1 month from the date of the court's order——

(a) if the order relates to a company that has been struck off the register under section 12(3) of this Act, all outstanding annual returns required by section 125 or 126 of the Principal Act are delivered to the registrar of companies,

(b) if the order relates to a company that has been struck off the register under section 12A(3) of this Act, all outstanding statements required by section 882 of the Taxes Consolidation Act, 1997, are delivered to the Revenue Commissioners.

(6) The court shall, in making an order under subsection (3) of this section, being an order that is made on the application of a creditor of the company, direct that one or more specified members or officers of the company shall, within a specified period——

(a) if the order relates to a company that has been struck off the register under section 12(3) of this Act, deliver all outstanding annual returns required by section 125 or 126 of the Principal Act to the registrar of companies,

(b) if the order relates to a company that has been struck off the register under section 12A(3) of this Act, deliver all outstanding statements required by section 882 of the Taxes Consolidation Act, 1997, to the Revenue Commissioners.

(7) The court, on an application made by the registrar of companies (on notice to each person who, to his knowledge, is an officer of the company) before the expiration of 20 years from the publication in Iris Oifigiúil of the notice referred to in section 12(3) or, as the case may be, 12A(3) of this Act, may, if satisfied that it is just that the company be restored to the register, order that the name of a company which has been struck off the register under the said section 12(3) or 12A(3) be restored to the register and, upon the making of the order by the court, the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off or make such other order as seems just (and such other order may, if the court considers it appropriate that it should do so, include a provision of the kind referred to in subsection (4) of this section).

(8) A letter or notice to be sent under this section to a company may be addressed to the company at its registered office, or, if no office has been registered, to the care of some officer of the company, or, if there is no officer of the company whose name and address are known to the registrar of companies, may be sent to each of the persons who subscribed to the memorandum, addressed to him at the address mentioned in the memorandum.

(9) Without prejudice to section 2(1) of the Principal Act where such an application is made by any other person, in the case of an application under this section that is made by a creditor of the company or the registrar of companies, 'the court', for the purposes of this section, means the Circuit Court.

(10) An application under this Act to the Circuit Court by a creditor of the company concerned shall be made to the judge of the Circuit Court for the circuit in which the registered office of the company was, immediately before it was struck off the register, situated or, if no office was registered at that time, for the circuit in which the creditor resides or, in case the creditor resides outside the State, for the Dublin Circuit.

(11) An application under this section to the Circuit Court by the registrar of companies shall be made to the judge of the Circuit Court for the Dublin Circuit.

12C. (1) Without prejudice to the provisions of section 311(8) or 311A(1) of the Principal Act or subsection (3) or (7) of section 12B of this Act, if a member or officer of a company is aggrieved by the fact of the company's having been struck off the register under section 12A(3) of this Act, the registrar of companies, on an application made in the prescribed form by the member or officer before the expiration of 12 months from the publication in Iris Oifigiúil of the notice striking the company name from the register, and provided he has received confirmation from the Revenue Commissioners that all outstanding, if any, statements required by section 882 of the Taxes Consolidation Act, 1997, have been delivered to the Revenue Commissioners, may restore the name of the company to the register.

(2) Upon the registration of an application under subsection (1) of this section and on payment of such fees as may be prescribed, the company shall be deemed to have continued in existence as if its name had not been struck off.

(3) Subject to any order made by the court in the matter, the restoration of the name of a company to the register under this section shall not affect the rights or liabilities of the company in respect of any debt or obligation incurred, or any contract entered into by, to, with or on behalf of, the company between the date of its dissolution and the date of such restoration.

12D. If the question of whether a statement which a company has failed to deliver to the Revenue Commissioners in accordance with section 882(3) of the Taxes Consolidation Act, 1997, has or has not been subsequently delivered to them falls to be determined for the purpose of the exercise by the registrar of companies of any of the powers under sections 12A to 12C of this Act, the Revenue Commissioners may, notwithstanding any obligations as to secrecy or other restriction upon disclosure of information imposed by or under statute or otherwise, disclose to the registrar any information in their possession required by him for the purpose of that determination.'.".

Amendment agreed to.

Section 46, as amended, agreed to.

SECTION 47.

Question proposed: "That section 47 stand part of the Bill."

Mr. Treacy

Section 47 is designed to overcome difficulties that would have arisen. If subsection (8) of section 195 as inserted by section 51 of the Companies Act, 1991, were to be commenced, while a great amount of thought and discussion went into the development of the provision as it stands, some further thoughts on the detailed application of the section and matters that might be added to it, making it more workable in practice, have been submitted to us. Time did not permit us to complete our examination of these issues before Committee Stage. I intend to examine these between now and Report Stage and, if appropriate, will again come forward with further refining amendments.

Question put and agreed to.

Section 48 agreed to.

NEW SECTIONS.

Mr. Treacy

I move amendment No. 34:

In page 41, before the First Schedule, to insert the following new section:

"49.-Section 311 of the Principal Act is hereby amended-

(a) in subsection (8), by the substitution for 'as if the name of the company had not been struck off.' of 'as if the name of the company had not been struck off or make such other order as seems just (and such other order is referred to in subsection (8A) as an "alternative order").', and

(b) by the insertion after subsection (8) of the following subsection:

'(8A) An alternative order may, if the court considers it appropriate that it should do so, include a provision that, as respects a debt or liability incurred by, or on behalf of, the company during the period when it stood struck off the register, the officers of the company or such one or more of them as is or are specified in the order shall be liable for the whole or part (as the court thinks just) of the debt or liability.'.".

Amendment agreed to.

Mr. Treacy

I move amendment No. 35:

In page 41, before the First Schedule, to insert the following new section:

"50.-Section 311A (inserted by the Compan-ies Act, 1990) of the Principal Act is hereby amended by the substitution in subsection (1) for 'Without prejudice to the provisions of section 311(8) of this Act and section 12(6) of the Companies (Amendment) Act, 1982,' of 'Without prejudice to the provisions of section 311(8) of this Act or subsection (3) or (7) of section 12B, or subsection (1) of section 12C, of the Companies (Amendment) Act, 1982,'.".

Amendment agreed to.

Mr. Treacy

I move amendment No. 36:

In page 41, before the First Schedule, to insert the following new section:

"51.-Section 8 of the Companies (Amendment) Act, 1983, is hereby amended in subsection (3) by the substitution for '(7) and (8)' of '(7), (8) and (8A)'.".

Amendment agreed to.

Mr. Treacy

I move amendment No. 37:

In page 41, before the First Schedule, to insert the following new section:

"52.-(1) Any act referred to in subsection (4) of section 368 of the Principal Act which, before the commencement of this section, was done to or by-

(a) an assistant registrar appointed under subsection (2) of that section, or

(b) any other person employed in the office of the registrar of companies to perform generally duties under any enactment referred to in that subsection,

shall be valid and be deemed always to have been valid as if the Minister had directed under that subsection (4) that such an act was to be done to or by such an assistant registrar or other such person (including in cases where the existing registrar of joint companies (or his or her successor) was not absent).

(2) On and from the commencement of this section, any act required or authorised by the Companies Acts, 1963 to 1999, the Registration of Business Names Act, 1963, or the Limited Partnerships Act, 1907, to be done to or by the registrar of companies, the registrar of joint stock companies or, as the case may be, a person referred to in the enactment concerned as 'the registrar' may be done to or by a registrar or assistant registrar appointed under section 368(2) of the Principal Act or any other person authorised in that behalf by the Minister.

(3) Subsection (4) of section 368 of the Principal Act shall cease to have effect.".

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 companies registrar or, in his absence, such a person as the Minister may, from time to time, authorise. Up to recently, the Assistant Secretary General in the insurance and company law division of the Department of Enterprise, Trade and Employment was the registrar of companies. Now, however, the office of registrar is assigned to the principal officer in the Companies Registration Office. Some doubt has been raised in respect of actions that have been done by the assistant registrars over the years and whether, in discharging their functions, for instance, in signing certificates of incorporation or dealing with the registration of mortgages and charges, they were properly doing so with the registrar absent. Subsection (1) of amendment No. 37 is designed to remove any doubt in this regard. Subsection (2) is designed to make it clear that assistant registrars or any other person authorised by the Minister may discharge the functions that, under the Companies Acts, are to be discharged by the registrar and that this is not dependent on the registrar being absent. Subsection (3) provides that section 368(4), which previously provided for these matters, will cease to have further effect.

Mrs. Owen

I can see what the Minister is up against. I encountered this kind of problem when the courts decided that the assigning of duties on behalf of the Minister to sign in District Court clerks was found by a judge that it had to be done personally by the Minister, and the Minister for Justice, Equality and Law Reform, Deputy O'Donoghue, had to sit up late one night signing the allocation of District Court clerks. I can see, therefore, that it is necessary to ensure that there is no doubt that if a registrar or assistant registrar signs something, it is seen as valid.

I wonder whether the Minister has gone too far by adding "or any other person authorised in that behalf by the Minister". He should keep this legislation as tight as he can so the responsibilities of registering companies and all that go with them would remain tight. It should not be possible to authorise someone down the line to do the job of registrar or assistant registrar. It is valid that the registrar would have an assistant. Why has the Minister given himself such an open-ended authorisation that any other person authorised by the Minister may carry out the functions of the registrar or assistant registrar?

Mr. Treacy

I did not want to take upon myself this open-ended situation but I was referring to Part XIII, section 368 of the Companies Act, 1963. We are quoting exactly from that, where in 1963 this was exactly what was proposed, the Minister could delegate responsibility to any such person as the Minister may, for the time being, authorise. We felt that, to be consistent, we should do that. It is no different.

Mrs. Owen

Does the Minister mean that, at the moment, he has powers to authorise any person of any rank to take the registrar or assistant registrar's place?

Mr. Treacy

That is right, to do a job. Within the normal administrative framework within Departments there is usually a specific grade below which you would not assign responsibility such as this. That would be a matter for the management.

Mrs. Owen

Is the Minister suggesting that the authorisation could not be done by post-dating it, that the person would have to be assigned ab initio?

Mr. Treacy

The person would be assigned and they would sign the document personally. It could not be signed in advance by any other person. They would be authorised on behalf of the Minister to execute the duty.

Amendment agreed to.

Chairman

Amendment No. 38 is a new section. Amendment No. 38 and amendment No. 1 to amendment No. 38 are related and may be taken together by agreement.

Mr. Treacy

I move amendment No. 38:

In page 41, before the First Schedule, to insert the following new section:

"53.-Section 21 of the Companies Act, 1990, is hereby amended by the substitution of the following paragraphs for paragraphs (d) to (h) of subsection (3):

'(d) the Minister for Finance or any other Minister of the Government in whom functions stand vested the performance of which could be assisted or facilitated by the publication or disclosure of the information, book or document concerned to him or her;

(e) a person authorised by the Minister for Finance or any other Minister of the Government as aforesaid;

(f) any court of competent jurisdiction or any person who is a party to proceedings that have been instituted before such a court;

(g) a supervisory authority within the meaning of regulations relating to insurance made under the European Communities Act, 1972;

(h) the Central Bank of Ireland;

(i) the Office of the Revenue Commissioners;

(j) any recognised stock exchange or any other stock exchange to which the Minister authorises the publication or disclosure of the information, book or document concerned;

(k) any accountancy or other professional organisation which regulates the conduct of members of that profession;

(l) any authority established outside the State which performs functions of a supervisory or regulatory nature in relation to bodies corporate or undertakings, or a person acting on behalf of such an authority, to which or to whom the Minister authorises the publication or disclosure of the information, book or document concerned;

(m) any tribunal to which the Tribunals of Inquiry (Evidence) Acts, 1921 to 1998, apply;

(n) any company in relation to which an inspector has been appointed under section 14 or any person required by the Minister to give any information under section 15, and

(o) any company in relation to which a person has been authorised under section 19 to exercise the powers conferred by that section or any person named in a report prepared by a person so authorised, being a report with respect to the results of the exercise of those powers by him or her.'.".

The purpose of this amendment is essentially to widen the definition of competent authority for the purposes of section 21(3) of the Companies Act, 1990. This defines the parties who are entitled to receive information, books or documents relating to a body which has been the subject of examination under sections 14, 15 and 19 of the 1990 Act. These will be persons appointed by the Minister to conduct an examination of a company's affairs on the relevant provisions of part 2 of the Companies Act, 1990.

The new paragraph (d) widens the description to include any other relevant Minister of the Government. It will enable the Minister for Enterprise, Trade and Employment to communicate information to any other relevant Minister. The subject matter of the examination and the information that has come to hand will obviously determine who the relevant Minister might be in a particular case. In paragraph (e) this is being broadened to include any other Minister of the Government. In addition, it is proposed to substitute a person for an officer which would encompass a person appointed who is not a departmental officer. It also brings it into line with paragraph (b).

The extension of paragraph (f) is intended to allow information obtained by the Minister to be given to a party who is engaged in judicial proceedings. This is to address difficulties which have arisen in specific cases in the application of this provision. Paragraphs (g) and (h) are essentially unchanged from those contained in the existing subsection (3).

The specific reference to the Office of the Revenue Commissioners in paragraph (i) is designed to resolve the problem of the awkward mechanism in the current paragraph (e) which requires the Minister for Finance to formally authorise the chairman or other officers in the Revenue Commission to receive information obtained pursuant to section 19. Experience indicates that many section 19 reports have a taxation dimension which warrants disclosure to the Revenue Commissioners. Paragraph (j) will enable the Minister to provide the Irish Stock Exchange or any other relevant stock exchange with any section 19 report or any public limited company which would be subject to its supervision. The inclusion of a professional regulatory body in paragraph (k) is designed to allow disclosure to any body which regulates professions such as accountants, architects, solicitors, barristers and so on.

Paragraph (l) is designed to make it clear beyond doubt that disclosure can be made to foreign company law authorities or persons acting on behalf of such authorities. Paragraph (m) will allow disclosure to any tribunals of inquiry established under the Tribunals of Inquiry (Evidence) Acts, 1921 to 1998. This will effectively deal with the proposal by Deputy Rabbitte in the Companies (Amendment) Bill, 1999, which he tabled earlier this year before the Oireachtas. Paragraphs (n) and (r) will ensure that persons who may be subject to a report under sections 14, 15 or 19 are able to be given sight of the report and this could enable reasons to be given to a person as to why certain actions are being taken. Paragraph (o) also covers a situation where the report of an authorised officer may contain critical comment of an individual or other party whose books and documents have not been examined under section 19. The rules of natural justice would suggest that any affected party should be given the opportunity to make comment or representation on a relevant extract of a draft report before it is finalised. At present such information can only be released through a third party with the written consent of the company being examined in accordance with section 21(1) of the 1990 Act.

Mr. Rabbitte

I move amendment No. 1 to amendment No. 38:

After paragraph (m) to insert the following:

"(n) either House of the Oireachtas or a Committee appointed by either or both of such Houses;".

I congratulate the Minister and welcome amendment No. 38. It is a sensible elaboration of the law to allow raw data collected under section 19 investigations to be made available to a wider range of agencies and persons than is provided for in the existing legislation. It was especially farcical that a great deal of resources were spent on investigations, for example, initiated by the current Tánaiste and that although similar areas are being inquired into by tribunals of inquiry currently under way she may not automatically transfer that information to those tribunals of inquiry, a tribunal of inquiry not being considered a court of competent jurisdiction within the existing legislation. It is now expressly provided for in this amendment.

My amendment seeks to introduce a new category after (m), which states: "any tribunal to which the Tribunals of Inquiry (Evidence) Acts, 1921 to 1998, apply:", to read: "either House of the Oireachtas or a Committee appointed by either or both of such Houses;". This would be in keeping with the direction we are taking. It is easily forgotten that tribunals of inquiry are set up by this House, they are not, as I have said, courts of competent jurisdiction. It is odd that we ought to be able to provide this data to an agency of the House or a tribunal set up by the House but not to the House itself. Today's newspapers report on the inquiry initiated by the Committee of Public Accounts. For the first time a Committee of the House, in this case a sub-committee of the Committee of Public Accounts, will, by invoking the new compellability legislation, inquire into the revenue matters contained in the Comptroller and Auditor General's report relating to certain financial institutions. A committee of the House will do what might at another time have been referred to a tribunal of inquiry, and most citizens as well as most Deputies welcome that. We do not know how it will work. It is the first time that it is being done.

It is a huge imposition in terms of resources available to the Committee of Public Accounts and it will require a huge commitment by the Deputies involved. A total of 23 successive days are slotted in September to examine the report of the Comptroller and Auditor General, starting on 30 August. When we have gone thorough the present cathartic period that is being examined in Dublin Castle, in one guise or another, we are likely as a Legislature to have to look at the efficacy of those procedures to cope with modern day conditions. We need to look at whether a mechanism established in 1921 is capable of efficiently, speedily and relatively cheaply inquiring into some of the matters now being dealt with in Dublin Castle. We are likely to have to look at a different and, hopefully, more brief and less expensive way of establishing facts in areas such as these. The Companies Acts to some extent provide for this in areas such as, for example, the provision for the appointment of a High Court inspector or, in the case of the inquiries being undertaken by the Tánaiste, an authorised officer appointed by her Department.

It is timely, when broadening the definition of competent authority, that we make provision, in certain circumstances, for the Houses of the Oireachtas, or a committee established by either of the Houses, to be deemed such competent authority. Let us consider a committee established, for example, under the compellability legislation for the express purpose of inquiring into a certain matter. If an authorised officer of the Department trawls the same area, he or she, or the Minister, ought to be enabled to make that information and data available to the committee of the House.

Mrs. Owen

I welcome that the Minister has considered a number of issues raised on Second Stage, particularly by Deputy Rabbitte. In reply to my priority questions about making information public, the Tánaiste continually referred to being shocked by matters in some of the reports. She could not perform functions without the express agreement of the company principals who were being investigated. Is this amendment changing that? If we make such a report available to a tribunal, it is likely to be made public. Before referring a report to a tribunal, must the Minister get permission to make it public on a section 21 examination, as is now the case? The acceptance of Deputy Rabbitte's amendment is relevant. Once a report is made available to the Houses of the Oireachtas, or to a committee appointed by either of the Houses, there is no way it would remain private.

Mr. Treacy

Under section 21 of the Companies Act, 1990, no information, book or document relating to a body which has been obtained under sections 19 or 20 shall, without the previous consent in writing of that body, be published or disclosed, except to a competent authority. It states:

(3) For the purpose of this section, "competent authority" includes-

(a) the Minister,

(b) a person authorised by the Minister,

(c) an inspector appointed under this Act,

(d) the Minister for Finance,

(e) an officer authorised by the Minister for Finance.

We have added in all of these thereby removing all impediments for the future.

Mrs. Owen

The Tánaiste replied that she was unable to publish the report without permission because it was relevant to the Garuda company. When the report comes in she seeks permission from the person who is the subject of it. That person has a right to withhold permission to make the report public. I do not know the section but I recall the Tánaiste often mentioned not being able to publish these reports, even if they went to a competent authority such as the DPP, to which, in some instances, some reports went.

Mr. Rabbitte

There is a prohibition in law.

Mr. Treacy

Section 21 states it cannot "be published or disclosed except to a competent authority". It can be given to a competent authority but it cannot be published.

Mrs. Owen

Except with the permission——

Mr. Treacy

It cannot be published or disclosed except to a competent authority. The competent authorities are specified and that is what we are discussing in this proposal.

Mr. Rabbitte

I seek to have the Houses of the Oireachtas, or a committee, set up for the purposes which I explained, deemed a competent authority.

Mrs. Owen

Is there another section of the Act that contradicts the part concerning the person who is the subject of the report, from taking an order and preventing the report being published?

Mr. Treacy

It cannot be published under the law.

Mr. Rabbitte

According to one section, it can be published in the case of the person who is the subject of the inquiry assenting.

Mrs. Owen

It can be agreed.

Mr. Treacy

Section 21 states it must have the prior consent. Otherwise it cannot be published or given to anybody except the competent authority.

Mrs. Owen

We are therefore extending the list of competent authorities, but not removing the power of the person who is the subject of the report, to deny the right to have it published. Even when a competent authority, such as a tribunal or the Dáil receive it they must keep it private.

Mr. Treacy

That is correct.

Mr. Rabbitte

It is both correct and incorrect. For example, if the Minister of State were enabled to pass on data that had been assembled by an authorised officer to a tribunal of inquiry, under that section of the Act, the tribunal would be free, in its own time and process, to mediate information from that to the public domain. It could use the information as it wished, parts of which would then become public and other parts would remain private.

Mr. Treacy

We are not certain in that situation but we will examine it.

Mrs. Owen

The Tánaiste persisted in stating in the Dáil that notwithstanding the reports being given to the competent authorities, they could not be published.

Mr. Treacy

She may be correct but we will check it.

Mr. C. Lenihan

Are the investigations preliminary to a possible prosecution?

Mr. Treacy

Yes.

Mr. C. Lenihan

Prior publication by a competent authority would therefore be prejudicial to a fair trial should the matter go to court. It cannot be released, even in the case of a public tribunal that is set up to achieve a prosecution. It could only be shared with a public tribunal on the basis that there were no grounds for prosecution, but inter alia issues of public interest raised by the investigation were of public interest by the definition of a tribunal. Substantive issues of malpractice, criminality or breaches of company law that the report did not conclude could not be referred to an inquiry for a second trial.

Mr. Rabbitte

Two different matters are involved. First, putative, criminal prosecution is a matter for the DPP. Second, other matters such as compliance with company law must be established. In my submission, a tribunal of inquiry is free to use, in its process, the finding of fact. The absolute prohibition, to which Deputy Owen adverted, is an appalling vista. Does it mean that the Tánaiste will pass gracefully into old age, oppressed with this awful information which appears on her desk that she cannot share with anyone? That situation would be a cause of concern for us. In the past 12 months she gave to us several interviews. Some of us applauded her and were worried for her and offered to share and alleviate her burden. She has not been forthcoming.

Mr. Treacy

I know the Tánaiste appreciates that concern. She is a young woman with much work to do and I am confident she will continue to do it. Deputy Rabbitte is aware that his amendment was only circulated today. The proposal appears to make sense but I wish to reflect on it further. I will come back on Report Stage with my response.

Mr. Rabbitte

I appreciate the Minister of State's remarks.

Amendment to amendment, by leave, withdrawn.

Amendment agreed to.

Mr. Treacy

I move amendment No. 39:

In page 41, before the First Schedule, to insert the following new section:

"54.-(1) Section 253 of the Companies Act, 1990, is hereby amended-

(a) in subsection (1)-

(i) by the deletion in paragraph (a) of 'and',

(ii) by the insertion in paragraph (b), after 'nominal value thereto,' of 'and', and

(iii) by the addition of the following paragraph after paragraph (b):

'(c) that the issued share capital of the company for the time being shall not be less than a minimum amount nor more than a maximum amount specified in the memorandum,',

and

(b) in subsection (2A) (inserted by the Investment Intermediaries Act, 1995), by the deletion of paragraph (b).

(2) Section 256 of the Companies Act, 1990, is hereby amended-

(a) in subsections (5) and (7), by the substitution for 'by promoting the sale of its shares to the public', in each place where it occurs, of 'by providing facilities for the direct or indirect participation by the public in the profits and income of the company',

(b) in subsection (6), by the substitution for 'promote the sale of its shares to the public' of 'provide facilities for the direct or indirect participation by the public in the profits and income of the company', and

(c) by the deletion of subsection (9).

(3) The following section is hereby substituted for section 260 of the Companies Act, 1990:

260. (1) The following provisions of the Principal Act, namely sections 5(1), 36, 213(d) and 215 (a)(i), are hereby amended by the insertion after "private company", in each place where it occurs in those provisions, of "or an investment company (within the meaning of Part XIII of the Companies Act, 1990)".

(2) None of the following provisions of the Principal Act shall apply to an investment company, namely sections 53, 56, 58, 60, 69, 70, 72, 119 and 125.

(3) None of the following provisions of the Companies (Amendment) Act, 1983, shall apply to an investment company, namely sections 5(2), 6 and 19, subsections (3) and (4) of section 20, sections 22, 23 to 25, 30 to 33, 40, 41 and Part IV.

(4) Section 14 of the Companies (Amendment) Act, 1986, shall not apply to an investment company.

(5) None of the following provisions of this Act shall apply to an investment company, namely, Chapters 2 to 4 of Part IV, section 140 (whether as regards a case in which the investment company is being wound up or a case in which it is a related company (within the meaning of that section)) and Part XI.'.".

Part XIII of the Companies Act, 1990, 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 we are proposing are, in large measure, in response to requests from the IFSC funds industry. The proposed changes have the support of the Central Bank.

Subsection 1(a) provides that investment companies should state the minimum and maximum amount of share capital. Subsection (1)(b) is designed to regularise the disapplication in respect of certain investment companies of regulation 30 of the UCIT's regulations provided for in section 258 of the Companies Act, 1990. This disapplication should not have been made. The amendment will have the effect of applying regulation 30 of the UCIT's regulations to all Part XIII investment companies. This requires an investment company to state in its documentation that it is an investment company.

The changes contained in subsection (2) to section 256 of the Companies Act, 1990, are designed to bring the wording as regards sales to the public into line with the wording used in other investment company legislation, in particular the Unit Trusts Act, 1990. In this regard the phraseology "by promoting the sale of its shares to the public" is being replaced by "by providing facilities for the direct or indirect participation by the public in the profits and income of the company". The other change here is to introduce the concept of direct or indirect participation. This is designed to offer greater flexibility to the funds industry, particularly as it operates from the International Financial Services Centre as regards the parties to whom its investment products may be sold.

The deletion of subsection (9) provided for in paragraph (c) is consequential on the further disapplications provided for in subsection (3), specifically the proposed disapplication ofsections 6 and 19 of the Companies (Amendment)Act, 1983.

Subsection (3) provides for the substitution of a new section 260 in the 1963 Act. This section has already been amended by section 80 of the Investment Intermediaries Act, 1995. The changes being made are explained in the following paragraphs. The new subsection (1) will allow the formation of a public limited company which is an investment company within the meaning of Part XIII of the Companies Act, 1990, by two members. At present seven persons are required to form a public company. This is something the funds industry has constantly indicated created difficulties in marketing funds which it designs for sale to investors.

The additional disapplications provided for in subsection (2), that is, above those already in place, relate to sections 53 and 56 of the 1963 Act. These provisions relate to the allotment of shares. While they are necessary in the context of normal operating companies, they are considered unnecessary in the context of the specific nature of investment companies marketed by the investment industry.

The additional disapplications provided for in subsection (3) are those relating to sections 6, 19, 20(3) and (4), 22 and 30 to 33 of the 1983 Act. Section 6 provides for the issue of a certificate by the Companies Registration Office once certain requirements are complied with when public limited companies are being established. In the nature of investment companies, it is the Central Bank which authorises the companies to commence business. In the circumstances, a certificate from the Companies Registration Office is not considered necessary.

Section 19 relates to minimum capital. The Central Bank specifically regulates the amount of capital of Part XIII investment companies and the disapplication of section 19 will remove any doubt that the Minister may impose an obligation in respect of minimum capital. Section 20(3) and (4) relate to the requirement to obtain approval of shareholders in a particular manner. The Central Bank has confirmed that this is unnecessary in the case of Part XIII companies. The provision, accordingly, is being disapplied.

Section 22 relates to the earlier proposal to disapply sections 53 and 56 of the Companies Act, 1963, and is being disapplied for the same reason. Sections 30 to 33 deal with the manner in which assets will be valued if a company becomes involved in accepting payment for shares by means other than cash. In the case of Part XIII companies, the Central Bank has indicated that it will require that the statutes of the company specifically provide for such matters and, accordingly, sections 30 to 33 can be disapplied.

Subsection (4) repeats the existing subsection (3). The only change made in subsection (5) is to disapply section 140 of the Companies Act, 1990. Where an investment company is constituted within an umbrella structure where some or all of the subsidiaries operate higher risk funds, the Central Bank always requires such entities to ensure that liabilities in the higher risk sub-funds are limited to the assets of that sub-fund. The disapplication of section 140 is needed for the removal of any doubt that may exist as to the operability of this Central Bank requirement.

Mrs. Owen

Where did this come from?

Mr. Treacy

It is the result of the recommendations of the IFSC sub-group which highlighted the impediments. We decided to respond positively.

Mrs. Owen

The Bill was published with a certain intention in mind. The Minister of State said that many matters raised in the report of the company law review group remain to be dealt with in a monster tome yet to be published and that this small Bill deals, among other matters, with Irish registered non-resident companies. This is a bit like the complex Companies (Amendment) (No. 3) Bill which appeared out of nowhere and which dealt with the Stock Exchange. There was insufficient time to delve into it to ascertain why it was necessary. In spite of this we agreed to take it in the national interest as it dealt with the flotation of Telecom Éireann shares.

Is the amendment the result of the recommendations of the report of the company law review group? Was there special pleading? Have the courts said that there is a need for change? Who will benefit? Why have some of the other recommendations been ignored in this legislation? Why is the amendment being tucked in? I am anxious, not suspicious, that there was special pleading as happened in the case of lessors among others. Will the Minister of State explain, in simple terms, why it is necessary to include the amendment in this legislation under the heading of miscellaneous when he was so adamant that Deputy Rabbitte's amendment and some of those in my name could not be accepted?

Mr. Rabbitte

I do not want to labour the point but I agree with Deputy Owen. The Minister of State should indicate who will benefit. This reminds me a little, when I used to deal with the Finance Bill, of the Minister for Finance tabling an amendment on day four of Committee Stage that was so opaque that nobody could understand it, about the number of days one had to be domiciled in this jurisdiction for tax purposes and finding out five years later that it was of great significance for a small number of people. This may have nothing to do with that, but it is late in the day and it has been a long year. Perhaps the Minister of State will put our minds at rest by informing us cui bono?

Mr. Treacy

This is relevant and Ireland will benefit. We have a very successful International Financial Services Centre.

Mr. Rabbitte

Has the Minister of State heard the comedy programme on Saturday mornings?

Mr. Treacy

I have never been that anxious to listen to those shows.

Mr. Rabbitte

There is somebody with an accent reminiscent of a senior Deputy and when they trot out the usual line, they all say "in the national interest". If it is in the national interest, we have no choice but to go along with it.

Mr. Treacy

The IFSC is very successful but it must operate in a competitive regime. The strategy group looked at its future development under the chairmanship of the Secretary General of the Department of the Taoiseach, Mr. Teahon. Its report which was laid before the Oireachtas in February contained 19 recommendations on this matter. That is our response to some of those recommendations. Those recommendations are vital and we must sustain the operation to take account of the international competition in this area. It is important there would not be any impediments and that we make it as attractive as possible for the development of the centre. Those are the reasons for this amendment.

Mrs. Owen

Does this amendment contain the totality of the recommendations in the report of the Secretary General, Mr. Teahon, or has the Minister of State cherrypicked only one recommendation and, if so, why has he picked this particular one? I was a Minister and I know that a person can rush into a Minister's office and make a special pleading about a matter and ask that it be hooked into legislation that is under consideration. This is a case of hooking in this provision into the legislation because it has appeared out of nowhere.

Mr. Treacy

We were given the report and have been working on it since last March. We gave a commitment that we would respond as generously and as quickly as we could to the recommendations of the report. This is part of our response but not our total response to them.

Mr. Rabbitte

We have heard the Minister of State's speaking note on the section. What would be the effect of this amendment?

Mr. Treacy

In the case of the formation of a company to sell products, rather than seven directors being required to form such a company, as heretofore, such a company could be formed by two directors. This provision would simplify the structure and the systems. It would facilitate greater competition and the expedition of decisions and would make it much easier for the centre to operate in an international climate, which is very competitive.

Mrs. Owen

Why it is proposed to reduce the number of directors from seven to two? It is a major decrease.

Mr. Treacy

Such companies would continue to be authorised and supervised by the Central Bank.

Mr. C. Lenihan

Does this amendment deal with the treatment and definition of special purpose vehicles?

Mr. Treacy

It may, but it is not specifically related to them.

Mr. C. Lenihan

The Department of Finance has a very narrow interpretation as to what special purpose vehicles are involved. Is the subject of such vehicles part of this or the other recommendations in the report?

Mr. Treacy

No, not that I am aware of.

Mrs. Owen

Will the Minister of State tell us how many more recommendations are in Mr. Teahon's report?

Mr. Treacy

There is a total of 19.

Mrs. Owen

There are 19 and the Minister of State picked one.

Mr. Treacy

There are 19 priority recommendations.

Mrs. Owen

The Minister of State picked one or is this a combination of recommendations?

Mr. Treacy

Two or three of these recommendations relate to company law and we are responding to them.

Mrs. Owen

The others might relate to finance law.

Mr. Treacy

Yes.

Mrs. Owen

Is this the only one that relates to company law?

Mr. Treacy

These are the recommendations we could respond to immediately. There are a few more.

Mrs. Owen

Are there any more that might have had some relevance to this one? Has the Minister of State tabled this amendment to give effect to consideration of one of the recommendation and is it a case that it may have to be amended at a later stage?

Mr. Treacy

Yes. We hope the new company law review group will examine this area with a view to there being constant reviews of company law to make it constantly relevant.

Mrs. Owen

The Minister of State still has not put my mind at rest. Why did he choose to give effect to this particular recommendation? All I can understand from it is that it will only require two directors to set up a company to sell products as opposed to seven directors who were required to do so heretofore.

Mr. Rabbitte

The main objective of the Act was to prevent that kind of thing happening.

Mrs. Owen

It was to try to improve answerability in companies and not make it easy for people to set up companies. Is the Minister of State saying that financial services centres in other jurisdictions allow two people to set up a company or to sell one? He has not given us a good reason this recommendation has been picked from the recommendations of Mr. Teahon's report? The normal procedure followed by the Government seems to be that as soon as one report is completed, it is hived off to another group to examine the ways and means of implementing its recommendations. That has happened in the case of the single regulatory authority.

Mr. Treacy

That is not true.

Mrs. Owen

Normally a report such as this would be examined and its recommendations would give rise to the introduction of major legislation. The Minister of State has not satisfied me as to why one of the recommendations of this report have been selected.

Mr. Treacy

I regret that the Deputy is not happy about this amendment.

Mr. C. Lenihan

Would this provision apply to companies that are set up to sell particular products?

Mr. Treacy

It would apply to companies that set up as investment vehicles.

Mr. Perry

Anywhere in Ireland.

Mr. Treacy

Yes, in the context of IFSC operations.

Mr. C. Lenihan

These companies would be set up to sell a particular product.

Mr. Treacy

They have to adhere to the normal exigencies of company law. They are authorised and under the supervision of the Central Bank. This amendment proposes to ensure that they are not uncompetitive or that there are no impediments pertaining to their opportunities in the international marketplace.

Mr. Rabbitte

Are they not already under the Central Bank.

Mr. Treacy

They are.

Mrs. Owen

Seven of them.

Mr. Treacy

All of them are under the Central Bank at this stage and under this provision they would still be under it and would have to meet the same exigencies and criteria as heretofore. We are making it simpler to allow this facility to proceed and on a quicker basis so that they could avail of the opportunities that exist rather than operate under the cumbersome structure that prevailed heretofore when they were losing market share and market opportunity.

Mr. Rabbitte

Are the provisions, as expressed in the amendment, consistent with the recommendations in the report of the Secretary General, Mr. Teahon?

Mr. Treacy

Yes.

Mr. Rabbitte

Are these provisions in the amendment that were not complemented in Mr. Teahon's report?

Mr. Treacy

No. There are 19 priority recommendations and we have picked the ones that we feel we can deal with immediately.

Mrs. Owen

Where in the amendment does it refer to reducing the number of directors required from seven to two.

Mr. Treacy

I quoted it.

Mrs. Owen

The Minister of State quoted it from his speaking note, but where is it referred to in the amendment? Is it stated anywhere? When I read this amendment, it was like looking into the end of a bucket. If I had read that the number of directors required would be reduced from seven to two, I would have understood that.

Mr. Treacy

The amendment states: "260. (1) The following provisions of the Principal Act, namely sections 5(1), 36, 213(d) and 215(a)(i), are hereby amended by the insertion after "private company", in each place where it occurs in those provisions, of "or an investment company (within the meaning of Part XIII of the Companies Act, 1990)". " That is where that change is made.

Mrs. Owen

Part XIII of the 1990 Act.

Mr. Treacy

Section 5 of the 1963 Act states that any seven or more persons or, where the company to be formed would be a private company, any two or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association or otherwise comply with the requirements of this Act relating to registration, form an incorporated company. When account is taken of Part XIII of the 1990 Act, it provides for any two or more persons. We are making this legislation consistent with the 1963 Act in order to allow the flexibility that is required.

Mr. Rabbitte

Does the Minister of State's ingenious civil servants, for whom I have very high respect, and the draftsman go out of their way to write English that is impenetrable on occasion? Could the Minister of State possibly take that meaning out of the amendment if he did not have an expert whispering in his ear?

Mr. Treacy

I may not have taken that meaning out of it. I can say that I can only account for the civil servants who work with me and I have no difficulty whatever with their English in terms of its interpretation, writing or otherwise. When it moves from that area there may be some slight difficulties.

Mrs. Owen

Why did the Minister of State not word the amendment as follows: "260. - (1) The following provisions of the Principal Act, namely, sections . . . . . are hereby amended so that two persons rather than seven be part of the company"? The amendment is phrased in lawyers' words.

Mr. Treacy

Such wording would not be correct. This amendment proposes to change from a position heretofore where seven people were required to form a company to a position where any number from two to six persons can form a company.

Mrs. Owen

Why does it not state that in the amendment?

Mr. Treacy

Two or more persons can form a company.

Mr. C. Lenihan

That applies only to legislation establishing the IFSC and to specific investment companies.

Mr. Treacy

It applies to Part XIII investment companies specific to the IFSC.

Mrs. Owen

Does the Minister of State go out of his way to hide this information by writing it in the form in which it is written in the amendment? This is a lawyer's bonanza . The ordinary person, even an employee in the IFSC, would have to check all the relevant sections of the Acts. We are moving into an era where we should be making matters clearer.

Mr. Treacy

If we included the phrase "two people" that would mean that every company could be formed by two people.

Mrs. Owen

No. The words "two or six people" could have been included.

Mr. Treacy

We have put in two or more.

Mrs. Owen

The amendment states "(within the meaning of Part XIII of the Companies Act, 1990)" but the definition is set out in the 1963 Act.

Mr. Treacy

The definition in terms of the formation of a company is set out in the 1963 Act and it is mandatory for all formations. This amendment proposes that in a specific situation regarding Part XIII investment companies specific to the IFSC these companies can now be formed by two or more people.

Mr. C. Lenihan

I do not want to debase the words "national interest", but it appears to me that legal changes in company structures are in the national interest. However, it is probably better that they are not disclosed because there are other competitors out there who would be only too willing to——

Mr. Treacy

I was going to refer to what Deputy Owen said earlier. If we include it in a bald, naked way, we will invite situations where they might not be as attractive or desirable.

Mrs. Owen

There are clever people in the gallery who may understand that but to me it is like looking through a dark glass.

Amendment agreed to.

First and Second Schedules agreed to.

TITLE.

Question proposed: "That the Title be the Title to the Bill."

Mrs. Owen

The Long Title is misleading. It states it is a Bill to "require one of the directors of a company to be a person resident in the State", which is not what the Bill does. The Bill provides that there must be either a resident director or a bond of £20,000. I should have tabled an amendment on this. The Long Title states the Bill is doing what I would like it to do, but that is not what it is actually doing. It does not require one of the directors to be resident in the State - it is an either/or situation. I ask the Minister of State to look at that. If I were a lawyer challenging a company which had taken out a bond, I could make a very good legal case.

Chairman

Deputy Owen has made a valid point. The Minister of State might like to comment now or on Report Stage.

Mr. Treacy

My initial comment is very simple and direct. We are making a clear statement about our priorities. Our motive is to have a resident director in all future companies registered in Ireland. As and from last February, all companies registered in Ireland are taken as being tax resident. Consequently, we are making our goals and requirements quite clear in the Long Title. There is only one alternative, which we are obliged to provide under European law. We are doing what we believe is correct but we are also taking into account the requirements of European Union Treaties. We should not water down what we are proposing to achieve.

Mrs. Owen

It is watered down in the Bill.

Mr. Treacy

That is a matter of interpretation.

Mrs. Owen

The Minister is misleading people. It is not a matter of interpretation. It is very clear from our discussion that the Bill does not require people to have——

Mr. Treacy

There is another alternative. Section 44(2) states:

The registrar of companies may grant to a company, on application in the prescribed form being made by it in that behalf, a certificate stating that the company has a real and continuous link with one or more economic activities that are being carried on in the State.

Mrs. Owen

That is a separate qualification. By highlighting the fact that——

Mr. Treacy

Section 44(1) states:

Subsection (1) or, as the case may be, subsection (2) of section 43 shall apply in relation to a company in respect of which there is in force a certificate under this section.

Mrs. Owen

That is a further qualification. It would be better to not give a misleading indication in the Long Title. If I were in a debate I could say we have a Bill which requires every company to have an Irish director, but that is not what the small print says.

Mr. Rabbitte

Can the Minister say in a sentence why it was decided not to stay with the intent of the Long Title? Why did we move from a director resident in the jurisdiction to "or a bond"?

Mr. Treacy

Under the European treaty of establishment, we are obliged to ensure we do not create any impediment for a company operating in another member state. Consequently we had to create an alternative. The legal advice given to us over a long protracted period, which involved a great deal of discussion and detailed effort, was that this was——

Mr. Rabbitte

Thank you. I was out of the room for that explanation.

Mr. Treacy

We have taken no short options.

Chairman

Is the Title of the Bill agreed?

Mrs. Owen

Yes, in the absence of any amendment and on the understanding that the Minister of State will look at it again.

Mr. Treacy

I am not sure I can say that. I am looking at many things but I am not sure if I will look at the Title.

Chairman

Perhaps the Minister of State could include the words "or otherwise" which would send a signal to people about the EU regulations. We ask him to consider that.

Question put and agreed to.