May I put this matter on record? I propose that after to-day's meeting we do not meet in future until we have received the debate of each previous meeting. It is important that we go back over the previous debates.
Official Report of Debates
Official Report of Debates.
I agree that it is very difficult indeed. I intended to raise this matter myself.
Circumstances might arise which would render it difficult to have the report of the previous meeting. It might be desirable to proceed with the next one. If Deputy Sweetman's resolution is carried, we would be precluded from holding a meeting.
I think we should give notice that we intend taking this matter seriously. If we do not have the report, we cannot carry on. I was not in the Dáil this evening when Deputy Sweetman raised the matter. We are now two sessions in arrears. We have no record of the first one at all. If there is any difficulty about printing, I see no reason why we should not get an advance copy of the minutes.
Those concerned have been put on to other work. The reports of this committee have not been given the priority that I feel they should get. In my view, the Dáil debates should get priority No. 1, the Seanad debates No. 2, and the special Committees of either House No. 3. If that priority had been granted, this difficulty would not have arisen.
Apart from this, we cannot possibly get through the work. There have been reservations, and references to matters raised on previous sections. We have not any record of that except through the minutes. Has the Chair been given any information?
The information is that the printers have been instructed to give the reports of this Committee the same priority as the reports of the Dáil, i.e. that we would try to get them in the same interval. They are not obliged to do this but they have been asked to do so. We can expect the report of the second last meeting to-morrow.
May I take it that the fault lies with the printers and not with the reporting staff.
So I am informed.
If the fault lay with the reporting staff it would be difficult to see how, in the event of the Seanad and Dáil sitting together, we would ever get our reports.
Deputy Sweetman, do you wish to press the issue?
No. I shall leave myself open to go back on it again.
That is understood.
NEW SECTION.
I move amendment No. 20:
Before Section 60 to insert a new section as follows:
(1) Subject to subsections (2), (12) and (13), it shall not be lawful for a company to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company, or, where the company is a subsidiary company, in its holding company.
(2) Subsection (1) shall not apply to the giving of financial assistance by a company if—
(a) such financial assistance is given under the authority of a special resolution of the company passed not more than 12 months previously; and
(b) the company has at least 10 days before the meeting at which the special resolution is to be considered delivered to the registrar of companies for registration a statutory declaration which complies with subsection (3) and (4).
(3) The statutory declaration shall be made at a meeting of the directors held not more than 21 days before the said meeting and shall be made by the directors or, in the case of a company having more than two directors, by a majority of the directors.
(4) The statutory declaration shall state—
(a) the form which such assistance is to take;
(b) the persons to whom such assistance is to be given;
(c) the purpose for which the company intends those persons to use such assistance;
(d) that the declarants have made a full inquiry into the affairs of the company and that, having done so, they have formed the opinion that the company, having carried out the transaction whereby such assistance is to be given, will be able to pay its debts in full as they become due.
(5) Any director of a company making the statutory declaration without having reasonable grounds for the opinion that the company having carried out the transaction whereby such assistance is to be given will be able to pay its debts in full as they become due, shall be liable to imprisonment for a period not exceeding 6 months or to a fine not exceeding £100 or to both; and if the company is wound up within the period of 12 months after the making of the statutory declaration and its debts are not paid or provided for in full within the period of 12 months after the commencement of the winding up, it shall be presumed until the contrary is shown that the director did not have reasonable grounds for his opinion.
(6) Notwithstanding anything in the articles of association of the company, every member of the company shall have the right to receive notice of and to attend the meeting at which the special resolution is to be proposed.
(7) Unless all of the members of the company entitled to vote at general meetings of the company vote in favour of the special resolution, the transaction whereby such assistance is to be given shall not be carried out before the expiry of 30 days after such special resolution has been passed or, if an application under subsection (8) is made, until such application has been disposed of by the court.
(8) If application is made to the court in accordance with this section for the cancellation of the special resolution, such special resolution shall not have effect except to the extent to which it is confirmed by the court.
(9) Subject to subsection (10), an application under subsection (8) may be made by the holders of not less in the aggregate than 10 per cent. in nominal value of the company's issued share capital or any class thereof.
(10) An application shall not be made under subsection (8) by any person who has consented to or voted in favour of the special resolution.
(11) An application under subsection (8) must be made within 28 days after the date on which the special resolution was passed and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(12) Nothing in this section shall be taken to prohibit the payment of a dividend properly declared by a company or the discharge of a liability lawfully incurred by it.
(13) Nothing in this section shall be taken to prohibit—
(a) where the lending of money is part of the ordinary business of the company, the lending of money by the company in the ordinary course of its business.
(b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company being a purchase or subscription of or for shares to be held by or for the benefit of employees or former employees of the company or of any subsidiary of the company including any person who is or was a director holding a salaried employment or office in the company or any subsidiary of the company;
(c) the making by a company of loans to persons, other than directors, bona fide in the employment of the company or any subsidiary of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves as beneficial owners thereof.
(14) Any transaction in breach of this section shall be voidable at the instance of the company against any person (whether a party to the transaction or not) who had notice of the facts which constitute such breach.
(15) If a company acts in contravention of this section every officer of the company who is in default shall be liable:
(a) on conviction, on indictment, to imprisonment for a term not exceeding 2 years or to a fine not exceeding £500 or to both, or
(b) on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding £100 or to both.
(16) Nothing in this section shall prejudice the provisions of section 72.
Amendments Nos. 123, 125 and 130 appear to be consequential. I suggest that we take amendments Nos. 20, 123, 125 and 130 together.
I have no comment on amendment No. 125 for various reasons. I was thinking that we would have to go through the Parts of Table A as if they were sections—or at least parts of Table A. By taking these now, would it involve a different procedure ?
Yes. I agree that the procedure Deputy Sweetman suggests might be better. In that case we had better not regard the later amendments as consequential at this stage.
Those amendments will be made consequential on what we do now. We should not bind ourselves at this stage.
At the moment then we have amendment No. 20 only before us.
The section as it was originally drafted was a repeat of Section 3 of the Companies Act, 1959. The British counterpart was considered by the Jenkins Committee, and they found that it had proved embarrassing to honest companies in certain circumstances not to be able to lend money for the purchase of their shares, and at the same time it was not a serious inconvenience to the unscrupulous. The purpose of the amendment is to give effect to their ideas. The brief that has been supplied to the members of the Committee explains the details.
Could the Minister indicate what in his view is the point of paragraph (2) (b) in regard to the delivery of the declaration before the meeting. It seems to me that it should be consequential thereon that the Registrar would have power in certain circumstances to do something about the declaration, if he did not like it or if he thought it disclosed a certain situation. If the Registrar just has to receive it and file it and there is nothing more to be done, I do not see the point in having to deliver ten days before the meeting.
It was never the intention that the Registrar should be charged with examining documents of this nature submitted to him, to see what is behind the documents themselves. His main purpose is to ensure that the law as he sees it is complied with in relation to the lodgements of documents. But so far as the financial stability of the company and other things of that nature, which are matters which have to be established in other ways are concerned, it was never considered that these were matters on which the Registrar ought to exercise any judgement.
What is the point of making it " 10 days before "? There could be another point. If you put an obligation in certain circumstances on the company to furnish a copy of such declaration on request by a shareholder, then there would be some reason for it.
Assuming there was no obligation under this, would the shareholders have any other way, except at a meeting, of getting the information required? It says in subsection 4 (d) that " declarants have made a full inquiry ". Further on it says: " such assistance is to be given ". If they do not lodge it at some stage, is there any other way in which a shareholder could have it ?
You would not have it any other way, except at the meeting.
Would the Minister consider, where there is an obligation on the company to have such a declaration filed, having a copy of it made available on request in the same way as Articles are made available ?
I certainly would consider that.
Would it be possible, as an alternative, to insert a provision that the statutory declaration should be read at the meeting ?
I think people want to make up their minds before they go to the meeting and before they send their proxies.
You get statutory notice of the meeting itself so that any shareholder would have advance notice that the matter will be raised. All he wants his proxy to ensure is that a statutory regulation is filed and accepted by the Registrar.
If the company has accepted it, the Registrar has no alternative.
But it has to be in the prescribed form. The Registrar does not take any responsibility for its accuracy but at least if it were read at the meeting, it would give some assurance that the directors have committed themselves.
Paragraph 6 entitles every member to get notice of the meeting.
There is no provision for bringing a statutory declaration before the members.
Except this, having got notice of the meeting, I take it most shareholders would be aware that the company is obliged to lodge the declaration before the Registrar and they would have the opportunity of examining it in the Registrar's office.
It is not always convenient for a shareholder to come to Dublin to inspect it. He might have gone back to Galway.
I accept the suggestion that it might be looked into and I think it is not unreasonable. I feel I may be able to do something by the time we come to the next Stage.
In relation to subsection (3) regarding the declaration to be made by the directors, is it clear that it is a majority of the directors and not merely a majority of the directors present at the meeting? I think what is intended is a majority of the full Board. Perhaps the Minister will ask the parliamentary draftsman to make quite sure it is so provided. It should be the full Board.
It should be.
I think it is clear that a majority of the directors means a majority of the full board.
That is the interpretation and it is what the Minister intends.
If you want to qualify it, you will have to insert the qualification.
The significant part of this amendment is subsection (2). You go on to subsection (13) to deal with another type of contingency altogether. Should we consider the question of splitting the section into two sections. This is a very necessary provision to cover the case of a company which is actually providing its employees with a kind of incentive bonus through shares. Is that not what the Minister is covering there ?
I think there are two reasons why we should not do that. First of all, subsection (13) is only a relaxation of what is set out in sub-section (1), and it is desirable for practical reasons. Secondly upsetting the numbers would involve a lot of extra work.
I do not understand the note in the brief in relation to subsection (15). In the brief it says —" There are similar penalties in the existing draft ". The penalty in sub-section (15) in the new section is £500. In the old section it was five years or £1,000. It is changed and I should like to know why there is the change.
Secondly, is there any significance in the fact that subsection (15) in the new section starts off:—" If a company acts in contravention of this section every officer of the company who is in default . . . ". The old section was—" Every person who aids, abets or assists a company or another person in contravention . . ." was to be made amenable to the penalties. There seems to be quite a difference in the drafting of the two. I am not quite clear what the reasons are.
The first thing I would say is that the use of the word " similar " in the brief supplied to the Deputy was a mistake. The fact is that the new penalties are more consistent with penalties under other sections of the Act, and that is why they are reduced. As far as the wording of the new section compares with the old one, which appears more comprehensive, I am afraid I can only conclude that the draftsman must have assumed that it was better expressed.
Is the new sub-section (15) in keeping with the pattern throughout the Bill, or is the old one in keeping with the pattern? It is desirable that we should keep the same pattern, as if we do not, when it comes to construing the difference, it would be assumed that we had some reason for the difference.
The amount of the penalty ?
No, the basis to form the Bill—" If a company acts in contravention of this section every officer of the company . . .", or whether it will be—" Every person who aids, abets or assists a company or another person . . .".
Different sections have different purposes. This section, for example, is designed to protect the company. Therefore, there would be no point in imposing a penalty on the company when the company would be adversely affected by a breach of the section. The intention is that the penalty should be imposed on the officer of the company.
That is an argument for subsection (15) instead of subsection (3) of the old section, but it is not an argument for subsection (15), instead of subsection (4) of the old section. It seems to me that if we are trying to protect anyone, the phraseology, " Every person who aids, abets or assists a company or another person in a contravention of this section " has a wider scope and might be continued. May I with respect suggest to the Minister that he has just contradicted himself ? He said that the reason he was changing to the new penalty was that it was more in keeping with the pattern, and now he says that the pattern of the Bill does not matter.
I was referring to the £1,000 and the five years. The £500 is more in keeping with the penalties and fines provided for elsewhere.
I am prepared to accept that. What I do not understand is why we have struck out: " who aids, abets or assists a company or another person in a contravention . . ."
I understand that it is not necessary to deal with those especially because they are already covered by an Act of 1861.
I thought this was to be a consolidation Bill, and now we are going back to another Act of 1861.
It is an Act the title of which I forget but it imposes on people who aid and abet the same penalties as those for which the primary offender is liable. It covers more than companies.
In 1861, there was not a Companies Act.
It would be one of these old Acts.
Is there a possibility that what the draftsman had in mind was that under subsection (4), as originally drafted, those who were going to be held responsible were people who actually did something—who aided, abetted or assisted the company—whereas under the new subsection (15), one will be penalised for a default which can be called a wrongful act or failure to act. I feel that the new subsection (15) gives wider scope than the original subsection (4) which might enable an officer of the company to plead with success that he had not actually aided, abetted or assisted, even though he might have omitted to take some action. On those grounds, I prefer subsection (15). It puts a liability on every officer of the company not only to see that he does not contravene the law but to see that the law is not contravened by anyone else either.
" . . . who is in default "—not the company which is in default.
That an officer of the company should use his offices to make sure that the company is not in default either. He is in default if he allows the company to do something, even if he may not take any active part.
First of all, I think Deputy Booth is confusing two subsections in the old draft—in the Bill as it stood. In the old draft, we have subsection (3) and subsection (4). Subsection (3) is down as subsection (15) in the new draft. Subsection (4) has been wiped out as being unnecessary.
I see that now.
That is where this Act of 1861 comes in.
Is the auditor an officer of the company ?
Does the effect of the amended section exclude the liability of people such as bank officials?
Yes. They are not covered by the Companies Act as we hope to have it enacted. They would be liable under the 1861 statute.
Could we have the statutes?
Was there a Companies Act before 1860? The 1862 Act is the first one I know of. Unless there was a Companies Act before 1862, how can the 1861 Act apply unless it was applied by the 1862 Act, in which case we ought to apply it here?
It is probably one of those Criminal Evidence Acts because the old Common Law was very rigid.
I do not think it includes auditor.
The Companies Act never attempted to deal with the question whether an auditor is an officer or not.
Is it wise for us to take that attitude to undefined work in a Consolidation Act ?
Would it not be wise if it were a true Consolidation Act.
This is the second time the point has arisen in this form : something that has never been defined. It seems to me that we are purposely leaving sleeping dogs lie, and, therefore, conniving at a possible barking in court on some future occasion.
Let me quote from the 1861 Act: " An Act to consolidate and amend the statute law of England and Ireland relating to accessories to and abettors of indictable offences ". It is very short.
Indictable offences.
What is the penalty for aiding and abetting ?
It is not by any means tied to indictable offences, is it ? We would have to see how that was extended.
Paragraph (a) of subsection (15) of the new section refers to conviction on indictment. It still does not affect the situation.
This Act of 1861 says " An accessory before the fact shall be indicted, convicted and punished in all respects as if he were a principal felon ".
To cut the matter short, I think that if you have established a crime you can be virtually certain that the law by now has netted in all those who aid and abet.
May I draw the Chairman's attention to this. In our new draft we are restricting this entirely to every officer of the company—as far as I can remember without having the debates before me. If we look at Section 35, subsection (5), we find there a similar penalty section: " Any person who authorised the delivery ". In other words, it goes outside the officer and if it goes outside in one case should it not go outside in the other case also? The Minister might agree that it would be desirable to have the same pattern all the way through.
In subsection (5) of section 35 you are dealing with people authorised to deliver. Without authorisation, it can only be done by someone who is actively engaged in the work of the company.
He could be somebody who is actively engaged in the working of the company, but produces the wrong basis for the statutory declaration.
Is it not meant to cover the case of an expert who is not an officer of the company but is actively engaged in the preparation and delivery of the statement and having responsibility for it ?
A person, in subsection (15), can hardly be an outsider because he must have authority and would not have authority unless he was an officer of the company.
There is another possibility on the construction of subsection (15): " If a company acts in contravention of this section ". That phrase of itself, unless there is a general power somewhere else in the Act, does not make the company, as the body corporate, guilty of a crime. What it does say is that if the company does act in contravention of the section that the officers shall be liable to certain things. Now is that enough to capture anybody outside the officer who aids and abets? Is the wording of that section sufficiently definite to attract a criminal liability to the company itself in a way that would make the other person aid and abet the company if he were not aiding and abetting the officers ?
This is like a Supreme Court argument.
I was trying to avoid that. If that kind of question can arise, that a company shall be liable if the company acts in contravention of this section—if the liability went with the company as well as with the officers it would probably meet everything. The trouble I see is that unless the question is proved to both aiding and abetting, the officers are liable.
They would have to be aiding and abetting the officers, not aiding and abetting the company.
Yes, but the act of contravention is the act of the company, if the person is going to be punished and the company has to be put into the position of being the felon.
I would like to cut the argument short by saying to the Minister that this is really a matter for the expert legal men and the Attorney General.
I will take the matter up with him again but I am satisfied that he would have had regard to all the implications of the section and the company's liability in this section when the redraft was submitted to him.
Possibly the Attorney General and the draftsman might have been misled by not having these matters brought to their attention.
They will be brought to their attention, if and when we get the transcript. Having got it, I again undertake to the Committee that I will ask him to have another look at this.
Supposing the secretary of a company is in default, he is liable, but is the company liable? Supposing the secretary of the company was in default and maybe was induced to skip, there is no conviction against him. Where are you?
The intention of the section is not to penalise the company. The shareholders are part of the company and they would have lost by the misdeed of this man who has skipped. There would be no use getting after the company.
In subsection (4) of the first draft, it is only aiding and abetting the officers and directors of the company so there is a fundamental change now. It is inaccurate to say that this section is not necessary. There is a fundamental change in outlook. Before, the company was liable; now the case is that you do not want that. That is very fair. An abetting clause with aiding and abetting officers who are not in default and not the company—that is fair enough.
I am glad you convinced yourself.
It was Deputy Sweetman who raised that.
I am still standing exactly where I was before.
Amendment agreed to.
Section 60 deleted.