I move amendment No. 116 :
In page 136, to add a new subsection as follows :
" (6) Nothing herein contained shall affect the privilege of any client in respect of any information in the possession of a solicitor."
I move amendment No. 116 :
In page 136, to add a new subsection as follows :
" (6) Nothing herein contained shall affect the privilege of any client in respect of any information in the possession of a solicitor."
As amendment No. 116 is cognate with No. 127 they may be taken together.
I do not think there is any intention in the Bill of affecting privilege but the people who are intimately concerned with this feel that inadvertently the Bill does affect it. Section 245, to which this is an amendment, enables the court to summon before it any person known or thought to have any property of the company or capable of giving information and to examine him on oath and to compel him to produce books, papers, etc., subject, where appropriate, to lien. Perhaps I may digress—it would shorten the discussion—in order to refer to Sections 299 and 388 to which I have also put down amendments. They are all cognate and it would be simpler if we dealt with all of them together. Section 299 enables the Attorney General to institute proceedings and an agent—which expressly includes a solicitor—must give assistance in regard to a prosecution. Section 388 provides that where proceedings are instituted under the Act against any person, nothing in the Act is to be taken as requiring any person who acted as a solicitor for the defendant to disclose any privileged communication. That is the same, I think, as Section 446 of the Insurance Companies Act, 1948, which is expressly limited to criminal proceedings. Here we have no defendant in criminal proceedings, nor would there be one in an examination under Section 245, so in both these cases the examination under Section 388 would not apply, nor would it apply to protect a solicitor summoned by the Attorney General under Section 299 who was asked to give information which might involve disclosing the business of a client who is not the defendant. Whether this is the best place to put in the saver for privilege I do not know, but I cannot stress often enough for the members of the Committee who are not solicitors that it is not the solicitor who may be damnified by this but the client.
What we should have in here is a provision saying : " . . . shall be taken to require any person who has acted as a solicitor for any person " and not as it is: " for the defendant ". And then it reads on: " . . . to disclose any privileged communication made to him in that capacity ". Where it is dealt with I am not in the least bit fussy, but it is essential to protect the privilege that exists. If we do that here, we need not then have the saver which is in Section 173 where we agreed to leave the question of privilege to be dealt with later. This matter has been considered by people in that line of business more skilled than I am and all of them without exception are apprehensive that the present framing of the Bill does not do what the Minister, I believe, intended should be done.
I should like at this stage to make some general observations. There are two types of exercise involved here in which privilege might be claimed. Take first, Section 168, which deals with an investigation by an inspector appointed by the Minister into a company's affairs. He will be given certain powers to ask for documents and information and to examine the people concerned. These are not proceedings, and insofar as privilege might be affected by any action or requirement of the inspector, that is specifically saved in Section 173 which reads :
Nothing in the foregoing provisions of this Part of this Act shall require disclosure to the Minister or to an inspector appointed by the Minister by a solicitor of any privileged communication made to him in that capacity.
I suggest, therefore, that there is a complete saver as to genuine privilege for the purpose of anything required of a solicitor by Section 168. There are other sections which deal with proceedings. These are Section 170, and Section 299 where proceedings are specifically mentioned, and I suggest that, so far as these sections are concerned, the saver in Section 388 for privilege is sufficient to overcome any difficulties that a solicitor might have in the case of a communication between him and his client. I shall elaborate more on that later, as I suppose I will be asked to.
Section 245 deals with the power of a court to summon persons for examination in a winding up. There is no mention here of a solicitor as there is in the other sections I have just referred to. Therefore, the ordinary rules of privilege as established by Common Law would apply here. In connection with this section, I suggest Deputy Sweetman's amendment is not necessary. There is case law on the section which protects privileged communications.
I have only a few short observations to make. I am in agreement with the Minister, except that I should like to point out, as a person who has absolutely no interest, but a little experience, that the point Deputy Sweetman is raising here is fundamental from the point of view of the freedom of the citizen or the liberty of the subject, and I should like again to emphasise what I said at the beginning. If it is necessary to include Section 388 as the Minister has drafted it—I am accepting his argument on Section 245 and on Section 168—this section is objectionable in that it is limited to a solicitor for the defendant. It would, I would point out, be possible to sue A and get at the solicitor for B. In other words, it would be possible to proceed against A and get at B's solicitor. This could easily be developed as a technique. There will be a number of people involved in all these cases if there are to be proceedings, and as only the solicitor acting for the defendant is privileged, and as the choice of the defendant in a case like this is, so to speak, arbitrarily in the hands of the prosecution or some other person, say the Minister, then by choosing the defendant it is possible obliquely to invade the privilege of somebody else. It is from that point of view that I would suggest the Minister could meet all the points completely, including Deputy Sweetman's, by suitably amending Section 388.
I have put down an amendment to that section. That amendment was intended solely to delete the words " for the defendant ".
That covers only proceedings.
It would cover all proceedings.
But only proceedings. And it would cover only criminal proceedings. I am inclined to agree with the Minister on the case he has made in relation to Section 173, as amended.
And Section 245?
I am not happy about Section 245.
The amendment would give a general saving, similar to that in Section 388.
There seems to be a very strong feeling outside about this.
May I inquire whether the Minister isad idem with the people who are making the point? Is there any part of the Bill under which the Minister visualises the solicitor or the client not being able to claim privilege?
There is no intention whatever of making any inroad on privilege. But we want to avoid the abuses which could possibly arise if we make the saver in Section 388 too wide. As Deputy Sweetman rightly observed, privilege is intended to protect the client, not the solicitor.
It should protect every client, not merely the client who happens to be the defendant. If I am defending X and I am asked a question which I know is not a question of privilege as regards X, but I happen to have knowledge of it because I act for Y, I must equally be allowed to say I cannot disclose it because it is a privilege of Y.
Taking X and Y in this context, what we want to avoid is this. If a solicitor acts for X, which is a company, and also acts for Y who is a director of the company, and if a prosecution is taken against Y, the director, for wrongs done to the company by that director, it is possible that the solicitor would have knowledge from X, the company, which would be relevant to the proceedings. It would be in the interests of the company, which would be an interested party in a prosecution against a fraudulent director, that it should be disclosed, but if that fraudulent director has sufficient influence over the company by means of his shareholding or otherwise it might be possible for him to get the company to claim privilege in respect of communications made by it to the solicitor. The proceedings could thereby be seriously impeded.
You might get into a worse trap. Solicitors are officers of the court. There is also the Incorporated Law Society. I would not be at all averse from any provision that would enable the Minister, in a case where he thought fit, to compel the solicitor through those channels, but not as a matter of law. I would be very chary of it, because I think it would bring in all sorts of abuses, and it might defeat itself. I wonder would the Minister consider the suggestion that he could act through the authority controlling the solicitors. What the Minister is talking about is, in effect, an abuse by a solicitor falling down on his job as solicitor.
If you draft the section on the lines of the amendment it would help to create that kind of abuse.
In the circumstances described by the Minister, would it not be possible that the solicitor would claim the privilege in respect of information which he had received as solicitor for the company, and use that privilege to protect the director ?
Yes—the fraudulent director who has defrauded the company, the shareholders or the creditors.
Would that not be against the interests of the company ? Would it not be possible in those circumstances to get another member of the company to deal with it ?
Could you not simply say that nothing in this Act shall affect the privilege of solicitor and client—the customary privilege, if you like, if you want to qualify it—the customary privilege between solicitor and client as recognised by the courts. Would that not do it ?
Would what the Minister said not involve a conflict of interests between solicitor and client ?
Yes, it would.
He would be more or less bound to disclose.
What the Minister is worried about is the case where the company has gone into liquidation and the liquidator wants to get after the director who has fraudulently acted on the company. Is it not true that in that case the liquidator has the right to waive privilege ? If the liquidator wants to get information before the court he can instruct the solicitor and say : " I direct you not to claim privilege in respect of that man. I am now the person authorised to act." I think the Minister's point is met by the fact that the liquidator has the right to waive privilege.
I am making the suggestion that we say that nothing in the Act shall affect the customary privilege between solicitor and client, as recognised by the courts. That throws it back to the courts, and leaves it within the spirit of the Act. It also leaves the Minister free to move. One of the things the Minister is rightly afraid of is that a positive provision in the Act will stop him from moving from the word " go ". I think that if you have a saver of that nature, you save the privilege and, at the same time, leave the initiative with the Minister. I would make that compromise.
Privilege between solicitor and client is the client's privilege and the client can waive it. The liquidator acting on behalf of the company can waive the privilege without regard to the solicitor acting on behalf of the company, so, in a case such as an application brought under this section, the liquidator would be entitled to waive privilege on behalf of the company, and the solicitor would be required to produce records and documents. The difficulty is the case where the solicitor might be acting for the director and as solicitor for the director, he is in a completely different position. As the section is drafted at the moment, it might require such a person to produce documents which he has in his possession and as solicitor for the director and that could be a dangerous situation. I do not think this section should militate against a company because the liquidator, as I say, has power to waive privilege, and would waive it if there were any malpractice. If he were not getting the information it would be his duty. A solicitor might be brought before a court and he might say : " I have documents, but they are in my possession as solicitor for the director and I claim I am not entitled to produce them."
In case I miss the point later, may I say that what Deputy Costello says would be quite all right so far as compulsory liquidations are concerned. In such cases the liquidator is appointed by the court and is an officer of the court. However, it is possible in voluntary liquidation that the liquidator would be acting more in the interests of the directors than of the shareholders or creditors of a company. Voluntary liquidations are far more numerous than compulsory.
Is the answer not then that it is turned into compulsory liquidation?
The shareholders or creditors may not even have begun to suspect it. Again Deputy Costello has dealt only with liquidation. There still remains Section 170 which deals with proceedings instituted after a report by an inspector appointed by the Minister. Deputy Costello's remarks would not apply to such a case at all.
I am not quite certain what the Minister is answering. Is he accepting my point that there may be privilege between a solicitor and a director ?
I am accepting the point the Deputy observed and I think I have already said that this privilege with which we are concerned is the client's privilege and that the case the Deputy was making could relate only to compulsory liquidation.
A voluntary liquidator may not always have the highest possible standards and may not wish to waive privilege that will protect the interests of the company and its creditors as against the interests of the directors.
I wish to make a suggestion which may shorten the discussion. It is quite clear that if we go into all the details and ramifications of this that we shall get no solution. I would suggest—and this has been done occasionally in previous Acts—that there should be a declaration at the end something like this : " For the purpose of removing doubts it is hereby declared that nothing in this Act shall affect the customary privilege of solicitor and clients as recognised by the courts." That is very loose and I would have to go to precedent to be precise about it but I suggest that to the Minister as a way out.
Whom does the Minister contemplate being a defendant under Section 388 ?
The people I have in mind are those against whom, under Sections 170 and 299, proceedings would be taken.
May I put this to the Minister ? Supposing under Section 299 the law decides to proceed against Director A and a solicitor who is acting for Director B is summoned before the court, there is nothing in Section 388 to protect the privilege of B at all.
Can the Minister give us any reason why he might not be prepared to accept Deputy de Valera's suggestion provided we have the Minister's assurance it is not intended in any way to limit privilege as already existing ? If that is the fact, as I believe it to be, I cannot see any conceivable objection to accepting Deputy de Valera's suggestion and Deputy Sweetman's, to have an overall covering clause stating that categorically. Once we start going into details and suggesting possible situations that may arise we shall get bogged down in administrative difficulties. There may be many cases in which the exercise of privilege will be greatly inconvenient for the prosecution but that must not influence us in any way in limiting privilege. The only way I can see of dealing with it is the overall clause stating categorically that nothing in this Act shall affect the existing right of privilege.
That declaration would be nothing stronger than an interpretative direction and would enable the Minister to leave practically everything else he has in the Bill.
It is entirely for the court to decide what is the normal right of privilege established hitherto.
There are certain obligations imposed in Section 299 on every person and agent of the company. That expressly includes a solicitor when he acts as agent. Our difficulties spring from that and from the corresponding clause in Section 170.
When a solicitor has been guilty of a criminal offence.
Subsection (4) of Section 299 reads :
If, where any matter is reported or referred to the Attorney General under this section, he considers that the case is one in which a prosecution ought to be instituted and institutes proceedings accordingly, it shall be the duty of the liquidator and of every officer and agent of the company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably able to give.
In the next paragraph it says:
For the purposes of this subsection, " agent " in relation to a company shall be deemed to include any banker or solicitor of the company. . .
I want to avoid the situation whereby a solicitor under a blanket provision as to privilege could avoid assisting the court in criminal proceedings.
That is equivalent to saying every man is guilty until he is found innocent. I could not possibly agree to that.
Let the Minister finish his statement.
The prosecution envisaged here is one against officers and members of the company. If a solicitor is agent of the company and if the prosecution is taken against an officer or member of the company, it ought to be clearly his duty to make available to the court knowledge he has got in his capacity as solicitor for the company.
What is the law at the moment ? I was assuming we did not want to change the law.
I think Deputy de Valera is right. The Minister is, perhaps un-wittingly, endeavouring to make some inroad on the existing doctrine of privilege.
That is not my intention at all. I want to prevent an abuse of privilege.
Is there any objection to Deputy de Valera's suggestion ? If it is intended not to breach in any way the existing doctrine of privilege, a good many of us around this table feel that intention is not being given effect in this Bill. If it is the view of this Committee we should not breach this principle this provision should be carefully considered. This is a very important principle. None of us is trying to have directors kept out of prison if in fact they are guilty, and none of us is trying to see that the process of law is impeded, but we are concerned to see that this doctrine of privilege should not be upset in any way in this Bill. Why not insert a general clause as suggested by Deputy de Valera ?
Would it meet the situation if I accepted Deputy Sweetman's amendment to Section 245 and left Section 388 as it stands?
As Section 388 is at present, it seems to me the Attorney General can prosecute Director A, obtain required information from Director B, and thereby break privilege. It is not for Director B that the privilege has been provided but for Director A. Although I did not agree with the proposition at the beginning, the more we have discussed this the more I have come round to the conclusion that Deputy de Valera's approach is the right one. While I do not want any inroads made into the field of privilege, I submit it should be left to the judge to determine how the facts meet the particular case. I particularly do not want any new privileges added.
Why not enlarge Section 388 to provide a general saver?
I think a general saver such as Deputy de Valera suggests could be inserted in Section 388. Then all the individual savers could be dropped.
It is possible we could make some compromise in this case. You could reserve to the courts certain power in relation to claims of privilege.
The court has it already. I would have no objection if the Minister put in powers for himself to apply to the court.
The Minister is trying to provide against unwarranted claims for privilege. That is, of course, not a matter for the Executive but for the courts to decide. The judge would ask what the grounds were on which privilege was claimed and the grounds would have to be proved as to whether or not privilege in fact existed.
I think the Minister will agree it is much more difficult to establish these privileges in court than to break them. The courts are quite jealous about abuse of privilege.
I am quite satisfied as long as it is left to the courts. Might I make a suggestion that the Minister would consider this matter between now and Report Stage in the Dáil. We will have an opportunity of considering it in detail in the meantime from the report of the Committee and perhaps shortly before it comes to the Dáil the Minister could circulate to each member of the Committee, informally, a note as to what he will propose at Report Stage. Then we will have an opportunity of sitting back and seeing whether that meets the individual views expressed or not.
I think that is a reasonable proposition.
In fact we could do it without meeting again. If we approved of it, it could be inserted.
We could meet informally. In other words, instead of finally finishing our job today, we could adjourn our meeting to a date on which we could consider the Minister's treatment of this before the Dáil get it back.
I understand we cannot move a new amendment now. We can only amend the amendments which have been recommitted to us in matters of detail.
I do not think this could be considered a minor amendment.
If it takes the form suggested by Deputy de Valera, it would be a new amendment.
Of course it could be moved in the Seanad.
It can be moved in the Dáil.
Cannot an amendment be moved now by agreement ?
No. The Minister having considered the matter, can put down an amendment in the Dáil to cover the point.
We could consider it sometime before it is likely to come before the Dáil. I must say, before we pass on, that I am obliged to the Minister. He has been most fair.
I move amendment No. 117 :
In page 146, subsection (2), lines 19 and 20, to delete " which have not been claimed during the 6 years preceding the commencement of the winding up " and substitute " more than 6 years preceding the commencement of the winding up which have not been claimed within the said 6 years."
This is designed to improve the wording and does not provide a change in substance.
Am I right in thinking " six years " will be inserted in the Bill for this as well as for the earlier section which we changed from five to six years ?
I move amendment No. 118 :
In page 147, subsection (2) (a) (ii), to delete lines 10 to 14, inclusive.
What I am suggesting here has been recommended by the Committee on Company Law Reform. I am asking the Committee to delete paragraph (11) of subsection (2) (a) which gives preference to the State in relation to income tax and corporation profits tax. The State would appear to have the right to go back in the event of three years' taxes being in arrears. The right is not confined to last year's trading. I say that because in practice in the past the global State preference given by the Finance Act of 1935 was not always availed of by the State, and in some cases the Revenue Commissioners rested on the position of only collecting one year's tax under these provisions, but it has been the custom to take any one of three or four different years which may have been in arrears. Not only that, but there is a case on record in which they took one year for individual tax and another year, which suited them better, for corporation profits tax. I think the best thing would be to implement the recommendation of the Committee on Company Law Reform. At paragraph 203 of their Report, the Committee said :
If the company is solvent no question of priorities can arise: if the company is insolvent the priority given to sums due to the Central Fund inflicts hardship and injustice on many small creditors: it cannot be seriously contended that small traders are in a better financial position to bear the loss than is the Central Fund. We cannot see any reason why any taxes (other than Schedule A income tax) should be given priority and we recommend that the priority given by Section 209 to one year's taxes should be repealed. We would make a similar recommendation in relation to rates due to a local authority were it not for the great difficulties in title and conveyancing which the abolition of this preference would cause.
I put it to the Minister that the State has broad shoulders and is much better equipped to bear losses on insolvency than small traders.
Might I put a case of principle, the principle being that this Bill is drafted on the basis of the community regulating companies, and in any litigation which involves a loss in these circumstances, it would be equitable to distribute that loss over the whole community rather than on particular persons, whether they are creditors or beneficiaries, over whatever funds would be left over? In such a case, would it not be reasonable on principle to postpone the priority for taxes on the basis that in effect you are distributing that particular loss over the community as a whole? We must assume that after this Bill is passed we will have done everything possible to restrict companies' actions in the interests of the public at large. I am trying to put this as a matter of general principle rather than one of equity as between one group and another.
The Committee will recall that as the law stood before the introduction of the Bill, there was a blanket preference for many debts due to the State, by virtue of the 1924 Finance Act. I do not mind admitting I had a tough battle with the Minister for Finance to alter that provision, but he was insistent that at least this one right should remain to the Exchequer in respect of one year's taxes. The Minister for Finance was good enough to introduce in the current Finance Bill a provision abolishing completely the blanket preference provided for the State in the 1924 Finance Act. That will also cover debts due in bankruptcy. The Minister for Finance went a long way, and it would be difficult for me to extract any further concession from him. Therefore, I appeal to the Committee not to insist on the State preference being wiped out completely.
I agree with the Minister. I would not go the whole way with Deputy Byrne.
It is agreed that it is damaging to the community as a whole, if a person evades income tax which is payable and that there ought therefore be special provisions for the recovery of arrears. But there are many other arguments and counter arguments.
The Minister has convinced me. I capitulate.
This is not a question of evading income tax. It is a case of what a company owes to the State. There will be a lot of small creditors and wage earners, and they will bear the loss. The point is that the Committee, and Deputy Byrne, think the State is better able to bear the loss than small creditors. Deputy Byrne raised a point about the construction of the section. As now drafted, the section gives power to Revenue to take a good year rather than the last trading year. In many cases, the last trading year would probably be a bad one but the section, as drafted, might permit Revenue to go back two or three years for arrears of tax.
That has always been the law, and it is there for obvious reasons. When a company has gone into liquidation, it is not unreasonable to assume that in the last year it would not have made any taxable profits and, therefore, nothing would be gained by the Exchequer. In the case of a company which made profits in previous years on which they paid no tax, but should have paid tax, it is not unreasonable—and it has been the practice—for Revenue to seek the best year they can find. Again, it is in ease of the community at large, and it is something I will not be able to convince the Minister for Finance to waive. He has gone a long way to meet us already on the question of preference for State debts.
I think the concession the Minister mentioned is important.
So far as income tax is concerned, the Minister for Finance has not made quite as considerable a concession as the Minister for Industry and Commerce may think because, for some unaccountable reason, there have been cases on record of more than one year's arrears of tax, and Revenue have not availed of the global terms of the Finance Act, but have rested on this section and collected only one year's tax, the best year. A company which has not made any profits in its last one or two years' trading, has at its disposal only those funds which arise from the sale of, say, creditors' stock which has originated from the supplier of goods to the company. Those people are being asked to surrender a considerable portion of their equitable interest in those goods to the State. I know of a liquidation which is in process at the moment where there are about 50 small creditors, none more than £500 each. They will get a dividend of 3/6d. in the £, and the State will collect about £2,500 in income tax. That is a very grave blow to those small traders. The English precedent should not be considered at all, by reason of the fact that a trader in this country is in a weaker position to sustain losses arising out of liquidations and insolvencies than are the wealthier companies which are usually involved in Britain.
The creditor Deputy Byrne has in mind is the person who provides goods or services to the company voluntarily. Before he agrees to provide those goods or services, he is in a position to inquire about the position of a company, and he can withhold the goods or services having made such inquiries, or he can look for security from the company, whereas the State, willy-nilly, must provide all the services required by law and has no right to discriminate between good and bad customers in the provision of those services. It has not the same right or capacity to say: " Well——
" We are not going to collect income tax."
Put it that way if you like. The running of the State must go on. It depends on known sources of tax in that year for revenue to make provision for the services, whereas the individual can withhold his services or goods, or look for reasonable security for payment. I want to say again that this has been argued very closely over a long period between my officials and the officials of the Minister for Finance, and I want to assure the Committee that we have wrung the last possible concession out of them in this respect.
I know of a company about which there were for the past three years rumours that it would get into difficulties, and it is now in difficulties. Many people kept supplying it even though they knew it was doubtful. They have only themselves to blame for the position in which they now find themselves. I do not think they should be given any priority over the State. I agree with the Minister.
Would the Minister consider confining it to the last trading year ?
For the reason I have already given I would rule out that possibility from Revenue's point of view, because the last trading year might often be a year of loss.
There could be fraudulent manipulation.
There is another objection to this amendment. If it were accepted it would mean that the Revenue Commissioners could not collect, for instance, Schedule A tax which would be due. That would create the same conveyancing difficulties as those referred to in the report in regard to rates.
I think the Committee specifically excluded Schedule A tax.
Yes, but the effect of this amendment would be to leave this gap.
I forget how Deputy Dillon put it last week. I think he said that I have a grain of the past in me and I must say I believe, against Deputy Byrne, that if this Section is removed the effect will be that the Revenue Commissioners will be much tougher and will make the collections earlier and will not give time nearly as much as they do at present. I am not thinking of the loss of revenue that will arise from the deletion of the clause but there would be an obligation on the Revenue to be much more stringent in collection if they did not get the preferential right.
In very many cases arrears are due to delays on the part of the Revenue.
I agree with the Deputy in that.
I wonder would I be in order in referring to this point—there is no specific amendment on it? Am I correct in thinking the section as now drafted does not give any priority to pension?
I am afraid you are not in order.
May I ask the Minister to look into that aspect of it?
The Deputy could put himself in order by saying that if the section did so provide for a pension then he would be satisfied to agree with the amendment but that if it does not that he would not.
Only wages and salaries and holiday pay of certain persons are preferred.
I would ask the Minister to consider inserting a provision in connection with arrears of pension. I know of a case where a person served for many years in the insurance company which is now in liquidation. It is very unfair that he will not have any priority in regard to pension.
I would strongly support Deputy Costello.
The Minister might consider amending the section?
I shall consider that suggestion.
I move amendment No. 119 :
In page 148, subsection (3), line 8, to delete "£200 " and substitute "£300 ".
That is very reasonable.
We are very much in advance of British and Six County legislation in this respect.
I move amendment No. 120 :
In page 150, subsection (1) (b), line 26, to delete " person " and substitute " officer of the company ".
If the Committee agree amendments Nos. 120 to 125 may be taken together.
This was a suggestion made by the Irish Banks Standing Committee. It appears it is common practice for the banks in dealing with a customer who has been treated too liberally with unsecured overdraft to ask him to provide security for the amount involved. In order to avoid complications arising out of the rule in Clayton's case, the banks close the old account and open a separate one in respect of the fresh transactions. If Section 289 is enacted in its present form any security so given by the client within 12 months before winding-up may be void, and the banks feel that this would compel them to adopt a more cautious policy in regard to overdrafts in the future. I think the Committee can take it this is more in ease of the customer than of the banks.
I see that these amendments are allied. I admit frankly I made a mistake in leaving out some amendments to Sections 286 and 287. Did the Minister consider the representations that were made in connection with the sections? Is he clear that Section 289 will not solve the problem because, if not, the amendments to Section 289 do not solve the problem.
The points raised by Deputy Sweetman were taken into consideration and I am advised the sections are all right.
Would the Minister explain what is the effect of Section 289 ? I do not quite understand it.
This section was specifically recommended by the Company Law Reform Committee to deal with a method of evasion of the antecedent of Section 288 which has been adopted by dishonest directors over a long period of years. Section 288 provides that the floating charge will be void except where money is paid at the time of or subsequent to the creation of the charge. They had developed the trick of getting repayment of an earlier advance on the understanding that they would make a subsequent one which would have the benefit of a floating charge. Section 289 is designed to prevent abuses of that kind.
I move amendment No. 121 :
In page 150, subsection (1) (d), line 29, before " charge " to insert " floating ".
I move amendment No. 122 :
In page 150, subsection (1) (d), line 31, to delete " person " and substitute " officer ".
I move amendment No. 123 :
In page 150, subsection (1) (d), line 32, to delete " or his spouse or nominee ".
I move amendment No. 124 :
In page 150, subsection (1), line 35, to add " unless it is proved that the company immediately after the creation of the charge was solvent ".
I move amendment No. 125 :
In page 150, between lines 37 and 38, to insert a new subsection as follows :
" (3) In this section ‘ officer ' includes the spouse, child or nominee of an officer."
I move amendment No. 126 :
In page 151, subsection (6), lines 32 and 33, to delete " may be proved by him as a debt in the winding up " and substitute " shall be deemed to be a debt proved and admitted in the winding up ".
This was an amendment suggested by the Committee inquiring into bankruptcy. Its object is to ensure that the person who is awarded damages will not have to go to the trouble and expense of proving his claim. The effect of the amendment is that once the award is given it must be treated as a debt proved and admitted in the winding up.
I move amendment No. 128 :
In page 159, subsection (1), line 6, to add the following to paragraph (b) :
" and, in the absence of any direction as to their disposal, he may then dispose of them as he thinks fit."
Section 305 refers to the disposal of books and papers of a company in winding up. This amendment gives the liquidator power to dispose of those books, in the absence of any direction as to their disposal, in any manner he deems fit.
I move amendment No. 129 :
In page 159, subsection (4), line 39, to delete " appear to him to ".
This is a fairly simple drafting amendment. Deputy Booth objected to this discretion given to the Minister for Finance where the person claims he is entitled to the funds. As amended, the section requires the Minister now to issue such sum to that person as will be necessary to provide for the payment, and not as " may appear to him " to be necessary. In other words, it takes the discretion away from the Minister.
I move amendment No. 130 :
In page 159, to delete subsection (5), lines 41 to 44.
During the Committee Stage an amendment was introduced to delete subsections (4) and (5), but at that time a number of Deputies thought that subsection (4) was a desirable clause and for that reason the amendment was withdrawnin toto. But it was recognised, and I think it was mentioned at the time, that something would have to be done later about subsection (5) which could be regarded as objectionable as it amounts to ex-propriation of property. It is for that reason that this special amendment in relation to subsection (5) is now being moved.
I move amendment No. 131 :
In page 165, subsection (3) line 16, after " reasonable " to add " , subject to an appeal to the court ".
We could discuss this and the following amendment together. Subsection (3) provides for payment of costs and expenses incurred by a person in preparing the statement required on the appointment of a receiver. The subsection as it stands suggests that the decision of the Receiver would be final. Deputy Costello suggested that the person to whom the money was due might not think the sum agreed by the receiver was reasonable and that he therefore ought to have the right of appeal.
I move amendment No. 132 :
In page 165, subsection (4), line 20, after " declaration " to insert " ; and in any other case references to the court shall be taken to refer to the court by which the receiver was appointed."
I move amendment No. 133 :
In page 175, subsection (1), paragraph (c), line 43, to add " and also the address of the company's principal place of business in the State ".
We have already discussed this in connection with amendment No. 66. The same applies to amendment No. 134.
I move amendment No. 134 :
In page 176, paragraph (c), line 47, to add " or the address of its principal place of business in the State;".
I move amendment No. 135 :
In page 177, after line 52, to add a new subsection as follows :
" (3) This section shall cease to apply to a company on the expiration of three years after it has given the notice referred to in section 357."
In the event of the company ceasing to have a place of business here, it does not seem reasonable that a document could be served in the manner provided after three years.
I think three years would be too long.
We can alter the wording of the amendment to read " two years " instead of " three years ".
Amendment, amended by leave by the substitution of " two " for " three ".
I move amendment No. 136 :
In page 179, subsection (1), paragraph (a) (v), line 11, to delete " office " and substitute " place of business ".
We have already discussed this in conjunction with amendment No. 66.
I move amendment No. 137 :
In page 180, subsection (8) (b), line 12, to delete " previously issued " and substitute " issued within the preceding 3 years ".
The same remarks apply to this as to an earlier amendment where we altered the wording to read " two years " instead of " three years ".
Amendment amended by leave by the substitution of " 2 " for " 3 ".
I move amendment No. 138 :
In page 182, subsection (2), lines 11 and 12, to delete " of the contract ".
This is to rectify a drafting error.
I move amendment No. 139 :
In page 183, to add a new subsection as follows :
(5) The registrar shall separately keep an index of
(a) all companies incorporated in Ireland;
(b) all companies to which XI of this Act applies;
(c) all persons registered as directors of any company and specifying the company of which each such person is a director."
We had a similar discussion during the sitting of the Committee on the Registration of Business Names Bill. I feel strongly there should be some central index to enable people to discover under which thimble is the pea in relation to directorships of businesses. For example, if such an index had been kept in England you would not have had the scandals that are now being disclosed in relation to properties in the Rachmann case. It is a fact that people are able, by setting up chains of companies, to perpetrate frauds that would be undoubtedly prevented if some sort of index were provided such as I suggest here. I do not think the task would be as formidable as it would appear at first sight. It would be desirable to provide such a safeguard for the public.
The indices mentioned in paragraphs (a) and (b) are already maintained and so there is no need for legislative action on these matters. I am advised the task involved in (c) would be most formidable and that in any event the information sought could be obtained elsewhere.
It is in that sub-paragraph I am mainly interested.
Section 195 imposes the obligation on each company to notify the registrar of the particulars of directorships held by different directors, and if a member of the public is aware that an individual in whom he is interested is a member of a company, he can in most cases, by examining the file of that company, ascertain particulars of other directorships of that person. If he still is not satisfied there are the commercial intelligence agencies available to him.
Would the Minister mind going back to paragraph (e) of Section 195 ? Can anyone advise me whether " particulars of any other directorships " is the same as " particulars of all other directorships " ? I think that, as the paragraph is drafted, you could select the directorships you would put down. If it means " particulars of all other directorships " I am met to a very large extent.
It was intended to be all other directorships.
Would the Minister put that point to the draftsman?
I will, certainly.
I move amendment No. 140 :
In page 183, subsection (3), line 43, after " registrar " to insert " assistant registrar or other officer authorised by the Minister ".
This is simply to bring the wording into line with the corresponding clause of the Registration of Business Names Bill.
I move amendment No. 141 :
In page 183, subsection (1), to delete all words from " having made default " in line 47 to " requiring it " in line 52 and substitute " or any officer of a company having made default in complying with any provision of this Act fails to make good the default within 14 days after the service of a notice on the company or officer requiring it or him ".
This is intended to make this section more effective. As drafted, Section 371 relates only to defaults by a company and defaults in sending documents to the registrar. I may say this was recommended by the Jenkins Committee.
I move amendment No. 142 :
In page 186, subsection (1), lines 40 and 41, to delete " at or to the address of any subscriber of the memorandum " and substitute " by registering it at the office for the registration of companies."
I think you, Mr. Chairman, said on Committee Stage that there was some objection to the words now proposed to be deleted, on the grounds that the subscriber of the memorandum might have long ago ceased to have any connection with the company. Deputy de Valera suggested the revised wording, and it has been incorporated in the amendment.
Did the Minister consider providing that the service should be by registered post ?
I did consider it, but it was thought that it was unnecessary.
I marked it to put an amendment down to that effect, but I must have forgotten it.
I move amendment No. 143 :
In page 188, subsection (3), line 12, after " final " to insert " subject to an appeal to the Supreme Court on a question of law ".
This has already been discussed with amendment No. 50.
I move amendment No. 144 :
In page 188, line 30, after "£50 " to add :
" unless the court having regard to all the circumstances of the case, otherwise decides ".
Deputy Costello raised this point on Committee Stage. He thought that in certain cases a fine of £50 for a second offence might be excessive. I think the wording we now propose was agreed at the time as meeting the point.
I move amendment No. 145 :
In page 188, to delete lines 31 to 33.
Deputy Costello, Deputy Norton and Deputy Cosgrave asked to have this section deleted.
The Minister is deleting the section ?
I move amendment No. 147 :
In page 190, to delete lines 24 to 26 and substitute :
" 398.—Notwithstanding section 58 of the Solicitors Act, 1954, a person to whom paragraph (a) or (b) of subsection (1) of section 162 applies may draw or prepare any document for the purposes of this Act other than a deed or a memorandum or articles of association."
We had some discussions on this and, as a result of subsequent inquiries we made, I understand that the chartered accountants are not anxious to have their members undertake the preparation of memoranda and articles of association, so I am restoring the position.
There is one trifling point on the question of the word " deed ". Does that include share transfer forms ?
Share transfer forms are specifically dealt with in the 1954 Solicitors Act.
I should like to put on record the appreciation of certain people outside for the manner in which the Minister gave consideration to what had been inadvertence earlier.
I move amendment No. 148 :
In page 197, Table A, regulation 51, line 51, before " An " to insert " Subject to sections 133 and 141 of the Act,".
We discussed this with amendment No. 76.
I move amendment No. 149 :
In page 198, Table A, regulation 51, to delete all words from " so, however," in line 9 to the end of the regulation.
Why is the Minister deleting these words ? Have we discussed it already?
The amendment is related to amendment No. 76.
It is consequential on amendment No. 76.
I thought the Minister was preventing short notice.
I move amendment No. 150 :
In page 203, Table A, regulation 88, line 11, after " be " to insert " by such person or persons and ".
Amendments Nos. 159 and 168 are cognate, and I suggest we discuss them together.
The paragraph, as it stands, was regarded by Deputy Sweetman—and the Irish Banks Standing Committee have since agreed with Deputy Sweetman's interpretation—as being too narrow, and that the words " in such manner " would confine signing and drawing cheques to the directors themselves. It was thought proper that we should also include the words " by such person or persons."
Without that you could not have accounts operated by the manager of a company.
I move amendment No. 151 :
In page 203, Table A, regulation 91, lines 38 to 40, to delete " (other than an offence under the Road Traffic Act, 1961, or any Act or Acts amending it)".
Amendments Nos. 160 and 169 are cognate and I suggest that we take them together.
It was thought that there was no reason why offences under the Road Traffic Act should be specifically excluded from the paragraph. This amendment is to meet the wishes of the Committee.
I agree with the amendment. I do not know why it grew up over the years. It was always included in the articles of association that disqualification did not apply to offences under the Road Traffic Act.
That was very reasonable. The point about this is that it is an indictable offence under the Road Traffic Act. I do not know if I am completely in agreement with the amendment for this reason. The old rule in articles of association was to exempt offences under the RoadTraffic Act, that is, dangerous driving or careless driving offences, and that would be all right. What we are including here is an indictable offence. The only indictable offences are dangerous driving causing death or serious bodily harm. This is not the place to discuss the operation of the Road Traffic Act but certainly it is being operated in a very unfair way. A person might be convicted of an indictable offence now where he has the misfortune to cause serious bodily harm through driving that might be dangerous but which under the previous Act would have led to his being convicted summarily and fined £10.
Under the Road Traffic Act at present a person can be convicted of an indictable offence as a result of which he might have caused death or serious bodily harm. His degree of fault in the accident might not be very great but he could be convicted. As I say we shall have to discuss the operation of the Road Traffic Act later on but as far as this provision is concerned it would be wrong to provide that a person could be disqualified merely because he is convicted of an indictable offence under the Road Traffic Act since his offence might not be very grievous.
This is Table A. It is optional.
I know that but it is the sort of thing to which people will not advert. They will think an indictable offence under the Road Traffic Act is a very serious thing.
The directors themselves can decide each case, as you will see from the paragraph.
He vacates office but he can immediately be co-opted back on.
In any case it would be completely objectionable to recognise a greater or less degree of heinousness, if you like, in an Act of Parliament.
I thought myself the reason why the Road Traffic Act used to be mentioned in Articles was that a man might be charged with manslaughter and with such offences as dangerous driving, driving without due caution, and so on, and, having been acquitted of the major charge he might be convicted of a lesser charge. I thought that was the reason why there was specific mention of the Road Traffic Act.
I move amendment No. 152 :
In page 210, Table A, Part II, regulation 4, line 8, before " An " to insert " Subject to sections 133 and 141 of the Act,".
This has been discussed with amendment No. 76.
I move amendment No. 153 :
In page 210, Table A, Part II, regulation 4, to delete all words from " so, however," in line 19 to the end of the regulation.
This also has been discussed with amendment No. 76.
I move amendment No. 154 :
In page 210, Table A, Part II, lines 28 to 33, to delete regulation 6 and substitute the following:
" 6. Subject to section 141 of the Act, a resolution in writing signed by all the members for the time being entitled to attend and vote on such resolution at a general meeting (or being bodies corporate by their duly authorised representative) shall be as valid and effective for all purposes as if the resolution had been passed at a general meeting of the company duly convened and held, and if described as a special resolution shall be deemed to be a special resolution within the meaning of the Act."
This is consequential on amendment No. 77.
I move amendment No. 155 :
In page 210, Table A, Part II, to delete lines 62 to 65, and in page 211 to delete lines 1 to 4.
This amendment is consequential on amendment No. 86.
I move amendment No. 156 :
In page 211, Tábla A, line 15, at the end of the line to insert " (Uimh. de 196) ; ".
This is inserted in order to identify sufficiently the Irish title of the Act, " Acht na gCuideachataí".
These are translations of the amendments later on?
These are all disposed of.
These have been dealt with in the English version.
I move amendment No. 157 :
In page 218, Tábla A, rialachán 51, line 30, before " Déanfar " to insert " Faoi réir ailt 133 agus 141 den Acht,".
I move amendment No. 158 :
In page 218, Tábla A, rialachán 51, to delete all words from " sadóigh " in line 40 and 41 to the end of the regulation.
I move amendment No. 159 :
In page 224 Tábla A, rialachán 88, lines 51, after " bheidh ". to insert " ag cibé duine nó daoine agus ".
I move amendment No. 160 :
In page 225, Tábla A, rialachán91, lines 28 to 30, to delete " (seachas cion faoin Acht um Thrácht ar Bhóithre, 1961, nó aon Acht nó Achtanna a leasú)".
I move amendment No. 161 :
In page 233, Tábla A, Cuid II, rialachán 4, before " Déanfar " in line 37 to insert " Faoi réir ailt 133 agus 141 den Acht,".
I move amendment No. 162 :
In page 233, Tábla A, Cuid II, rialachán 4, to delete all words from " sa dóigh " in line 48 to the end of the regulation.
I move amendment No. 163 :
In page 234, Tábla A, Cuid II, lines 6 to 12, to delete rialachán 6 and substitute:
" 6. Faoi réir alt 141 den Acht, beidh rún i scríbhinn, arna shíniu ag na comhaltaí uile a bheidh de thuras na huaire i dteideal beith i láthair agus vótáil ar an rún sin ag cruinniú ginearálta (nó, i gcás comhlachtraí corpraithe, ag a n-ionadaithe cuíúdaraithe), ina rún chomh bailíéifeachtach chun gach críche agus dá mbeadh an rún arna rith ag cruinniú ginearálta den chuideachta. a comóradh agus a tionóladh go cuí, agus má thugtar rún speisialta de réir bhrí an Achta é".
I move amendment No. 164 :
In page 234, Tábla A, Cuid II, to delete rialachán 10, lines 44 to 50.
I move amendment No. 165 :
In page 237, Table C, article 8, before " An " in line 43, to insert " Subject to sections 133 and 141 of the Act,".
This is related to amendment No. 76 which we have already discussed.
I move amendment No. 166 :
In page 238, Table C, article 8, to delete all words from " so, however " in line 1 to the end of the article.
This is also related to amendment No. 76.
I move amendment No. 167 :
In page 239, Table C, lines 23 to 28, to delete article 20 and substitute :
" 20 Subject to section 141 of the Act, a resolution in writing signed by all the members for the time being entitled to attend and vote on such resolution at a general meeting (or being bodies corporate by their duly authorised representatives) shall be as valid and effective for all purposes as if the resolution had been passed at a general meeting of the company duly convened and held, and if described as a special resolution shall be deemed to be a special resolution within the meaning of the Act. "
This is related to amendment No. 77 which we have discussed.
I move amendment No. 168 :
In page 241, Table C, article 37, line 31, after " be " to insert " by such person or persons and ".
This has been discussed with amendment No. 150.
I move amendment No. 169 :
In page 241, Table C, Article 39, lines 53 to 55, to delete " (other than an offence under the Road Traffic Act, 1961, or any Act or Acts amending it)".
This was discussed with amendment No. 151.
I move amendment No. 170 :
In page 248, Table E, article 4, before " An " in line 14 to insert " Subject to sections 133 and 141 of the Act,"
This and the following amendment, No. 171, were discussed with amendment No. 76.
I move amendment No. 171 :
In page 248, Table E, article 4, to delete all words from " so, however " in line 26 to the end of the article.
I move amendment No. 172 :
In page 254, paragraph 1(d), to delete lines 8 and 9 and substitute
" , the amount of the premium (if any) payable on redemption, the earliest and latest dates on which the company has power to redeem those shares and whether redemption is at the option of the company or obligatory."
Amendments No. 172, 174 and 175 are cognate and may be discussed together.
The wording now proposed was suggested by the chartered accountants in connection with paragraph 2 of the Sixth Schedule. It is desirable that the prospectus and accounts should disclose full information about the shares being dealt with here.
I move amendment No. 173 :
In page 268, to delete lines 2 to 4 and " Companies Act, 1909," in line 5 and substitute " Except in the case of a company which is excluded or exempt from the application of section 128 of the Companies Act, 1963,".
This has been discussed in relation to amendment No. 71.
I move amendment No. 174 :
In page 268, Part I, paragraph 2, subparagraph (a), to delete from " and the earliest date " in line 48 to the end of the subparagraph and substitute " , the amount of the premium (if any) payable on redemption, the earliest and latest dates on which the company has power to redeem those shares and whether redemption is at the option of the company or obligatory."
I move amendment No. 175 :
In page 269, Part I, paragraph 2, subparagraph (b) to delete from " and the earliest date " in line 3 to the end of the subparagraph and substitute " , the amount of the premium (if any) payable on redemption, the earliest and latest dates on which the company has power to redeem those shares and whether redemption is at the option of the company or obligatory."
I move amendment No. 176 :
In page 269, paragraph 4 (1), line 21, to add " Amounts set aside to meet future tax liabilities or for tax equilisation purposes shall be treated as provisions but separately indicated ".
This arises out of a recommendation by the chartered accountants again. The Jenkins Committee in their report made a similar suggestion. Apparently accountants have had difficulty in agreeing whether amounts set out for future tax or for tax equalisation should be treated as reserves or provisions, and the practice has grown up of showing them as entirely separate. The object of the amendment is to give statutory recognition to this practice.
I move amendment No. 177:
In page 271, paragraph 8 (b), line 6, after " ascertainable " to insert " from the books of the company or from any contracts or documents relating to the purchase or sale of property ".
This was a suggestion of the chartered accountants. They felt that under the paragraph as at present drafted, directors might feel under an obligation to estimate the value of goodwill even in cases where it does not figure at all in the books of the company. This is not the intention of the paragraph which is aimed at ensuring that where goodwill is included in the company's books, then it must be disclosed.
I move amendment No. 178 :
In page 273, Part II, paragraph 15, line 17, after " Private company " to insert " taking advantage of subsection (1) of section 154".
I move amendment No. 179 :
In page 274, to delete subparagraph (6), lines 28 to 41.
I move amendment No. 180 :
In page 275, lines 5 and 6, to delete " (other than a Private Company)".
I move amendment No. 181 :
In page 280, in the second column, opposite the mention of section 102 to delete " Duty of judgment creditor to register judgment mortgage created by him against company " and substitute " Registration of judgment mortgages ".
That terminates our examination of the Bill. Before we come to the matter of moving our Report, might I have an opportunity of saying three things ? As one of the Deputies who put down a fair number of amendments, I want to pay a tribute to the manner in which the Minister endeavoured objectively to consider them and to give as wide a consideration as he possibly could to the various points of view expressed which were different from those with which the Minister first came to the Committee. Secondly, I should like to pay a tribute, though I crossed swords with him on some occasions, to the Minister's principal adviser. In relation to the Bill itself, I should like to pay a tribute to the quite amazingly encyclopaedic knowledge of the Companies Acts that he displayed, to all the assistance that he gave us and to the quick manner in which he was able to refer to the Jenkins Report, the reports of our own and other Committees and to the law in various other countries. Thirdly, in relation to the members of this Committee, I should like to say we all tried as hard as we could to make this Bill better. I suggest it would be of great use in the future, if the reports of the proceedings of this Committee, both in Committee and on this Stage, could be bound into one volume and a copy made available to each member.
That will be done.
It would be of great assistance to the Chairman, certain other people, and myself.
I think all the members will agree with what Deputy Sweetman has said.
I should like to express my thanks to the Committee. I owe a lot to the manner in which the members addressed themselves to the consideration of the Bill. It was very helpful to me. Without that co-operation from the Committee it would not have been possible, in such a comparatively short time, to have reached this stage. On behalf of Mr. Holloway, I wish to express thanks to Deputy Sweetman for his remarks with which I fully agree and I am glad that it presents me with an opportunity of writing Mr. Holloway's name into the Report.
I did not think it quite in order or I would have done so myself.
Perhaps it is not but I have done so now in any event.
I should like to add a word of complete agreement with what the Minister and Deputy Sweetman have said. In fact, a tribute is due to Deputy Sweetman himself for the amount of industry he has put into the work of this Committee. It is due in no small way to his contributions to the debate that we have been able to reach this stage in such a comparatively short time. I should like to say also that the success of the work of this Committee has been largely due to the efforts and advice of Mr. Holloway behind it all.
Report of the Committee.
The suggested Report of the Committee is as follows :
The Special Committee has considered the Bill and has made amendments thereto. The Bill, as amended, is reported to the Dáil.
Report agreed to.
The Special Committee concluded its business at 12.45 p.m.