Special Committee on the Companies (No. 2) Bill, 1987 díospóireacht -
Wednesday, 20 Dec 1989

SECTION 54.

Mr. J. Bruton

I move amendment No. 79:

In page 53, subsection (2), line 36, to delete "3 days" and substitute "14 days".

Section 54 (2) states that there is "an obligation imposed by section 53 (2) to (4) (regarding the entry of information into the register) shall be fulfilled before the expiration of the period of three days beginning with the day next following that on which it arises". This concerns the obligation imposed on the company itself to incorporate information received by it about changes in shareholding in the register of interests which it has to keep under section 53. The requirement is that this obligation must be fulfilled by the company within three days of receiving the information. I realise that in normal circumstances, three days is more than sufficient time to transfer information that has been notified by letter into a register which is available for inspection under this subsection (8) but it is possible that if a company are going through a difficult time — perhaps they are in danger of losing a great deal of money or problems are arising — and if they are a very small company with maybe one or two employees, the company may have more than enough on their hands just to stay alive, without being able to do this job within three days. I acknowledge that it is not a huge job to transfer information being notified into a register, but it can be overlooked. That is why I suggest that the time limit should be 14 days rather than three days, remembering that the transaction itself must be notified within five days of it taking place and it must be incorporated in a register within three subsequent days. This means that the total time from the transaction to the incorporation in the register under the present legislation is a maximum of eight days, otherwise you break the law.

Given that in the case of companies to which section 190 (12) of the Principal Act applies, which are companies where all the shareholders are directors, this never had to be fulfilled, and, to require everything to be done within eight days to my mind may well be a bit onerous particularly for small companies. I have heard concern that we may be making too much legislation here that we will not be able to enforce and that it will be onerous. Therefore I suggest that 14 days instead of three days would give a little more time for compliance. I am suggesting this because it is an obligation that applies to every company and not just to cowboys.

Mr. O'Malley

The amendment proposes the time limit imposed under section 54 (2) of the Bill should be extended from three days to 14, as the Deputy says. This particular limit relates to the time within which the information received by a company from a director or secretary in relation to his holding in the company should be recorded by the company in their internal register. The time limit imposed on the company in the Bill as it stands is three days. I consider this a reasonable time within which a company should record the information received. The whole purpose of having the type of register proposed in the Bill is to ensure that persons involved with the company, whether as shareholder, creditor or otherwise, should be able to get up-to-date useful information as to who is running the company. The time limit of 14 days proposed by the Deputies is in my view far too long and would result in an unreasonable delay between notification by a director or secretary of the acquisition by him of an interest in the company and its actual recording in the company's register.

I should point out, furthermore, that the director or secretary himself is required under section 50 to notify the company of an interest acquired within five days of his becoming aware of having acquired the interest. The idea, therefore, as proposed by the Deputy that a company should thereafter have 14 further days in which to record the information received is, in my view, unreasonable. I do not think it is unreasonable to require a company to record the information they receive within three days. Indeed, human nature being what it is, the more time slips by with this sort of obligation the more chance there is of it being ignored or forgotten completely. I want to stick to a short timetable here which, in the circumstances, I think is entirely reasonable.

Regarding the sort of case that Deputy Bruton mentions, where a company are perhaps losing a great deal of money and they might have their attention diverted away from requirements of this kind, I suggest that such a case is where people at large really want to know what is hapening in a company, and it is more important that they know at a time like that. For that reason, a short period is important. The total time that would elapse under the present situation and what Deputy Bruton proposes would be 19 days. If somebody disreputable, for example, were to come in to a company and acquire a significant shareholding in it which would cause people to think twice about dealing with it, and if there was no obligation to record that fact for 19 days, then somebody trading with that company in ignorance of his control of the company might well feel aggrieved. For that reason I feel that we should keep the time limits to the shortest possible. Particularly it should be borne in mind that this is not some sort of public notice that has to be given by the company. This is simply the secretary of the company writing down on the relevant register, minute book or wherever it is the one line of information to the effect that on the blank day of blank, X became the holder of 10,000 shares in this company.

Mr. J. Bruton

I will not pursue this matter. It is not a big issue. I would prefer to see the time limit of notification lengthened rather than emphasise the time limit for the entry of the information once received.

Amendment, by leave, withdrawn.

Amendment No. 8 not moved.

Mr. J. Bruton

I move amendment No. 81:

In page 54, subsection (9), line 32, to delete "at" and substitute "one hour before".

Section 54 is all about a register of interest in shares in the company. There are two ways in which this register is available to the public. One is within ten days of a requirement for the provision thereof and the payment of 15 pence for every 100 words of information provided; the other is once a year that it shall be provided at the annual meeting and remain open and accessible during the continuance of the meeting to anyone attending the meeting.

It seems to me that if there is a meeting going on and you are going to have people running up behind the chairman and looking at registers and messing around with papers and saying, "What is this and this", people who are dealing with other business at the meeting will be somewhat distracted. It seems here that the only time the register shall be opened under section 54 (9) is actually during the meeting, while the business is going on, so we are asking people to do two things at the one time. It is a sensible suggestion that the register should be available one hour before the meeting so that people who are coming to the meeting should have the time before the meeting starts to look at the register of interests and shares; if they want to raise something or anything arises from that during the meeting, they will have had an opportunity during that hour to get the information so that they will be able to raise it at the meeting. It may well be that if they are only able to look at this register during the meeting itself the point at which they would have raised the issue arising from that information will have passed because the chairman will have gone on to other business. I think my amendment is a very reasonable one for that reason.

Mr. O'Malley

The amendment relates to section 54 (9), which requires the register of directors' and secretaries' holdings must be available for inspection during a company's AGM by any person attending the meeting. The Deputy is proposing that the subsection be amended to require the register to be viewed one hour before the AGM begins. I have to say that I do not have any great problems of principle with what the Deputies are proposing but I must question whether such an amendment is necessary. The provision as drafted is already contained in section 190 (7) of the 1963 Act and I am not aware of any situation where members or others felt they were not given adequate time to inspect the register. It must be remembered that the Bill already provides that the register must also be available for inspection at all reasonable times during business hours to any person whatsoever. Section 54 (5) provides for this.

The provision in subsection (9) that the register shall also be available for inspection during the AGM is simply an additional facility for members and others who may be attending the AGM. I have to say also that frankly I do not consider the type of provision proposed by the Deputies to be good law. A consequence of the proposal would be that if the register of directors' and secretaries' holdings were not produced until, say, 45 minutes before the AGM, then strictly speaking the company and every officer in default would be guilty of an offence by virtue of subsection (10) and would be liable to a fine of up to £1,000. In practice, the only people I can see bringing this sort of default to the attention of the prosecuting authorities would be people who want to harm the company. Furthermore, I consider that the prosecution of such an offence would be an unnecessary expense on the State and, indeed, on the company. I would regard what the Deputies are proposing as unnecessarily bureaucratic. I am afraid I have to oppose it, first on that very basis and second on the grounds that it is not necessary.

Mr. J. Bruton

It seems to me that all you would have to do to get around that would be to postpone the start of the meeting for 15 minutes until the hour had expired.

Mr. S. Barrett

What is the point of having a register available during a meeting if the meeting is in progress and people cannot look at it? If you are going to have the provision at all you might as well have it available when people can look at it, say, an hour or half an hour before the meeting, but it should be available. Otherwise do not have it at all. I am glad to see the Minister is concerned that people could be fined up to £1,000, but you can be fined up to £1,000 if you change the index within ten days. It is not we who are introducing bureaucracy into this whole affair. It is a reasonable amendment.

Mr. O'Malley

As I pointed out, the register is available during business hours anyway. This is only an additional convenience. I will compromise with the Deputies by putting it at one quarter hour before.

Chairman

Are we accepting the amendment to Deputy Bruton's amendment?

Mr. O'Malley

I move amendment No. 1 to amendment No. 81:

To insert the word "quarter" before the word "hour".

Mr. S. Barrett

Would it be better to say one quarter of an hour before the appointed time of the meeting? In other words, suppose the meeting is called for 3 o'clock and it does not start until say, 3.05 p.m.

Mr. O'Malley

If something preferable could be devised we can do that on Report Stage. I am thinking of meetings that are held in places where it might not be open an hour or even a quarter of an hour beforehand, in hotels where they have a succession of meetings, for example.

Mr. J. Bruton

If it is only a quarter of an hour that problem should be got around quite easily by just delaying the start of the meeting long enough to allow anyone who wants to read the register to do so.

Amendment to amendment No. 81 agreed to.

Amendment, as amended, agreed to.

Question proposed: "That section 54, as amended, stand part of the Bill".

Mr. J. Bruton

Under subsection (8) you can get the document within ten days and under subsection (7) you can inspect it in the premises. For instance, a well known company quoted on the Irish Stock Exchange, formerly Edenderry Shoes are now having their AGM in London. Although they have substantial Irish interests and were an Irish company up to now, will it be possible to get the information easily under subsection (7) if the index is kept in an office in London? If that is to be the tendency, I think we are going to find increasingly that subsection (8) is the one that will have to be used. It is a somewhat cumbersome provision.

Mr. O'Malley

The position so far as I know, and we are checking the position as I speak, is that an Irish company must hold their AGM within the jurisdiction. They must have their registered office, as far as I know, within the jurisdiction.

Mr. J. Bruton

Substantial share-holding of a company quoted on the Dublin Stock Exchange — European Leisure formerly Edenderry Shoes — are held by Irish people. They are having their AGM this week in London. That is not going to make it terribly easy for people over here to get this sort of information on what is happening. Maybe they are protected otherwise.

Mr. O'Malley

I am advised that it depends on where the company are registered, where their registered office is, and the AGM must be held in accordance with the regulations that pertain to their registered office. I thought an Irish registered company would have to hold their AGM in Ireland. I cannot find the reference to it now but we will look it up and I will let the Deputy know. If they are Irish registered I do not think it is a desirable practice that they hold their AGM outside Ireland. I will do all I can to help the tourist trade in Edenderry. I suggest that the company revert to their more humble origins in Edenderry for the purpose of holding their AGM.

Mr. Briscoe

My understanding was that some other companies—like American and British companies—are encouraged to have their AGMs over here; although they have the subsidiary conpany here they are permitted to have their AGMs in Ireland. What is the difference? Is this not a quid pro quo?

Mr. O'Malley

Our law does not prevent the company of another country holding their AGM here if they want to. Indeed, I would encourage it. What we are talking about here obviously are Irish companies. Any foreign companies who want to hold their AGM here are more than welcome. We can provide facilities in all parts of the country but we do not reciprocate in these matters at the moment.

Mr. Briscoe

In 1988 for the first time in 34 years the Guinness Company in Britain said they would like to hold more AGMs over here. That is why I was concerned about starting to put an embargo on any company holding their AGM in another country. These facilities should be available to Irish shareholders. A copy of the register should be on show or available here to facilitate Irish shareholders who are not prepared to travel to England or elsewhere. I am a little concerned that we might be throwing the baby out with the bath water if we suddenly said, "No, you cannot, subject to certain provisos."

Mr. J. Bruton

Subsection (5) relates to the availability of the register of interests in the company during business hours in the registered office of the company. That applies, I take it, to Irish registered companies. There may be many Irish registered companies whose main business interests are not in this country. Conversely, there are probably companies registered overseas, for instance in the Isle of Man which may be carrying on substantial business in this country. Under the company law in the Isle of Man they have removed formalities associated with the formation of companies, particularly the abolition of the need to file a declaration of compliance by a duly authorised person. In the Isle of Man private companies which have bearer or registered shares do not even have to file accounts in the public registry or elsewhere and also are no longer obliged to state their objects in the Memorandum of Association. A company in the Isle of Man is presumed to be resident there and therefore eligible to benefit from all of these concessions unless it is registered as being a non-resident in the Isle of Man. It seems to me, and this is a point that I would like to put to the Minister quite seriously, that if we impose too many requirements on companies operating here they may register in the Isle of Man where they will have no disclosure requirements at all. Therefore I suggest to the Minister that perhaps subsection (5) should be amended to bring within it companies conducting substantial amounts of business in this State as well as companies registered here. Otherwise there is a danger that companies now registered here will re-register themselves in the Isle of Man to avail of all of these very generous concessions under the Isle of Man Companies Act of 1986, which is going in completely the opposite direction to company law in virtually every other state around it.

While other states, including Ireland, Britain and those of continental Europe are all moving towards more disclosure, the Isle of Man deliberately, in order to attract business, is moving towards less and less disclosure. They are not obliged to comply with any EC requirements because they are not part of the EC. I think they are going to prove to be very much more of an attraction from the point of view of those wishing to avoid company law just as there is already an attraction from the point of view of those wishing to avoid onerous personal taxation. The only difference is that you can move a company much more easily than you can move yourself because to move yourself you have to actually live in the place. You do not even have to go to the Isle of Man in order to move your company to there. I am not able to go into detail on that but that seems to me to be the case. It seems to me, therefore, that these bearer share companies with freely transferable shares in bearer form, which is the new Isle of Man phenomenon, are going to be used to run a coach-and-four right through all this stuff we are at here today. One way of dealing with that, I suggest to the Minister, would be to apply the provisions of subsection (5) to companies doing substantial business here requiring them to maintain a registered office wherein this sort of information would have to be made available.

Maybe this is not quite the place to bring in an amendment of this kind but I would ask the Minister if he would look at this possibility. I am quoting here from an article by Peter Bond who is a senior manager with Charles Kane and Company, an Isle of Man company who, I think, are promoting the idea of registering in the Isle of Man. It is something the Minister should take fairly seriously.

Mr. O'Malley

I am grateful to Deputy Bruton for drawing this to my attention. I certainly think it is a matter that we will have to deal with. Whether it is appropriate to do it in this particuar section is open to argument. Ideally it would be better dealt with, perhaps, in a section dealing with registered offices. I think we will have to recognise that this difficulty is there. Of course, not only the Isle of Man but all these exotic places such as the Channel Islands, the Cayman Islands, Liechtenstein, Andorra and wherever else is in favour at the moment with those who engage in these matters.

Mr. J. Bruton

I take it that the Minister is going to come back to us on this. It probably will arise later on in the Bill as well.

Mr. O'Malley

I will. It is quite a substantial point. It is not just in relation to the matters we are discussing now. It is more fundamental, and I was aware that things were becoming even more free and easy in the Isle of Man than they had been hitherto. It is something that we will have to take into account otherwise we will lose control over companies, something I am not prepared to allow happen. In principle if somebody is trading here he will have to abide by the rules of this country, whether he goes to the Isle of Man, the Cayman Islands or somewhere else. We may suggest the insertion of a section to making that clear.

Mr. S. Barrett

It is not just a question of the companies having preferential treatment if they register in these places, but the fact that we are passing new laws bringing in obligations for companies here which makes it easier for competitors to get information on these companies who in turn may not be able to get similar information about them. That is the big difficulty I see. That is why we have to be very conscious of the fact that we are exposing information to people who may want it, not for trading purposes in the true sense, but from the point of view of taking the business of Irish companies. That is the real difficulty I see in all of this.

Mr. O'Malley

That is a difficulty which has been adverted to before. The difficulty is compounded by the fact that the Isle of Man and the Channel Islands are not within the EC although for other purposes they say they are part of the United Kingdom. What I might do is have some consultations with the Department of Trade and Industry in London as to how they cope with it, because British companies would be perhaps even more liable to be subject to this problem of improper competition than Irish companies would and I will see how they cope with it.

Question put and agreed to.

NEW SECTIONS.

Chairman

Is it agreed that we take amendments Nos. 82 and 83 together? Amendment No. 83 is consequential to No. 82. Agreed.

Mr. O'Malley

I move amendment No. 82:

In page 54, before section 55, to insert the following new section:

"55.—(1) A company may remove an entry against a person's name from the register of interests in shares and debentures kept under section 53 if more than 6 years has elapsed since the date of the entry being made, and either—

(a) that entry recorded the fact that the person in question has ceased to have an interest notifiable under this Chapter in shares in, or debentures of, the company, or

(b) it has been superseded by a later entry made under the said section 53 against the same person's name;

and in a case within paragraph (a) the company may also remove that person's name from the register.

(2) Where a name is removed from a company's register of interests in shares or debentures in pursuance of subsection (1), the company shall within 14 days of the date of that removal make any necessary alterations in any associated index.

(3) If default is made in complying with subsection (2), the company and every officer of it who is in default shall be guilty of an offence and liable to a fine.".

These two amendments propose the insertion before the present section 55 of two new sections. The sections I am proposing to insert concern the removal of entries from the register of directors and secretaries holdings which is required to be kept by a company under section 53. Provisions along these lines are already contained in Chapter 2 of this Part relating to the register of shareholders in excess of five per cent, the relevant sections in Chapter 2 being sections 78 and 79. Section 78 allows a company to remove a person's name from the register where six years have elapsed since that person's interest in the company had ceased. Section 79 lays down the sanctions which apply where entries in a register are removed otherwise than in accordance with section 78. All we are doing here is essentially recognising that provisions like this are just as necessary in Chapter 1 of this Part as they are in Chapter 2 and rectifying this oversight in the published text of the Bill.

Amendment agreed to.

Mr. O'Malley

I move amendment No. 83:

In page 54, before section 55, to insert the following new section:

"56.—(1) Entries in a company's register of interests in shares and debentures under this Chapter shall not be deleted except in accordance with section 55.

(2) If an entry is deleted from a company's register of interests in shares in contravention of subsection (1), the company shall restore that entry to the register as soon as is reasonable and practicable.

(3) If default is made in complying with subsection (1) or (2), the company and every officer of it who is in default shall be guilty of an offence and liable to a fine.".

Amendment agreed to.