Section 128 marks the beginning of Part VII of the Bill. Before we start on the section perhaps the Minister would like to give the committee a brief outline on the provisions of this Part.
I move amendment No. 174:
In page 106, before section 128, but in Chapter 1 of Part VII, to insert the following new section:
128.—(1) This Chapter applies to any company if—
(a) at the date of the commencement of its winding-up it is proved to the court, or
(b) at any time during the course of its winding-up the liquidator of the company certifies, or it is otherwise proved, to the court,
that it is unable to pay its debts (within the meaning of section 214 of the Principal Act).
(2) This Chapter applies to any person who was a director of a company to which this section applies at the date of, or within 12 months prior to, the commencement of its winding-up.
(3) This Chapter shall not apply to a company which commences to be wound up before the commencement of this section.
(4) In this Chapter—
‘company' includes a company to which section 351 of the Principal Act applies;
‘relevant date' means—
(a) the date of commencement of the winding-up, in a case where it appears to the court that the company is unable to pay its debts at that date, or
(b) in any other case, the date on which it is certified or proved to the court, as the case may be, that the company is unable to pay its debts.
(5) This Chapter applies to shadow directors as it applies to directors.".
This is grouped with a large number of others. I will give the committee an introductory statement on the group of amendments.
Amendments Nos. 174 to 177 in the name of the Minister.
I think we have amendments to those.
Amendments Nos. 175, 176, 177, 180, 181, 182, 184, 185, 186, 187, 188, 189, 200, 201 and 203 form a composite proposal. Amendment No. 178 is an alternative. Amendments 1, 2 and 3 to amendment 175 and amendments 1 and 2 to amendment 177 are related. We are taking all those amendments together. Is that agreed?
I do not know. Within this group there are a total of five or six new sections which if they were being taken as sections in the Bill itself would be discussed individually. We are not just taking a group of small amendments which are related together. We are taking a new Part and we want to discuss it as one section rather than section by section.
It is not as bad as Deputy Bruton thinks because the proposal is to divide section 128 into four separate sections to make it easier. Section 128 is a very long section — it is three pages long and it is proposed to divide it in four sections. All the other amendments are consequential on the division of section 128. The reference has to be changed because the numbers of the section will be changed and these will have no more consequence than that. If I could take the group together it would make it clearer.
That is the position. Should we take the suggested grouping it will become clearer.
As has been the practice when the Committee commences consideration of a new Part it might be for the benefit of the Committee if I said a few words about Part VII in general before going on to speak to the amendments.
Along with the provisions which we discussed earlier about fraud, reckless trading and so on, it is fair to say that Part VII pretty much represents the wholeraison d’ï¿½tre of this Bill since it has to do with disqualifying people from being company directors for proven abuses and placing other related restrictions on them to curb the so called phoenix syndrome. The Committee Members are fairly familiar with that concept by now.
While most observers have given a general welcome to the measures proposed in Chapters 2 and 3 of Part VII, there has been considerable debate both within the Oireachtas and outside it about the provisions of Chapter 1. Public opinion on these provisions is fairly evenly divided with some people wanting to go much further than the Bill proposes, while others argue that the provisions involved are anti-enterprise and they catch the innocent with the guilty and so on.
Having re-examined the provisions thoroughly I have come to the conclusion that some of the arguments on both sides have a certain validity and that the provisions concerned ought to be somewhat refined as a consequence. I would, therefore, propose on the one hand to liberalise the provisions by making the following changes.
First, rather than have the provisions in Chapter 1 apply automatically, as it were, I am now proposing that a person would not become subject to the restrictions unless the court declared that he should. This would counter the complaint that the provisions are too automatic and draconian in nature. Second, I now propose that the court could not make such a declaration in two specific cases: (a) where it was satisfied that the person concerned had acted honestly and responsibly in relation to the conduct of the affairs of the company — this would counter the criticism that the existing text catches the innocent with the guilty and takes no account of a director's culpability — or (b) where the person concerned was a director of the company solely by reason of his nomination by a sponsoring bank or venture capital company. Third, the restrictions would only last for a set period, in other words five years, rather than be open ended as at present. Finally, the provisions would only apply to companies whose winding up commenced after the Bill came into effect. That is the way I propose to liberalise the provisions of Chapter 1.
On the other hand, I would propose toughening the provisions by making the following changes. First, where the court did make a declaration, the minimum capital amounts for the new company would be double what they are in the current text, in other words, they would now be £100,000 for public limited companies and £20,000 for private companies. Second, the restrictions would apply not merely to any company with which the director subsequently became involved but also to any existing company of which he is a director. Thirdly, and finally, the restricted company could not take advantage of the new more liberal directors' loans régime in Part III which we discussed earlier.
I would also propose to make several substantive changes to the content of the provisions along the way both to tighten up the drafting and to improve the layout and presentation, and we will debate these in due course.
That is an overview of what the Part is all about and the ways in which I am proposing to amend it. For discussion purposes it will be necessary to group, as we have already agreed, a large number of amendments together. Moreover, the changes which I am proposing in this Part are complex and to do justice to them, my explanation will be somewhat on the long side. In the circumstances I ask the Committee to bear with me while I set these out. I know that technically the amendments tabled by Deputies Bruton and Barrett to my amendments Nos. 175 and 177 would be the first to be discussed. But these Deputies and the Committee as a whole might benefit if I were to give my explanation for the main amendments in the first instance. When the Deputies hear what I have to say they may view the need for their amendments in a different light.
Getting back to the amendments themselves at this point, what I am proposing is to break up the ideas in section 128 into four separate sections dealing respectively with (a) the scope of application of chapter 1; (b) the restrictions involved; (c) the mechanics of its application and (d) the question of relief. The first amendment would replace and amend what are now subsections (1), (2), (3) and (14) of section 128 by a new section. The most significant change in subsection (1) compared to the present text is the removal of the automatic application of the restrictions involved to directors of insolvent companies. The restrictions would now apply only where the court becomes involved rather than as provided by the current subsection (1) (a) at any time when the liquidator certifies that the company is insolvent. The second change in subsection (1) is the minor one of replacing the existing reference to contingent and prospective liabilities by an overall reference to section 214 of the 1963 Act. This change has already been made in certain other areas of the Bill, for example, section 155 (1) (a) and the new reference is somewhat less unwieldy. Subsection (3) of the revised section is new and is intended to provide that the section will not have retrospective effect. In other words, when the section comes into effect there will obviously be many companies in liquidation and the effect of the section as currently worded is that in those cases the liquidator could certify to the court at any time during the course of its winding up that the company is unable to pay its debts. This appears to be inequitable, so subsection (3) would limit the scope of section 128 to cases where a company commences to be wound up after the section comes into force.
The proposed new subsection (4) would bring within the scope of the section directors of a company to which section 351 of the Principal Act applies. These are companies incorporated outside the State which establish a branch but not a subsidiary in the State. It has been suggested to the Department that some Irish companies might deliberately decide to relocate outside the State in order to avoid being subject to these measures. The reference to section 351, therefore, is intended as an anti-avoidance measure. Finally, subsection (14) of the present section 128 has to do with the scope of the provisions and should properly appear in the proposed new scope section.
The proposed new section 129 is a development of subsections (4), (5) and (6) of the current text of section 128. The substantive changes which it would make are as follows: First, rather than have the restriction apply automatically to every director of an insolvent company, the procedure would, as I mentioned earlier, be court based. Subsection (1) of the new section would, therefore, require the court to declare that a director of an insolvent company should be subject to the restrictions concerned unless it was satisfied as to the matters set out in the proposed new subsection (2). I think that this would make the whole procedure more legally certain since the restrictions would only apply where the court declared they should. One of the criticisms of the present section is that although it purports to be automatic, the sequence of events is such that a director cannot be certain where he stands under the present subsection 128 (1) (a) and (7) taken together.
Second, the second main change that this amendment would make is that the court could not make a declaration if it was satisfied about either of the following matters: (a) that the person concerned had acted honestly and responsibly in relation to the conduct of the company's affairs and that there is no other reason it would not be just and equitable to make the declaration; or (b) the only reason a person was a director of a company concerned was that he was nominated by a supporting financial institution. I am thinking here in terms of banks or investment bodies, such as the National Development Corporation.
The first of these tests would import the idea of the director's own conduct in relation to a company and is a response to the criticism that the section currently catches the innocent with the guilty. The second test is a pragmatic one and reflects the fact that in many cases a financial institution will only agree to lend money to a company, or indeed invest in it, if it is allowed to nominate a director to the board. Importantly, however, the fact that an institution put a nominee on the board should not of itself rule out the restriction of such a person by the court under the section. There may be cases where the conduct of the nominee is such that he too should be restricted along with the other directors. The third main change in the new section would be that the minimum capital requirements for the new company with which a restricted director became involved would be doubled from what they are in section 128 (5) of the present text, in other words, from £50,000 to £100,000 for a public limited company and £10,000 to £20,000 for a private company. The existing amounts have been widely criticised as being too low and while there is room for debate on the matter I would be more confident about raising the amounts now given the other changes I am proposing and the sharper focus they would give to the provisions concerned.
The other main change the amendment would make has to do with the nature of the restriction itself. As currently worded, section 128 (4) provides that a person "shall not be qualified to be appointed or to begin to act in any way whether directly or indirectly as a director or secretary or to begin to be concerned or take part in the promotion or formation of any company" unless that company meets the minimum capital requirements involved. On reflection I think this reference to a person beginning to act as a director is somewhat too liberal and that the emphasis should instead be on stopping such a person from continuing to act as such a director.
The third of the proposed new sections subdividing the present section 128 — in other words, the proposed new section 130—simply repeats subsections (7), (8), (9) and (13) of the present section without substantive amendment and I do not think it calls for any particular comment. The same goes for the fourth of the proposed new sections — proposed section 131 — which consists of subsections (10), (11) and (12).
The fact that I am proposing to restructure section 128 in this way means that we will have to make several other consequential amendments altering the existing cross references to section 128 elsewhere in Part VII of the Bill. That is the reason — and I think the only reason — for amendments Nos. 180, 181, 182, 184 to 189 inclusive, 200, 201, and 203.
As Deputies will have gathered from my lengthy explanations in relation to the revision of section 128, we have put a lot of thought and effort into devising a scheme which is fair and at the same time, legally certain. We have listened very carefully to all the objections raised by various interested parties to section 128 as it is in the Bill at present. As mentioned, some of those argued for more stringent penalties whereas others thought we had gone too far. All were agreed nevertheless that the abuse of the phoenix syndrome must be tackled.
Chairman, I apologise for taking so long to introduce this first group of amendments to Part VII but I felt it necessary to do so, not just because the amendments concerned are important but because, as I said earlier, many people would regard these particular provisions as among the most significant and crucial in the whole Bill.
I would like to acknowledge at the outset that the Minister, in these amendments, has sought to meet some of the criticisms that were expressed by Fine Gael and others when the Bill was discussed in the Dáil on Second Stage. However, I think there remains a number of problems with the approach the Minister is adopting and the Fine Gael amendments on this occasion represent a different and, we believe, a better way of dealing with the problem.
Let us start with where we are agreed with the Minister. We agree with the Minister that there should be provision for disqualifying directors who have by recklessness, negligence or the commission of criminal offences covered by the Bill, resulted in the creditors losing their money, or the employees losing their rights to redundancy payments or any other such eventuality. However, we feel that the approach the Minister is adopting, which essentially is that there is a presumption that somebody should be disqualified simply because the company failed, is going too far. The fact that a company fails should not create a presumption as is the case here that the company directors should be disqualified. We believe that section 135 — this is the next chapter which we are not considering it at the moment — which also provides for disqualification for certain persons from acting as directors or auditors or being involved in the management of companies, is the better approach in that it is more targeted. It says that if a person is convicted of an indictable offence he should then be disqualified. We do not believe, however, that there should be a presumption in favour of disqualifying people whose company simply became insolvent.
I acknowledge that section 135 does not contain as wide a range of grounds for disqualification as one would like. It is targeted specifically in its present form at those who have committed indictable offences involving fraud or dishonesty. That is the reason we have proposed amendment No. 192 (a) which adds to a conviction involving fraud or dishonesty any conviction involving fraud, dishonesty, negligence or recklessness. We believe that disqualification should apply in all those circumstances and not in the narrow set of circumstances outlined in section 135.
We also agree with the Minister that there should be an increase in the paid up capital of companies, but we believe that should apply to all companies. The evidence is that the number of occasions upon which somebody who has already failed in business fails the second time if they establish a company is on average actually less than the number of times a first-time starter fails. In other words, the evidence suggests that people do learn by their mistakes and that there is actually a greater risk of a failure arising in respect of an entirely new company started by somebody who has never set up a company before than there is by somebody starting again having once got into difficulty. If that is so, and the international evidence to which I had access when I was Minister for Industry and Commerce clearly indicated that that is so, then the appropriate approach is to require a higher allotted share capital of all companies no matter who sets them up, in other words, that there would be more money in the company, and the company would be better funded initially and therefore less likely to fail, and that there would be more money available in the company to meet creditors in the event of it failing. That is the reason Deputy Barrett and I proposed amendment No. 178 which says that in respect of all companies, not just those of which one of the directors was previously involved in an insolvent company, but all companies, there should be a minimum paid up capital of £30,000 in the case of a public limited company and in the case of a private limited company a limited paid up capital of £3,000. I am not dogmatic about the £3,000 — that could be £6,000 or even £10,000 — but rather than setting up these £2 companies which we have at the moment, we believe there should be a minimum of a £3,000 and possibly higher for all companies because the failure rate is greater among new start ups who have no record than it is among restarts. That is the factual situation. If we are concerned with protecting creditors we should be concerned with the practical protection of creditors rather than with some form of punishment of people simply because they failed in business. As we all know, the essense of enterprise is the possibility of failure as well as the possibility of success.
We hear many speeches from Ministers for Industry and Commerce and other Ministers extolling risk talking. Implicated in the concept of risk taking is, of course, the possibility of failure. If we say that everybody who is involved in a failed company is automatically presumed to be worthy to be disqualified unless he can convince a court that he was honest and the burden of proving his honesty is on him under amendment No. 175, then essentially we are saying any body who has failed is presumed to be dishonest until they have proved themselves honest. To my mind that concept is not consistent with the sort of enterprising society that I believe, and I am sure the Minister believes also, we should have.
Let us look at the practical situation contained in the Minister's amendments. In essence every company that fails will now have to be the subject of a court hearing. It will not be a matter that can simply be dealt with by the Master of the High Court. Every company will have to be the subject of a High Court hearing because now, if the company is insolvent, the court will have to make an inquiry as to whether the people running it are honest.
If they contend that they are honest, under amendment No. 177, having received notice from the liquidator that the company was insolvent, they will have to lodge in two daily newspapers a notice of an application that they intend to apply to the court to rebut the presumption created by this Bill that they are dishonest because they failed in business. Even if they subsequently succeed in convincing the judge that they are honest, they have to advertise the fact that they are blacked in two newspapers circulating in their area. I believe that these people will be avoided by others wishing to do business in the future once their names have appeared in a paper under this section. Presumably every such application will now be contained in Stubbs Gazette and similar gazettes, rather than just company names, individual names will now have to be advertised as applying for release under section 131 of what will then be the Act. Even if subsequently in the court the judge decides that they were honest under the new section 125 (2) (a) the harm will have been done by virtue of the fact that they had to put a notice in the newspapers indicating that they were setting out to rebut this presumption of dishonesty created by amendment No. 175.
I do not think that that is the right approach. I do not believe that failure should create a presumption of dishonesty which somebody has to disprove to a court. What cost is going to fall upon individual directors who now have to prove their honesty to court? The minimum cost of having any procedure of this kind processed through the High Court is going to be £3,000 or £4,000. Court fees are extremely high as Mr. Justice Walsh pointed out. There will also be legal fees that will have to be met. People who were entirely blameless and subsequently proven to be so and accepted to be so by the court under section 129 (2) (a) will have to spend between £2,000 and £4,000 advertising that they had to apply for relief and then getting a court to agree that they were honest. To my mind that is creating a situation which is entirely unacceptable from the point of view of promoting risk taking. People, simply because they failed are going to be made a show of under this section, not people who have committed crimes or who have been involved in dishonesty because those people can be more than adequately dealt with under section 135. We do not need this Part to deal with dishonest people; they can be caught under section 135. This Part is concerned solely with every person who failed, not just the dishonest ones. If we were concerned with disqualifying dishonest fraudulent directors, section 135 covers them more than adequately. We do not need any of these amendments to deal with those people.
There are a few curious amendments which the Minister proposed which we would like to home in on, and they are the subject of our amendments to the Minister's amendments. I would like to referseriatim to the amendments in the names of Deputy Barrett and myself. The first is in subsection (2) (b). For example if a financial institution purchases shares in a company and puts a director on the board to protect its interests, the financial institution has special treatment for that director in terms of the provisions of this section. To my mind financial institutions do not deserve special treatment. For example if the Minister, Deputy O’Malley, in his personal capacity makes an investment of £20,000 in a company and his wife agrees to go on the board of that company as a director to represent his interests, he is entitled to the same treatment and protection for his wife not being disqualified as any financial institution because, after all, a financial institution has more information, not less, than the Minister would in making an individual decision to purchase shares. Why, therefore, should there be special protection here for financial institutions which have the financial clout to demand personal guarantees and all sorts of other things, to protect themselves which the Minister or any other Member would not have in making a personal investment in a company? Why we need section 2 (b) to protect financial institutions I am not quite sure.
We are taking out the provision giving special status to directors appointed by financial institutions in respect of the purchase of shares. I can understand that there may be a case for protecting financial institutions where they are extending credit facilities as distinct from purchasing shares because purchasing shares involves going in as shareholders in the normal way. Since it is risk taking they are engaged in, why should they enjoy any protection over and above other individual risk takers who wish to invest?
The next amendment is amendment No. 2 which says that no financial institution shall enjoy such protection if it has already demanded personal guarantees from the directors of the company. I believe that the bank which has personal guarantees from directors has more than enough protection not to require any special treatment in the form of additional safeguards being built in which are not enjoyed by normal investors in companies who appoint directors to those companies.
The next amendment in our name proposes the deletion of section 125 (5) (c) of amendment No. 175 which says:
In this section, "financial institution" means—
(a) a licensed bank, within the meaning of section 24,
(b) a company the ordinary business of which includes the making of loans or the giving of guarantees in connection with loans, or
I have no problems with that. That is a clear definition of what we are talking about and if you are going to give this sweetheart treatment to financial institutions, that is a fair definition, but we have a very curious section here which says that a financial institution also includes "a prescribed company or undertaking". What this means essentially is that the Minister could say that any company will enjoy this special protection if he prescribes it as having that protection — any prescribed undertaking. He could decide that a supermarket company could enjoy this protection under this section.
I think all sorts of companies will look for this exemption. They will say the Minister is entitled to prescribe who he wants under this section and that there is no restraint on him. The company does not have to be a financial institution since a financial institution means "a prescribed company or undertaking". I do not think the Minister should be able to extend this protection to new categories simply by making an order over which there is no supervision. I therefore, propose the deletion of paragraph (c).
We should say what we are talking about and mean it and not create a situation in which the Minister can add at will any body he wants. I am not suggesting that the present Minister would add on anybody improper or that he would be subject to any improper representations to add friends who had set up companies to the category of institutions which enjoy this special protection here — I am absolutely sure in the case of Minister O'Malley there would be no question of doing a thing like that, but that is not the point. The point is that successor Ministers are being given a power they should not get.
The next amendment is amendment No. 1 to amendment No. 177. Under this Chapter a person may apply for relief: in other words he can prove he is honest and he can try to rebut the presumption of dishonesty. There are two points about this. First, there should be a time limit on the period within which a person can apply for this relief. If we are going to have this Part at all — and I do not think we should have it because Fine Gael amendments represent a better way of dealing with this problem — and if we are going to have the relief, in order that the affairs of the company can be wound up at some stage and not left hanging there, with the liquidator having to wait to see if one of the directors is going to apply for relief under this section, there should be some limit on the delay that can occur from the time a person is notified that they are going to be disqualified and the time that they can apply to remove the disqualification. We have suggested a time limit of a year. I think a year is not unreasonable because some people whose company fail, perfectly honestly, may be so shattered by the experience or may even suffer a nervous breakdown that they would be unable to deal with correspondence and a reasonably generous time limit should be allowed so that they can apply for relief against disqualification which essentially puts them on a black list and means they are marked for life in commercial terms. If there is not a time limit the affairs of the company in insolvency will never be wound up.
The other amendment we are putting forward is to delete this requirement to circulate in two daily newspapers the fact that you are applying for relief. Remember, we are talking about people who, in most cases are entirely honest, whose honesty will subsequently be vindicated by the court and whose only "crime" was that they were associated with a company which failed; and, of course, the essence of free enterprise is failure as well as success. To them at the moment we are saying that in order to obtain relief from disqualification these people must advertise their failure in two daily newspapers. I do not think there is any need for this advertisement. An alternative might be that the liquidator or receiver would be obliged to inform all creditors that such an application had been made, not advertising in the paper but only telling those directly concerned. I think that would be a better approach than requiring this advertisement to be submitted. That is essentially the set of amendments we have in our name and I believe the right approach is not to have this automatic presumption of disqualification based on dishonesty just because people have failed, but to do two other things, to strengthen section 135 which provides for disqualification for fraud or recklessness or negligence and to raise the subscribed paid up capital of all companies from the present ridiculously low limit of £2.
I regret I have to leave. Minister Leyden will take over for me. But I thought it was only right that I should reply to Deputy Bruton as best I can having heard him because it would be very difficult for Minister Leyden to do it when he had not heard all Deputy Bruton had to say.
Could I make one quick point if the Minister is going to reply.
Subsection (3) of Amendment No. 175 reads:
The requirements specified in subsection (1) are that—
(a) the nominal value of the allotted share capital of the company shall—
(i) in the case of a public limited company, be at least £100,000,
(ii) in the case of any other company, be at least £20,000,
(b) each allotted share shall be fully paid up, including the whole of any premium thereon, and
(c) each such allotted share and the whole of any premium thereon shall be paid for in cash.
Does that mean that if the share capital was £50,000 the £20,000 would not apply, or would you have to have fully paid up £50,000? That is one question I am asking the Minister. My second question is how does he envisage records being kept, and how can he guarantee that if the court makes a decision those records will be amended? Under amendment No. 176 it is the duty of the liquidator to notify the Registrar of Companies of the name of every person to whom paragraph (a) applies. If the liquidator notifies the Registrar of Companies presumably those persons names will go on some list. How will they get off that list if they are subsequently proved to be totally innocent?
Where is that? In amendment No. 176?
Yes, No. 176. I am just concerned to know from the Minister how records are going to be kept and how records will be amended and updated. What system would be used? I had other points to make but as the Minister has to leave I would be anxious to hear him on the points made by Deputy Bruton which I agree with.
This is very complicated and difficult. I will do the best I can in regard to it. I am not sure that putting these long sections into these Bills is the right way to go about it when, on Committee Stage, you have to try to recycle them into shorter, more manageable ones. I wish to goodness they had never put in section 128 as it is because it is madly unwieldy. Unhappily as a result of this we are now taking 19 amendments to it together. It is very hard to deal with each one separately as, ideally, they should be dealt with.
The first point I would make is that Deputy Bruton in the early part of his contribution just now kept talking about disqualifying a person, that we are disqualifying the directors and disqualifying entrepreneurs who tried and failed but tried and failed honestly. I want to make it clear that that is not the case. I draw his attention to the sidenote and the heading of Chapter I. We are dealing in Chapter I, which is all these sections and proposed sections, with restrictions on directors of insolvent companies. The question of disqualification, which is what Deputy Bruton talked about at length, begins five pages later at Chapter II under the heading "disqualification generally". All of this does not apply to disqualification and there is no proposal for disqualification in the whole of Chapter I, either as it stands or as it would stand if all these amendments were accepted. We are not talking about disqualification.
I was using the term disqualification in the sense that they will be disqualified from setting up companies in the normal way. They would have to have this extra share capital in the company which effectively means they would go on a black list.
They would not be disqualified from setting up any company. They would not be on a black list at all. They are simply restricted as to the type of company they can establish, and it will have to have paid up capital of £20,000.
They would have to be on a black list because if they are invited to become directors of a company and that company does not comply with subsection (3) of section 129, the company will have to know whether they are a person to whom this section applies. For the company to know that, such people would have to be on a black list.
They are not disqualifed from forming or joining the board of another company. The only restriction on them is that it would have in the case of a private company, paid up capital of £20,000, in the case of a public company, £100,000, which it would always have anyway and the purpose of this is not to set out to penalise people for the sake of penalising them; it is to stop the abuse of the phoenix syndrome. Deputies will have to answer the question now: do they want this phoenix syndrome to continuead infinitem or do they want to avail of the opportunity that is given to them in these sections of the Bill to stop it? I suggest that if Deputies stand back from the detail of it and from analysing single lines they will agree on reflection that we all want to stop this fraud that is going on all the time and this is the way to stop it.
Of course we do.
But you cannot say in one breath you want to stop the fraud and then raise an objection to every effort that is made to define how it is done.
We want to use a rifle, the Minister wants to use a machinegun. The person at whom this section is directed——
We are trying to meet that point. As the Bill stands, all of these people are automatically restricted. What I am trying to do is to give the innocent ones the freedom that they do not enjoy under the Bill. The Bill has been very heavily criticised for not going far enough and for not being stringent enough or penal enough. The point of view that Deputy Bruton is expressing is, I suggest, in the context of the overall comment on these sections, very much a minority view. It is that it is too penal or too stringent. The view that most people would take is that it is not stringent enough. As I explained at length in my opening statement, I tried to meet what I consider are valid arguments from both of those points of view or sets of objections to the Bill. I am trying to balance it. There is no question therefore of anyone being disqualified under this. They are perfectly free to go ahead and start again but they are subject to a restriction —£20,000 is to be paid up and I think that is fair enough. That is a relatively mild restriction given the known widespread abuse of the formation and liquidation of companies that has been going on now for years with people deliberately liquidating companies in order not to pay their debts. I think this is a relatively minor restriction placed on them.
The point is then made that they have to go to court and engage in all this expense and so on. They do not have to go to court. There is no compulsion on anybody to go to court. They can go to the court of their own volition if they want to be freed from this particular restriction of having to have £20,000 paid up capital. A lot of people would not find that an undue restriction at all. Therefore they would not bother going to the court.
They are on a black list.
I do not think it is fair to characterise the Minister's approach as putting them on a black list.
They have to be dealt with in some way if we are to stop the phoenix syndrome. Deputy Bruton is making up the phrase, a black list, suggesting that people are in some way dishonest or whatever. The whole point of this is that they are not and the draft legislation recognises that if people have acted reasonably and honestly they will simply point that out to the court if they do not want to be subject to the restriction. A lot of other people will go ahead anyway because the restriction is so relatively minor.
They have to prove that they acted reasonably and honestly.
They have to satisfy the court on that. That is not going to be very difficult. It is a much better situation from their point of view than the position under the existing Bill as passed by the Seanad where they are automatically excluded anyway and restricted.
Here we have an amendment which is being introduced to alleviate what was an absolute cut-off in the Bill as passed by the Seanad. Nobody is forced to go the route envisaged in the amendment but if they wish to avoid the £20,000 requirement that is being put there they can opt to go this particular route. As the Minister has said, the figure involved, £20,000, is not a colossal sum of money and, given that there has been a failure before, it is a guarantee to the public that people will be cautious. I cannot understand why there is an objection to this approach. It is certainly not right to characterise it as creating a black list because the person will have the opportunity but if they do not wish to go to the court they do not have to, provided they meet the other requirements set out, which are relatively modest.
With respect to Deputy Roche, that is not the case. Before I give an example I want to say that it is a little unfair to present the Minister's reply in an emotional fashion which has the tinge of suspicion to it that we on this side of the House are somewhat sympathetic to the phoenix syndrome or that we are somewhat sympathetic to rogue directors. We have endeavoured to say that rogue directors, people who should not be in business, can be restricted sufficiently if you widen the powers of section 135. If a small company goes into liquidation as a result of a rogue director and the company cannot get its money reasonably without fraud or dishonesty, the liquidator is required under this amendment to notify the registrar of companies of the name of every person. This means there must be a list and if one's name is on that list there is bound to have some stigma attaching to it. Whether you go the other route of setting up another company with £20,000 capital is irrelevant — you are on a list straightaway. I find this extraordinary.
We are here dealing with the Committee Stage of a Bill and we were castigated by the Minister in the newspapers for holding up legislation. Here we are dealing with numerous amendments that were never discussed on Second Stage and because I want to make a contribution of three minutes and because the Minister wants to go, I have to shut up. I think it is outrageous.
On a point of order, no one asked you to shut up and you should not take that attitude. I did not ask you to shut up. You should withdraw that remark because I have been more than fair with Deputies here. I did not ask you anything.
You did not use the words "shut up" but is it not the case that you wanted me to stop because the Minister——
I wanted to say something to you. I did not ask you to shut up.
Chairman, I offered before Deputy Barrett. I know the Minister has another appointment, but surely this is the essence of this Bill. If we are all agreed that the phoenix syndrome from which so many people have suffered has to be dealt with, I would like to see what the alternative is. I have looked at the amendments and the amendments to the amendments, and if we are all agreed the only question that arises is whether the impositions suggested here are punitive, or are they unfair. It is a question of scale as far as I can see and the requirement is that there should be a minimum paid up capital. Is it really being suggested in the 1990s that the minimum of £20,000 stipulated is punitive, unfair or unreasonable in any way? I do not believe it is. Over a period of 15 years I have personally dealt with many victims of the abuse of the phoenix syndrome. It is galling to see many of these directors driving around in company cars with a new life, while their victims have lost their jobs, their livelihoods, finance or whatever. If in 1990 it is suggested that £20,000 is too much, I simply cannot accept that. I would have preferred to see some yardstick applied whereby there would be some protection against the exposure of the new company — in certain cases it might require more than £20,000 depending on the exposure of that new company — but if we go for a simple suggestion of stipulating a particular figure, then £20,000 seems to be reasonable. I cannot accept the philosophical basis of Deputy Bruton's submission which is that is is somehow causing a black list or imposing a stigma on directors of all former insolvent companies even though some of them may have become insolvent because of the vagaries of commercial life as distinct from dishonesty or whatever. There must be some way of tackling the phenomenon that is rife at present. I am quite prepared to vote for Deputy Bruton's amendment if he can convince me of a more reasonable way then is suggested here.
I am sorry I have to leave. It is in the public interest that I go. I have to deal with something unfortunate that has arisen and is serious. It is not my choice or wish that I have to leave. I am sorry——
You have plenty of time to give interviews to the newspapers.
I am sorry I have to leave and it is a pity Deputy Barrett takes that view.
I take exception to the Minister's interviews in newspapers which imply that we are trying to delay the Bill.
There is nothing I can do about it and I think——
You can by not giving interviews of that type——
That comment speaks for itself and I do not need to say any more.
On a point of clarification, there was no interview. Stephen Collins was in on the committee on the previous Tuesday and made a report in the following Sunday's newspaper. That is what happened.
He did not.
On the three amendments Deputy Bruton has moved to amendment No. 175 I am sympathetic to the three of them and I am prepared in principle to accept them. However, I have a problem about the drafting of one or two of them but I am prepared to accept in principle the three of them. In regard to amendments Nos. 1 and 2 to amendment No. 177, I am prepared to accept the first one but I think it should read "not more" rather than "not less". The other point is that it is in the wrong place. It should be to the previous subsection. However, I am prepared to accept it provided it says "not more" instead of "not less".
I am also prepared to accept the second amendment which is to remove the provision about newspaper advertisements, but this will have to be done on the basis that the creditors will know. I suggest that the way to handle that is to enjoin the liquidator to inform them. I agree that it is inappropriate that the advertisement should appear in the newspapers because it gives the wrong impression. On amendment No. 3 to amendment No. 175, I agree that it is quite inappropriate that a phrase like "a prescribed company or undertaking" should apply. The reason it is there is that it was sought to exempt venture capital companies, but there is a difficulty in how you define a venture capital company. As it stands, the Minister could prescribe any kind of company and in my view that would be wrong.
I thought the Minister said that he would accept amendment 3 to delete paragraph (c).
In principle yes, but to substitute a venture capital company for it.
If you have problems with amendment No. 1 to amendment No. 172, would it not be with the purchase of shares.
No. The case was made to this Committee and was made in the Seanad that if you do not exempt the directors or nominees of venture capital companies from these provisions, you will not get any investment by venture capital companies. For that reason it is appropriate to put them in the same situation as a bank or, as in paragraph (b), a company that makes loans in the course of its business. I believe I have gone a long way in trying to meet the reasonable requests or suggestions, but I cannot go, I think it would be agreed, any further than that because we dilute the thing too much if we do. I believe I have met all the reasonable points that were made.
I will make one or two points here. First, I am glad the Minister has been able to accept the amendments we have put forward. There are just one or two points of clarification the Minister of State might be able to give. If amendment No. 1 to amendment No. 175 is accepted, it would delete a reference to the purchase of shares from the work of our financial institution. It seems to me the essence of venture capital acitivity is, in fact, the purchasing of shares. What I was objecting to was giving banks a privilege in regard to the public purchasing of shares which nobody else had. If banks are going to purchase shares, they should not enjoy any extra protection over anyone else who purchases the shares. If, on the other hand, you are talking about a new category, not banks but venture capital, it is not possible for the Minister to accept my amendment No. 1 and be consistent with what he has just said. That needs to be clarified.
What I was objecting to, however, was, as I said, giving special privileges to banks and also giving the Minister this unlimited power to add new companies to the list. He has indicated that he will accept amendment No. 3 and I presume what he intends to do then is to come in on Report Stage, having accepted it, with a new amendment defining a venture capital company. That is essential because otherwise we are going to have, as I said, this danger that the Minister could do anything he wanted and that is not good legislation.
Deputy Bruton is quite correct in his assessment of the situation, that on Report Stage we will be defining exactly the situation regarding venture capital companies. In relation to amendment No. 1, we would not be accepting that because amendment No. 3 will define——
Sorry, if you are going to put in a new subsection (c) to paragraph (ii) defining venture capital companies, then I would suggest that there is not any problem with accepting amendment No. 1, because amendment No. 1 will then be the one that relates only to banks I do not think banks should have a special privilege in regard to purchasing shares. If they want to purchase shares, banks should set up a venture capital arm. I do not think they should be given the protection simply as banks. It may be possible, therefore, for the Minister to accept amendment No. 1 and to deal with the problem by a new amendment on Report Stage, dealing specifically with venture capital companies.
Chairman, at this stage, as the Minister has agreed to certain amendments and is prepared to draft certain sections on Report Stage, I could not at this stage disagree with Deputy Bruton's assessment of his amendment. I request the committee to wait for Report Stage to have this matter clarified, and rectified in a sense. We will come back with the details at that stage. I would like to leave the Minister and the Department the flexibility in this regard.
You have flexibility, anyway. If you accept our amendments and look at them between now and Report Stage and you do not quite like the form, you can always come back with a Report Stage amendment. That is not a problem.
We have to work out the definition of the venture capital companies, so I think we should now await Report Stage in this regard.
There are one or two things I would like to explain, if I may, for the benefit of Deputies here, as to why we are saying a black list for innocent people is involved in this. First, as Deputy Barrett pointed out a few moments ago, the Registrar of Companies is going to have to be notified of every director of every company to whom this Chapter applies, and that means all directors of insolvent companies. That is what happens under amendment No. 176. Every such director of every insolvent company will, therefore, appear on a list in the Companies Office. Then anybody consulting the Companies Office about directors of insolvent companies will be able to get a full list of anyone who was ever a director of an insolvent company. That inevitably arises under paragraph (b) of section 131. Having got on to that list it will then be possible for people to apply to get off it, but they will have to go to the court. If they are not taken off it by the court they will then go on to a second list, which will be a list of people to whom the restrictions here apply; in other words, any company accepting them on to the board will have to have paid up share capital of £20,000.
Suppose it happened that somebody was once a director of an insolvent company, say, four years ago, and he is back in business doing something else and is offered a directorship on the board of another company, that other company will have to check before offering anybody a directorship, if he was ever somebody to whom this restriction applied. That is because, if that other company does not have paid up share capital of £20,000, it will not be able to take that director on board.
Before offering him the directorship, the company will have to check if he is a person who would require the company to bump up its paid up share capital by £20,000 to accept him. The effect of that means that for practical purposes a register of directors of previously insolvent companies to whom these restrictions apply, even though they may be entirely honest in their conduct, will have to be maintained and for practical purposes, simply to facilitate people who might be offering directorships to individuals in the business world, to know they are not restricted and they are not ones, therefore, that require the company to reorganise its share capital in order to take them on board.
Surely that is a question for them to ask in the first place. You would not walk out on to the street and ask anybody to come on the board of a company just because you met him in Buswells. You would ask him about his track record.
Deputy Bruton is in possession, Deputy Rabbitte may speak after him. I ask him to address his remarks through the Chair.
What is not prudent is to create a practical requirement to have a list in being, which essentially is a black list, of directors to whom this restriction applies. Because of the need to have information available to anybody who might offer them a directorship in the future because of the implications of that for the share capital of the company offering the directorship. I do not think that in respect of innocent people they should be on a black list simply because their company became insolvent. I do not think there is any need for that. I believe it is going too far and it is not dealing with the Phoenix Syndrome. The Phoenix Syndrome is concerned with people who are insolvent because of recklessness or negligence, not simply with people who failed. It is about dealing with fraud, not about simply penalising failureper se. The penalisation of fraud in the matter of becoming a director is more than adequately dealt with in section 135 and that is why we say there is not need for this provision at all. I have explained our position as well as I can.
I do not accept that because you go on to this list that the emotive term "innocent people" somehow become guilty. All that happens is that there is a requirement placed on such former directors of insolvent companies. There is a requirement or a restriction that there must be a minimum paid up share capital of any new company. I do not accept that that is somehow condemning them publicly as being guilty of the use of the Phoenix Syndrome or whatever. It is merely a requirement, a restriction, that applies to them. There are restrictions in every walk of life that apply in certain cases, if you have a certain track record, if you are convicted of drunken driving or whatever.
Or a former employee of Ferenka.
If that is the level at which we want to conduct the debate, I am getting more sympathy with the Minister every day this goes on.
It has happened.
Secondly, you cannot offer anybody a directorship in a company because of the restrictions imposed in this section. I would have thought that any company choosing to offer a directorship to, say, Deputy Carey would take prudent steps to establish that Deputy Carey does not have anything on his record that would not be in the best interests of the company or that he might not have an outstanding contribution to make or whatever. That is merely a prudent examination by any company who would want to get a director on to the board who has a contribution to make and who has not got a record that could somehow be harmful. The only requirement is that there would be a paid up capital of £20,000 which in 1990 seems to me to be the minimum penalty that could be imposed to root out the abuse that is there.
I entirely accept what Deputy Bruton says, that companies become insolvent for reasons other than where there was fraud but we all know there is also widespread abuse of the Phoenix Syndrome so how do you root it out unless you impose some restrictions on former directors in the situation of insolvent companies? There is no other way it seems to me that you can prevent it happening again. A sum of £20,000 share capital, of course, does not prevent it happening again. It can happen again after the £20,000 is paid up but at least it is some kind of minimum protection. I would like to see a yardstick applied that if the company had exposure that was substantial, in that circumstance £20,000 could well be inadequate.
I fully understand and subscribe to the views expressed by Deputy Rabbitte but I feel we are missing a point. Where a rogue director who has been dishonest and has mismanaged and so on makes an application or is invited to join another company, I can agree wholeheartedly that is the kind of thing we need to stop. The problem is, what about the company unfortunate enough by virtue of the domino effect to be put out of business through no fault of their own and who find themselves insolvent as a result? In that type of situation there should not be a general blanket condemnation of the individual concerned by virtue of being associated with the company when they themselves were not dishonest or in any way negligent in their duty. I think that is a very important item. The company to which they would be applying for directorship would be placed at a disadvantage by virtue of their being associated allegedly with the company that had gone into liquidation previously.
In relation to the question of the alleged blacklist, there is no such blacklist proposed in the Bill. The Registrar of Companies is an independent entity, independent of my Department. I would envisage that they would devise methods that would certainly avoid this question of listing directors as people who would be unsuitable, or black-listing them in a way. In relation to an overall list of directors that would be maintained in the Companies' Office, there may be some definition of people who may have had certain difficulties in the past but I envisage that would be restricted to a limited period.
I have sympathy for the view expressed by Deputy Bruton on a personal basis. It is worthy of consideration to devise a method which would allow for the deletion of restrictions on persons, who may have had difficulties at a particular time that this would not be retained for all time against their names. Generally speaking, in relation to the development of companies, we in Ireland are far too quick to earmark people for all time if they fail in one company. I always bring up the case of Walt Disney who became a multi, multi, multi-millionaire. I understand he failed three times, was broke three times, and resurrected himself and went on to success. However, for some reason we have this mentality here that one failure is enough to cast an aspersion on that person for life when he may have had some difficulties without fraudulent reasons.
I know exactly what Deputy Bruton is getting at. He does not want to allow fraudulent directors to have the opportunity of resurrecting themselves without some sort of restriction. I would be totally opposed to such a black list but records must be kept and they must be available for a certain time with certain information that should be available to the public. I will bear in mind the points raised in the course of these deliberations.
In relation to the overall situation, to summarise our position at this point because we might be getting away from the main bones of the amendments, first, we cannot accept amendment No. 1 to amendment No. 175. Secondly, we can accept amendment No. 2 to amendment No. 175. Thirdly, we cannot accept amendment No. 3 to amendment No. 175 today, but what we are going to do is to try and come up with a definition of "venture capital company" to replace it. Fourthly, we can accept amendment No. 1 to amendment No. 177, provided the words concerned are inserted after the word "may" in the first line of subsection (1), and that the word "less" is changed to "more" in the amendment. Finally, we can accept amendment No. 2 to amendment No. 177, but that is as far as we reasonably can go in relaton to the contributions which have been made to the debate.
I asked some questions initially and I have not got a reply to the them yet. One is in relation to amendment No. 175 (3) (b). Could I have an explanation, please, as to what exactly it means? Also, in relation to the black list, as the amendments are framed at present could the Minister explain to me how exactly this information is passed on to the Registrar of Companies, how exactly will it be kept and under what provisions can people have their name cleared if they are found to be totally innocent? I feel very strongly about this whole issue until the Minister gives us a satisfactory answer.
There must be a requirement under existing legislation on the Registrar of Companies to do things with information he gets. Presumably, the Minister, through his officials, will be able to tell us exactly what is envisaged with this type of information he will be getting in the future. The one thing that is quite obvious in this Bill is that it is drafted in such a way that people are guilty until proven innocent which goes against the normal principles of law that a person is innocent until proven guilty. I repeat that none of us — and I speak for every single member of this committee — wants in any way to give support or succour to rogue directors, people who behave in a fraudulent fashion, but we want to also deal with the realities of life here. If some small business firm goes into liquidation, perhaps as a result of some other company behaving improperly and finds itself out of business as a result of some act over which they had no control whatsoever over we, as legislators, should be able to say to the directors of that small company what exactly we mean when we say we are going to notify the Registrar of Companies that they are directors who were part and parcel of an insolvent company, without giving them the opportunity of explaining why their company went into liquidation. We should also be able to explain to them how they can clear their name, so to speak, for the future.
Without having to go to the High Court.
Exactly. This is going to be a bonanza for the legal eagles. It is fine to say you can go to court but there are plenty of small business people around the country that cannot afford £2,000 to £4,000 to go to court. We deserve a full explanation as to what exactly will happen in this situation and how people will be treated in the future, before we agree to the passing of this legislation.
I genuinely appeal to my colleagues on the committee from the Fianna Fáil Party who, I know, would be very interested in this to contribute and support the request we are now putting to Minister. I do not think it is good enough to come in and say: "I am sure something will be worked out". It is fine to say something will be worked out, but this can affect credit rating in the future, it can affect a person's future in business, it can affect a person's whole family life. I will support the Minister 110 per cent in any proposals he brings in to strengthen section 135. It deals with directors who have been indicted in our courts where it has been proved they behaved in a fraudulent or dishonest fashion or even as our amendment says, in a negligent or reckless fashion.
I have no difficulty whatsoever in supporting that section and, if the Minister wants to strengthen if fifty times, I will be totally behind him but we owe it to the ordinary, honest to God, business person who has given employment to say to them: "We are not going to blast you against the wall simply because some person along the line put you out of business because he could not pay the bills he owed you". What we are saying to these people is that they should go to the High Court to clear their name and get their name off a list. That is the point we are arguing here. None of us is supporting, for one second, people who behave dishonestly or fraudulently. This country is made up of thousands of small businesses and they are giving genuine employment to thousands of ordinary people. What we need to do is to encourage those people to expand and, if they are unfortunate enough to find themselves against the wall through no fault of their own, we should encourage them to get off their knees. We should encourage them to get back in there again. We should help them instead of saying blandly they can go into the court and prove they are innocent.
What we are saying in our amendment No. 178 is that before anybody goes into business there should be a reasonable paid up capital in a private company or indeed in a public limited liability company. This should apply to everybody starting up, they should have a reasonable amount of money. If one has a reasonable amount of money, I do not believe that all of the provisions of amendments Nos. 175, 176 and 177 are necessary. We can then together work to strengthen section 135 even further to enable us to get at the people all of us want to get at.
We are engaging here in too much bureaucracy that will ultimately cost people thousands of pounds, going into court to prove that they acted honestly and responsibly. If one does not do this, he is prevented from becoming a director unless the company has a paid up capital of £20,000. One could be the most innocent person in the world and be unable to do this. The person's name will also appear in the Companies Office, blacklisted, so that everyone can go in and have a look. This would give the impression that the person concerned is not to be trusted, that his name is there for some reason. There is no explanation as to why it is there.
This is one of the most important parts of the Bill we are dealing and I would like the Minister to say why he cannot accept our amendment No. 178 and cut out all the other nonsense and strengthen even further section 135 to deal with fraudulent behaviour and people who have acted dishonestly in business.
Could the Minister clarify how this would actually function? We are all going on record with our anxiety about the vagueness of the section, about the list, who will make it up, and who will go on it and come off it. That needs to be clarified. Do we have to spell that out now and then we can discuss whether we think it is too restrictive or otherwise. The Minister made the comment that this would be left to the Registrar of Companies. Could he tell us what the guidelines will be, who will draw this set of guidelines up and spell that out to us now?
I am amazed at the long speech we heard there from Deputy Barrett. Bankruptcy used to be more or less a crime. It is not a crime anymore and this does not make it crime. It was not possible to do anything if one was bankrupt in the past. You were on every black list and you were not allowed to be a public representative or a whole list of other things if you were a bankrupt. That was the way it was. If what Deputy Barrett suggests were to be introduced here in the Bill, I would hope he would pursue that and have it introduced into every hire purchase company in the country who are blacklisting people for non-payment and for various reasons where they are in difficulties and are totally innocent people. Even families of people who have taken credit are being involved, whereas all that is being asked here is to provide sufficient capital so that there will not be a second bakruptcy. I think it is a very reasonable provison to have in the Bill and I cannot see the problem. There is nothing criminal about having to put up a certain amount of money.
I have gone a long way down the road here. I have listened very carefully to the contributions which have been made by Deputies Bruton, Barrett and Mac Giolla. The whole purpose of this committee is to listen to the views being expressed and to try to come up with a reasonable approach to the actual legislation itself. That is our intention.
I would have sympathy with the views being expressed by Deputies Bruton and Barrett and I am also conscious of the point made by Deputy Mac Giolla. We are trying to devise a Bill here which will be workable and effective but we must bear in mind that the Registrar of Companies is an independent office here in the State. I wish to point out we have no rules as far as a list is concerned in the Companies Office, but it is only reasonable that people would be aware of a situation that arose in the past and that they would be conscious of it. What I am trying to devise now as a result of the contributions — and I am not in a position to give details now and neither are my officials — is to lay down certain restrictions in relation to the retention of the availability of this information at the Companies Office, but only for the period that that person is restricted. I think it is a reasonable point of view.
I do not think there is any other way. Can the Deputies devise some other way that this information will not be available. As Deputy Mac Giolla said there, I have experiences in my own constituency of situations where we have serious difficulties and where people are now in Spain enjoying the fruits of my constituents' labour. I want those people restricted from involvement in future business. I think Deputy Bruton and Deputy Barrett would also like to see that restriction. I have seen families broken in my constituency by this situation. I am sympathetic to the situation but I am not over-sympathetic. I think there should be some requirement that at least there would be a record kept of the situation. I think we are getting away form the main point of this. I am anxious that you proceed with the actual section of the Bill we are debating at the moment.
Did you answer my point?
In relation to the point raised by Deputy Barrett, his point about allotted shares, as section 129 (3) (b) is worded, each allotted share must be fully paid up.
Could I make a suggestion to the Minister here? If the Minister were to say in amendment 175 (3) (b) "after each allotted share, insert the words ‘provided for' in subparagraph (a) of this subsection," that would make it clear that is is only the allotted shares up to the limit of £20,000 that would have to be fully paid up and if the company had an allotted share capital which exceeded £20,000 for its own good reason, the restriction would only apply in respect of the limits here.
I agree with the points raised by Deputy Bruton and that will be taken on board when we come back with the details on Report Stage.
We agree on that. I will take no further discussions on that point.
To move on to another point here, again referring to the point made by Deputy Barrett, regarding amendment No. 176, in paragraph (b) of section 131 there is the provision that within seven days from the relevant date, which is the date when the liquidator discovers that the company is insolvent, he is obliged to notify the Registrar of Companies of the name of every person who was a director of that company in the previous 12 months prior to the commencing of the winding up. It seems it would be appropriate that we should have an amendment here to subsection 1 (b) to say the Registrar of Companies shall not make such information available to the public until such time as the person named has had an adequate opportunity to avail of the reliefs under subsection 131, namely, by applying to the court which he has a year to do under the amendment which the Minister has accepted. If you do not do that what you will have is the Registrar of Companies making available a list of names of people who subsequently are cleared by the courts but, in the meantime, they are on a list. The Minister says that this Bill does not provide for the setting up of a list. As members here are aware, the Companies' Office is now highly computerised, as a result of a decision I took to invest substantial amounts of money in the computerisation of the office, so it is possible to get any information you want. If you key in to get a list of names of all persons named under section 131 (b), unless you make a specific provision that that information shall not be made available to the public, those names will simply come up on the computer. They will be listed on the computer and the names will be printed out and be available to any member of the public.
The only point I would make is that it would be open to the court to make an order to direct the Registrar to take names off the list, if there is a list.
This is before it ever goes to court. The requirement is that the liquidator of the company shall notify the names of all directors of an insolvent company immediately, and, within seven days, he decides the company is insolvent. Subsequently, maybe a year later, that person will get into court to establish the fact that he was somebody to whom section 129 applied, and that he should never have been disqualified. But in the meantime for that year — and we know how long it can take to get to the High Court, it could be even longer — he is on the list as somebody in respect of whom a notification had been lodged with the Companies' Office, under section 130. I do not think that anybody should be on the list in those circumstances. That information should not be available to the public. The director can keep it and have it for his own use so that he can put it on a list, say, within 12 months if he has not been notified of an application under section 131. But nobody should automatically go on to the list. Would the Minister be prepared to accept an amendment to say that information notified to him under section 131 (1) (b), shall not be made available by him to members of the public, until the time limit provided for in section 131 (1) (a) has expired?
How would it work then for that 12 months period? Would it be open to one of those directors to start up a new company without the restrictions of the £20,000 share capital, because the Registrar of Companies would not be aware that he was a member of an insolvent company?
That is right. But if at the end of the year he would go on to the list and, as I think it applies to all existing companies, anybody who is already a director of a new company would, once the year was up, have to comply with the requirements. So once the year expired the £20,000 would come into effect unless he had made an application.
Could he form a company within that first year without the restrictions?
He could form a company without the restriction but, having formed a company, once the year expired and he had not made application for relief at that time, then he would have to bring the share capital up to £20,000 or else the company would be struck off. All of the directors would each have to have then paid up capital of £20,000 or else they would fall.
But the business is set up at that stage?
The Minister was careful to point out — I can not just find it here — that this requirement applies to companies existing as well as new companies being set up after the date. Any director who would set up a company in the period between the making of the notification and the expiry of the year would, on the expiry of the year, have to comply with the requirements in full.
I would not agree with them setting up a company without coming up with the money first.
We are going into another area at this stage and I was anxious to make progress. I will have to come back at our next meeting with a response to that point. Deputy Bruton has made certain suggestions. I do not think they are workable and they raise serious difficulties for us in this Bill and I will make a response on the matter the next day.
They are difficult points but——
The point has been put. It comes up under amendment No. 176 and let the Department come back to you on it. I am putting amendment No. 174 now.
If you start putting the amendments, because things are grouped, we will not be allowed to have any discussions on any of those amendments in the group.
The point I would make to you, Deputy Bruton, is that a considerable number of amendments have been agreed to on the points he has raised. It seems to me that the debate continues until all your points have been met. There is going to be a point of disagreement between you and the Minister. The point you raised in relation to amendment No. 176 is one of those points of disagreement. On the basis that I am going to put amendment No. 174 now. Let the Minister say what he thinks of your proposal. He is either going to accept or reject it.
I am prepared to come back on Report Stage on the issues raised by Deputy Bruton to clarify the Registrar of Companies situation.
That is the only way we can proceed because, otherwise we are not going to make progress.
Mac Giolla, Tomás.
I move amendment No. 175:
In page 106, before section 128, but in Chapter I of Part VII, to insert the following new section:
129.—(1) The court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom this Chapter applies shall not, for a period of five years, be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in subsection (3).
(2) The matters referred to in subsection (1) are—
(a) that the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section, or
(b) subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a financial institution in connection with the giving of credit facilities to, or the purchase of shares in, the company by such institution.
(3) The requirements specified in subsection (1) are that—
(a) the nominal value of the allotted share capital of the company shall—
(i) in the case of a public limited company, be at least £100,000,
(ii) in the case of any other company, be at least £20,000,
(b) each allotted share shall be fully paid up, including the whole of any premium thereon, and
(c) each such allotted share and the whole of any premium thereon shall be paid for in cash.
(4) Where a person to whom this Chapter applies was a director of another company on the relevant date, and that company had not, on that date, commenced business, he shall not act in any way, whether directly or indirectly, as a director or secretary of that company unless that company meets the requirements set out in subsection (3).
(5) In this section, ‘financial institution' means—
(a) a licensed bank, within the meaning of section 24,
(b) a company the ordinary business of which includes the making of loans or the giving of guarantees in connection with loans, or
(c) a prescribed company or undertaking.".
I move amendment No. 1 to Amendment No. 175:
In the fourth line of subsection (2) (b), to delete ", or the purchase of shares in,".
Mac Giolla, Tomás.
I move amendment No. 2 to amendment No. 175:
In the fifth line of subsection (2) (b), after "institution" to insert "provided that the institution in question has not obtained from any director of the company a personal or individual guarantee of repayment to it of the loans or other forms of credit advanced to the company".
I move amendment No. 3 to amendment No. 175:
In subsection (5), to delete paragraph (c).
I move amendment No. 176:
In page 106, before section 128, but in Chapter 1 of Part VII, to insert the following new section:
130.—(1) The liquidator of a company to which this Chapter applies shall within 7 days from the relevant date—
(a) notify every person who appears to him to have been a director of the company on or within the 12 months prior to the commencement of the winding-up of the company that he is a person to whom this Chapter applies;
(b) notify the registrar of companies of the name of every person to whom paragraph (a) applies.
(2) Where it appears to the liquidator of a company to which this Chapter applies that the interests of any other company or its creditors may be placed in jeopardy by the relevant matters referred to in subsection (3) the liquidator shall inform the court of his opinion forthwith and the court may, on receipt of such report, make whatever order it sees fit.
(3) The relevant matters are that a person to whom this Chapter applies is appointed or is acting in any way, whether directly or indirectly, as a director or is concerned or is taking part in the promotion or formation of such other company as is referred to in subsection (2).
(4) Any liquidator who contravenes subsection (1) or (2) shall be guilty of an offence and shall be liable—
(a) on summary conviction, to a fine not exceeding £1,000 and, for continued contravention, to a daily default fine not exceeding £50, or
(b) on conviction on indictment, to a fine not exceeding £10,000 and, for continued contravention, to a daily default fine not exceeding £250.".
I move amendment No. 177.
In page 106, before section 128, but in Chapter 1 of Part VII, to insert the following new section:
131.—(1) A person to whom this Chapter applies may apply to the court for relief, either in whole or in part, from the restrictions referred to in section 129 or from any order made in relation to him under section 130 and the court may, if it deems it just and equitable to do so, grant such relief on whatever terms and conditions it sees fit.
(2) Where it is intended to make an application for relief under subsection (1) the applicant shall give not less than 10 days notice of his intention—
(a) to the liquidator (if any) of the company the insolvency of which caused him to be subject to this Chapter;
(b) in at least two daily newspapers circulating in the district in which the registered office of the company is located.
(3) On the hearing of an application under this section the liquidator or any creditor or contributory of the company, the insolvency of which caused the applicant to be subject to this Chapter may appear and give evidence.".
I move amendment No. 1 to amendment No. 177:
In the first line of subsection (1), after "may" to insert ", within not more than one year after a notice has been furnished to him under section 130 (1) (a) of this Act,".
I move amendment No. 2 to amendment No. 177.
In subsection (2), to delete paragraph (b).
I move amendment No. 178:
In page 106, before section 128, but in Part VII, to insert the following new section:
"128.—(1) The nominal value of the allotted share capital of a company shall—
(a) in the case of a public limited company be at least £30,000,
(b) in the case of a private company be at least £3,000.
(2) Each allotted share shall be fully paid up including the whole of any premium thereon.
(3) Each such allotted share and the whole of any premium thereon shall be paid in cash.".