Special Committee on the Companies (No. 2) Bill, 1987 díospóireacht -
Tuesday, 26 Jun 1990

SECTION 207.

Mr. Leyden

I move amendment No. 278:

In page 154, subsection (4), line 7, to delete "section 297A (5) (b)" and substitute "section 297A (6) (b)".

This amendment is straightforward and will simply correct a cross-reference to a section being inserted in the 1963 Act by section 116 of the present Bill. When subsection (1) of the new section 297A was replaced by two subsections in amendments made in the Seanad thereby requiring the remaining subsections in the section to be renumbered, the consequential adjustment in what is now subsection (2) was not made and this amendment will rectify that oversight.

Amendment agreed to.

Section 207, as amended, agreed to.

Mr. Leyden

There is one further matter at which I have been looking, which is rather complicated, and related to section 128 (4) (c) of the 1963 Act. The problem arises because of an amendment to Article 44 of the Constitution regarding recognised religions. Some uncertainty has arisen in relation to charities operated by religions. Depending on the outcome of this study, I may want to bring forward an amendment on Report Stage in relation to this matter.

NEW SECTIONS.

Mr. Leyden

I move amendment No. 279:

In page 154, after section 207, to insert the following new section:

"PART XII

Investment Companies

208.—(1) In this Part—

‘the Bank' means the Central Bank of Ireland;

‘investment company' means a company to which this Part applies and ‘company' shall be construed accordingly;

‘property' means real or personal property of whatever kind (including securities);

‘the UCITS Regulations' means the European Communities (Under-takings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989).

(2) For the purposes of the application by this Part of certain provisions of the UCITS Regulations to investment companies, the said provisions shall be construed as one with the Companies Acts.".

Amendment agreed to.

Chairman

Amendment No. 280 and amendments Nos. 1 and 2 to amendment No. 280 are related and may be taken together. Agreed? Agreed.

Mr. Leyden

I move amendment No. 280:

In page 154, after section 207, to insert the following new section:

"209.—(1) Notwithstanding anything in the Companies Acts, the memorandum of a company to which this Part applies may in respect of the share capital of the company state in lieu of the matters specified in paragraph (a) of section 6 (4) of the Principal Act—

(a) that the share capital of the company shall be equal to the value for the time being of the issued share capital of the company, and

(b) the division of that share capital into a specified number of shares without assigning any nominal value thereto,

and the form of memorandum set out in Table B of the First Schedule to the Principal Act or Part I of the Second Schedule to the Companies (Amendment) Act, 1983, as may be appropriate, shall have effect with respect to such company with the necessary modifications.

(2) This Part applies to a company limited by shares (not being a company to which the UCITS Regulations apply)—

(a) the sole object of which is stated in its memorandum to be the collective investment of its funds in property with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds; and

(b) the articles or memorandum of which provide—

(i) that the actual value of the paid up share capital of the company shall be at all times equal to the value of the assets of any kind of the company after the deduction of its liabilities, and

(ii) that the shares of the company shall, at the request of the holders thereof, be purchased by the company directly or indirectly out of the company's assets.

(3) The memorandum or articles of a company shall be regarded as providing for the matters referred to in paragraphs (a) and (b) of subsection (2) notwithstanding the inclusion in the memorandum or articles with respect thereto of incidental or supplementary provisions.

(4) In the Companies Acts—

(a) a reference to a company limited by shares shall be construed as including an investment company within the meaning of this Part and a reference to a share in, or the share capital of, a company limited by shares shall be construed accordingly, and

(b) a reference to the nominal value of an issued or allotted share in, or of the issued or allotted share capital of, a company limited by shares shall be construed, in the case of an investment company, as a reference to the value of the consideration for which the share or share capital (as the case may be) has been issued or allotted.".

I should like to hear Members' comments on the amendments which have just arrived.

Mr. J. Bruton

I move amendment No. 1 to amendment No. 280:

In subsection (2) (b), in the second line of subparagraph (ii), to delete "the" where it firstly occurs and substitute "any".

The section requires that the articles and memorandum of association of this new category of company in Irish law — which are called UCITS — shall contain a provision for the shares of the company, at the request of the holders thereof, being capable of being purchased directly by the company, or indirectly out of the company's assets. I think the wording of subsection (2) (b) which says that "the shares of the company shall, at the request of the holders thereof" is ambiguous in the sense that it is not clear whether it is the request of all the holders, as a group, or the request of an individual holder of one of those shares. The amendment is designed to correct this ambiguity by making it clear that it is at the request of "any of the holders." The amendment is not properly framed: it should read "at the request of any of the holders thereof."

Mr. Leyden

I accept the amendment on the basis of "any of the holders".

Mr. J. Bruton

I am sorry the amendment was not correctly drafted. The Minister has the correct version now.

Amendment No. 1 to amendment No. 280 agreed to.

Mr. J. Bruton

I move amendment No. 2 to amendment No. 280:

To delete subsection (3).

I could not make head nor tail of subsection (3) which is why I propose to have it deleted. It says:

(3) The memorandum or articles of a company shall be regarded as providing for the matters referred to in paragraphs (a) and (b) of subsection (2) notwithstanding the inclusion in the memorandum or articles with respect thereto of incidental or supplementary provisions.

To my mind, the inclusion of other matter in the memorandum of a company containing incidental or supplementary provisions has no effect on the matters contained in paragraphs (a) and (b). It appears to me that subsection (3) is an attempt to lock a stable door that is already well and truly padlocked.

Mr. Leyden

Strange as it may seem, in the dying days of the Committee Stage of the Bill, the fact is that these amendments, published by us on Monday last have not afforded Deputies or myself much opportunity to fully examine them. The new section 209 (3) simply allows the memorandum and articles to include provisions incidental or supplementary to the sole object provided for in 209 (2) (a). I am advised that it is useful to have this included, that if it was not included it could create some difficulties for a company's operation.

Mr. J. Bruton

I cannot see that; it does not make the slightest difference. If the matter contained in subsection (2) (a) and (b) is in the memorandum the fact that other incidental material is put in as well could not possibly take out paragraphs (a) and (b). The material contained in paragraphs (a) and (b) is either in or it is not; whether incidental material is put in makes no difference.

Mr. Leyden

At this stage all I can tell the Committee is that we have received late amendments. We have been advised by specialists in this field that it is well worth having this. The points made by Deputy Bruton are worthwhile. I will have an opportunity of examining this further before Report Stage but I am not in a position to give a final decision now.

Mr. J. Bruton

I appreciate that. I do not want to make life difficult for the Minister at this late hour. This is a superfluous subsection. Perhaps the Minister would examine it before Report Stage.

Mr. Leyden

I will certainly do that.

Amendment No. 2 to amendment No. 280, by leave, withdrawn.

Amendment No. 280, as amended, agreed to.

Mr. Leyden

I move amendment No. 281:

In page 154, after section 207, to insert the following new section:

"210.—(1) Subject to subsection (2), the purchase by an investment company of its own shares shall be on such terms and in such manner as may be provided by its articles.

(2) An investment company shall not purchase its own shares unless they are fully paid.

(3) For the avoidance of doubt, nothing in the Companies Acts shall require an investment company to create any reserve account.".

Amendment agreed to.

Mr. Leyden

I move amendment No. 282:

In page 154, after section 207, to insert the following new section:

211.—(1) Shares of an investment company which have been purchased by the company shall be cancelled and the amount of the company's issued share capital shall be reduced by the amount of the consideration paid by the company for the purchase of the shares.

(2) (a) Where a company has purchased or is about to purchase any of its own shares, it shall have the power to issue an equal number of shares in place of those purchased and for the purposes of section 68 of the Finance Act, 1973, the issue of those replacement shares shall constitute a chargeable transaction if, but only if, the actual value of the shares so issued exceeds the actual value of the shares purchased at the date of their purchase and, where the issue of shares does constitute a chargeable transaction for those purposes, the amount on which stamp duty on the relevant statement relating to that transaction is chargeable under section 69 of the Finance Act 1973, shall be the difference between—

(i) the amount on which the duty would be so chargeable if the shares had not been issued in place of shares purchased under this section, and

(ii) the value of the shares purchased at the date of their purchase.

(b) Where new shares are issued before the purchase of the old shares, the new shares shall not, so far as relates to stamp duty, be deemed to have been issued in pursuance of paragraph (a) unless the old shares are purchased within one month after the issue of the new shares.".

Mr. J. Bruton

This deals with stamp duty——

Mr. Leyden

That is correct.

Mr. J. Bruton

——and states that it should be a net transaction which should be valued for stamp duty purposes. Is that not really a matter for the Revenue Commissioners? Why are we dealing with that in company law? Should the Minister be doing their work for them?

Mr. Leyden

This was included in the 1963 Act and we are now updating the section in line with similar updating in the 1990 Finance Act.

Amendment agreed to.

Mr. Leyden

I move amendment No. 283:

In page 154, after section 207, to insert the following new section:

"212.—(1) An investment company shall not carry on business in the State unless it has been authorised to do so by the Bank.

(2) The Bank shall not authorise an investment company to carry on business in the State unless the company has paid up share capital which, in the opinion of the Bank, will be sufficient to enable it to conduct its business effectively and meet its liabilities.

(3) An application by an investment company for the authorisation referred to in subsection (1) shall be made in writing to the Bank and contain such information as the Bank may specify for the purpose of determining the application (including such additional information as the Bank may specify in the course of determining the application).

(4) This section is without prejudice to sections 6 and 19 of the Companies (Amendment) Act, 1983.".

Mr. J. Bruton

I move amendment No. 1 to amendment No. 283:

In the second line of subsection (1), after "Bank" to insert "on the basis of criteria published by the Bank having been approved by the Minister".

I do not think the Central Bank should have the power to operate in this field on their own without some degree of ministerial supervision. The criteria the Central Bank will use in authorising these investment companies should be approved by the Minister. That is a matter of proper public policy for which there should be a measure of accountability. As we know, the Central Bank are not accountable to anyone; they are not accountable to the Dáil, a Minister may not answer questions about their activities unlike the situation, for example, in relation to the Department of Industry and Commerce where, in the exercise of their functions in the supervision of insurance companies, they are subject to detailed scrutiny in the Dáil and can be hauled over the coals if they make a mistake.

This is a new area of financial supervision, which is very similar to what is being done by the Department of Industry and Commerce in the matter of insurance companies, being handed over to the Central Bank without even the criteria under which they will act being subject to the approval of the Minister. This is a matter in which the Minister for Industry and Commerce, not the Minister for Finance, should at least have a policy role and the Central Bank should be required to publish the criteria under which they will make these decisions and have them approved by the Minister.

Mr. S. Barrett

My understanding is that there is an EC directive in relation to the operation of investment companies and that agreement is being sought as to who is responsible for the activities of the company in relation to trading outside their native country, or the country in which they are registered. It is important that there would be political accountability in respect of any actions that may be taken in this area. While this may seem to be a technical matter which we should just approve, there are other implications regarding investment policy and the type of advertising that goes on in relation to the possible returns from a particular type of investment and so on, and the public expect the Dáil to give answers. It would be a very dangerous step not to have some involvement here in relation to the accountability of the activities of such investment companies.

Mr. Leyden

We are in favour of having the criteria approved by the Minister, which would, to a great extent, meet the provisions in the amendment.

Chairman

What is its wording now?

Mr. J. Bruton

"On the basis of criteria approved by the Minister," the words "published by the Bank having been" are dropped.

Amendment No. 1 to amendment No. 283 agreed to, as amended.

Amendment No. 283, as amended, agreed to.

Chairman

Amendment No. 284, and amendments Nos. 1 and 2 to amendment No. 284 are related and may be discussed together. Agreed? Agreed.

Mr. Leyden

I move amendment No. 284:

In page 154, after section 207, to insert the following new section:

"213.—(1) Notwithstanding any other powers which may be available to the Bank under any other enactment, order or regulation, the Bank may impose such conditions for the granting of an authorisation to a company under section 212 as it considers appropriate and prudent for the purposes of the orderly and proper regulation of the business of investment companies.

(2) Conditions imposed under subsection (1) may be imposed generally, or by reference to particular classes of company or business, or by reference to any other matter the Bank considers appropriate and prudent for the purposes of the orderly and proper regulation of the business of investment companies.

(3) The power to impose conditions referred to in subsection (1) shall include a power to impose such further conditions from time to time as the Bank considers appropriate and prudent for the purposes of the orderly and proper regulation of the business of investment companies.

(4) Without prejudice to the generality of subsections (1), (2) and (3), conditions imposed by the Bank on an investment company may make provision for any or all of the following matters—

(a) investment policies of the company,

(b) prospectuses and other information disseminated by the company,

(c) the vesting of the assets or specified assets of the company in a person nominated by the Bank with such of the powers or duties of a trustee with regard to the company as are specified by the Bank,

(d) such other supervisory and reporting requirements and conditions relating to its business as the Bank considers appropriate and prudent to impose on the company from time to time for the purposes referred to in the aforesaid subsections.

(5) A company shall comply with any conditions relating to its authorisation or business imposed by the Bank.".

Part XII exempts a particular type of investment company from what might be considered as some basic principles of company law. This is a recognition of the unique nature of these companies as investment vehicles. These exemptions can only be considered if this type of company is tightly contained in a supervisory or regulatory regime.

New section 213 puts the second element of the supervisory regime in place. It allows the bank, notwithstanding any other powers in its possession, to impose conditions for the granting of an authorisation to the Part XII company. This will enable the bank to regulate the way in which these companies can operate. The bank can, under subsection (2) of this new section, impose conditions generally or by reference to specific classes of company or business. This provision is desirable as the bank may wish to discriminate between different types of investment companies. For example, it may feel that an investment company which sells its shares to the public needs to be subjected to more rigorous conditions than an investment company whose members are only to be a selected group of major companies. This particular distinction is not unlikely. Some of the companies which would be established, particularly in the IFSC, will be established to manage investment capital of major international firms. The bank will not only be able to impose conditions at the time of authorisation, as subsection (3) of this new section will allow them to impose further conditions from time to time. This is desirable to allow the bank to respond to changing conditions.

Subsection (4), while not restricting the type of conditions which the bank might impose, refers to four specific areas which might be covered by conditions. Paragraph (a) refers to the investment policies of these companies. While these companies are not subject to the investment constraints of UCITS it is still desirable that the bank, if it sees fit, should be able to impose conditions in relation to investment policies. Paragraph (b) refers to a prospectus and other information disseminated by the company. As this type of information will form the basis on which investors will make decisions. It is important to the company that the bank can impose conditions in this area. Paragraph (c) refers to the vesting of assets by the company in a person nominated by the bank. In this regard it should be noted that it is not uncommon where this type of company operates internationally, including under the UCIT's directive, to entrust its assets to what are known as "depositories". The UCITS regulations refer to such a depository as a trustee. Normally a depository is a licensed bank or a similar institution. Apart from holding its assets in safe-keeping, the depository may have the duty to ensure that the investment company acts in accordance with its articles of association. This paragraph specifically adverts to the possibility of the bank imposing conditions with regard to this type of depository or trustee. Paragraph (d) refers generally to conditions which the bank considers prudent to impose for the purpose of orderly and proper regulation of the business of Part XII investment companies.

Mr. J. Bruton

I move amendment No. 1 to amendment No. 284:

In subsection (4), paragraph (a), before "investment" to insert "the prudential requirements of the".

The Central Bank has been given the power to make provision for the investment policies of these companies. That is going a bit too far. What does the Central Bank know about investment? They do not have to make a living by making investments. They know, however, about prudential matters, keeping companies solvent and that sort of thing. The wording we are suggesting in the amendment would give the Central Bank the power to make provision by regulation for the prudential requirements of the investment policies of the company, not just dealing with investment policies, but from the point of view of keeping companies solvent rather than telling them whether they should invest in fish farms or agri-tourism or something like that. So long as it is a prudent investment, that is all the Central Bank should concern itself with.

Amendment No. 2 to amendment No. 284 is to deal with the costs that may be incurred by the Central Bank in fulfilling its obligations. These should be met out of fees charged to applicant companies but without any profit to the bank. In other words, the Central Bank should not be able to charge the general tax-payer, which essentially is what it would do if it were to subsidise this operation. The costs of supervision of companies should be met out of fees charged to these types of companies. It should not come out of the general funds of the Central Bank which ultimately is money belonging to the Irish people.

Mr. Leyden

I agree amendment No. 1 in relation to prudential requirements. However, in relation to amendment No. 2 to amendment No. 284, I will have to talk to the Department of Finance. If it is practical and enforcible I certainly will consider it on Report Stage. I cannot give any commitment now because it really is a matter for the Department of Finance.

Amendment No. 1 to amendment No. 284 agreed to.

Mr. J. Bruton

I move amendment No. 2 to amendment No. 284:

After subsection (5), to insert the following subsection:

"(6) Any costs incurred by the Bank in fulfilling the obligations placed on it by this section shall be met by fees charged to applicant companies, but without any profit to the bank.".

Amendment, by leave, withdrawn.

Amendment No. 284, as amended, agreed to.

Mr. Leyden

I move amendment No. 285:

In page 154, after section 207, to insert the following new section:

"214.—Regulations 14, 30, 63, 83 (2) to (7), and 99 to 105 of the UCITS Regulations shall apply to an investment company as they apply to the bodies to which those Regulations relate subject to the following modifications—

(a) a reference in those Regulations to a term or expression specified in the second column of the Table to this section at any reference number shall be construed, where the context admits, as a reference to the term or expression specified in the third column of the said Table at that reference number, and

(b) references to cognate terms or expressions in those Regulations shall be construed accordingly.

TABLE

Ref. No.	Term or Expression referred to in UCITS Regulations	Construction of Term or Expression for purposes of this section
(1)	(2)	(3)
1.	‘repurchase'	‘purchase'
2.	‘these Regulations'	‘Part XII of the Companies Act, 1990'
3.	‘UCITS'	‘investment company'
4.	‘unit'	‘share'
5.	‘unit-holder'	‘shareholder'

".

Investment companies with variable capital, which is one way to describe Part XII companies, already operate under UCITS regulations. UCITS are also subject to authorisation and supervision by the Central Bank. While Part XII is providing for non-UCITS investment companies, it is considered desirable to impose a number of UCITS regulations on Part XII companies. There are advantages in using some of the UCITS regulations, not least the fact that both the Central Bank and the financial services industry in Ireland are used to them and this will make it easier for the banks to apply them.

Amendment agreed to.

Mr. Leyden

I move amendment No. 286:

In page 154, after section 207, to insert the following new section:

"Default of investment company or failure in performance of its investments.

215.—An authorisation by the Bank under section 212 of an investment company shall not constitute a warranty by the Bank as to the creditworthiness or financial standing of that company and the Bank shall not be liable by virtue of that authorisation or by reason of its exercise or failure to exercise the functions conferred on it by this Part or any other enactment, order or regulation in relation to investment companies for any default of the company or failure in performance of its investments.".

Mr. J. Bruton

I move amendment No. 1 to amendment No. 286:

In the last line of section 215, after "investments" to insert "save where the Court is satisfied that negligence on the part of the Bank contributed materially to a loss suffered by an individual investor in an investment company".

When one thinks back on what we have been discussing in this Committee for the past year where directors were going to be responsible for this, that and the other if they made a mistake, they were going to find themselves on black lists, in danger of losing their houses and so on, and here we have the Central Bank who want a provision where they will not be responsible for anything they do wrong in their supervisory activities. If there was ever a situation of official bodies trying to have it both ways this is it. They want everyone to be liable for their mistakes except themselves. That is not a good provision. In this amendment we are saying that if the court is satisfied that negligence on the part of the bank contributed to a loss suffered by an individual investor in an investment company, then the bank shall be liable. That is eminently reasonable. The bank, just because it is a supervisor, should not be exempt from liability for its mistakes any more than anyone else should be exempt from liability for their mistakes if they cause losses to others.

Mr. S. Barrett

The wording of amendment No. 286 is quite extraordinary from the point of view of the ordinary investor and the ordinary individual. The fact that an investment company has received the authorisation of the bank to carry out its business, must imply that the bank has carried out a certain amount of investigation and is satisfied that this institution or investment company has some creditworthiness or financial standing. The way the amendment is worded it could mean that an individual in the bank could give authorisation and know that it does not really matter as the bank will not be responsible. The public are entitled to receive some comfort from the fact that an application to trade has been thoroughly investigated by the Central Bank and that, as a result of our amendment, the Minister will be responsible. There should be some degree of responsibility resting on somebody's shoulders. It would be extraordinary to put amendment No. 286 as it stands into legislation.

Mr. Leyden

In relation to section 215, an authorisation by the bank under section 212 of an investment company shall not constitute a warranty by the bank as to the creditworthiness or financial standing of that company. The bank shall not be liable by virtue of that authorisation or by reason of its exercise or failure to exercise the functions conferred on it by this Part or any other enactment order or regulation in relation to the investment companies for any default of the company or failure in performance of its investments.

If we accepted the general thrust of the amendment to the amendment it would impose impractical and unrealistic demands on the Central Bank. This would not work well. It would be introducing a very dangerous provision into the Bill and it would have major repercussions for the Central Bank.

Mr. J. Bruton

We are leaving the section as it stands. We are accepting the fact that because the bank approves a company it does not constitute a warranty as to its creditworthiness. We are saying that the bank should not be liable by virtue of that authorisation or by reason of its exercise or failure to exercise functions and so on. We are accepting all that as a general rule, "save where the Court is satisfied that negligence on the part of the Bank contributed materially to a loss suffered by an individual investor." We are saying that, as a general rule the bank is not liable, but if an investor can prove to the satisfaction of a judge that the bank was negligent, then liability will arise but the burden of proof will be not on the bank, but on the person trying to claim compensation from the bank. That is a minimal protection, given that elsewhere in this legislation we have provided to shift the burden of proof onto individual company directors in certain circumstances, where they had to prove they were not at fault or did not have mala fides. Here we are being generous to the official agencies and saying anyone who wants to claim off them has to prove that they were negligent. Many company directors under other sections of this Bill would be more than delighted to have the protection the Central Bank has been given in this case.

Mr. Leyden

When we get to Report Stage we will be able to read one section in relation to another and compare sections. In relation to the Stock Exchange, amendment No. 102 provides that:

88.—A relevant authority of the Exchange shall not be liable in damages in respect of anything done or omitted to be done by the authority in connection with the exercise by it of its functions under sections 84 to 89 unless the Act or omission complained of was done or omitted to be done in bad faith.

That is a possible arrangement that could be considered.

Mr. J. Bruton

When we were discussing amendment No. 102 I made the point that I thought that was too generous to the Stock Exchange. I have written down in my note, "negligently or recklessly". I felt that if the Stock Exchange behaved negligently or recklessly they should be liable. I am glad to say I am consistent.

Speaking to the Minister as a politician, I remember when the Central Bank came crying to me and Deputy Alan Dukes when ICI had collapsed, and all of a sudden we, the politicians, had to find the solution for the problems that had arisen because it appeared that AIB had got themselves in a very dangerous situation. I do not want to see that sort of thing happen again and I think it will if people in supervisory authority, such as the Central Bank, cannot be sued for their failures or omissions. It is not healthy to give them the sort of exemptions they are looking for in this section. I think that, as a politician, the Minister would agree with me.

I know that if the Minister goes back to the Government and starts talking there will be a load of paper coming from the Department of Finance with 140 different reasons this should not be done. The Minister will know, having digested all this paper, that they are wrong but there is so much paper that he could not possibly go against it. In the circumstances the position should be changed. The Minister should accept this amendment on the basis that it has been reasonably advanced and let them prove on Report Stage that the Minister should try to alter it. Put the burden on them to prove they need this exemption rather than on the Opposition to prove that they should not have it.

Mr. Leyden

We are going into uncharted waters. At this stage I am sympathetic to the points raised by Deputy Bruton because the Central Bank must be satisfied about their position. I will have to see how this relates to the licensing of existing banks, the UCITS and such other institution, and the building societies legislation which was passed by the Oireachtas recently. In fairness to my position, I would prefer if it did not go to a vote because it would be negatived at this stage. I would prefer to be able to come back to it on Report Stage. I see the point Deputy Bruton made and we have brought in a provision about the Stock Exchange. According to Deputy Bruton that is too weak. Maybe it is; nevertheless we are going into a grey area and I do not want to say "no" to it.

Mr. J. Bruton

It is a chance to come back on it anyway.

Mr. Leyden

It is not as simple as that, and Deputy Bruton knows that by accepting an amendment at this stage I would have to bring in an amendment on Report Stage if it is not acceptable. I would prefer to come back on Report Stage, having examined it and put it up to the Central Bank in the meantime. That is the direction I would be moving in to see if there is any precedent for this. I agree to look at the wording in amendment No. 102 — new section 88 — because of the points raised by Deputy Bruton in relation to negligence. I feel that this falls into the same category. I am prepared to do this because I am personally sympathetic to the points raised by Deputy Bruton and I am prepared to put it to the Central Bank in the meantime.

Mr. S. Barrett

All I can say is if the Minister puts it to the Central Bank he knows the answer he will get.

Mr. Leyden

In putting forward a proposal in this regard I would have to consult——

Mr. J. Bruton

The Minister can tell the Central Bank what he is going to do.

Mr. S. Barrett

As legislators we have an obligation not just to protect the Central Bank, we have an obligation to protect every ordinary investor who elects us to the Dáil. This Bill is full of regulations and obligations on various categories of people, from company directors to auditors, to the Stock Exchange and to various individuals. All sorts of people who will be dragged into court can be held personally liable for everything they have if they do something wrong. Here it seems a person who gives a licence to an investment company is saying to the ordinary punter in the street, "We are not standing over anything here. We are not saying that these individuals have creditworthiness or a financial standing." Who will protect the ordinary individuals if not the Central Bank? If you give somebody the power to regulate and to grant licences you cannot say there is no responsibility on them. What are we here for? At the end of the day the ordinary individual in the street is depending on us.

Let us learn our lesson from the PMPS, the ICI and the other institutions that went to the wall. Who was writing to whom at that stage? Who was compaigning? Who was calling to our clinics asking what we were going to do to help them because their life savings had gone down the Swannee? We should have learned our lesson there but here we go again. We are going to say nobody is going to be responsible for these companies either. That is not what we were elected for.

Mr. J. Bruton

My amendment proposes that the negligence of the bank must have materially contributed to the loss of the person concerned — the court must be satisfied, first, that the bank was negligent and, second, that that negligence contributed materially to the loss. It will not be very easy for people to get money from the bank in this situation. Would the Minister not agree that there are substantial safeguards there?

Mr. Leyden

All the points Deputy Bruton has put forward are reasonable. I have approached this question in a very positive manner and I appeal to the Deputy not to press this amendment. I cannot give an undertaking at this stage without further consultation.

Mr. J. Bruton

If the Minister comes back on Report Stage and gives convincing reasons for this exemption for the bank, there is not the slightest doubt but that he will get agreement to it but if he accepts this amendment, the banks will have to justify themselves.

Mr. Leyden

I have to look at this in the context of legislation passed recently in relation to building societies and so on. I cannot accept an amendment which would be completely different to other legislation passed recently by the Oireachtas. I have agreed to a number of amendments and I am prepared to accept amendments when I know I can implement and stand by them. I can assure the Deputies that I do not intend to come back on Report Stage and delete amendments I accepted today. I am not ruling out the proposal in the amendment in the long term because the points put forward by Deputy Bruton have great merit. The Central Bank will have responsibility for issues such as authorisations and I will make sure they do not give out authorisations without careful examination. I cannot go any further than that at this stage.

Mr. J. Bruton

Would the Minister be prepared to accept our amendment if it read: "An authorisation by the Bank under section 212 of an investment company shall not constitute a warranty by the Bank as to the creditworthiness or financial standing of that company."? It could be left to the courts after that.

Mr. S. Barrett

Basically the Minister's amendment provides that the bank will not be liable for anything even if they fail to exercise the functions conferred on them. That is an extraordinary power to give to anybody.

Chairman

Deputy Bruton's amendment to amendment No. 286 would be even more severe on the bank and would leave them open to be sued for negligence for material loss.

Mr. J. Bruton

The Minister can bring in another section on Report Stage if he wants to.

Chairman

I am making the point that the Deputy's compromise is more severe than his first.

Mr. Leyden

I will be prepared to delete all words after "company" subject to the agreement that I will come back on Report Stage after further analysis by the Deputy. For the record the amendment will read as follows:

215.—An authorisation by the Board under section 212 of an investment company shall not constitute a warranty by the Bank as to the creditworthiness or financial standing of the company.

Mr. J. Bruton

Perfect.

Amendment No. 1 to amendment No. 286, by leave, withdrawn.

Amendment No. 286, as amended, agreed to.

Mr. Leyden

I move amendment No. 287:

In page 154, after section 207, to insert the following new section:

"216.—(1) None of the following provisions of the Principal Act shall apply to an investment company, namely sections 60, 69, 70 and 72.

(2) None of the following provisions of the Companies (Amendment) Act, 1983, shall apply to an investment company, namely sections 5 (2), 23 to 25, 40, 41 and Part IV.

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

The unique nature and capital structure of an investment company, subject to Part XII, makes certain provisions of the Companies Acts inappropriate in the case of these companies. The new section 216 disapplies certain provisions of the Companies Acts in the case of Part XII companies.

Amendment agreed to.

Chairman

Amendment No. 288. Amendment No. 1 is related to amendment No. 288 and may be taken together. Agreed? Agreed.

Mr. Leyden

I move amendment No. 288:

In page 154, after section 207, to insert the following new section:

"217.— The Minister may make such Regulations as he considers necessary or expedient for the purposes of giving full effect to the provisions of this Part.".

Mr. J. Bruton

I move amendment No. 1 to amendment No. 288:

In the second line of section 217, to delete "or expedient".

The proposed regulation-making powers in amendment No. 288 are too wide. I believe it is sufficient to enable the Minister to make such regulations as he considers necessary for the purposes of giving full effect to the provisions of this Part. There is no need to refer to what is expedient. We have always been told that expediency is not necessarily a desirable characteristic.

Mr. Leyden

I will have to check with the Parliamentary Draftsman's office to see if there is a good reason for including the word "expedient". I will have to come back on this on Report Stage but I will delete it for the moment.

Amendment No. 1 to amendment No. 288 agreed to.

Amendment No. 288, as amended, agreed to.

Chairman

Amendment No. 289 and amendment No. 1 to amendment No. 289 to be taken together. Is that agreed? Agreed.

Mr. Leyden

I move amendment No. 289:

In page 154, after section 207, to insert the following new section:

"218.— Where a company contravenes——

(a) any of the provisions of this Part, or

(b) any regulations made in relation thereto (whether under this Part or under any other enactment), or

(c) any condition in relation to its authorisation or business imposed by the Bank under section 213,

the company and every officer thereof who is in default shall be guilty of an offence.".

The new section 218 specifies the three situations that constitute an offence in relation to Part XII as follows: a contravention of a provision of Part XII; a contravention of any regulation made in relation to Part XII — it should be noted that the regulation does not have to be made under this Part so long as it relates to it — and a breach of any condition imposed by the Central Bank under the new section 213. It goes on to stipulate that an investment company or officer thereof who defaults in any of these three ways shall be guilty of an offence. This is a final provision in this new Part XII.

Mr. J. Bruton

I move amendment No. 1 to amendment No. 289:

In the last line of section 218, after "offence" to insert "and/or may be guilty of a civil wrong against any person who suffered a loss as a result of such contravention".

Amendment No. 1 to amendment No. 289 provides that a contravention shall constitute a civil wrong as well as a criminal offence. This will make people more careful in complying with the regulations. If they fail to comply they may be sued by those who suffered as well as being sent to court for a criminal charge. I am not entirely satisfied that the wording in my amendment is perfect and I will not press it, but the Minister might say if he thinks there is any merit in what we are trying to achieve.

Mr. Leyden

I will check whether it is appropriate to include it on Report Stage. It may be unnecessary but, if Deputy Bruton agrees, I will look at it before Report Stage and if necessary, amend it at that stage.

Amendment, by leave, withdrawn.

Amendment No. 289 agreed to.

Title agreed to.

Mr. J. Bruton

I should like to pay tribute to you, Sir, for the way in which you have conducted, with great patience, tact and good humour, the proceedings of this Committee. We are very lucky to have had somebody like you to act as Chairman.

Mr. Leyden

I thank the Chairman, and express my thanks to the officials of the Committee and the officials of the Department of Industry and Commerce who have been working on this Bill for some years. I want to thank the Members of the Committee who have been so diligent attending very long meetings of this Committee. I also thank the Members on both sides of the House who have put forward very constructive amendments and suggestions which can be considered on Report Stage. I hope we will have a Bill which will benefit companies operating here. It was difficult at times to comply with the demands of the Presidency of the EC and of this Bill. This is a historic day that this Bill has passed Committee Stage. I look forward to the Report Stage and to the completion of this Bill as soon as possible.

Mr. S. Barrett

On behalf of this side of the House I thank the staff of the Department of Industry and Commerce who bore with us for so many hours during the Committee Stage of the Bill. I thank you personally, for your chairmanship and I thank the Minister of State who dealt with this legislation. We had our little altercations but we got on reasonably well and that is the important thing.

Chairman

I join in the vote of thanks to the staff of the Committee, to Marie Kennedy who has been very helpful since she came on the scene, to Alan Murphy, Seamus Killeen and Aileen McHugh who was secretary at the beginning. It was very educational to listen to the full debate. It was a credit to everybody concerned. A lot of work went into it. We had a few hairy moments but in general we achieved what we set out to do with courtesy to everybody concerned.

I would suggest now that the report of the Committee be as follows: The Special Committee has considered the Bill and has made amendments thereto. The Bill, as amended, is reported to the Dáil. Is that agreed? Agreed.

Report agreed to.

Ordered to report to the Dáil accordingly.

The Committee concluded its business at 8.10 p.m.