Seán Sherlock (Cork East, Labour) | Oireachtas source

I propose to respond to the two amendments together. I am not in favour of them. I draw the House's attention to section 38(2), which reads: "Nothing in subsection (1) shall relieve a company from any duty or obligation under any enactment or the general law." This safeguard prevents an argument to the contrary being made. In such circumstances, amendment No. 9 is already provided for in the Bill.
Amendment No. 10 is misconceived in law. It is contrary to the Constitution and the principles of natural justice generally to provide that, in the case of a clash of "rights and privileges", a natural human being's rights and privileges must always take precedence over those of a company. Companies are legal persons and, as such, have a number of rights that must be protected. Therefore, I am not in favour adopting these amendments.
I will avail of this opportunity to clarify that section 38 grants private limited companies the full legal capacity to enter into transactions and undertake business activities. Section 39 provides that a company, should it wish to do so, may authorise a person to bind it, that is, act on behalf of its board of directors. The provision contained in section 38 is new while section 39 is drawn from section 6(3) of the European Communities (Companies) Regulations 1973, although this is not a direct re-enactment. Section 38 is modelled on section 16(1) of the New Zealand Companies Act 1993. The rationale for the innovation in section 38 is to prevent its use in the avoidance of corporate contractual responsibility to the detriment of a particular creditor. Under current law, if a company does something outside the scope of its objects, it has committed an ultra viresact. This means that, if a company has entered into a contract and is subsequently found to have acted outside its powers, that contract will be deemed to have never existed.
This section reflects the reality that 90% of Irish companies are closely held ones, that is, companies in which the shareholders and management often consist of the same people. Thus, in circumstances where the demarcation of management and shareholders is virtually non-existent, the doctrine of ultra vireshas little meaning. I am satisfied that section 38 will add certainty to the law and is to be welcomed. As a result of this provision, any contract that a company enters into will be legally binding on that company. Therefore, I am satisfied that the introduction of section 38 does not mean that the company somehow can usurp the human rights of any person or ignore its legal obligations. A company is a legal person that has rights and duties of its own. It is not possible or proper to insert a provision that would undermine these rights.