Oireachtas Joint and Select Committees
Tuesday, 26 January 2016
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Companies Act 2014 (Section 1313) Regulations 2016: Motion
I inform members that this meeting is being carried live on Virgin Media channel 207, eir Vision channel 504 and Sky channel 574.
Apologies have been received from Deputy Dara Calleary.
As we have a very busy schedule, we will deal with housekeeping matters following the appearance of the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and the speakers on the Transatlantic Trade and Investment Partnership, TTIP.
Is this agreed? Agreed.
I remind members and those in the Visitors Gallery to ensure their mobile telephones are switched off for the duration of this meeting as they interfere with the broadcasting equipment even when in silent mode. I welcome the Minister for Jobs, Enterprise and Innovation and his official to the meeting and thank him for coming before the committee today to discuss the referral motion regarding the Companies Act 2014 (Section 1313) Regulations 2016.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. I invite the Minister to make his opening statement.
I thank the committee for facilitating us in taking this issue. This was essentially an inadvertent omission from the Companies Act, which, as the committee knows, is quite a tome. Basically, section 1120, which is being amended here, provided for the application of provisions that were set out in Part 1 of the Bill - sections 310 to 313 - that applied to private limited companies. It transferred their application to other types of companies in Part 2 of the Act. They were companies like designated activity companies, companies limited by guarantee and so on. Unfortunately, in drawing up that provision, one group of companies was omitted, namely, unregistered traded companies, of which there are very few. They do exist, most significantly, in the banking area. One of them is Bank of Ireland.
I wish to make it clear that what we are doing here is applying the very same rules to a credit institution that is an unregistered traded company - one formed under charter before independence - as would apply to any other credit institution. The effect of applying section 1120 to an unregistered credit institution in Schedule 14 is to ensure that the law governing the disclosure requirements in a credit institution's financial statement is the same for all companies trading as credit institutions in Ireland. If the section is not applied to unregistered traded companies, such companies would be placed at a significant disadvantage in respect of all other credit institutions, for example, by having to break the confidentiality of family relations of directors where loans from an unregistered company to them would have to be disclosed in the financial statements, which never was the intention. Credit institutions, regardless of the manner in which they are formed, must adhere to company law code as defined for traded companies. The various sections that are being provided here - sections 310 to 313 - essentially set out the requirements for disclosure of loans or other like transactions between directors of the company and the company. They do not apply to connected persons so they do not have to return in their financial statement the detail of loans to connected persons. However, there are a number of safeguards that apply in all these cases. First, the aggregate information about such loans must be provided in the financial statement. Second, a register of all of those transactions in their full detail must be kept by the bank. It must produce this register to the Director of Corporate Enforcement if required and facilitate the director in examining and making copies of it. It also must make the full statement available not less than 15 days before the annual general meeting for inspection by members.
This statement will contain the full particulars of all transactions with connected persons. There is a provision that the statutory auditors of the company have a duty to examine the statement and to make a report to the members on that statement. A final safeguard in section 313 is that these are the provisions in respect of company law but, of course, most of the oversight of credit institutions is conducted by the Central Bank. These provisions do not in any way dilute the obligations of such credit institutions under Central Bank law, which is the primary overseer of credit institutions.
I hope that is an adequate explanation for the committee of what is being done.
The Minister mentioned in his contribution that these companies were inadvertently omitted. However, the question of their not being included was raised when the Companies Bill was progressing through the Oireachtas process. I am curious as to the reason this issue was not addressed at that time. Are there likely to be other unregistered firms similarly omitted from this section?
It is a real pity that the opportunity presented by the Companies Bill 2014 was not availed of to address the threat of tactical insolvencies. Seven months on from the Clerys dispute, the State is on the hook for €2 million and workers have not yet received justice. The Department has drawn up a report on the matter and it is now to undertake a review of this area. I am disappointed that we are not utilising the short time remaining to us to ensure there is no legal loophole which would allow unscrupulous companies to separate assets from their legal responsibilities to workers, creditors and commission holders.
It was a genuine oversight. I do not know at what point this issue was raised specifically. This was an inadvertent oversight in an Act that runs to 2,500 sections. On the issue of tactical insolvencies, the Companies Act 2014 sets out, in section 599, additional protections for workers and creditors in situations of the type we have described. We have yet to see the impact of those. They have not yet been tested in the courts and may well be tested in the context of a debt to the State, such as that which occurred in the case referred to by the Deputy. Notwithstanding that, we believe that the circumstances of the Clerys case does justify an examination under both company law and employment law to see if there are things we ought to be changing. We have arranged for such a review to be conducted over the coming seven weeks. It will be a useful addition.
Provision is made in the Act to improve the position of creditors in these sorts of insolvencies. That provision is yet to be tested. It is our view that, notwithstanding that part of the legislation, we need to look afresh at this issue.