Mick Wallace (Wexford, Independent) | Oireachtas source

I move amendment No. 242:

In page 905, between line 18 and 19, to insert the following:“1233. (1)An unlimited company shall disclose by the filing of a notification with the Companies Registration Office a list of all members which are limited companies, and their respective number of allocated shares.

(2) Subsection (1) shall apply to all body corporate members, wheresoever registered.

(3) A transfer of shares to a new body corporate member which is a limited liability company shall not take effect until the notification referred to in subsection (1) has been filed with the Companies Registration Office.

(4) Failure to file the notification referred to in subsection (1) may result, on application to the Court by any interested party, to the imposition of limited liability status on the unlimited company in question.”.

In recent years, we have heard a great deal about how companies such as Apple, Google and Starbucks operate and manage to avoid paying tax. Such companies are greatly helped by their status as unlimited companies. I am concerned about the use of unlimited holding companies in corporate structures in Ireland and the use of offshore limited companies as shareholders within this structure. I had hoped some of my concerns in this regard would have been addressed in the Bill.

Perhaps the Minister of State will consider some of the following issues. It is possible to start up an unlimited company in Ireland with shareholders who have limited liability. If the company is based offshore, the unlimited liability of the company is reduced. The Government needs to examine this loophole. Most people assume that in the case of an unlimited company there is no upper limit on the personal liability of its shareholders for the company's debts were it to become insolvent. There are more than 4,000 companies with unlimited status currently operating in Ireland. These companies escape the stricter filing and disclosure requirements to which private limited companies are subject.

The usual filing and disclosure requirements allow a creditor to appraise himself or herself of a company's solvency before commencing trade with it. Many large corporate structures are, however, using unlimited liability companies with limited shareholder liability by ensuring that some or all of the shareholders are limited liability entities. They may also reorganise company structures to transfer trade to a limited liability company at a later date. While it is always open to the courts to look through the corporate character of unlimited companies to determine whether its members include limited companies, in other words to lift the corporate veil to examine the underlying members, it can only be done via an expensive court application. This general principle was approved by the Supreme Court in the case of Bray Travel Limited but as the High Court remarked recently in the Goode Concrete v.CRH case, this approach is not possible when the limited company is an offshore company. This happens where the subsidiary limited company of an Irish holding company with unlimited status is registered in a country outside the EU, including the Isle of Man, which has limited disclosure requirements.

A number of large companies which previously operated in Ireland, in particular in the construction sector, collapsed at enormous cost to the taxpayer, and much more than I cost them. The people trading with these companies at the time did not understand where they stood because of the level of secrecy around their business affairs. This could possibly be addressed by way of the introduction of legislation requiring all private unlimited companies to notify the Companies Registration Office of any shareholder company that might limit its liability. The unlimited company could be required to update information yearly when filing its annual returns or any abridged financial information required. This would allow a creditor to check the CRO's records of an unlimited company at the outset of contractual negotiations and would alert him or her to the fact that although registered as unlimited, the company's liability may be limited. Failure of an unlimited company to notify the CRO of any limited liability shareholder could result in the immediate imposition of a limited liability status on the company or in respect of a particular transaction, as the court sees fit within the limits of reasonableness and proportionality.

Transparency could be enhanced by addressing this issue. I realise that Fine Gael is pro large business but I would expect members of the Labour Party to try to hold them to account in terms of ensuring greater transparency. I look forward to hearing what the Minister of State has to say in response to those issues.

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