Feargal Quinn (Independent)

I welcome the Minister of State, Deputy Michael Ahern, to the House. I am pleased that this Bill, which I welcome, has been introduced. On previous occasions, the Minister of State listened carefully to what was said in this House and he and his officials responded to the points which were made. I am in favour of this legislation because it provides for an attack on red tape, which is high on the agenda at EU level. Shortly after Mr. Barroso became the President of the European Commission, he said the EU needed to wipe out approximately 70 pieces of legislation which he felt were no longer necessary. He was not referring to statutes which are over 100 years old, like those being made obsolete in this country, but to legislation which were passed in more recent times.

Last Monday, I became the chairman of Eurocommerce, which acts as the voice of commerce in Europe. It represents 5.5 million businesses, the vast majority of which are small businesses of the type Senator White spoke about. If we are to solve Europe's problems in the years to come, we will have to concentrate on services rather than on agriculture and manufacturing. While there is a place for the latter sectors, I predict that the importance of small businesses will increase. I am enthused about the steps being taken in this regard in this legislation. I am also a member of the Business Regulation Forum, which is a Government committee that is working with civil servants to try to find a way to reduce red tape in a manner that is attractive to small businesses.

I welcome this legislation, which is necessary. In particular, I welcome two aspects of the Bill which will simplify life for businesses and investors. The provisions in question represent a recognition of the urgent need to reduce the red tape that is affecting the survival of businesses. I refer first to the increase in the exemption level for company audits, which is very important. This measure will assist the many small businesses which constitute the backbone of our entrepreneurial infrastructure. The second aspect of the Bill I particularly welcome, and to which Senators White and Coghlan have referred, is the provision that will facilitate the removal of paper share certificates in favour of electronic records of ownership.

An increase in the exemption level for company audits has been sought for a long time. The Minister has been quite receptive to the proposal in the past, but it has not been easy to get it done. Nonetheless, it is now welcome because it has become a fact. The higher exemption level placed an unnecessary burden on many small companies. It cost them a relatively large amount of money and took up a disproportionately large amount of their management time. It took a long time for the State to realise this requirement was not achieving much other than getting in the way of people who were doing business and creating jobs.

While I welcome the abolition of red tape in this regard, I would like to sound a note of caution. It is vitally important that small businesses do not interpret this measure as a signal that they do not have to bother with good book-keeping. If such a message takes hold, this potentially positive move could have quite a disastrous outcome. The law will continue to require those who are involved in business to keep proper books of account. That is as it should be. I stress that it is in the interests of those who are running businesses to ensure they do their book-keeping properly and keep their accounts up to date. The keeping of proper books is a technical matter that is best entrusted to those who have the proper training to do that kind of thing. This Bill will mean that very small businesses will no longer have to employ professionally qualified accountants to verify their books at the end of each year. That will lead to very useful savings for such businesses. I hope the small businesses which do not already do so will use the resources freed up by this provision to put in place a proper day-to-day book-keeping system.

While I am handing out free advice, perhaps I should mention another matter I often noticed in my dealings with small businesses over the years. When I was studying commerce in UCD way back, 200 years ago, I was reminded of the importance of cash flow. If one wants to stay in business, it is important for one to be aware of the distinction between profit and cash flow. People who run small businesses are generally very good at reckoning their profits, which is important, but many of them fail to realise the similarly crucial importance of getting their cash flow right. As the Minister of State is aware, many inherently profitable operations have gone to the wall when they have run out of cash. This usually happens when business people do not take into account the time lag between incurring expenses and getting paid.

My free advice to small businesses — this is financial management 101 — is that they should not forget that such a gap exists. One will not be helped with this necessary aspect of business survival during a company audit. By the time the auditor arrives on the scene, the damage will already be done and the business may already have gone to the wall. While company audits have a role in the overall scheme of things, they are almost useless as safety nets for small businesses. Few people will mourn their passing, which I am inclined to celebrate.

The second provision I have chosen to highlight, which has been mentioned already, is equally important in terms of encouraging investment. I refer to the provision that will eventually make possible the total elimination of paper share certificates as records of ownership of company shares. It is somewhat brave of the Minister of State to introduce this measure at a time when electronic voting is not getting a good name and people are expressing worries about paper trails, etc. I can understand the concerns which have been raised in that regard.

Anybody who has ever bought shares will be familiar with the cumbersome administrative process that follows every transaction in the stock exchange. That process culminates in the arrival through one's letterbox, long after the event, of a fancy and usually glossy bit of paper that certifies the number of shares one owns. This document has to be carefully preserved as proof of ownership because one has to hand it back when one sells the shares, if one can find it at that stage. If one sells part of a holding, the certificate has to be surrendered and rewritten with the new amount of shares entered into it. Such activity creates a vast amount of paperwork that is totally unnecessary in this day and age, when every company's register of shares is maintained in electronic form. The Oireachtas has a lot to learn in this regard. I have spoken previously about the amount of paperwork, such as envelopes containing Order Papers, we end up with each morning.