The Gazette 1974

It is a cause of some surprise how little impression

socialist tendencies have made on company law over

the last half century.

In conclusion we should cut away the "dead wood

of socialism" for the time has come when the needs of

all those who partake in a company's activities will be

better guaranteed by the dynamism of capitalism than

by traditional socialist techniques.

The Minister for Justice, in proposing the vote of

thanks, said that company law was an area of consid-

erable importance to our economic and social way of

life; it was an area which will be the subject of sub-

stantial, if not radical, change as the programme of

harmonisation of company law progresses within the

Community. It is a subject which has not, perhaps,

received the degree of discussion and debate that its

importance deserves.

While he finds himself in general agreement with

much of what the Auditor has said, he must take issue

with him on some of his opening comments. He thinks it

is putting rather a harsh interpretation on things to sug-

gest, as he seems to suggest, that we have been less than

urgent in our desire for reform of company law. It is

fair to say that the former Companies Act of 1908

remained in existence for so long a period because there

was, as stated in the 1958 Report of the Company Law

Reform Committee, no evidence of any very substantial

abuses of the law of companies as it existed at that time.

The Committee went further and stated that it was a

system of company law well understood by, and familiar

to the public and that only necessary changes should

be undertaken. Accordingly, when the Companies Act,

1963, was enacted, it repeated in essence many of the

provisions of the 1908 Act and embodied new provi-

sions only where inadequacies were found to exist in

the law as it stood. Indeedj the Act of 1963 is a piece of

legislation which has well fulfilled its purpose.

Growth of Irish companies

But, of course, it is inevitable that laws become over-

taken by events and Company Law is no exception. As

economies develop, and as the ways of trade and com-

merce become more complex and sophisticated, provi-

sions which were previously regarded as balanced and

equitable may no longer meet the demands of change.

Since the current Act was enacted there has been a

significant increase in the growth of companies in this

country. In 1963, the number of Registered Companies

having a share capital was a little more than 12,000,

today it is in excess of 27,000. Over the same period the

rate of registrations has increased from about 1,000

per annum to almost 4,000 per annum. This means

that the number of companies registered has more than

doubled in the past decade and the rate of new regis-

trations per annum has quadrupled. This would sug-

gest that the time may now be ripe for a review of the

present legislation.

In calling for a reform of company law the Auditor

has mentioned such matters as insider trading, ware-

housing, nominee shareholding and greater disclosure

by companies and by directors. It is obvious that no

review of company law would be complete without

consideration of these matters. That is not to say that

he would venture to pre-judge such vexed and comp-

plex issues. He had a feeling, nevertheless, that public

opinion now tends to favour a change in the law on

many of these issues which represent only a small seg-

ment of the total issues which might appropriately be

examined. The field for examination is quite formidable

ranging from issues such as increasing the limit on the

number of partners in professional partnerships to a

consideration of permitting the issue of shares with no

par value.

As part of any review of company law it has been the

practice to look at what is happening in the same field

in other countries. The recent British White Paper on

company law reform is therefore of considerable interest

to us. However, it should be remembered that legis-

lation .and proposed reforms in other countries are

not

always those which are best suited to our situation.

Harmonisation of Company Law

One of the most important factors which must inevit-

ably influence us in considering reforms is the process ox

harmonisation of Company Law within the European

Community. This process is already manifest in the

form of the

European Communities

(Companies) Regu-

lations, 1973,

which came into operation on 1st

July

1973 and gave effect to the First E.E.C. Directive on

company law. This Directive was adopted in 1968,

before the enlargement of the Community, and conse-

quently we had to accept it as it stood, apart frofl

minor modifications. While the obligation which this

has imposed upon us in relation to the publication ot

notices in Irish Oifigiuil, of documents filed with the

Registrar of Companies, may be regarded as an onerous

requirement which we might have well done without,

nevertheless, the Directive has its positive aspects. For

example, it has been necessary to provide in these

Regulations a provision which further modifies the ultra

vires

rule. It has now been provided that a person

dealing with a company in good faith is not prejudiced

by the fact that the board of directors or other person

authorised to bind the company acted

ultra vires

their

powers as imposed by the memorandum and articles oj

association or otherwise as, for example, by the general

meeting.

Other Community proposals for Harmonisation ot

Company Law are still in the draft stage, however. Many

features of these proposals, although new in the context

of Irish Company Law, are, nevertheless, acceptable in

principle. Indeed it may be true to say that the process

of harmonisation will have the beneficial effect of re-

quiring us to look compulsorily at issues which we migb

otherwise be tempted to put on the long finger. Pending

the outcome of negotiations between the Council and

the nine member States it is not possible to say what

form the various proposals will finally take. It seems

certain, however, that, for example, a minimum paid-

up capital for large companies, disclosure and publi-

cation of accounts in some form by private companies

and worker participation in the affairs by the larger

companies, will become features of our company law u

the years ahead.

Most proposals for harmonisation were

f o r m u l a t ed

before the enlargement of the Community and some o(

them may not be appropriate in their present form to

the situation existing in the new member States. It is

essential therefore that, without sacrificing the principle

of harmonisation, there should be a degree of flexibility

to accommodate the situation in the individual

m e m b e r

States.

This is particularly important, for example, in the

field of worker participation to which the Auditor ha$

rightly attached such importance. As you know, the

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