Thank you for the invitation to address this conference, here this morning in this wonderful setting of the Royal Hospital. Addressing conferences such as this is an important role for me as Minister for Science, Technology & Commerce. It enables me not only to ascertain the views straight from directors but equally important allows me to review papers at conferences such as this and also to hear views from a number of disciplines involved in assisting directors in their legal responsibilities.

One of the most important intangible assets that a person or a company has is "reputation". One dictionary definition gives it as "the estimation in which one is generally held; honour or credit derived from favourable public opinion" [Cassell's 1979]. This issue of reputation in the business community is a matter of considerable importance at the moment. Directors would wish to be seen, even at their most unexpected moments, to have acted with probity, being shown as caring of their customers, creditors, shareholders and staff. They would wish to be shown to be in command of the company to which they have been appointed, and that they have put in place proper systems and procedures to run the show well.

With over 150,000 companies on the Register of Companies this would suggest that there are over 200,000 people who are actively involved in directing and managing company affairs or enterprises in this State. Directors have of course considerable responsibilities not only to their members but also to the wider public, the Revenue Commissioners, creditors and of course their valued customers. The days are long past that a non-executive director appeared at a meeting, enjoyed a nice lunch and trotted off taking his directors fee with him. The companies code and indeed our courts give equal responsibility both to executive and non-executive directors. However, one wonders to what extent directors are cognisant of their responsibilities?

Directors are not just managers but they are also entrepreneurs who continue to be the backbone of our society and such entrepreneurial activity is promoted by the knowledge that directors will receive recognition commensurate with their contribution not only to an individual company but to society as a whole. These are the individuals who are significantly responsible for the growth in enterprise and in turn for wealth and job creation as a whole. Thus, it is obvious that such individuals must inspire confidence in their activities.

As Mr. Lyndon MacCann, a former company law inspector and acknowledged expert in the area of company law said once in a recent book:

"in the last ten years there has been a veritable flourish of Companies Acts, often lengthy and complicated and to a lesser extent necessitated by our membership of the European Community" [A Casebook on Company Law]. While the responsibilities of directors are delineated in the Companies Acts, 1963-1990 I think it can be encapsulated by reference to the many audiences to which they report:

• The company itself of course,
• shareholders, creditors,
• employees and in some cases
• the environment.

As I said earlier, the law does not differentiate between the role of executive and non executive directors. The privilege of either limitation of liability, which of course limited company gives by the extension of this artificial creation by the community at large through the State, has a number of concomitant responsibilities. Increasingly in the world we operate institutions, and the State, and the wider community, expect that these responsibilities will be met honestly and with more than a token acknowledgement of these responsibilities. Currently our Department of Enterprise, Trade and Employment has over a dozen company law enquiries underway. These enquiries have resulted from considerable dissatisfaction with the way in which the responsibilities given to companies and their directors have been discharged. In addition we are very conscious that there have been and are a number of Tribunals of Inquiry which has brought to light elements of corporate maladministration. Indeed one of the Terms of Reference of the Moriarty Tribunal, currently under way, is to look at the responsibilities of the accountancy profession in particular and also other disciplines in the area of effective regulation for the purpose of achieving the highest degree of public confidence. The Tribunal is looking at the reform of the disclosure, compliance, investigation and enforcement provisions of Company Law in particular that relating to directors duties. Our Department is currently engaged in preparing a substantial submission for consideration by the Tribunal in this area. The area of compliance brings to mind a recent article entitled Company Law enforcement in Ireland - fact or fiction? [Bar Review November, 1998]. An analysis by our Department of previous reports undertaken under the Companies Act, 1990 produced a number of topics which will not surprise anybody. Foremost in that analysis (I should of course say that many of these reports have not been published due to the constraints of the legislation) is the recognition of deficiencies in the areas of · accounting procedures, i.e. lack of proper books and records being maintained by companies, · disclosure of beneficial interests [which was also noted by the Company Law Review Group] and · a lack of various registers, or inadequate or delayed completion of same.

In the area of complying with the filing requirements under the Companies Acts in so far as the Companies Registration Office is concerned an appalling 13% compliance rate has come to light. As you know compliance with the reasonable requirements of the Companies Acts extends to companies quoted on our Stock Exchange. I am aware that a number of mid-cap companies listed there have failed to file statutory returns with the Companies Office. To cater for these issues of compliance with the Companies Acts a multi-pronged approach has been considered and is now being put in place. Students of the history of company law will be conscious that some years back the Company Law Review Group looked at a variety of issues relating to company law and corporate governance. More recently our Government considered the report of the Company Law Enforcement Working Group at its meeting of the 9th March last.

It decided to established a specially dedicated office to enforce company law. Work is underway currently not only in drafting the necessary legislation to effect this Government decision but also finance is being set aside and staff recruited to meet the needs envisaged. That new office will, as its title suggests, enforce the Companies Acts. Such enforcement will be to the long term benefit of shareholders, creditors, employees, and ultimately the wider community.

It will have the power to investigate companies which it is felt will be better effected outside the policy responsibilities of our Department. It will have the power to seek disqualification and restriction orders, a power currently not available to our Department. It will review liquidator and receiver reports and take such action as is necessary. It is reasonable to assume that in the medium term it will be engaged in an educational function, in particular in relation to the responsibilities of directors and company secretaries, as well as auditors and other disciplines involved in advising companies of corporate responsibilities.

Part of that Government decision is to have Company Law Bills coming on stream every two to three years. This will ensure that there will be a ongoing focus on the evolving developments in company law. A further, and perhaps more exciting feature is a standing Company Law Review Group. That Group will be composed of quite a number of disciplines and will be a good testing board of requirements for the future and deletions of perhaps certain anachronistic requirements.

Another strand to recent developments is the promotion of a new Company Law Bill. I recently received approval from our Government to bring a wide ranging Bill before the Oireachtas this year. The Bill will address problems posed by Irish Registered Non-Resident Companies whereby companies are formed in this jurisdiction but perform no perceptible business activities in the State. It will have a regime restricting the number of directorships of promoters of companies. If I might digress here it is a matter of some amazement to me that a responsible director can hold much more than 10 or 15 directorships. Indeed I wonder to what extent a person holding much more than that can be regarded as prudent, and hold a reasonable perspective on the various companies in which he or she is engaged.

Other provisions of that Bill will be the elimination of the auditor requirement on small companies. As a further aside this does not avoid the necessity to file accounts in the Companies Registration Office. Whether your company is affected by elimination of the audit requirement as a prudent director you should concern yourself with how the actual mechanics of the company operate: have you considered whether you have the necessary accounting expertise to adequately meet the needs of Section 202 of the 1990 Act? To what extent do you review the systems involved, are you happy with the personnel abilities to adequately perform the tasks? A further strand to that Bill will be a new procedure for striking companies off the register who do not file returns. In future the rather generous provisions currently in operation will be significantly restricted, thereby cleaning up the register more quickly and where necessary the restoration of a company to the register will be achieved by application to the Circuit Court, which will reduce the costs involved.

Currently quite a number of companies have received warning notices from the Companies Office. That Office is, on a systematic basis, contacting each company in the State who's record of filing returns is inadequate. 500 of these notices are issuing each working day and to date over 11,000 companies have being dissolved. Within the next couple of weeks a substantial proportion of prosecutions of errant companies and directors will commence on a wide scale basis through the State.

Amongst the findings of the Company Law Enforcement Working Group were that there were over 250 provisions applying penalties for failure to adhere to company law. Other than in the area of filing returns with the Companies Office the bulk of the provisions of the Acts have never been employed. However in recent months our Department has undertaken a more proactive approach, within the extremely limited staffing resources of our Department, following on complaints lodged with it or arising from company law inquiries.

A common feature of the prosecutions undertaken and convictions obtained have been a determined stance by a small number of companies not to hold annual meetings at which the directors present accounts and meet the reasonable questioning of their shareholders. Other areas that have attracted the attention of our Department have been the keeping of registers of members, the improper use of the word "Limited" in a title, and a lack of co-operation in changing names.

These and other areas are currently being prosecuted by our Department. I should say that there is a responsibility on auditors to examine the adequacy of books and records of limited liability companies. Where, in their professional opinion, there is inadequacies in this area of a material nature, they have an obligation to so advise the Companies Office. All such notifications are now routinely examined by our Department and the assistance of the individual auditor has been requested in considering whether the inadequacies warrant further action.

Up to now the tenure of my remarks might be regarded as negative! However a definition of Corporate Governance refers to the processes of management of risk and it can be directly linked to the risk to the company from improper or lax corporate governance. Good corporate governance encompasses the responsibilities of directors in keeping proper books of accounts, registers etc. The extent of this type of responsibility is clearly illustrated in the Mantruck case. Thus I commend you for taking time out to get a better understanding of the legal environment in which this national economy operates, and would encourage other directors to do so, and in doing so assist the improvement of corporate governance at all levels in our society.

The effects on the operation of our labour market of labour legislation - including that inspired by our EU obligations - have been debated at length in recent years without the controversy ever being satisfactorily resolved. Employers have tended to the view that such legislation can lead to increased labour costs, to a loss of competitiveness and to a discouragement of investment - as well as imposing onerous liabilities on employers. Against this view, much of the international literature over the last decade has acknowledged the economic benefits of employment security and long-term employment relationships in terms of co-operative labour relations, greater internal flexibility, acceptance of technological change, cumulative skills and a greater incentive for investment in human resources. Labour legislation has an input in respect of each of these factors in the labour market.

In recent years, a consensus approach to other economic and social issues in this country has facilitated the putting into place of a well balanced body of labour legislation which, together with measures designed to stimulate employment, has provided a framework aimed at achieving an efficient and competitive business environment. I am advised that the degree of statutory regulation of the Irish labour market is relatively low by international standards. In keeping with the voluntarist tradition, collective agreements are the primary method of determining conditions of employment and the role of statute law has generally been limited to that of setting a minimum level of protection.

Where new labour law initiatives are being considered, careful consideration is given to the possible impact of the proposed measures having due regard to the importance of maintaining a consensus approach to industrial relations generally. Priority is also given to the provision of clear and comprehensive information on the rights and obligations of both employee and employer and to developing speedy, informal and inexpensive enforcement procedures. In such circumstances, it would be expected that employers, generally, would be aware of their responsibilities under such legislation - liabilities being incurred only where such responsibilities are neglected or ignored.

Finally, I am advised that the process over the past 25 years of developing a balanced package of labour laws setting out basic social standards is now virtually complete and it is anticipated that the emphasis for the foreseeable future will be on consolidating, simplifying, and improving existing provisions rather than on introducing major new initiatives.

Finally a plea! The directors present will be conscious of my Science & Technology brief. Section 13 of the Companies Act, 1986 requires in the directors report an indication of the activities of the company in the field of research and development. If you are involved in the application of intellectual effort in technology matters, ensure that that activity is recorded in your directors report. Not only will it advise your shareholders, customers and staff of what is going on but it will also be an important feeding in mechanism to our Department in this increasingly crucial area.