Office of the Director of Corporate Enforcement
Consultation Paper C/2003/1
The Liquidation-Related Functions of the Director of
Corporate Enforcement - Further Commencement of
Section 56 of the Company Law Enforcement Act 2001.
Contents
Section 1:
Section 2:
Section 3:
Section 4:
Section 5:
Section 6:
Section 7:
Section 8:
Introduction
Background
Commencement of Section 56
Impact of Section 56
Proposal
Impact of Proposal
Invitation to Comment
Receipt of Comments and Follow Up
Copyright Statement
The contents of this document are the copyright of the Director of
Corporate Enforcement. Nothing herein should be construed as a
representation by, or on behalf of, the Director of Corporate
Enforcement as to his understanding or interpretation of any of the
provisions of the Companies Acts 1963 to 2001 or as to the
interpretation of any law.
Independent legal advice should be sought in relation to the effects of
any legal provision. The Director of Corporate Enforcement accepts no
responsibility or liability howsoever arising from any errors, inaccuracies
or omissions in the contents of this document. The Director reserves
the right to take action, which may or may not be in accordance with the
provisions of this document.
© Director of Corporate Enforcement 2003
1.
Introduction
The purpose of this Consultation Paper is:
 to set out the views of the Director of Corporate Enforcement on
a further commencement of section 56 of the Company Law
Enforcement Act 2001 relating to the submission of reports by
liquidators appointed to insolvent companies and
 to provide an opportunity to insolvency practitioners, professional
and representative bodies, Government agencies and other
interested parties to offer comments on these proposals.
2.
Background
In dealing with the Liquidation-Related Functions of the Director of
Corporate Enforcement, Decision Notice D/2002/31 outlined, inter alia,
the Director of Corporate Enforcement’s thinking on a phased approach
to implementing the reporting obligation under section 56 of the
Company Law Enforcement Act 2001 (CLEA) for liquidators appointed
to insolvent companies. Decision Notice D/2002/3 indicated that a
further extension or extensions of the scope of section 56 would be
considered by the Director and, in the event of a positive decision,
suitable recommendations would be made to the Minister for Enterprise
Trade and Employment.
Copies of Decision Notice D/2002/3 are available from the Office of the
Director of Corporate Enforcement and are also on the ODCE website
http://www.odce.ie/publications/decisions.asp.
3.
Commencement of Section 56
Section 56 was commenced on an initial basis on 1 June 2002 under
the provisions of the Company Law Enforcement Act 2001 (Winding-up
and Insolvency Provisions) (Commencement) Order 2002 [S.I. No. 263
of 2002]. Section 56 of the CLEA applies at present to:
(a) liquidators appointed to insolvent companies on or after 1 June
2002 and
Decision Notice D/2002/3 - The Liquidation-Related Functions of the Director of Corporate Enforcement –
November 2002
1
(b) liquidators appointed to insolvent companies on or after 1 July
2001 and before 1 June 2002 where –
(i)
an order has not been made under section 249(1) of the
Companies Act 1963, or
(ii)
the meetings required under section 273(1) of the
Companies Act 1963 have not been held.
Section 249(1) deals with the making of a dissolution order by the High
Court. Section 273(1) deals with the final meeting of creditors and the
dissolution of the company.
The effect of these Regulations is to require the qualifying liquidators to
report to the ODCE on the conduct of the directors of insolvent
companies within six months of their appointment or within six months
of the commencement of section 56, whichever is the later. However,
section 56 does not at this stage apply to the liquidators of insolvent
companies appointed before 1 July 2001.
4.
Impact of Section 56
The commencement of section 56 resulted in about 300 reports being
submitted to the ODCE by the end of 2002 dealing with the conduct of
over 780 directors. An on-going submission of 35 reports per month
during 2003 is expected. In the case of each report, the ODCE
considers if the liquidator should be relieved of the obligation in section
56(2) to apply to the High Court to restrict each of the directors of the
insolvent company under section 150 of the Companies Act 1990. The
examination of the section 56 report also allows the ODCE to detect any
breaches of company law requirements and to determine whether
criminal investigations or any other actions are appropriate in relation to
those breaches.
The evidence from the first tranche of reports suggests that relief from
restriction is warranted in about 50% of the reports and that serious
misconduct appears to be present in a significant minority (about 20%)
of insolvent companies. The Director is accordingly of the view that
there should be a further commencement of section 56, in order to bring
to light errant behaviour in other insolvent companies for possible
sanction.
5.
Proposal
The Director therefore proposes that section 56 should now apply to all
liquidators appointed to insolvent companies on or after 1 January 2000
and before 1 July 2001, where these liquidations are still on-going on 1
June 2003.
The Director envisages that this will represent the final phase of
implementing section 56. As these section 56 reports will only become
available to the ODCE by the end of November 2003 and possibly come
before the High Court in early 2004, any wider application would not
serve any useful purpose in assessing the behaviour of the directors of
each company.
6.
Impact of Proposal
It is estimated that there are over 250 cases which could be covered by
the suggested proposal. On the basis that some of these liquidations
would be completed by 1 June 2003 and would not therefore be
covered by the reporting requirements, some 175 reports might be
anticipated. Such a volume of reports should be conducive to  the orderly and efficient examination of those reports by the
ODCE and
 a timely and detailed consideration by the High Court of the
applications for restrictions which would subsequently be made.
7.
Invitation to Comment
The Director invites comments from interested parties on his proposal to
recommend a further and final phasing-in of the section 56 reporting
obligations with effect from 1 June 2003 in respect of liquidators
appointed to insolvent companies on or after 1 January 2000 and before
1 July 2001 where such liquidations are still ongoing on 1 June 2003.
Comments should be submitted to the ODCE by close of business
on Monday, 31 March 2003.
Submissions may be forwarded in written or electronic form to the
following contact points:


@
Consultation Paper C/2003/1
Office of the Director of Corporate Enforcement
16 Parnell Square
Dublin 1
01 – 858 5802
consultation@odce.ie
8.
Receipt of Comments and Follow Up
All comments are welcome and will be given consideration by the
Director and his staff.
The final shape of the arrangements which will apply will be published
on the ODCE website at http://www.odce.ie/publications/decisions.asp
by way of a Decision Notice, and a copy will be sent to all those who
make submissions. Those responding to this invitation to comment are
asked to note that submissions may be released in whole or in part
under the Freedom of Information Act 1997 (as amended).
Copies of this Consultation Paper are available from the following
contact points:


Insolvency Unit,
Office of the Director of Corporate Enforcement,
16 Parnell Square,
Dublin 1
http://ww.odce.ie/publications/consultations.asp
@
info@odce.ie

01 – 858 58 00
Lo call 1890 315 015

01 – 858 5802
Office of the Director of Corporate Enforcement
10 March 2003