The ODCE – Setting the standard
Presentation to Diploma in Corporate
Governance Class
Kevin Prendergast
Corporate Compliance Manager, ODCE.
Presentation Overview
• Background and role of the ODCE
• How we receive our information
• Civil orders - Restriction and Disqualification
• Criminal prosecutions
• Breaches and advice
Office of the Director of
Corporate Enforcement (ODCE)
• Increased public concern arising from a number of alleged
instances of corporate malpractice e.g. McCracken
(Ansbacher (Cayman) Ltd. etc.), Moriarty, Flood, NIB etc.
• Working Group on Company Law Compliance &
Enforcement (1998)
• DIRT Investigation (1999) and resultant reports
Office of the Director of Corporate
Enforcement (ODCE)
 Enforcement of filing obligations remains with the Registrar of
Companies
 Company Law Review Group established, on a statutory basis, in
recognition of the need for a modern company law regime
 Office of Director of Corporate Enforcement established to deal
with Companies Acts in general
 Other measures introduced to streamline enforcement
Office of the Director of
Corporate Enforcement (ODCE)
 Functions of the Director
 to enforce the Companies Acts, including by the
prosecution of offences by way of summary
proceedings,
 to encourage compliance with the Companies Acts,
 to investigate instances of suspected offences under the
Companies Acts,
Office of the Director of
Corporate Enforcement (ODCE)
 Functions of the Director cont’d
 at his or her discretion, to refer cases to the Director of
Public Prosecutions where the Director of Corporate
Enforcement has reasonable grounds for believing that
an indictable offence under the Companies Acts has
been committed,
 to exercise, insofar as the Director feels it necessary or
appropriate, a supervisory role over the activity of
liquidators and receivers in the discharge of their
functions under the Companies Acts,
Office of the Director of
Corporate Enforcement (ODCE)
• Independent
• 51 staff
• Divided into 5 Units:
– Compliance
– Assessment
– Insolvency
- Enforcement
- Corporate Services
Office of the Director of
Corporate
Enforcement
(ODCE)
• Assessment Unit assesses whether there is a prima facie actionable
breach of Company law i.e. sieving process
• Insolvency Unit considers all insolvent companies including all
companies in liquidation
• Enforcement Unit receives cases from Assessment & Insolvency Unit,
accumulates evidence & takes the appropriate action
• Team structure
• Member of the Garda Siochana
• Accountant
• Legal Adviser/Solicitor
• Administrative Civil Servant
How we receive our information
• Auditors are required to report suspected
indictable offences
– 191 reports in 2010
• Liquidators are required to make a report on
every liquidation
– 1,312 reports considered/received in 2010
– Will exceed 1,500 in 2011 (270 in 2007)
How we receive our information
• MOU’s with State authorities
– Revenue, Central Bank, ISE, IAASA
• Professional Bodies are required to report
indictable offences
• Public can make complaints
• 459 reports in 2010
Enforcement Options
• ODCE has a number of enforcement options open to it
depending on circumstances. These include:
– seeking voluntary compliance
– initiation of investigations (directly or via the Courts)
– civil remedies e.g. injunctions, applications for restriction,
disqualification, imposition of personal liability etc.
– criminal prosecution (summary or on indictment)
– referral to other enforcement agencies.
ODCE Actions
• Seeking voluntary compliance
– Company refuses to hold AGM, member
complain
– ODCE contacts company and directors,
explaining legal obligations and powers of
Office to require meeting to be held (court
order)
– In almost all cases, meeting then happens
– Minimal cost, timely and appropriate result
ODCE Actions
• DCC/Fyffes – Appointment of Inspector
– DCC sold Fyffes shares for large profit
– Fyffes subsequently took civil case for damages against
DCC on behalf of shareholders
– Supreme Court found in favour of Fyffes, case settled
– ODCE applied to High Court for Inspector to be
appointed to investigate
– Inspector reported 18 months later that CEO Flavin
made “error of judgement” but there was no further
evidence of misbehaviour
ODCE Actions
• Anglo Irish Bank - Criminal investigation
– Evidence from Financial Regulator and Bank that
indicated potential company law issues
– Sought and obtained search warrants
– Executed warrants at premises of Anglo Irish Bank in
March 2009
– Large amount of hard and soft copy documents seized
• Necessitated changes in company law
– Amended legislation on evidence and third party
witnesses
– Criminal investigation ongoing
Civil Orders - Restriction
• Director of an insolvent company
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–
–
–
Not able to prove that acted honestly and responsibly
Reverse Burden of proof
Company need not be in liquidation
Applies to Shadow Directors (Those in accordance with whose
wishes directors ordinarily act)
• Must have minimum capitalisation of Company
– Private company €63,487, plc €317,435
Civil Orders - Restriction
• 156 directors restricted by the courts in 2010
• Liquidator obliged to take action unless relieved
by ODCE
• ODCE acts as a filter to separate those cases that
warrant High Court attention from those that do
not
• During 2010 in some 95% of cases liquidators
were either partially or fully relieved of duty to
take proceedings
Civil Orders -Disqualification
• Automatic disqualification
– Breach of restriction order
– Conviction on indictment of an offence involving fraud or
dishonesty or any offence in relation to a company
– Undischarged bankrupt acts as director
– Disqualified abroad and not disclosed here
• By court
– Guilty of fraud or breach of duty as director
– Conduct makes them unfit to act as a director
Civil Orders -Disqualification
• By court – continued
– Persistently in default
– Director of company struck off the Companies Register with debts
owing
• For a period of five years or other such period as the courts
direct:
– Cannot act as a director (or other officer or auditor or receiver or
liquidator or examiner)
– Cannot take part in the formation, promotion or management of a
company
– Name will appear on the register of disqualified persons
Civil Orders -Disqualification
• 1 director disqualified in 2010, some 14
cases before the courts
• A number of these related to unliquidated
insolvent companies
• Also cases relating to NIB are under appeal
in the Supreme Court. One yet to be heard
in High Court
Referral to other agencies
• Breaches of provisions relating to directors’
loans
– Forwarded to Revenue Commissioners
• Breaches of law/good practice by auditors
– Referred to professional bodies and IAASA
Criminal prosecutions
• In general, maximum penalties under the Companies Acts
are:
– €1,900 and/or 12 months imprisonment on summary conviction,
and;
– €12,700 and/or 5 years imprisonment on conviction on indictment
(any offence for which the maximum sentence is 5 years or more is
an arrestable offence).
Criminal prosecutions
• Significantly higher penalties are available for certain
offences e.g.
– fraudulent trading: €63,500 and/or 7 years, and;
– Market abuse: €10million and/or 10 years.
Criminal prosecutions
• In 2010 the Office secured 8 criminal convictions,
– Unqualified auditors
– Failure to keep proper books of account
• Number have dropped significantly since Anglo
commenced
• ODCE prosecutes through District Court
• A small number of cases have been referred to the
Circuit Court due to declining of jurisdiction by
DC
Proposed Companies Bill
• Replaces the current Acts’ focus of the Public Limited
Company (PLC) with the private company limited by
shares
(Which represents around 90% of Companies on the Register).
• Simplicity by regulating all companies under the same
legislation
• Clear demarcation lines between the different type of
companies.
Splitting Company Law into two
Pillars
• Pillar A – is exclusively concerned with the
private company limited by shares (CLS),
• Legislation focuses on requirements for this
entity which is expected to become the
norm.
Pillar B
• Pillar B – provides the variation for other
company types, such as:– Public Limited Company,
– Investment Company,
– Designated Activity Company, (such as
AOMC’s) etc…
New dispensations for CLS’s
• Constitution rather than memo and Articles
• Will have the capacity of a natural person
(Doctrine of ultra vires disappears)
• May have just one director
• More flexible validation of decisions
• Companies must “opt in”
Companies Bill
• In Oireachtas by end 2012
• 6/12 months to pass through Oireachtas
• Grace period before commencement (6+
months?)
More Common Breaches
• On the basis of information coming to ODCE’s attention, the
following are some of the more common breaches:
– transactions with directors - breaches of directors’ loans provisions
• 146 reports to ODCE
– auditing deficiencies
• 59 reports
– failure to hold AGM/EGM
• 37 reports
– failure to keep proper books of account
• 36 reports
– unpaid debt issues
• 32 reports
What to do ODCE advise
Directors?
• Advice to Directors
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–
–
–
–
–
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Ask questions
Don’t assume anything
Books & Records - where are they
Discuss issues don’t avoid them
Seek professional advice
Consult your company secretary/auditors/legal advisors
Possibility of insurance
Questions for directors to ask
• Where is the registered office
of the company?
• Are your website and emails
compliant?
• Are you a properly appointed
director?
• Are the addresses of directors
correct?
• What books and records do
you have?
• Who maintains your accounts,
and where?
• Have your books ever been
audited?
• When was your last meeting of
directors?
• When was your last
AGM/EGM?
• What is your annual return
date (ARD)?
• Are you large enough to have
added responsibilities?
• Are you taking advantage of
your power as a director?
• Are you in financial trouble?
Sources of Information
• ODCE Information Books
– Guidance for directors, secretaries, shareholders etc.
• ODCE website – www.odce.ie
– guidance for directors and secretaries etc.;
– commentary on corporate governance best practice and access to
main reports on the subject;
– public notice information e.g. civil enforcement action,
prosecutions, insolvency information;
– information on ODCE services.
• LO - CALL 1890 315 015, info@odce.ie
– General advice on company law issues, but get professional advice!
Question & Answers
Thank You