The Role & Functions of
the Office of the
Director of Corporate Enforcement
Presentation at the
Dundalk Institute of Technology
2nd May 2002
Ian Drennan
Corporate Compliance Manager ODCE
Overview
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Company directors’ responsibilities
Background to the Company Law Enforcement Act, 2001
Role & Powers of the ODCE
New Reporting Obligations
ODCE Services
Sources of Information
Directors’ Responsibilities
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A company is a separate legal entity
Members appoint directors to manage the company
Directors’ primary legal duty is to the company
However, directors also owe certain duties to other parties
such as the members and creditors of the company
• Directors’ responsibilities are grounded in common law
and in statute
Directors’ Common Law Duties
• Directors must exercise their powers in good faith in the
interests of the company as a whole
• Directors are required to carry out their duties with due
care, skill and diligence
• Directors should not make undisclosed profits from their
position as directors
• Where directors abuse their powers, their actions are
voidable (but can subsequently be ratified by members in
general meeting)
Directors’ Statutory Duties
• Directors’ statutory duties include, inter
alia:
• Maintenance of Registers
• Filing obligations
• Operational obligations
Registers etc.
Required to be maintained and available for inspection:
• Directors and Secretary
• Directors’ and Secretary’s interests in the company and
related companies
• Directors’ service contracts
• Members
• Debenture holders
• Minutes
Filing Obligations
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Annual return
Financial statements (abridged or full)
Mortgages and charges
Changes in directors / secretary
Change of registered office
Change in company constitution (articles / memo)
Increase in authorised or issued share capital
Operational Obligations
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Maintain proper books and records
Prepare financial statements
Subject to exceptions, have the f/s audited
Hold an AGM as required
Prior to the AGM, circulate every member with a full set of
financial statements
• Convene EGMs as required
Directors’ Responsibilites
to Members
These include obligations to:
• provide personal information for inclusion in the various
registers
• disclose interests in contracts with the company, including
service contracts
• notify members of proposed susbstantial property
transactions with the company and seek their approval
Directors’ Responsibilities
to Creditors
These include the obligations to:
• use the proper name of the company on invoices and
cheques etc.
• make an accurate declaration of solvency where proposing
to initiate a members’ voluntary winding up
• co-operate with a liquidator, where appointed
Background to the Company Law
Enforcement Act, 2001
• Government established a Working Group on Company Law
Compliance & Enforcement (1998)
• This decision was influenced by the emergence of “strong indications
of abuses of company law and the need to allay public concerns”
• Group’s recommendations were largely accepted by the Government
and enacted through the Company Law Enforcement Act, 2001
Company Law
Enforcement Act, 2001
In summary, the CLEA, 2001 provides for:
• the enforcement of filing obligations to remain with the Registrar of
Companies
• the establishment of the Company Law Review Group (CLRG)
• the establishment of the ODCE
• the introduction of new reporting obligations on certain parties
• other measures to streamline enforcement
Office of the
Director of Corporate Enforcement
• Director: Paul Appleby
• 37 staff
• Initial budget of €3.7m
• Harcourt Road (temporarily) - Parnell Square (permanent)
Role of the ODCE
• Under the provisions of the Company Law
Enforcement Act, 2001 the Director has two
primary roles i.e.
• to encourage compliance with the law, and;
• to bring to account those who disregard the law
Compliance Role
The ODCE fulfils its compliance role through, inter alia:
• Delivery of public presentations
• Provision of information in both printed and electronic
form
• Engagement with professional and other bodies
• Consultation process
Compliance Information
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Website (www.odce.ie)
Legislation
Information Notices (draft)
Consultation Papers
Decision Notices
Guide to the CLEA (in progress)
Company Life Event Guide (planned)
Enforcement Role
The Director has extensive powers in relation to:
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Investigations
Breaches of the Acts
Restriction & Disqualification
Companies in Liquidation and Unliquidated Insolvent
Companies
• Supervision of Liquidators and Receivers
• Receipt of mandatory reports
Investigations
The Director can:
• conduct a preliminary examination of a company’s books and records
for the purposes of determining whether breaches have taken place
• appoint an inspector to establish the beneficial ownership and control
of a company’s shares/debentures
• apply to the High Court for the appointment of an Inspector to conduct
a wide ranging investigation into a company’s affairs
Breaches of the Acts
Where breaches of the Acts are detected, the Director can:
• Impose a fine in respect of summary offences. Where the fine is paid
and the default remedied within 21 days, no prosecution will ensue
• Initiate a summary prosecution
• Refer the matter to the DPP for a decision
Restriction
• Provision for the restriction of directors (and secretaries) was
originally introduced by S150, CA 1990
• S150 allowed, but did not require, liquidators of insolvent companies
to apply for the restriction of company directors
• CLEA 2001 requires the liquidators of insolvent companies to apply
for the restriction of the directors unless relieved of the obligation
• Director can also apply for restriction orders
Restriction
• Saver where a person can demonstrate that they have acted honestly
and responsibly
• Restriction orders last for 5 years
• Companies having a director or secretary who is restricted must satisfy
certain criteria: i.e.
- minimum fully paid up share capital of €63k (€317 for plcs)
- each share must be paid for in cash
Disqualification
• Provision for disqualification was originally introduced by S160, CA
1990
• Disqualified persons are precluded from acting as directors,
secretaries, auditor, liquidator, receiver or examiner
• Disqualification is automatic where a person is convicted on
indictment of an offence involving fraud or dishonesty
Disqualification
The Director can apply to the Courts for a disqualification order where:
• a person is guilty of three or more defaults under CA requirements
• a person is guilty of two or more offences of failing to keep proper
books (new provision)
• a director of an insolvent company fails on request to file all
outstanding annual returns and the company is subsequently struck off
Companies in Liquidation
• The Director can prosecute certain offences and apply for
certain orders or judgements in respect of companies in
liquidation:
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criminal liability for fraudulent trading
to inspect the company’s books
to have the Court examine directors etc. on oath
order for payment or delivery of property
Companies in Liquidation
• an arrest warrant (absconding contributory or officer)
• the return of assets improperly transferred to officers of the company
• an assessment of damages (against a director, officer etc. in the case of
misapplication or retention of company property or misfeasance or
breach of duty)
• freezing of assets of directors or officers
Unliquidated Insolvent Companies
• Under S251 CA, 1990 (as amended by S54 CLEA, 2001) the Director
can also apply to the Court for certain orders and judgments in respect
of insolvent companies not in liquidation
• However in such circumstances the primary onus for pursuing
defaulting officers of these companies rests with the creditors (i.e. a
civil matter)
• Accordingly, the Director will only intervene in insolvent companies
not in liquidation in exceptional circumstances (such as the public
interest)
Unliquidated Insolvent Companies
• Criteria to be considered in such cases
might include, inter alia:
• the insufficiency of funds available to creditors to initiate proceedings
on their own initiative
• the size of the suspected deficit
• the extent to which the company’s assets are suspected to have been
dissipated prior to closure
• the track record of the persons involved
Supervision of
Liquidators and Receivers
The Director:
• Will receive a copy of each notice of appointment filed with the
Registrar
• May require production of the liquidator’s/receiver’s books
• May seek an explanations of their conduct
• Must be notified as to whether, on completion of a receivership, the
company is solvent
Reporting Obligations
• The CLEA 2001 introduced a number of new reporting
obligations on:
• Professional bodies
• Auditors
• Liquidators
Reporting Obligations
• Professional Bodies:
 indictable offences by auditors, liquidators and receivers
 failure of a liquidator or receiver to maintain appropriate records
• Auditors:
 indictable offences (Consultation Paper 2)
• Liquidators:
 report on the conduct of company directors (Consultation Paper 3)
 reporting of criminal offences to the Director
Auditors’ Duty to Report
under S74, CLEA 2001
• “where in the course of, and by virtue of, their carrying out an audit of
the accounts of a company, information comes into the possession of
the auditors that leads them to form the opinion that there are
reasonable grounds for believing that the company or an officer or an
agent of it has committed an indictable offence under the Companies
Acts, the auditors shall forthwith after having formed it, notify that
opinion to the Director with details of the grounds on which they have
formed that opinion”
Auditors’ Duty to Report
under S74, CLEA 2001
• “no professional or legal duty to which an auditor is subject by virtue
of his appointment as an auditor of a company shall be regarded as
contravened by, and no liability to the company, its shareholders,
creditors or other interested parties shall attach to, an auditor, by
reason of his compliance with an obligation imposed on him by or
under this section”
Auditors’ Duty to Report
under S74, CLEA 2001
• Indictable offences
• Does not apply to accountants’ non-audit work
• However, auditors must have regard for matters coming to attention
during the course of non-audit work
• No requirement to seek out offences (over and above normal audit
procedures). However, auditors are expected to react to information
coming to their notice
• Public interest reporting aspect
• SAS 120 and 620 of particular relevance
Liquidators’ Duty to Report
under S56, CLEA 2001
• “a liquidator of an insolvent company shall, within 6 months after his
or her appointment or the commencement of this section, whichever is
later, and at intervals as required by the Director thereafter, provide to
the Director a report in the prescribed form” (Section 56(1) CLEA,
2001)
Liquidators’ Duty to Report
under S56, CLEA 2001
• “a liquidator of an insolvent company shall, not earlier than 3 months
nor later than 5 months (or such later time as the court may allow and
advises the Director) after the date on which he or she has provided to
the Director a report under subsection (1), apply to the court for the
restriction under section 150 of the Act of 1990 of each of the
Directors of the company, unless the Director has relieved the
liquidator of the obligation to make such an application” (Section
56(2) CLEA, 2001)
• “any liquidator who fails to comply with subsection (1) or (2) is guilty
of an offence” (Section 56(3) CLEA, 2001)
Liquidators’ Duty to Report
under S56, CLEA 2001
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Applies to liquidators of insolvent companies only
Insolvent: unable to meet its debts as they fall due
Applies also to shadow directors
Director can relieve the liquidator in respect of less than the full
complement of directors
• ODCE will not subsidise legal costs. However, the Court can direct
that the restricted person(s) bear the costs of the application(s)
• Proposed commencement date – 1 June 2002
• Proposed approach is a phased basis (up to 3 phases)
Liquidators’ Duty to Report
under S56, CLEA 2001
• Phase 1
• all liquidators appointed on or after 1 June 2002
• all liquidators appointed on or after 1 July 2001 where the liquidation
is ongoing on 1st June 2002
• Phase 2 (provisional) – 1 December 2002
• all liquidators appointed between 1 July 2000 and 30 June 2001 where
the liquidation is ongoing at 31 December 2002
Liquidators’ Duty to Report
under S56, CLEA 2001
• Phase 3 (possible) – 1 June 2003
• All liquidators appointed between 1 July 1998 and 30 June 2000 where
the liquidation is ongoing at 1 June 2003
Information Required
in Liquidators’ Reports
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Liquidator’s details
Type of liquidation
Date of appointment
Company details
Directors’ details
Liquidator’s opinion as to
whether each director acted
honestly and responsibly in the
conduct of the company’s
affairs
• Statement of affairs
• Audited financial statements
• Report to creditors (including of
minutes of creditors’ meetings)
• Whether the liquidator intends
to apply for restriction or
disqualification
• Details of any other civil or
criminal proceedings in train or
anticipated
• Presence of any criminal
offences
ODCE Services
 Compliance Information Service (draft Notices)
 General Information Service (info@odce.ie)
 Complaints Facility (complaint form available at
www.odce.ie)
 Registration Service (via www.odce.ie)
 FOI Service (foi@odce.ie)
 Feedback Facility (feedback@odce.ie)
Sources of Information
www.odce.ie
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decision notices
exemptions granted re applications for restriction
court decisions
prosecutions
company investigations
restrictions
disqualifications
Sources of Information
www. cro. ie
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information
doing Business with the CRO
CRO Fees
company search facility
Sources of Information
www. clrg. org
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about the Company Law Review Group
text of the CLRG’s First Report
opportunity to comment on the First Report
CLRG’s Second Work Programme (7 areas)
opportunity to make submissions on the new work
programme
Sources of Information
www.basis.ie
 company law
 employment legislation
 environmental legislation
 health & safety regulations
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