Presentation to the
Annual Conference of the
Institute of Chartered Secretaries
and Administrators
Conrad Hotel, 16th October 2002
Ian Drennan, Compliance Manager ODCE
Presentation Overview
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Overview of the ODCE
Role of the ODCE
Mandatory Reporting Obligations
Consequences of Non-Compliance
More Common Breaches
ODCE Services and Sources of Further Information
Overview of the ODCE
• Independent statutory Office
• Established under the Company Law Enforcement Act,
2001 (CLEA)
• 37 staff – multidisciplinary
• Location – NB moving shortly!
Company Law
Enforcement Act, 2001
In addition to establishing the ODCE, the CLEA provided:
• that the enforcement of filing obligations remain with the Registrar
• for other measures to streamline enforcement e.g. introduction of the
concept of an Annual Return Date (ARD)
• for the introduction of new reporting obligations on certain parties
Role of the ODCE
• The ODCE’s role is set out in the CLEA
• Two primary roles:
– a compliance role, and;
– an enforcement role.
Compliance Role
• Encourage compliance through, inter alia:
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education and raising of awareness
issuing of publications
provision of information to the public (non-advisory)
engaging with professional, trade and other
representative bodies
Compliance Role
• Consultation Papers
• Decision Notices
• Other publications on an ongoing basis e.g. Introduction to
the ODCE, ODCE Annual Report, Guide to the CLEA etc.
• Website: www.odce.ie
Enforcement Role
• Prosecution of offences or referral for decision to
prosecute
• Imposition of fines in lieu of prosecution
• Investigative role
Enforcement Role
• Role in relation to companies in liquidation and insolvent
companies
• Supervision of liquidators and receivers
• Receipt of mandatory reports
Mandatory Reporting Obligations
• Professional Bodies:
 failure of a liquidator or receiver to maintain appropriate records
 commission of an indictable offence during the course of a liquidation or
receivership
• Auditors:
 indictable offences
• Liquidators:
 report on the conduct of company directors
 reporting of criminal offences to the Director
Auditors’ Reporting Obligations
• The CLEA 2001 introduced a new reporting obligation on company
auditors. Auditors are now required to report to the ODCE where they
have reasonable grounds for believing that an indictable offence under
the Companies Acts has been committed by a company or an officer of
the company.
• Joint guidance published by ODCE and the Auditing Practices Board
(APB) to assist auditors in discharging their duties in thie regard.
• Guidance available on www.odce.ie
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
• SAS 120 and 620 of particular relevance
Auditors’ Reports - Contents
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Auditor details
Details of the company/persons the subject of the report
Whether the matter has been discussed with the directors
Details of the suspected offence(s)
Details of the grounds
Context (e.g. extent investigated, rectification steps taken)
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
• Applies to liquidators of insolvent companies only
• 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)
• First liquidators’ reports due in by 30th November (commencement
date 1st June 2002 I.e. appointed thereafter of liquidation ongoing on
that date).
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
Consequences of Non-Compliance
• Admininstrative fines – maximum €500
• Prosecution – 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.
Consequences of Non-Compliance
• Significantly higher penalties are available for certain
offences e.g.
– fraudulent trading: €63,500 and/or 7 years
– insider dealing: €254,000 and/or 10 years
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
• Persons subject to a disqualification order are precluded from acting as
director, secretary, auditor, liquidator, receiver or examiner.
• Disqualification can be automatic or discretionary, depending on
circumstances.
• Lasts 5 years
Disqualification
Disqualification is automatic in the following circumstances:
• where an individual is convicted on indictment of any indictable
offence relating to a company or involving fraud or dishonesty
• where a person is convicted of acting in contravention of a restriction
order (also an offence)
• where a person is convicted of acting in contravention of a
disqualification order – disqualification is extended for a further 10
years (also an offence)
Disqualification
The Court has the discretion to issue a disqualification order
where a person involved in a company has been guilty of, inter alia:
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a fraud in relation to the company, its members or creditors
a breach of duty in relation to the company
persistent default in relation to CA obligations
two or more counts of failure to maintain proper books of account
reckless trading
fraudulent trading
More Common Breaches
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Failure to keep proper books of account
Illegal transactions with directors
Failure by directors to hold AGMs and/or EGMs
Failure to maintain the required registers and/or make them
available to entitled parties
• Trading while insolvent
Steps to Improve Compliance
• Stress that company property and directors’ property are not one and
the same - and that directors should accordingly
• Keep the necessary registers, minutes etc.
• File the necessary documents with the Registrar
• Convene an AGM and EGMs as required
Steps to Improve Compliance
• Ensure that company transactions with directors are lawful
e.g. avoid misapplication of company assets etc.
• Maintain proper books of account
• Prepare and regularly review management accounts with a
view to timely identification of potential solvency
problems.
If there is a solvency problem?
• Seek professional advice i.e. accounting, secretarial and legal
• If insolvent, cease trading i.e. don’t incur further debts and do not
accept prepayments/deposits from customers
• Don’t engage in selective discharge of debts e.g. discharging bank
liabilities carrying personal guarantees in preference to other creditors
(including Revenue).
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)
Further Information
www.odce.ie
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decision notices
exemptions granted re applications for restriction
court decisions
prosecutions
company investigations
restrictions
disqualifications
Thank You