Presentation to MBS in Accounting Students, Dublin City University 23 October 2012

Outline of Presentation  Introduction to the ODCE  Our Goals and associated work  Our initial impact  Concluding Comments

What is the ODCE?  Business scandals of the late 1990s (Tribunals of Inquiry – McCracken/Flood, High Court Inquiries – Ansbacher/NIB) and the PAC’s DIRT Inquiry)  Working Group on Company Law Compliance and Enforcement finding of “a culture of non- compliance” with respect to company law duties

What is the ODCE?  Remit focused on the Companies Acts  Multi-disciplinary agency comprising c.49 administrative, legal, accounting and Garda staff  Expenditure of €3.4 million in 2011  Director must act on an independent basis  Director obliged to respect commercial confidentiality

ODCE Goals  Encouraging Improved Compliance  Uncovering Suspected Breaches  Prosecuting Detected Offences/Breaches of Duty  Sanctioning Improper Conduct affecting Insolvent Companies  Providing Quality Customer Services

DPP referrals Disqualifications Summary Prosecutions Civil Enforcement Actions (Compliance Orders, Restrictions) Administrative and Legal Actions (Investigations, cautions, rectification and remediation on a non-statutory basis) Encouraging Compliance (Advocacy & guidance) Enforcement Pyramid

ODCE’s Compliance Work  Publications  Information on the ODCE’s Remit - Auditor Reporting  General Guidance on Directors’ Duties, etc.  Guidance on new legal requirements, e.g., New Companies Acts  Topical Guidance, e.g., Management companies, Audit Committees, Transactions involving directors  Presentations, Conferences, etc. (c.70 per year)  Press Statements, syndicated news articles

ODCE’s Compliance Work  Policy Contributions  New Companies Bill  Company Law Review Group  Irish Auditing and Accounting Supervisory Authority  International Dimension  Responses to EU Company Law consultations  International Association of Insolvency Regulators  Future of audit

ODCE’s Detection Work  Public Complaints about companies, directors, etc.  Auditor Reports of suspected indictable offences  Regulatory Bodies like Revenue, the Garda, etc.  Matters in the public domain, e.g., Inquiry Reports  ODCE’s own inquiries, e.g., the CRO Register

ODCE’s Detection Work  Identify if a prima facie breach has occurred  Consider if administrative rectification will suffice  Assess if ODCE intervention is called for  Consider if legal action is necessary or desirable  Evaluate if other actions are warranted, e.g., referral of case to another regulator for evaluation  Vast majority of issues dealt with administratively

ODCE’s Detection Work  Directors’ Transactions – One Area of Work  General Ban on use of Company Assets for personal purposes  Auditors have been reporting on average 300 cases a year since 2003  Publication/issue of ODCE Guidance in November 2003  ODCE Article issued to all Directors in 2004  Directors’ voluntary or prompted remedial action often accepted  A handful of cases of ‘wilful default’ have been prosecuted  Law amended to allow easier prosecution  2011, 143 cases, €44million (2009, 185 cases, €162million)

ODCE’s Enforcement Work  Criminal Enforcement Options  Summary Prosecution in the District Court  Referral to the DPP for Prosecution on Indictment  Typical Criminal Enforcement Offences  Persons acting as Directors/Auditors while prohibited  Accounting issues, e.g., failing to keep proper books  Falsification of company documents

ODCE’s Enforcement Work  Corran Building Services Ltd. Case  Liquidator submitted a criminal conduct report  Gardaí obtained/executed a search warrant  Gardaí seized two company cars bought with company funds which had not been handed over to the liquidator  One director convicted of fraudulent trading, failing to keep proper books and failing to file annual returns  Two directors afterwards restricted by the High Court

ODCE’s Enforcement Work  Civil Enforcement Options  Remedial Orders  Restriction  Disqualification  Related Civil Enforcement Responses  Failure to discharge an obligation of law  Failure to act honestly and responsibly in insolvency  Serious misconduct, e.g., fraud

ODCE’s Enforcement Work  Anglo investigation  Information disclosed by FR  Further disclosures by bank  Warrant obtained, paper and electronic documents seized  Amendments to law to deal with scale of seizure  Documents being interrogated  Individuals making statements, some under arrest  Individuals have been arrested and charged, more may follow  Largest and most complex financial investigation in State

ODCE’s Insolvency Work  Formerly only court appointed liquidators sought the restriction of certain directors.  Every liquidator of an insolvent company must report to the ODCE and apply to the Court for directors’ ‘restriction’, unless relieved by the ODCE  About four out of five directors avoid restriction

ODCE’s Insolvency Work  Initial reports received within 6 months of appointment  Formerly 250/300 reports a year  1,287 reports in 2011  Same or more in 2012

ODCE’s Insolvency Work  ODCE may also seek disqualification of directors in unliquidated insolvent/struck-off company cases  Our role is to ensure that persons who abuse their position are brought to account in Court  ODCE has successfully piloted actions in this area

ODCE’s Insolvency Work  Phoenix Activity  One acted as director of eight struck-off companies, all of which had debts outstanding  Another acted as director of four of these companies  Came to attention due to employee, creditor and Pensions Ombudsman complaints in a failed company  First director disqualified for 12 years  Second director disqualified for 8 years

ODCE Impact since 2002  Over 80 new or revised ODCE Publications issued  178,000 visits to the ODCE website in 2011  12,000 complaints/reports dealt with  More than 100 companies/directors/others convicted by ODCE on over 300 charges  1200 directors restricted  Over 100 directors disqualified

ODCE Impact  Future Direction  Reach out to company stakeholders and SME directors  Deal with minor offences administratively  Target and aggressively prosecute serious misbehaviour  Concentrate more enforcement resources on complex cases or areas of major non-compliance

Concluding Comments  ‘Culture of non-compliance’ which was said to prevail is being turned around:  State had failed to regulate effectively  Professional Conduct was not supported  Little Prospect of Sanction for Misconduct  Deficient Accountability Framework in Practice

Concluding Comments  New Situation  Directors, etc. now more accountable  Auditor’s independent role reinforced  Errant and unscrupulous Directors face ODCE Inquiry/Court action  Creditors’ Situation has improved  Better Information Disclosures to Market  Reinforcing Good Practice in other areas

Concluding Comments  Effective and Balanced Regulation protects:  The public from fraud  Employees, traders and suppliers from irresponsible conduct  State revenue and the taxpayer’s interest  Investors and credit institutions from bad debts  Legitimate business from fraud-based competition  Personal and Corporate Reputation

Thank You Further Information is available from www. odce. ie