Institute of Chartered Secretaries and Administrators Annual Conference October 2005

Company Law Regulation - ODCE What’s on the ODCE’s Agenda? Paul Appleby Director of Corporate Enforcement

Outline of Presentation ODCE’s Goals/Results Compliance Detection Enforcement Insolvency Concluding Comments

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

ODCE Highlights in 2004 Revised Guidance on Directors’ Compliance Statements Rectification of Unlawful Directors’ Loans 66 Convictions of Companies, etc. (+53% on 2003) 217 Directors Restricted (up from 193 in 2003) Three Directors Disqualified following ODCE action ODCE Website Visits increased by 54% to 117,000

Compliance Agenda in 2005 Participated in Review by CLRG of Directors’ Compliance Statements Provision Notes on parts of the Companies Act 2005 published New Exemption for Auditors Reporting Filing Defaults Planned Guidance on new Duty for Reporting Auditors to provide assistance to the ODCE Planned Guidance on new Audit Committee Provisions Future Conduct of Market Research on ODCE and Compliance

Detection Agenda in auditor non-filing indictable reports in the first half of the year (357 in H1, 2004) 220 public complaints, etc. in H1 (167 in H1, 2004) Work-through of directors’ transactions cases ongoing Review of Restricted Directors to assess compliance with High Court orders Review of Directors disqualified abroad New/existing company investigations ongoing

Enforcement Agenda in 2005 About 50 ODCE proceedings will be initiated (41 in 2004) Aim for more balance between civil/criminal proceedings More ODCE disqualifications (10 to date; 3 in 2004) Some 40 more disqualification applications in Court or to be initiated shortly Some of these arise from recent company investigations

Enforcement Agenda in 2005 Consequential drop in convictions will occur (20 to date) Convictions to date in respect of: –persons acting as auditors while disqualified; –restricted persons acting as directors in breach of law –failing to keep proper books of account –knowingly lodging a materially false return in the CRO

Enforcement Agenda in 2005 Current Criminal Proceedings in train/in prospect also include: –undischarged bankrupts acting as directors –unlawful directors’ transactions –falsification of company books and their use –trading while dissolved

Enforcement Agenda for 2005 Section 160(1), 1990 provides that a person is disqualified for five years if “convicted on indictment of any indictable offence in relation to a company, or involving fraud or dishonesty” However, the identity of those individuals were not recorded on the CRO Register of Disqualified Persons Following ODCE/CRO/Courts Service contacts, these ‘deemed disqualifications’ are now being notified by the Courts Service disqualified directors now registered (10 at end-2004)

Insolvency Agenda for 2005 Assessment of a further 1,000 liquidator reports this year In about one case in every six of new insolvent liquidations, directors are having to defend High Court restriction proceedings taken by liquidators Some 200 directors will be restricted this year We continue to pursue defaulting liquidators We are now involved in examining applications by directors for relief from restriction or disqualification

Insolvency Agenda for 2005 Disqualification of Directors of ‘Struck-off Companies’ –First successful test cases initiated in 2004 –Eight directors disqualified this year to date –Another 100 cases have since been selected. These were widely spread throughout the country and across economic sectors –Correspondence issued to the 200 directors involved recently –Some 22 directors from 11 of these companies face imminent disqualification proceedings –Other directors have satisfied us that their struck-off company had no debts or that its debts have been discharged –The remaining cases are under active consideration

Concluding Comments Our compliance work is designed to secure voluntary compliance by directors in the interests of good order Where a problem is detected, correspondence may be sufficient to resolve the alleged company law default Where sanctions are deemed appropriate, Court action is pursued at the civil or criminal level We seek to give effect to the balance of stakeholder duties and obligations in company law and to bring potential abuse to the Courts’ attention for possible sanction

Concluding Comments Company Secretaries have an important role in keeping their clients compliant We have produced a ‘Corporate Health Check’ – Ten Steps that Every Company Director should take to help secure their Compliance with Company Law Company Secretaries may wish to encourage their clients to fulfil these basic duties

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