Enforcement and the new Copmpanies Bill

2. The New Enforcement Provisions
under Company Law
Kevin Prendergast
Head of Advocacy and Assessment, ODCE.

3. Presentation Overview
 ODCE Power to wind up companies in the public interest
 Categorisation of offences
 Directors’ Compliance Statements
 Codification of Directors’ Duties

4. ODCE power to Wind up
 Section 570(1)
“A company may be wound up by the court—
…
(g) if the court is satisfied, on a petition of the Director, that
it is in the public interest that the company should be wound
up;”

5. ODCE power to Wind up
 Director may petition the court
 In practice Officers will do so under delegated power
 Section 576, court may appoint a liquidator, and indeed a
provisional liquidator
 Section 573(2) – A company with obligations to NAMA
may not be wound up without agreement of NAMA

6. ODCE power to Wind up
 The “Watchdog” proposal
 May be guided by referrals from other
bodies:
 Central Bank
 National Consumer Agency
 Etc
 As Insolvency is not a State service, will be
a costs/resources impact for the Office

7. Categorisation of offences
 Current situation
 Most offence sanctions by means of s240
Companies Act 1990
 Penalty on summary conviction – fine of up to
€2,500 and/or up to one years imprisonment
 On Indictment – fine of up to €22,220 and up to
five years’ imprisonment

8. Categorisation of offences
 Certain offences have higher tariffs
 Fraud – on indictment a fine of up to €111,102
and up to seven years in jail
 Transparency Directive – fines of up to
€1million and up to five years in jail
 Market Abuse Directive – fines of up to
€10million and up to ten years in jail

9. Categorisation of offences
 New offence categories
 Set out in section 872
 Interacts with Fines Act to ensure that lower
level fines continue to be upgraded
consistent with other legislation

10. Categorisation of offences
 Category 1 offence
 Summary charge – Class A fine and/or up to 12
months imprisonment
 Indictment – Fine of up to €500,000 and/or up to
ten years imprisonment

11. Categorisation of offences
 Category 2 offence
 Summary charge – Class A fine and/or up to 12
months imprisonment
 Indictment – Fine of up to €50,000 and/or up to
five years imprisonment

12. Categorisation of offences
 Category 3 offence
 Summary charge only – Class A fine and/or up
to 6 months imprisonment
 Category 4 offence
 Summary charge only – Class A fine only

13. Categorisation of offences
 Class A fine under Fines Act 2010 is
currently €5,000
 Categories 1 and 2 are indictable and
therefore reportable by auditors to ODCE
 Will continue to be some “hors categorie”
offences, for example under Market Abuse
and Transparency

14. Categorisation of offences
 CLRG has provided guidance on the
categorisation of future offences
 Proportionality
 Technical/Filing offences to be category 3 or 4
 Public policy reason for offences to be indictable
 Classification should have regard to possible
impact on all relevant stakeholders

15. Directors Compliance Statements
 Originally included in CAA 2003
 Reviewed by CLRG in 2005
 Less onerous DCS requirements suggested
 To be incorporated into Companies Bill
 2003 legislation uncommenced

16. Directors Compliance Statements
 New provisions apply to LTDs, CLGs and
DACs with
 Turnover in excess of €25m, and
 Balance sheet total exceeds €12.5m
 All plc’s
 Minister can exempt certain classes of
company

17. Directors Compliance Statements
 “Relevant obligations” are
 Category 1 and 2 offences under company law
 “Hors categorie” offences (Market Abuse, etc.)
 All tax law

18. Directors Compliance Statements
 Directors must acknowledge their
responsibility for company compliance with
relevant obligations
 Statement setting out policies to comply
 “Appropriate arrangements or structures”
 Review of arrangements or structures in the
year

19. Directors Compliance Statements
 Can rely on external expertise
 Must provide “reasonable assurance of
compliance in all material respects”

20. Codification of Directors’ Duties
 Directors fiduciary duties are a common law
construct
 Based on civil disputes and court findings
 Textbook rather than legislatively based
 However, duty to employees set out in s.52
CA1990

21. Codification of Directors’ Duties
 Duty to employees retained
 Fiduciary duties set out in s.229
 Duties enforced and interpreted in same way
as other fiduciary duties
 Do not affect validity of contracts

22. Codification of Directors’ Duties
 Act in good faith
 Act honestly and responsibly
 Act in accordance with company
constitution
 Not use company property for personal or
third party benefit without approval

23. Codification of Directors’ Duties
 Not fetter judgement unless in best interest
of company
 Avoid conflicts of interest
 Exercise due care, skill and diligence
 A director may have regard to the interests
of a member who has appointed him/her

24. Codification of Directors’ Duties
 No substantive difference in legal reality
 No ODCE role in enforcing duties
 Remains a potential cause of civil action
 Clarity for directors as to their fiduciary
duties, but interpretation remains a matter
for legal advice

25. Question & Answers
Thank You