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Wednesday, 24th April 2024 |
| Sea change likely in corporate compliance |
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| The recently approved McDowell report on company law compliance and enforcement could have the same effect on corporate compliance as clamping has had on parking offences all over Dublin. |
The recently approved McDowell report on company law compliance and enforcement could have the same effect on corporate compliance as clamping has had on parking offences all over Dublin. One leading company law practitioner recently told Finance that corporate compliance in its current state was in serious need of a 'sea change in attitude' and that the McDowell report may be just the thing to force this into being:
'When you look at the appalling compliance statistics, there's no doubt that something more stringent was required - the Companies Office didn't have the wherewithal to deal with it and the DPP had no interest. There needs to be a sea change in the corporate attitude to compliance - you could draw analogies with the attitude to parking offences in Dublin since there has been clamping all over the city'.
The thrust of the report, initially commissioned by the Tanaiste, Mary Harney, in August 1998, was accepted by the Government in the course of March and bears wide-ranging consequences for company law enforcement.
At the forefront of the measures to be taken in light of the report is the establishment of a new Office of Director of Corporate Enforcement. Speaking recently at the annual members' luncheon of the Institute of Certified Public Accountants, Noel Treacy, Minister for Science, Technology and Commerce, said that the McDowell report had 'confirmed [his] fears as to the low level of compliance with company law and the extent to which company law is being enforced in Ireland'. He pointed to statistics unearthed by the McDowell group which indicated that in 1997, only 13 per cent of the 136,000 companies due to file their returns on time actually complied with their obligations. Minister Treacy said that it was sign of how seriously the Government was taking this information that it had 'goner beyond the recommendations of the Working Group, and had decided to transfer from Department of Enterprise, Trade and Employment to the new Director, primary responsibility for future company law investigations.
The Director of Corporate Enforcement, with the help of thirty staff and an allocation of seven gardai, will handle six main areas:
l The prosecution of summary offences under the various Companies Acts;
l Assisting in the preparation of company law cases for the DPP;
l The power to petition the High Court to appoint inspectors to investigate the affairs of particular companies, to directly appoint inspectors to establish the beneficial ownership and control of shares in a company and to appoint authorised officers to examine the books and records of any company;
l Seeking injunctions against companies, their directors or other persons in order to secure compliance;
l Applying to the courts for the restriction of directors and the disqualification of persons who act as company directors or other officers or promoters who discharge important roles; and
l Exercising a limited supervisory role over the activity of liquidators in the discharge of their duties.
It was estimated in the report that the annual cost of the Enforcement Office would comprise about IRĀ£2 million, made up by IRĀ£1 million in staffing and overheads and the remainder in external legal services and court costs.
The Working Group also made a recommendation that the codification/consolidation of company law should become a priority, whereby 'the provisions of the existing Companies Acts and the substantive company law not set out in regulations made under the European Communities Cats into one single comprehensible companies code. In light of this, the Tanaiste is currently addressing consolidation 'as a matter of priority' This work will be undertaken in parallel with the work on a biennial company law Bill. |
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| Article appeared in the April 1999 issue.
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