Companies (Corporate Enforcement Authority) Bill 2021

The Companies (Corporate Enforcement Authority) Bill 2021, which will form a critical part of the Government’s strategy to tackle white-collar crime in Ireland has passed through all legislative stages in the Houses of the Oireachtas and will now be sent to the President for enactment into law. The Bill provides for the establishment of the Corporate Enforcement Authority (CEA) as a new independent statutory authority to replace the much-maligned office of the Director of Corporate Enforcement (ODCE).

The ODCE was established in November 2001 as a response to growing concerns in relation to corporate malpractice in Ireland. However, the ODCE has been roundly criticised for its lack of resources, for being ill-equipped to deal with more complex breaches of company law in Ireland, and for lacking sufficient powers to adequately investigate suspected company law breaches and non-compliance. Furthermore, various tribunals, parliamentary committees and review groups have commented on a growing rate of breaches of company law and related legislation in recent years, with little to no consequences for offending parties.

The government’s response is the establishment of the CEA, which will benefit from increased autonomy, greater resources and expanded powers to enforce company law in Ireland. The CEA is expected to come into operation in early 2022.

Function

As was the case for the ODCE, the CEA will be charged with the following responsibilities:

• investigating suspected breaches and non-compliance with company law in Ireland;

• prosecuting summary offences;

• referring indictable offences to the Director of Public Prosecutions; and

• supervising the activities of liquidators and receivers.

Structure

The CEA will be structured as a commission, similar to the Competition and Consumer Protection Commission, and will comprise of up to three full time commissions, with one designated as the chairperson charged with the management of the agency’s staff and business. Unlike the ODCE, whose staff are assigned to it by the Department of Enterprise, Trade and Employment, the CEA will be able to appoint its own staff with the skills and expertise it deems necessary to perform its functions. The Bill also provides for the secondment of members of An Garda Síochána to the CEA.

Ian Drennan, the current Director of Corporate Enforcement, is expected to be appointed to lead the establishment of the CEA, a move which will serve to ensure continuity.

Resourcing

Budget 2021 approved a €1 million increase in funding in this area. The overall staffing level will increase by almost 50% on its previous level. Additionally, the number of Gardaí allocated to the agency will be increased from 7 to 16. Resourcing will be kept under review to ensure that the organisation remains adequately equipped.

Oversight

The CEA will be accountable to the Oireachtas to a greater extent than the ODCE. Each year within four months of financial end it will prepare a report to the Minister for Enterprise, Trade and Employment on its activity over the year. The report will be laid before the Oireachtas and made publicly available on the CEA’s website.

Every three years the CEA will be required to present the Minister and the Oireachtas with a Strategy Statement, setting out key objectives and the allocation of resources. This statement will be made available on the CEA’s website. This is a new obligation which the ODCE was not subject to.

The Act also mandates that the Committee on Public Accounts may call on the chairperson of the CEA to give testimony.

Miscellaneous Amendments to the 2014 Act

The Bill also contains some important amendments to the Companies Act 2014, which will give effect to a number of recommendations of the Company Law Review Group.

Share Capital

• A company will once again be able to use its share premium account for various purposes, such as the writing off of the company’s preliminary expenses, or the expenses of, or commission paid on, any issue of shares or debentures by the company.

• Clarification has been provided in relation to three-party group reorganisations and share-for-share transactions in respect of the requirement that the transferring company will need to have distributable reserves that are at least equal to the value of the undertaking being transferred.

• In order to clarify post-merger treatment of merging/dividing companies’ shares acquired by a successor company, the definition of treasury shares will be amended to include shares acquired by a company pursuant to a merger or division.

• Confirmation that unlimited companies will not require reserves to purchase or redeem their own shares.

• A new provision will permit directors to decline to register the transfer of a share in a range of circumstances, including to a person of whom they do not approve, where the company has a lien on a share or where the transfer of a share would “imperil or prejudicially affect the status of the company”.

Corporate Governance

• In order to prevent uncertainty as to the identity of a director, directors will be required to provide their PPSNs or equivalent information for non-resident directors when incorporating a new company, filing an annual return or notifying a change of director.

• The Minister’s power to grant exemptions to companies from the requirement to show the names of directors on business letters of company will be removed.

• Clarification that shareholders of a company limited by guarantee will not be entitled to appoint proxies to attend and vote at meetings, unless so permitted by the company’s constitution.

Insolvency

• To correct an unintentional omission from the 2014 Act, the obligation to register resolutions in a creditors’ winding-up with the Registrar will be restored.

• The CEA will have the power to request evidence from a person that they are qualified to act as liquidator. Failure to comply will be an offence.

• Liquidators may be required to make more frequent reports to the CRO where this is required by the Registrar.

• New grounds for a restriction order to be made by the High Court against a director who has failed to meet certain procedural requirements in the course of a company becoming insolvent will be introduced.

The Bill and establishment of the CEA is an important first step in the overhauling of Ireland’s corporate enforcement regime, which will enhance the State’s ability to investigate and prosecute white-collar crime. Further legislative reform in this area can be expected as the government seeks to implement the findings of the White-Collar Crime Review Group.

Contact our Head of Company Secretarial Ronan Donohoe to find out more.