The General Scheme of the Companies (Corporate Enforcement Authority) Bill 2018 (the “Scheme”), which proposes to make a number of amendments and additions to the Companies Act 2014 (the “Act”), was recently published
The main aim of the Scheme is to establish the Office of the Director of Corporate Enforcement (ODCE) as a stand-alone agency, to be called the Corporate Enforcement Authority (the “Authority”). Currently, the ODCE is an office within the Department of Business, Enterprise and Innovation. The changes are intended to enhance the status of the body tasked with enforcing company law in Ireland, by increasing its independence and giving it more control over its resources. The proposed legislation is seen as a key element of the Government’s package of measures to strengthen Ireland’s response to white collar crime.
The Authority will have the same functions and powers as the Director of Corporate Enforcement, with modifications to reflect the new proposed agency structure. Up to three full time members known as “Commissioners” will be appointed to the Authority for a term of up to 5 years with the possibility of reappointment for a further 5 year term. It is intended to give the Authority more autonomy and flexibility to meet the differing demands of its remit, which includes investigation, prosecution, supervision, and advocacy, and along clear lines of responsibility.
The Scheme also provides for new investigative tools, including new search and entry powers to enhance the Authority’s ability to gather evidence that is held electronically.
In addition to the establishment of the new Authority, the Scheme makes a number of unrelated amendments to the Act, many of which will give effect to recent recommendations of the Company Law Review Group, the most relevant of which are as follows:
A number of clarifications to the share capital provisions of the Act are proposed to deal with issues that have arisen in practice when carrying out corporate transactions. These include clarifying that a company can use its share premium account for various purposes, disapplying the requirement that an unlimited company have distributable reserves to redeem its own shares and exempting capital reductions from the strict rules on the making of distributions.
New grounds for restriction of directors
Due to public concerns surrounding a perceived lack of protection of employees and unsecured creditors in a liquidation scenario, the Scheme suggests new grounds for the making of a restriction order against company directors in these circumstances. In particular, a director may be restricted where he or she has:
- Failed to convene a general meeting of shareholders for the purpose of nominating a named liquidator;
- At such a meeting, failed to table a motion to nominate a named liquidator; or
- Failed to provide the required notice to employees in a winding up.
Directors to supply PPSN to the CRO for verification purposes
There is a proposal to oblige directors of companies to supply their PPSN (in data format only) to the Companies Registration Office (CRO) when incorporating a company for the first time (Form A1), filing the Annual Return (Form B1) and notifying the CRO of a change in director or secretary (Form B10).
We understand that the PPSN will not be available to view by the general public. The change is proposed to support the accuracy of the CRO Register. It should also deal with situations where an individual uses variations of their names and addresses (for example using different initials or English transliterations of Irish language given names) to circumvent the provisions of the Act that put a limit on the number of directorships any one person can hold and that prohibit on a person being both director and secretary of a sole director company. Persons who are not entitled to a PPSN number will be required to supply a copy of the photo page of their passport.
End of exemption from including particulars of directors on business letters
The Act currently enables the Minister for Business, Enterprise and Innovation to grant an exemption from the requirement to disclose particulars of directors on company letterhead. This exemption was introduced to facilitate companies that had frequent changes of director that gave rise to a corresponding need to print new company stationery. This exemption is no longer considered necessary given that company stationary can now be updated without large print runs. Any exemptions that are currently in effect will be allowed to run their course.
Drafting on the Bill ‘proper’ will now commence, based on the Scheme. It is expected that the Bill will be introduced to (and pass through) the Houses of the Oireachtas during 2019. Once the Bill is enacted, the Act will be amended, with the citation of the Act remaining as is (i.e. Companies Act 2014).
Contributed by Aoife Kavanagh