Following the delivery of the first annual report of the Corporate Enforcement Authority (the “CEA”) on 19 June 2024 (the “Report”), the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024 (the “Corporate Governance Bill”) has also been published.
These developments demonstrate an ongoing legislative and regulatory commitment to enhancing Irish corporate compliance across all sectors. This article will look at key learnings for directors arising from the Report and what else to anticipate once the Corporate Governance Bill is enacted.
CEA Report
The Report covers the period from the CEA’s formal establishment on 7 July 2022 to 31 December 2023 and provides a detailed account of the CEA’s work over its first 18 months in operation.
The stated mission of the CEA, which replaced the Office of the Director of Corporate Enforcement (the “ODCE”), is to “promote and serve the public interest by ensuring high levels of compliance with company law through effective advocacy and proportionate, robust, and dissuasive enforcement”. The Report considers how the CEA has pursued that vision strategically using the following three core pillars:
- Embedding governance structures, building operational capability and establishing presence
- Effectively advocating and influencing
- Operating effective systems of proportionate, robust and dissuasive enforcement
Work of the CEA
The transition from ODCE to CEA has been described recently by CEO Ian Drennan as being “far from aesthetic”. In parallel with the significant recruitment of suitably qualified and experienced staff that was facilitated by its evolution to a standalone agency, the Report records how the CEA has also sought to increase awareness of company law obligations and rights, including by issuing various Information Notes and Information Booklets.
The Report notes the CEA’s aim to be “a trusted source of impartial information” and “a credible actor and source of influence on the enforcement landscape”.
In relation to the latter, the Report shows that the CEA has taken a graduated and proportionate response to non-compliance. For less serious matters compliance has been secured, where appropriate, via administrative measures. However, where necessary, the CEA has not shied away from using its statutory civil powers of enforcement to bring about compliance with the law and, in the most serious of cases, pursuing criminal enforcement. Over 100 court orders, 5 search warrants, 200 witness statements and 12 arrests are stated in the Report to have been made by the CEA since 2022.
The Report illustrates the CEA’s work across this range of actions using multiple case studies. Some points arising from those case studies that may be of particular interest to directors are:
- The approach of the CEA towards, and its resolution of, less serious corporate infringements and non-compliance in cases involving the use of an incorrect registered office address, failure to hold an Annual General Meeting, failure to file correct annual returns or breaches of directors’ loan provisions. These have been dealt with and resolved by administrative intervention measures of the CEA without resorting to its statutory powers
- The CEA will use its civil powers of enforcement to secure compliance for more serious breaches where appropriate. Examples provided of this include a company refusing to provide access to its register of members or liquidators failing to comply with their reporting obligations
- The CEA has the power to ask the court to appoint inspectors to investigate a company. The high-profile Independent News & Media case, where the inspector’s report into various governance issues was put before the High Court on 31 July 2024, is an example of this power in action
- Examples of criminal breaches of company law cited in the Report include convictions for impersonating an auditor, failure to keep proper books of account and using fake invoices to defraud a creditor
- Referrals to the CEA come from a variety of sources, including members of the public, regulatory bodies, auditors, insolvency practitioners, as well as protected disclosures
In addition to its investigative role and enforcement work, the Report also discusses the CEA’s role in the supervision of the corporate insolvency process, underlining the importance of the public protection measures of director restriction and disqualification. The Report cited a total of 80 company directors having been restricted and a further 27 disqualified since the inception of the CEA, with the majority of those being achieved using the administrative undertakings procedure rather than requiring an application to the High Court.
The Corporate Governance Bill
The Report also considers (by reference to the preceding General Scheme of Bill) provisions that have now been published in the Corporate Governance Bill which, when enacted, will make significant amendments to the Companies Act 2014, as amended (the “Companies Act”). Certain corporate governance and administration aspects of the General Scheme (most of which have been carried into the Corporate Governance Bill) were the subject of this recent Matheson Insight, highlighting the additional flexibility and practical processes that the legislation would provide, in the context of the operation of Irish companies.
The proposed legislation is broad-ranging, additionally including amendments to provisions related to regulation of receivers and to corporate insolvency. Other noteworthy features include increased powers and functions of relevant statutory authorities including the Companies Registration Office and the CEA.
Within the numerous changes proposed, some enforcement provisions in the Corporate Governance Bill that directors should note in particular include the following:
- there will be three additional grounds proposed for a company to be involuntarily struck off the register, namely, failure to have a company secretary recorded in the CRO, failure to file certain beneficial ownership information and failure to deliver notice of change of registered office. However, where a company is to be struck off on any of these new grounds, the directors of the company will not be liable to be disqualified
- there will be enhanced co-operation between investigative and regulatory agencies in relation to the sharing of information. The statutory bodes that can disclose information to the CEA will be expanded to include, amongst others, the Registrar of Beneficial Ownership, the Financial Services and Pensions Ombudsman, the Charities Regulator and the Data Protection Commission. The CEA will also be empowered to disclose information to a broader list of competent authorities including those entities, as well as the Competition and Consumer Protection Commission, subject to the safeguard that the information may only be used by the CEA and/or those authorities as prescribed by the Companies Act, including for the purpose of carrying out their statutory functions
- the CEA’s investigative powers will be bolstered by two provisions designed to assist with potentially large volumes of information - additional time will be allowed to apply to court to determine if that information is legally privileged and the court will be empowered to appoint more than one legal expert to reduce the time involved in preparing a report in relation to it. A proposal in the General Scheme for applications for a determination in relation to privilege to be made on an ex parte basis has not been included in the Corporate Governance Bill. Separately, a provision in the General Scheme to give the CEA targeted surveillance powers in relation to certain suspected company law offences, which would have been a significant new power for the CEA, has also not been carried through to the published Corporate Governance Bill
- a new criminal offence of obstructing, interfering with or impeding CEA officers while they are exercising their powers or duties, which is capable of resulting in imprisonment, will be created. A specific offence of intimidation of CEA officers that was envisaged under the General Scheme has not been included in the Corporate Governance Bill. The general offence that has been included however is intended to deter the obstruction of CEA staff, with the clear message that such behaviour will not be tolerated.
Conclusion
The CEA’s impact on the corporate enforcement landscape since it was established is clear as evidenced by the Government’s reaction to the Report, with Minister of State for Trade Promotion, Digital and Company Regulation, Dara Calleary, noting that:
“The CEA has quickly positioned itself as a highly professional regulatory body for company law that yields significant value for stakeholders. We can now confidently say that Ireland has an established architecture by which to regulate company law in an autonomous and agile manner. This ensures better regulation for companies in Ireland and supports the enterprise base to grow and prosper. It also further strengthens Ireland’s global reputation as a top tier country in which to do business - underpinned by a strong company law enforcement framework. I look forward to continuing to support the CEA in their efforts to address white collar crime.”
Given that the CEA’s powers are set to grow further in light of the upcoming enactment of the Corporate Governance Bill (expected by the end of 2024), which will in turn inform its next report, the importance of understanding and ensuring compliance with obligations under the Companies Act is a key message of the Report.
Relevant stakeholders, including company directors, should take note of these developments and expect the CEA to continue to grow and develop its infrastructure, to ensure company law compliance. CEA Ian Drennan has acknowledged, including in a recent interview, that “the vast majority of company directors are trying to do the right thing” and the Report highlights the CEA’s emphasis on engagement with companies to achieve compliance, with proportionate enforcement action only taken when necessary. A fair and robust enforcement framework can only benefit Ireland as a positive place to do business into the future.
For more information on the above, please contact Angela Brennan, Connor Cassidy, Brendan Colgan, Kevin Gahan, Julie Murphy O’Connor, Karen Reynolds or your usual Matheson contact.