Presentation to MBS in Accounting Students,

Dublin City University

23 October 2012

Outline of Presentation

Introduction to the ODCE Our Goals and associated work Our initial impact Concluding Comments

What is the ODCE? Business scandals of the late 1990s (Tribunals

of Inquiry – McCracken/Flood, High Court Inquiries – Ansbacher/NIB) and the PAC’s DIRT Inquiry)

Working Group on Company Law Compliance and Enforcement finding of “a culture of non-compliance” with respect to company law duties

What is the ODCE?

Remit focused on the Companies Acts 1963-2009 Multi-disciplinary agency comprising c.49

administrative, legal, accounting and Garda staff Expenditure of €3.4 million in 2011 Director must act on an independent basis Director obliged to respect commercial confidentiality

ODCE Goals

Encouraging Improved Compliance Uncovering Suspected Breaches Prosecuting Detected Offences/Breaches of

Duty Sanctioning Improper Conduct affecting

Insolvent Companies Providing Quality Customer Services

 

DPPreferrals

Disqualifications

Summary Prosecutions

Civil Enforcement Actions(Compliance Orders, Restrictions)

Administrative and Legal Actions (Investigations, cautions, rectification and remediation

on a non-statutory basis)

Encouraging Compliance (Advocacy & guidance)

Enforcement Pyramid

ODCE’s Compliance Work

Publications Information on the ODCE’s Remit - Auditor Reporting General Guidance on Directors’ Duties, etc. Guidance on new legal requirements, e.g., New Companies

Acts Topical Guidance, e.g., Management companies, Audit

Committees, Transactions involving directors Presentations, Conferences, etc. (c.70 per year) Press Statements, syndicated news articles

ODCE’s Compliance Work

Policy Contributions New Companies Bill Company Law Review Group Irish Auditing and Accounting Supervisory Authority

International Dimension Responses to EU Company Law consultations International Association of Insolvency Regulators Future of audit

ODCE’s Detection Work

Public Complaints about companies, directors, etc. Auditor Reports of suspected indictable offences Regulatory Bodies like Revenue, the Garda, etc. Matters in the public domain, e.g., Inquiry Reports ODCE’s own inquiries, e.g., the CRO Register

ODCE’s Detection Work

Identify if a prima facie breach has occurred Consider if administrative rectification will suffice Assess if ODCE intervention is called for Consider if legal action is necessary or desirable Evaluate if other actions are warranted, e.g.,

referral of case to another regulator for evaluation Vast majority of issues dealt with administratively

ODCE’s Detection Work

Directors’ Transactions – One Area of Work General Ban on use of Company Assets for personal purposes Auditors have been reporting on average 300 cases a year since

2003 Publication/issue of ODCE Guidance in November 2003 ODCE Article issued to all Directors in 2004 Directors’ voluntary or prompted remedial action often accepted A handful of cases of ‘wilful default’ have been prosecuted Law amended to allow easier prosecution 2011, 143 cases, €44million (2009, 185 cases, €162million)

ODCE’s Enforcement Work

Criminal Enforcement Options Summary Prosecution in the District Court Referral to the DPP for Prosecution on Indictment

Typical Criminal Enforcement Offences Persons acting as Directors/Auditors while prohibited Accounting issues, e.g., failing to keep proper books Falsification of company documents

ODCE’s Enforcement Work Corran Building Services Ltd. Case

Liquidator submitted a criminal conduct report Gardaí obtained/executed a search warrant Gardaí seized two company cars bought with

company funds which had not been handed over to the liquidator

One director convicted of fraudulent trading, failing to keep proper books and failing to file annual returns

Two directors afterwards restricted by the High Court

ODCE’s Enforcement Work

Civil Enforcement Options Remedial Orders Restriction Disqualification

Related Civil Enforcement Responses Failure to discharge an obligation of law Failure to act honestly and responsibly in insolvency Serious misconduct, e.g., fraud

ODCE’s Enforcement Work

Anglo investigation Information disclosed by FR

Further disclosures by bank

Warrant obtained, paper and electronic documents seized

Amendments to law to deal with scale of seizure

Documents being interrogated

Individuals making statements, some under arrest

Individuals have been arrested and charged, more may follow

Largest and most complex financial investigation in State

ODCE’s Insolvency Work

Formerly only court appointed liquidators sought the restriction of certain directors.

Every liquidator of an insolvent company must report to the ODCE and apply to the Court for directors’ ‘restriction’, unless relieved by the ODCE

About four out of five directors avoid restriction

ODCE’s Insolvency Work

Initial reports received within 6 months of appointment

Formerly 250/300 reports a year 1,287 reports in 2011 Same or more in 2012

ODCE’s Insolvency Work

ODCE may also seek disqualification of directors in unliquidated insolvent/struck-off company cases

Our role is to ensure that persons who abuse their position are brought to account in Court

ODCE has successfully piloted actions in this area

ODCE’s Insolvency Work

Phoenix Activity One acted as director of eight struck-off companies, all

of which had debts outstanding Another acted as director of four of these companies Came to attention due to employee, creditor and

Pensions Ombudsman complaints in a failed company First director disqualified for 12 years Second director disqualified for 8 years

ODCE Impact since 2002

Over 80 new or revised ODCE Publications issued 178,000 visits to the ODCE website in 2011 12,000 complaints/reports dealt with More than 100 companies/directors/others convicted

by ODCE on over 300 charges 1200 directors restricted Over 100 directors disqualified

ODCE Impact

Future Direction Reach out to company stakeholders and SME directors

Deal with minor offences administratively

Target and aggressively prosecute serious misbehaviour

Concentrate more enforcement resources on complex cases or areas of major non-compliance

Concluding Comments

‘Culture of non-compliance’ which was said to prevail is being turned around: State had failed to regulate effectively Professional Conduct was not supported Little Prospect of Sanction for Misconduct Deficient Accountability Framework in Practice

Concluding Comments

New Situation Directors, etc. now more accountable Auditor’s independent role reinforced Errant and unscrupulous Directors face ODCE

Inquiry/Court action Creditors’ Situation has improved Better Information Disclosures to Market Reinforcing Good Practice in other areas

Concluding Comments

Effective and Balanced Regulation protects: The public from fraud Employees, traders and suppliers from irresponsible

conduct State revenue and the taxpayer’s interest Investors and credit institutions from bad debts Legitimate business from fraud-based competition Personal and Corporate Reputation

Thank You

Further Information is available from

www. odce. ie