knowledge 10 December 2018 |

Corporate Enforcement Authority: Strengthening Ireland’s Regulatory Framework

Separately, the General Scheme proposes clarifications and amendments in other areas of the Companies Act 2014 (the “Act”) some of which are set out below.  

 The Authority

The General Scheme provides that the Authority will be a body corporate and many of the functions to be conferred on the Authority will re-enact the corresponding provisions of the Act relating to the ODCE.

Structure and Reporting   

The Authority will comprise between one and three full time members appointed by the Minister (on recommendation by the Public Appointments Commission) one of whom will be appointed as Chairperson. The members will be appointed for a term of up to 5 years with the possibility of reappointment for a further 5 year term. 

Under the proposed legislation, the Authority will submit to the Minister an annual report on its activities to be put before the Houses of the Oireachtas. This will be in addition to the strategy statement prepared every three years by the Authority. The Authority can appoint staff and, members of an Garda Síochána can be seconded to the Authority.  

Enhanced Powers

Some proposed amendments to the Act to strengthen the Authority’s powers include:

• a new investigatory tool, by permitting a court to consider admitting written statements (which might otherwise be excluded) into evidence in certain circumstances and subject to certain conditions; and
• enhancing current search powers relating to electronically held evidence. 

Nature of the Reform

There will be provision made so that on-going investigations and other work started by the ODCE can be continued by the Authority.

The provisions of the Act for the current structure for the ODCE will be repealed and replaced with new provisions to reflect the new structure. It is intended that, once the General Scheme proceeds to the final stage of legislation, it will be integrated into the Act so that the citation for the “Companies Act 2014” will remain unchanged. 

The proposed structure of the Authority is similar to that of the Competition and Consumer Protection Commission so the provisions of the Competition and Consumer Protection Act 2014 have served as a precedent for the relevant provisions in the General Scheme.  

Other Amendments    

Separately, the General Scheme sets out a number of proposed clarifications and amendments to the Act some of which will give effect to certain recommendations of the Company Law Review Group (the “CLRG”).² It is possible that more of these CLRG recommendations, and submissions made by the Law Society, will be included as the General Scheme progresses  through the legislative process. The proposed changes in the areas below, which if enacted in their current form, will provide for:    

Shares and Share Capital

• restoration of a provision to allow a company with a share premium to use the account for various purposes including the writing off of the company’s preliminary expenses, or the expenses of, or commission on, any issue of shares or debentures;   
• amendment of the exceptions to the prohibition on a company giving financial assistance, for the purpose of an acquisition of shares in either itself or its holding company, to include payment of commissions to persons other than intermediaries;    
• clarification of provisions on variation of company capital on reorganisation, so that three-party share-for-undertaking and share-for-share transactions could proceed;
• disapplication of the requirement for directors’ consent to the transfer of shares in the case of a PLC;
• clarification on the status of own shares acquired by a company pursuant to either a merger or division under the Act;  
• amendment of the definition of “distribution” to exclude the reduction of share capital by (i) paying off of paid up share capital; and (ii) by extinguishing or reducing all or part of a member’s liability on shares not fully paid up;   

Corporate Governance

• amendments to the form of proxy to refer to the right of proxy to either demand or join in demanding a poll and clarity on the appointment of proxies by Companies Limited by Guarantee;  
• amendments to align the statutory solvency test applicable to the summary approval procedure declarations for certain restricted activity;
• an additional ground on which a director may be restricted namely, that he or she has failed to meet certain requirements in the course of a company becoming insolvent, for example, where he or she fails to convene a shareholders meeting to nominate a liquidator; 

Incorporation and Registration   

• an obligation on directors to include their PPSN for verification purposes in an application to incorporate a company, an annual return and, a change of directors/secretaries or their particulars;    
• removal of the power of the Minister to grant an exemption from the requirement for a company to include its directors’ particulars on its letterhead;

Winding Up

• restoration of the obligation to register, with the Registrar of Companies, resolutions in a creditors’ voluntary winding-up; and
• an amendment to allow for the variation of periods within which a liquidator must provide statements on the progress of a liquidation.  

Further Steps

The General Scheme provides that certain of the provisions proposed will be subject to further consultation, for example, the proposals on search powers will be subject to consultation with the Office of the Attorney General.