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Jordan Publishing Ltd.

Jordan Publishing Ltd. Corporate Governance and Administration Conference Jurys Ballsbridge Hotel 9 March 2005. Developments in Enforcement Activity and Policy. Paul Appleby Director of Corporate Enforcement. Outline of Presentation. Directors’ Compliance Statements

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Jordan Publishing Ltd.

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  1. Jordan Publishing Ltd. Corporate Governance and Administration Conference Jurys Ballsbridge Hotel 9 March 2005

  2. Developments in Enforcement Activity and Policy Paul Appleby Director of Corporate Enforcement

  3. Outline of Presentation • Directors’ Compliance Statements • Other Compliance Work • Detected Non-Compliance • Enforcement Activity • Supervision of Insolvent Companies • Other Matters

  4. Directors’ Compliance Statements • ODCE Consultation Paper/Draft Guidance issued • 36 Submissions received and considered • ODCE Submission sent to Ministers on start date and scope of the obligation in November 2004 • ODCE Revised Guidance issued, December 2004 • Support of CCAB-I, IBEC, IFSRA, IoD, Revenue

  5. Affected Companies ‘Relevant Obligations’ Directors’ Reporting Terminology Developing Procedures Effectiveness Review Audit Committee Role Offences/Sanctions Financial Services Area Directors’ Compliance StatementsMain Issues addressed in Revised Guidance

  6. Directors’ Compliance Statements • Issues yet to be determined by Ministers • Form and Date of Commencement (likely to apply for financial years starting on or after a date in the latter half of 2005) • Company Exemptions (may include companies in the financial services area) • Decisions likely shortly

  7. Other Compliance Work • Some 70 presentations to various interests • Articles/papers on issues of concern • Press Statements on ODCE developments • Large number of public enquiries • Thousands of ODCE publications distributed • Further Guidance planned in 2005, e.g., on Audit Committees and Management Companies

  8. Detected Non-Compliance • Approach here is to ensure that: • Those required to report indictable offences to us do so • Those permitted to report to us exercise that discretion • Remind auditors in default of their mandatory duty • Information-sharing Memoranda of Understanding signed in 2004 with the Irish Stock Exchange and the Revenue Commissioners

  9. Detected Non-Compliance • About 1,950 new Auditor/Public/Other Reports • Some 20 offences types came to notice • Annual return defaults dominated again • Excessive directors’ transactions also prominent • New reported defaults relating to the acquisition or disposal of interests in company shares, etc.

  10. Detected Non-Compliance • Company Investigations • Publication of NIB/NIBFS Inspectors’ Report in 2004 • Other investigations completed and ongoing • Legal action under active consideration in a number of these cases • Scope for expansion of this work in 2005

  11. Enforcement Activity • Tiered Approach to Enforcement • Will usually decline to enforce civil matters • Will leave single annual return defaults to the CRO • May accept voluntary rectification • May warn of sanctions in the event of further default • May seek High Court Order to remedy ongoing default • Will take enforcement action in priority cases

  12. Enforcement Activity • General Objectives • Extend the number of prosecuted offences • Continue to focus on cases involving wilful misconduct and/or adverse market effects • Pursue a balanced mix of resource-intensive and more routine cases • Continue to secure a high level of Court success

  13. Enforcement Activity • Some 24 ODCE cases were concluded in 2004 • 67 charges resulted in convictions (+54% on 2003) • 36 charges were taken into account, thought proven etc • 3 disqualifications • 2 restrictions • 1 compliance order • 16 cases were before the Courts at year-end • 1 case awaiting a decision from the DPP

  14. Failing to keep Proper Books • Purpose is to Protect Creditor, etc. Interests • 38 Convictions in 15 cases in 2004 • Range of Companies/Directors convicted to date • International and Domestic Businesses • Auditors’ Evidence Usually Persuasive • Court unconvinced by Liquidator Evidence

  15. Persons Acting while not Permitted • Purpose is to Protect Company Stakeholders • Acting as Directors while not permitted in 2004 • Undischarged Bankrupts (1 conviction/disqualification) • Disqualified Persons (ODCE involved in relief application) • Restricted Persons (1 conviction/disqualification) • Restricted Persons (ODCE involved in relief application) • Acting as Liquidators while not permitted • Company Officer/Related Persons (1 case initiated)

  16. Persons Acting while not Permitted • Acting as Auditors while not permitted in 2004 • Unqualified Persons (19 Convictions) • Those with little or no accounting qualifications • Those who may be accountants but are not auditors • Disqualified Persons (Probation Act applied) • Auditors who had acted as directors of the company

  17. Other Enforcement Matters • Other Cases Concluded in 2004 • Provision of false information to the CRO • Failure to file annual returns • Failure by a director to cooperate with a liquidator • Fraudulent trading in an insolvent company • Acting irresponsibly as a director of insolvent company • Failure to file annual returns resulting in its dissolution • Failure by liquidator to report on an insolvent company

  18. Insolvent Companies • Initial ODCE actions focused on liquidator reports • Wish to identify suitable cases for disqualification • New approach includes UICs/dissolved companies sourced from the CRO strike-off list and Revenue • director of UIC restricted based on unpaid judgement • directors of dissolved company disqualified/restricted • further cases in the pipeline

  19. Insolvent Companies Initial Liquidator Reports 2003 2004 Cases Determined 560 529 Full Relief 52% 67% No Relief 36% 18% Relief ‘at this time’ 6% 10% Partial Relief/Other Decisions 6% 5%

  20. Insolvent Companies • Restriction of Directors • 270 directors restricted in 2004 • about 500 directors now stand restricted • we are actively identifying directors not complying • all those prosecuted were convicted/disqualified to date • Liquidators not reporting/seeking restriction • we are actively pursuing these

  21. Insolvent Companies • EU Cross-Border Insolvency Regulation • Failure of Eurofood IFSC Ltd. (and Parmalat SpA) • Italian and Irish Courts disagree on jurisdiction • Fundamental principle of company law at stake • ODCE participated in High/Supreme Court cases • ODCE has made observations to European Court

  22. Other Matters • Focus on keeping ODCE website up-to-date • Continues to attract favourable comment • Visits increased to 116,000 in 2004 from 75,000 and 42,000 in 2003 and 2002 respectively • Technical improvements will be made in 2005

  23. Other Matters • ODCE led international research report on Phoenix Companies • Positive ODCE Market Research Results in 2004 • improved compliance environment • appreciation of ODCE’s educational activity • recognition that enforcement not yet at full potential • will undertake further research in 2005/2006

  24. Conclusion • 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

  25. Thank You Questions? Further Information is available from www. odce. ie

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