169   Key Features Of The Draft Companies BillIn Ireland, companies and individuals who breach company law run the risk of criminal proceedings and court penalties; this fact has been illustrated broadly in the media through this years trial of top-level executives of Anglo-Irish bank.

Criminal Proceedings

 
Breaches of company law can be classified as summary offences or indictable offences. Summary offences are considered less serious and are dealt with in the District Court before a judge. Indictable offences are treated more seriously and the defendant may be prosecuted in the Circuit Court before a judge and jury.

The Office of the Director of Corporate Enforcement (“ODCE”) and the Companies Registration Office (“CRO”) both have powers to issue proceedings against a company or individual in the District Court. The ODCE can prosecute under the Companies Acts once they have sufficient evidence of wrongdoing following investigation. The CRO may prosecute offences relating to a failure to file documents with them. The Director of Public Prosecutions is the only person with authority to initiate prosecutions in the Circuit Court and this is normally based on findings from an ODCE investigation.

Penalties

The ODCE suggest that the highest penalties imposed upon conviction would be:

  • €1,905 and/or 12 months in prison for each summary and indictable offence prosecuted in the District Court; and
  • €12,697 and/or five years in prison for each indictable offence prosecuted in the Circuit Court.

The ODCE notes that some very serious offences such as fraudulent trading or market abuse carry higher penalties.

Civil Proceedings

Individuals found to be breaching their duties under company law may also face civil proceedings which could result in disqualification, restriction, or personal liability.

Disqualification

Individuals convicted in the Circuit Court of indictable offences involving fraud or dishonesty relating to a company can expect a five year disqualification from acting as an officer of the company.

The High Court may disqualify individuals found to be unfit to manage a company, or if they are found to have committed fraud or a breach of duty. Individuals are usually found to be unfit to manage a company for reasons such as:

  • Two or more offences of failing to maintain proper company accounting records;
  • Three or more company law defaults; or
  • The company owes money to creditors and the directors subsequently caused the company to be struck off for failure to file annual returns.

Restriction

The ODCE, liquidators, creditors and other parties can apply to the High Court to have the Directors of an insolvent company restricted. The onus is on the Director to prove to the High Court that they acted honestly and responsibly while in office. Individuals who have restrictions imposed on them by the courts are not disqualified from appointment, but are subject to significant restrictions. Director’s restriction applies to acting as a director or secretary of a company for a period of 5 years unless the company meets certain capital requirements.

The capital requirement for a private company is the nominal value of the allotted share capital being €63,486 and €317,434 for a public company. If a restricted Director ignores these provisions and the company goes into insolvent liquidation, the Director may find themself held personally liable for the company’s debts and liabilities. The restriction also applies to involvement in any company formation or promotion.

Personal Liability

Individuals can be held personally liable for a company’s debt by the High Court if they are convicted of carrying on the business of the company recklessly or fraudulently; or if they failed to maintain proper company accounts which contributed to the company’s incapability to pay its debts. Such proceedings can be initiated by the company’s creditors or liquidators.

Implications For Future Prosecution

With increasing calls from the public, as well as professional bodies for more effective corporate governance and transparency in relation to the running of companies, there is a growing expectation of accountability for top-level executives. This trend can be seen in part 15 of The Companies Bill 2012 which proposes a stricter and more transparent approach in relation to compliance and enforcement, as well as the streamlining of criminal offences for breaches of company law.

 

Legal
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