Presentation to MBS in Accounting Students, Dublin City University

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(No Transcript)
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Presentation to MBS in Accounting
Students,Dublin City University

• 23 October 2012

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Outline of Presentation

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

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What is the ODCE?

• Business scandals of the late 1990s (Tribunals of
  Inquiry McCracken/Flood, High Court Inquiries
  Ansbacher/NIB) and the PACs DIRT Inquiry)
• Working Group on Company Law Compliance and
  Enforcement finding of a culture of
  non-compliance with respect to company law duties

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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

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ODCE Goals

• Encouraging Improved Compliance
• Uncovering Suspected Breaches
• Prosecuting Detected Offences/Breaches of Duty
• Sanctioning Improper Conduct affecting Insolvent
  Companies
• Providing Quality Customer Services

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Enforcement Pyramid
DPP referrals
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)
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ODCEs Compliance Work

• Publications
• Information on the ODCEs 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

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ODCEs 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

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ODCEs 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
• ODCEs own inquiries, e.g., the CRO Register

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ODCEs 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

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ODCEs 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)

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ODCEs 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

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ODCEs 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

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ODCEs 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

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ODCEs 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

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ODCEs 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

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ODCEs 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

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ODCEs 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

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ODCEs 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

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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

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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

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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

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Concluding Comments

• New Situation
• Directors, etc. now more accountable
• Auditors 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

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Concluding Comments

• Effective and Balanced Regulation protects
• The public from fraud
• Employees, traders and suppliers from
  irresponsible conduct
• State revenue and the taxpayers interest
• Investors and credit institutions from bad debts
• Legitimate business from fraud-based competition
• Personal and Corporate Reputation

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Thank You

• Further Information is available from
• www. odce. ie