Office of the Director of Corporate Enforcement Acts Reasonably!

Posted in Good Advice

The Office of the Director of Corporate Enforcement (ODCE) has issued their Annual Report 2020 and confirms a common sense approach to the range of enforcement options at its disposal.

Company Law Breaches

Prosecution (or referral to the DPP) is not the default response to breaches of company law. If it were, every company director who has failed to ensure that a company’s name appears outside each of its places of business or to ensure that directors’ names appear on a company’s letterhead would face prosecution. Such an approach to enforcement might, if adopted, make for very impressive headline prosecution statistics year on year. However, such an approach would also likely raise legitimate questions as to the appropriateness and credibility of the ODCE’S strategic approach towards fulfilling its statutory mandate.

Many indications of breaches of company law are dealt with in a proportionate and resource-efficient manner that never requires the initiation of an investigation or prosecution – for example, by way of education, the provision of assistance to complainants, through securing voluntary rectification by way of exercising their powers of persuasion, through the issuing of warnings and, where necessary, by issuing statutory directions to comply with obligations (which, where necessary, they enforce through the Courts).

Directors Restrictions

Liquidators of companies that are in insolvent liquidation are required by law to report to the ODCE on the circumstances giving rise to the company’s failure and on the conduct of any person who was a director of the company during the twelve months preceding the entry of the company into liquidation. The liquidator must also proceed to apply to the High Court for the restriction of each of the directors, unless relieved of that obligation by the ODCE.

The essential aims of this statutory reporting regime are to:

  • afford the public a degree of protection by ensuring that persons who have been determined by the High Court as not having acted honestly and/or responsibly in the period prior to a company’s entering insolvent liquidation may, in respect of the mandatory five-year period of restriction, only act as directors of other companies that meet minimum capitalisation requirements; and
  • ensure that persons who, in the period prior to a company’s entering insolvent liquidation, have been judged to have acted honestly and responsibly can continue to engage in entrepreneurial activity through the medium of limited liability companies without sanction or penalty

In discharging its role in this regard, the ODCE expects liquidators to provide it with all of the information which is relevant to the making of an appropriate decision. The ODCE continuously seeks to ensure that liquidators make evidence-based recommendations regarding relief/no relief by reference to the results of their investigations.

The ODCE considers granting relief where a liquidator advances an evidence-based justification in support of a claim that a director has acted honestly and responsibly in conducting the company’s affairs. In making its decisions, the ODCE is keen to ensure that no director needlessly bears the burden of a High Court hearing where he or she has clearly demonstrated honest and responsible behaviour in the conduct of the affairs of the failed enterprise. In practice, the ODCE acts as a filter to remove the need for consideration by the High Court of those cases which do not appear to warrant its attention. In practice, the ODCE acts as a filter to remove the need for consideration by the High Court of those cases which do not appear to warrant its attention.

It is important to note, however, that ODCE decisions of ‘no relief’ or ‘partial relief’ do not constitute a finding of dishonesty or irresponsibility in respect of the directors concerned, and it would be inappropriate for any such inference or imputation to be drawn. It is solely a matter for the High Court (having heard the submissions of the liquidator and director(s) respectively) to determine if a Restriction Declaration should be made in respect of any particular company director.

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