Presentation Irish Venture Capital Association Merrion Hall, Sandymount, Dublin 4 11 May 2004

The New Company Law Regime – Improving Corporate Standards Paul Appleby Director of Corporate Enforcement

Making Compliance Worthwhile From Vicious Circle of Non-Compliance To Virtuous Circle of Compliance, where –Obligations are clear and understood –Market benefits from transparency –Non-compliance is reported and investigated –Those in default are sanctioned

Who’s Involved? Oireachtas, Government and the EU Companies Registration Office Company Law Review Group Director of Corporate Enforcement Irish Auditing and Accounting Supervisory Authority

Oireachtas, Government and EU Company Law Enforcement Act 2001 –Company Law Review Group –Director of Corporate Enforcement Companies (Auditing/Accounting) Act 2003 –Irish Auditing/Accounting Supervisory Authority EU Financial Services Action Plan –Market Abuse, Prospectuses, Auditing, etc.

Companies Registration Office Encouraging Market Transparency ‘Know your Customer/Client’ Late Filing Penalties Prosecution of Companies/Directors Strike-Off of Companies Filing Compliance Rates Improved

Company Law Review Group Modernisation of Existing Areas of Law Single Consolidated Companies Act –Private Company limited by shares –Additions, etc. for other Forms of Company Ongoing/Regular Review Decoupled Elements, e.g., financial services

Director of Corporate Enforcement Encouraging Compliance Uncovering Suspected Breaches Prosecuting Detected Breaches Sanctioning Improper Conduct in Insolvent Companies Providing Quality Services

Director of Corporate Enforcement Encouraging Compliance –Information Books on Duties of Directors, etc. –Guidance for Auditors/Liquidators –Programme of Presentations/Meetings –Press Statements/Releases –Website Updates

Director of Corporate Enforcement Uncovering Suspected Breaches –Mandatory Auditor Reports (1,500 in 2003) –Mandatory Liquidator Reports (560 in 2003) –Public Complaints (300 in 2003) –Media Reports –Information-Sharing with other Regulators

Director of Corporate Enforcement Uncovering Suspected Breaches –Correspondence/Documentation –Witness Statements –Bankers’ Books Orders (13 in 2003) –Search Warrants (10 in 2003) –Arrests (10 in 2003) –Detentions (5 in 2003)

Director of Corporate Enforcement Prosecuting Breaches (convictions in 2003) –Failing to Keep Proper Books of Account (29) –Auditing while not Qualified (6) –Furnishing False Information (5) –Director while Undischarged Bankrupt (3 + Disqual.) Many other cases of Voluntary Rectification, etc.

Director of Corporate Enforcement Other Enforcement Decisions –Filing Default Cases referred to the CRO –Failure to hold EGMs Cases } Cautionary –Excessive Directors’ Loans Cases} Letters –Company Investigations

Director of Corporate Enforcement Sanctioning Improper Conduct in Insolvent Cos. –298 liquidators relieved (53% of 560 reports in 2003) –202 liquidators not relieved (36%) –Restrictions in 85 of the 121 cases heard (70%) –153 directors restricted/108 not restricted (59%) Ensuring that Restricted Directors comply

Director of Corporate Enforcement Liquidator Supervision –14 High Court Orders –Books sought from 3 Liquidators Unliquidated Insolvent Companies –1 restriction order obtained to date; more in prospect Dissolved Companies –Disqualification applications in hand

Irish Auditing and Accounting Supervisory Authority (IAASA) Scope of Remit –Supervise the prescribed accountancy bodies –Promote high professional standards –Review the accounts of all public limited companies and major private companies –Act as specialist source of advice to the Minister (IAASA is not yet in force)

Companies Act 2003 Directors’ Compliance Statement –Mandatory for public limited companies and all private companies limited by shares whose turnover exceeds €15.2 m. and balance sheet total exceeds €7.6 m. in the year in question Auditors’ Review of Compliance Statement (These provisions are not yet in force)

Companies Act 2003 Audit Committees –Mandatory for public limited companies –Optional for all private companies limited by shares whose turnover exceeds €50 m. and balance sheet total exceeds €25 m. in the year in question. However, the directors’ report to the company’s AGM must state if they have done so and explain why, if they have not (These provisions are not yet in force)

Companies Act 2003 Audit Exemption –Optional for most private companies where the turnover does not now exceed €1.5 m. and the balance sheet total does not exceed €1.5 m. Revised Auditor Reporting to the ODCE –Exemption for Filing Defaults (The revised Auditor Reporting provisions are not yet in force)

Companies Act 2003 Development of Guidance now underway –Drafting Phase (up to end-June) –Public Consultation Phase (July/August) –Review Phase (September) Initial Drafting being undertaken by ODCE, IBEC, Revenue, Accountancy Bodies and Institute of Directors

Conclusion Refocus/reduce company law requirements Meet EU obligations as they arise Ensure that legal requirements are adhered to Enhance Ireland’s reputation as a modern, secure and reliable jurisdiction for national and international investment

Conclusion Further information is available from: –www. odce. ie –www. clrg. org –www. cro. ie ODCE Information Books/Guidance are available free of charge on request

End of Presentation Thank You Questions ?