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CORPORATE INSOLVENCY - TOUGHER REPORTING REGIME TARGETS DISHONEST DIRECTORS

Paul Appleby, the Director of Corporate Enforcement, outlined today (28th November 2002) details of the new reporting regime that has been put in place for insolvent companies which are in liquidation.

‘In the middle of this year, the Tanaiste and Minister for Enterprise, Trade & Employment, Mary Harney TD, signed the necessary Statutory Instruments to bring into effect certain provisions in the Company Law Enforcement Act 2001, enabling my Office to begin a process which is radically altering the whole policing environment for insolvent companies put into liquidation.

‘In net terms, what is now happening is that all liquidators of such companies must submit a report to me, in a prescribed format, on the conduct of the directors of the failed enterprises. The final day for receipt of the first tranche of these reports is 30 November. As reports are received, they are being evaluated by my staff and, depending on the outcome of this evaluation process, I will then either require the liquidator to apply to the High Court for the restriction of each director or exempt the liquidator from this requirement. A restriction order effectively bars the director from acting as a company director for 5 years, unless the company to which he is to be appointed as a director meets certain paid up share capital requirements.

‘The new regime places a focus clearly on the directors and their actions in running the businesses in the period leading up to the liquidation. Honest and responsible directors have nothing to fear from the process. The directors it is designed to catch are those who have abused the privilege of incorporation.

‘I have decided to augment this reporting process with a procedure under which the public will be given the opportunity to bring to the liquidator’s attention - and to my attention - concerns that they may have in relation to a company which is in liquidation. We have placed on our website details of all those liquidations for which we are now due to receive reports, in order to afford creditors and others an opportunity to raise issues of concern. The information on the website will be updated regularly.

My Office is available to assist liquidators in discharging their new obligations. Since the middle of the year, we have written on several occasions to all relevant liquidators, informing them of the commencement of the new provisions and reminding them of their reporting obligations. I am anxious that all liquidators meet these obligations on time. By way of incentive, I intend to publish at the end of the year an initial list of those liquidators who have met their reporting obligations under section 56. Creditors in particular will wish to know for future reference which liquidators are discharging their legal obligations.

‘This new regime will be not be a ‘quick fix’ solution to the problem of dishonest and irresponsible directors of liquidated insolvent companies, nor will it be a panacea for everyone that gets stung by them. However, I would hope that it will not be long before these measures lower enterprise risk. I want to contribute to a much healthier corporate environment in which the majority of companies can carry on their business, without the fear that they are going to be disadvantaged by someone who irresponsibly accumulates debts at their ultimate expense.’

[28th November 2002]

If you have any enquiries about this release, please contact Dick O’Rafferty in the ODCE’s Insolvency Unit [tel 01-8585823 or