PRESS STATEMENT

“Non-Compliance with Company Law Obligations Involves Significant Costs” – Director of Corporate Enforcement

NOT FOR RELEASE BEFORE 12 NOON ON WEDNESDAY, 4 JUNE 2003

In introducing the Annual Report of his Office for 2002, the Director of Corporate Enforcement, Mr Paul Appleby, spoke about the achievements of his staff last year in organisational development, company law compliance and case throughput.

“Having started last year with a small staff and temporary accommodation, we had attained by the end of 2002 our approved complement of 37 full-time staff and relocated to permanent premises.

During 2002, we furthered our statutory remit to promote and encourage compliance with company law through a number of initiatives, including the issuing of a series of publications and some 30 presentations to business and professional interests. Our seven Information Books, which set out the principal duties and powers of company directors and others, have proven to be particularly popular. Clearly, these are serving their intended dual purpose of informing people in a straightforward manner about the main obligations with which we expect people to comply and apprising shareholders and creditors in particular of their rights under the law. As part of our ongoing compliance agenda, the Information Books dealing with Companies, Company Directors and Company Secretaries are currently being disseminated to all Irish-registered companies (approximately 150,000). Feedback from this initiative has been very positive, with many companies contacting us seeking copies of the remaining Books in the set.

We started the year with about 160 cases of possible misconduct on hands and received 920 new cases in the form of 221 voluntary reports (principally public complaints) and 699 mandatory reports from auditors, liquidators and other sources. The Office only received many of the auditor and liquidator reports late in the year following the publication of guidance documents and the commencement of the relevant statutory provisions. Nevertheless, we concluded over 540 cases during 2002 and have carried forward a similar number into 2003. We expect to receive about 1,500 new cases in 2003.

Last year, we participated in over 25 separate legal proceedings. A highlight was the High Court’s decision to publish the Ansbacher Inquiry Report in full. We also secured 20 convictions under the Companies Acts.”

Mr Appleby said that compliant businesses were incurring significant costs arising from the non-compliance of others with their company law obligations:

“Our current level of activity both with respect to solvent and insolvent companies suggests that non-compliance with company law obligations involves significant costs for business, and this in turn is reducing overall competitiveness. Our aim within the Office is to reduce this business risk by limiting the incidence of fraudulent, dishonest and non-compliant behaviour.

Creating a culture of compliance will undoubtedly be a long-term project.

Our analysis of 290 reports received last year from the liquidators of insolvent companies indicates that the collective deficit in these insolvencies was over €260 million. Over €160 million of this figure relates to companies where my Office has decided not to give the liquidators full relief from the requirement to undertake High Court restriction proceedings. However, the Court will eventually determine the extent to which (if at all) each of these insolvencies involved dishonest or irresponsible conduct on the part of the company’s directors.

Misconduct in business will be reduced by active encouragement of compliance and by vigorous enforcement. But further action is needed. In this context, I welcome the recent publication of the Companies (Auditing and Accounting) Bill 2003 which contains proposals to:

-regularly remind company directors of their important legal obligations and of the necessity to comply with them and

-strengthen the auditing function through the establishment of a new Authority and the introduction of a range of other measures.

The Director added that greater disclosure of corporate financial information would further assist companies in evaluating risk:

“Those who may be potentially affected by non-compliance must be vigilant in protecting their own interests. One of the worrying features to emerge from cases examined by us has been the infrequency with which many of those dealing with limited companies seem to check the financial and other information which is readily available through the Companies Registration Office (CRO) or the credit information sector.

Standards in business could be enhanced if more timely and comprehensive financial information on company performance were made publicly available. Those companies which choose to avail of the exemption from the requirement to undergo an annual audit should be required to place a more illuminating set of financial statements on the public record in the CRO. This would have the merit of enabling creditors and other stakeholders to make a more informed evaluation of a company’s financial situation and of the risks of doing business with that company.”

The Director looks forward to his Office continuing to enjoy the support of Government, the Oireachtas, professional interests and company stakeholders in further improving corporate compliance standards in the future.

4 June 2003

ENDS/