4 October 2022
The Companies (Corporate Enforcement Authority) Act 2021 (the ''CEA Act”) amended the Companies Act 2014 (the “2014 Act”) and commenced on 6th July 2022, with two exceptions - Section 35 relating to the provision of directors' PPS numbers in certain documents submitted to the Registrar of Companies has not yet commenced - and the establishment of the new Corporate Enforcement Authority (the “CEA”) which commenced with effect from 7th July 2022.
A consequential amendment has also been made to the Irish Collective Asset-Management Vehicles Act 2015 incorporating certain provisions in respect of the functions of the CEA.
The main aim of the CEA Act is to establish the CEA as a stand-alone authority which will subsume the responsibilities of the Office of the Director of Corporate Enforcement (the “ODCE”). Prior to the commencement of the CEA Act, the ODCE was an office within the Department of Enterprise, Trade and Employment (the “DETE”).
The changes are intended to enhance the status of the body tasked with enforcing company law in Ireland, by increasing its independence and giving it more control over its resources. The legislation is seen as a key element of the Government’s package of measures to strengthen Ireland’s response to white collar crime.
The CEA takes over the previous functions of the ODCE to include encouraging compliance with the 2014 Act, investigating suspected offences and non-compliance with the 2014 Act, prosecution of summary offences and the supervision of liquidators and receivers.
In place of the single Director of Corporate Enforcement, the Act provides that the CEA will have no more than three full-time 'members' and the Minister for Enterprise, Trade and Employment will appoint one of them as chairperson.
The former Director of Corporate Enforcement, Ian Drennan, is now the Chief Executive Officer of the CEA.
The Act enables the CEA to hire additional staff with the skills and expertise that it deems necessary and it provides for the secondment of Gardaí to the CEA. The DETE has sanctioned additional staff to be assigned to the CEA and there is a commitment to increase the permanent members of An Garda Síochána. If this happens, it will represent an almost 50% increase in staffing levels.
Although the ODCE was accountable to the Oireachtas, the CEA will have additional accountability obligations. The chairperson will be accountable to the Dáil Committee of Public Accounts and any member of the CEA must attend before any Oireachtas Committee "to give account for the general administration of the CEA".
The CEA Act continues the obligation for the CEA to submit an annual report to the Minister for Enterprise, Trade and Employment. It also requires the CEA to prepare a strategy statement and work programme.
The strategy statement which will cover the following three years, will specify the key objectives and outputs. One month before the commencement of each financial year, at the latest, the CEA must submit to the Minister a work programme relating to the discharge of its functions for the coming year. The annual report and strategy statement must be laid before the Houses of the Oireachtas by the Minister and published on the CEA’s website.
It is interesting that the CEA Act does not contain key proposals from the General Scheme, most notably:
The CEA Act does not also contain some of the recommendations of the Hamilton Review on Economic Crime and Corruption in the areas of surveillance powers, search warrants, provision of passwords and allowing non-Garda personnel to attend interviews with suspects.
Now that the CEA has been established, the Government may consider providing for additional powers in the future.
The CEA Act makes miscellaneous amendments to the 2014 Act, many of which are anomalies in, or restore previous company law provisions to, the 2014 Act. These amendments were recommended by the Company Law Review Group (the “CLRG”), the most notable of which are the following: -
Certain corporate governance amendments to the 2014 Act are contained in Part 4 of the CEA Act, including clarifying that a secretary (in addition to a director) of a company must be at least 18 years of age.
The Act also introduces a measure to validate the identity of directors to improve the accuracy and integrity of company information held on the Register of Companies and reduce the risk of identity theft.
The Companies Registration Office (the “CRO”) exists to provide members of the public with access to information on companies, their owners, directors, and financial results.
It has a stated policy of not seeking to impose unnecessary administrative burdens on companies and has sought to modernise and simplify its system for filing documents in recent years. Incorporating a company and details of director changes can now be submitted online directly to the CRO without identity validation checks or a requirement for a statutory declaration to be sworn in the presence of a solicitor or notary public.
Notwithstanding the recent filing improvements and greater accessibility afforded by online filing, the CRO has faced criticism for the deficiency of checks it performs on information filed with that office. A series of newspaper investigations identified multiple instances of companies being registered using bogus addresses, director details and, in some cases, individuals being appointed to companies without their permission (resulting in a complaint to the Director of Corporate Enforcement). Such instances highlight that the CRO’s current filing system is open to abuse by facilitating, with relative ease, the formation of companies without adequate verification or validation processes.
Additionally, there is some evidence that the CRO holds multiple director profiles for the same individual due to different variants of an individual’s name, residential address or date of birth being used on company filings, perhaps when filings are made by different service providers. This can make it difficult to identify an individual’s current directorships or to track through past directorships to determine the trading status and history of such companies.
Once commenced into law, the legislative changes will require directors to file details of their PPSNs with the CRO when: -
The PPSNs will be used for validation purposes only and will not be available to the public.
The precise date for the introduction of these changes is unknown at present as they will require a reconfiguration of the CRO’s online filing portal to permit implementation.
Once the online filing portal has been reconfigured, directors will be identified on the CRO filing system by reference to their PPSN rather than by reference to their name, address, or date of birth.
Overall, the changes are to be welcomed and it is hoped that they will eliminate the deficiencies in the current filing system, reduce incidents of identity theft and make it more difficult to set up and administer companies using fake or bogus details. The changes should also assist the CRO in enforcing other company law requirements such as enforcing the maximum number of Irish directorships that an individual can hold.
In cases where a director does not have a PPSN, it will be necessary to apply for a filing number.
While precise details of how to obtain a filing number have yet to be announced, it is thought that the process will be similar to the procedure for obtaining a RBO Transaction Number under the Beneficial Ownership of Corporates legislation.
This entails such directors confirming their identity in the presence of a notary abroad and signing a Declaration. The Declaration is then furnished to the CRO who issue a filing number.
While the changes are to be welcomed, there are likely to be significant teething problems along the way. Possible examples include: -
It may be the case that CRO filings such as annual returns, Forms B10 (change of directors) and incorporation documents will not be accepted for filing if the particulars under which the PPSN is registered are not the same as those already provided to the CRO (e.g. PPSN issued under an individual’s birth name but CRO record an individual’s “known name” or discrepancies relating to date of birth on CRO record and on PPSN records).
There may be delays in forming a company if a proposed director does not have a PPSN as it will be necessary to apply and obtain a filing number in advance of submitting the company formation documents. A new company may need to be incorporated using directors with PPSNs as the first directors and appointing additional directors post incorporation once filing numbers have been issued for those individuals who do not have a PPSN.
It will be necessary to file details of PPSNs and filing numbers for all directors on the annual return. If there are delays in obtaining a filing number, or the CRO filing system does not recognise the PPSN provided, the delays incurred in rectifying could result in a company being late in filing its annual return, thereby incurring late filing penalties and a possible loss of audit exemption.
If an appointee does not have a PPSN or was previously issued with a filing number, delays may be experienced in completing the filings to appoint additional directors with a corresponding delay in updating bank mandates etc.
There may be costs involved for individuals confirming their identity abroad to obtain a filing number.
Companies should start the process of compiling details of PPSNs for their directors and conduct a review of director information currently held on CRO records to identify any cases of inconsistencies between the information held on CRO records and the name and details under which the PPSN is registered.
Companies should also establish whether any of their directors should apply for a PPSN or a filing number where any director does not have a PPSN.
If you have any queries on The Companies (Corporate Enforcement Authority) Act 2021, or its implications for your company, please contact Salvador Nash, Head of Company Secretarial. We'd be delighted to hear from you.
Salvador Nash
Principal and Head of Company Secretarial