Corporate watchdog warns of 'potentially significant' increase in company closures as Covid supports unwind

Director of the Office of Corporate Enforcement Ian Drennan said there was a 39% reduction in companies entering insolvent liquidation in 2021, due to measures introduced to help firms during the Covid pandemic. File picture: Sam Boal/RollingNews.ie

Company liquidations are expected to increase, “potentially significantly”, as Covid-related State supports to businesses unwind, the corporate industry watchdog has warned.

This is coming at a time when the Office of the Director of Corporate Enforcement (ODCE) continues to be understaffed and awaits powers and resources promised under laws enacted last December and recommended by an expert group almost 20 months ago.

In its annual report for 2021, the ODCE said its actual staff, “as opposed to approved”, stood at 44.6 at the end of December 2021 — compared to 43 in the previous two years and a high of 53 staff in 2010.

The Government promised last December that as preparations are being made to transform the ODCE to the Corporate Enforcement Authority (CEA) — which more independence and powers and resources — that overall staffing levels will be increased by 50%.

It said approval had been granted for 14 additional civil servants — an increase of 35% — while the number of gardaí seconded to it would more than double — from seven to 16.

The annual report, completed in April, said there were 44.6 staff at the close of 2021, compared to 43 the previous year.

This included 10 gardaí, compared to nine at the end of 2020. It said the detective inspector post was vacant and there was a reduction (from three to two) at detective sergeant level.

In his foreword, ODCE director Ian Drennan said as regards his powers, the office “will continue to advocate for those additional legislative measures” recommended by the Hamilton Group in December 2020.

Regarding the promised new authority, he said: “Our focus is, and has for some time been, on finalising preparations for the establishment the CEA”.

Mr Drennan said there was a 39% reduction in companies entering insolvent liquidation in 2021, due to measures introduced to help firms during the Covid pandemic, such as credit forbearance and State supports.

“While it remains to be seen, the prevailing view seems to be that corporate insolvencies have been artificially low in recent years and that, as State supports are withdrawn and temporary legislative provisions unwind, the number of companies entering insolvent liquidation will increase — potentially significantly,” he said.

“Should that come to fruition, that will likely see a material increase in the volume of liquidators’ reports being submitted in the coming years.” 

The report said auditor indictable offence reports rose from 75 in 2020 to 131 in 2021, while complaints from members of the public increased from 149 in 2020 to 201 in 2021.

As a result of investigations by the ODCE in 2021, 62 criminal charges were brought against six people, including for fraudulent trading, furnishing of false information, theft and money laundering.

Two of those individuals were prosecuted in the district court and four in the higher circuit court (on indictment).

Four of those cases remained before the court at the close of 2021. A total of three people were convicted in the courts during the year.

Mr Drennan said in addition to these cases, there were a number of “large scale investigations” and an ongoing High Court Inspectorship — in relation to Independent News and Media.