Almost all directors unaware of law changes

A RECENT survey found that as much as 95% of company directors were unaware of some of the basic changes to company law in the past couple of years and their new responsibilities when running their business.

While the survey was conducted only among firms in the Midlands, it is probably an accurate reflection of the country as a whole with many firms ignorant of the major changes in Irish company law and enforcement since 2001 under the Company Law Enforcement Act.

The first, and obvious change has been the establishment of the Office of the Director of Corporate Enforcement (ODCE), headed by Paul Appleby, with wide-ranging powers to administer company law.

Joe Kelly, head of the corporate offences unit at A&L Goodbody solicitors, says company directors are becoming increasingly aware that they cannot just sign off on accounts and expect their responsibilities to end there.

Many companies may not be aware of the extensive powers of the ODCE. Members of the ODCE can go to a firm’s premises and take both documents and computers as part of their investigation of a firm, the so-called “dawn raids”.

“The ODCE has the capacity to raid not just your office but your home, and that unnerves people. It is unnerving for company directors to know that, if they don’t answer questions, they can be liable to sanctions themselves.

"You’ll appreciate that if you are contacted about a breach of company law, any reputable business will make sure they are compliant. It is the reputation risk that is as much a deterrent as the fact that you can be fined or jailed.

The ODCE is tasked with ensuring that over 400 company law regulations are complied with, but of concern to the majority of businesses is ensuring that proper books of account are kept; that they are filed on time; and that creditors and employees are protected.

Another area the ODCE is cracking down on is illegal loans to company directors. These are currently classified as loans to company officers that exceed 10% of the company’s relevant assets and this area is under review.

According to Joe Kelly, the level of awareness is increasing that companies must be run properly and this can only be good for Irish business.

But with the changes coming in a big-bang fashion rather than gradually, there is a fear that a genuine business trying to comply with the law will be caught out.

“It is very good that business be effectively regulated, but it is making sure there isn’t over-regulation and when companies make a decision they are not in breach of criminal law,” Mr Kelly added.