DIRECTOR OF CORPORATE ENFORCEMENT TO BE ESTABLISHED

"A deep-seated culture of non-compliance with even basic company law requirements has been confirmed by the report of the Working Group on Company Law Compliance and Enforcement," Tánaiste Mary Harney said today (Monday 15th March 1999).

"What is even worse," the Tánaiste went on to say, "is that the level of enforcement of the present law has been hopelessly inadequate," as she, her colleague Minister for Commerce Noel Treacy, and the Working Group's Chairman Michael McDowell Senior Counsel held a press conference this afternoon to mark the report's publication and the Government's response to it.

The Tánaiste stated that the Government had no hesitation in accepting the thrust of the "McDowell Group" report and announced that the Government had decided -

• to establish a new Office of Director of Corporate Enforcement with primary responsibility for the enforcement of company law, and
• to establish a statutory Company Law Review Group.

The Government has also decided to provide the necessary staffing resources to both the director and the statutory review group. "The Director's Office will comprise a dedicated multi-disciplinary team of 30 staff with the resources and expertise to enforce comprehensively company law. In addition, the Government have agreed to the allocation of 7 members of An Garda Siochana to work with the office on criminal prosecutions. The statutory Review Group will be supported by a staffing complement of 10. In her remarks, the Tánaiste said, "If 13% compliance rates for the most basic of corporate duties (i.e., the timely filing of annual returns) is properly indicative of corporate culture, it suggests that the law is honoured by business more in the breach than in the observance. Social cohesion in this society requires that the law applies equally to all sections of society. The State has a duty to ensure that this occurs, and that is why the Government has reacted so positively to the Working Group's Report".

The Working Group on Company Law Compliance and Enforcement was established because of the Government's concerns at the emerging indications of serious abuses of company law. The Report of the Working Group has confirmed the worst fears as to the low level of compliance with company law and the extent to which company law is being enforced in Ireland. For example, the Group found that in 1997 only 13% of the 136,000 companies due to file their returns on time actually complied with their obligations. The Group also found that most statutory offences have never been the subject of prosecutions, and those which have been prosecuted have resulted in only a handful of convictions. The Group concluded that those who are tempted to undertake serious breaches of company law have little reason to fear detection or prosecution.

The Group made a number of detailed recommendations for changes in company law and the manner in which company law is enforced. At the heart of the Group's proposals is the establishment of a new Office of the Director of Corporate Enforcement, the functions of which are set out in the Notes for Editors.

The Tánaiste said that in one important respect, the Government had gone beyond the recommendations of the Working Group, in deciding to transfer from the Department of Enterprise, Trade and Employment to the Director primary responsibility for company law investigations.

In addition to looking at ways of improving the enforcement of company law, the Working Group examined how company law might best be updated on a regular basis. Consistent with the Group's recommendations, the Tánaiste proposes to establish a statutory Company Law Review Group. The purpose of the Review Group will be to examine and make recommendations for reform in particular areas of company law. Pending the enactment of the necessary legislation, the Group will be established initially on an informal basis. The Tánaiste supports the Working Group's recommendation that there should be a reforming Companies Bill every two years to give cover the review group's recommendations and any other matters that might arise..

The Working Group identified the need for a complete consolidation of all company law. The Tánaiste said that she intended that this will begin to be addressed with the additional staffing being provided to her Department as a matter of priority. As this will be a major task, involving the consolidation of both primary and secondary legislation, it will be undertaken in parallel with the work on a biennial company law Bill.

Officials in the Department of Enterprise, Trade and Employment will now proceed with the drafting of legislation to establish the Office of the Director of Corporate Enforcement, as well as the Company Law Review Group, as a matter of priority.

The Tánaiste thanked Michael McDowell for the excellent work he had undertaken in chairing the Working Group and extended her thanks to all of those who had participated so diligently in the Group's work.