The Company Law Enforcement Act 2001 should not be considered anti-business, a conference was told yesterday.
"This is good news for business. The traditionally low levels of compliance with good business practices will be tackled and, from now on, businesses can be confident that they are trading with properly managed compliant third parties," said Mr Paul Carroll, managing partner with A&L Goodbody Solicitors. The Act will introduce significant changes, establishing the Office of the Director of Corporate Enforcement, with responsibility for ensuring compliance with, and enforcement of, the requirements of company law. It also has important implications for company directors and, in particular, exposes them to new sanctions as well as increased risk of personal liability.
Attorney General Mr Michael McDowell told the conference the Act heralded a new era for firms in compliance with corporate affairs and company legislation. The Act meant it was now crucial for company directors to have a firm grasp of compliance obligations under the Companies Acts, the conference heard.
"The Act introduces a range of statutory civil and criminal penalties for failure to comply with basic aspects of Irish company law," Mr Carroll said.
Ms Paula Reid, director of know-how and education at A&L Goodbody, outlined a checklist which directors facing insolvency should take to protect themselves from liability. These included:
compliance with Companies Acts and the maintenance of proper records and books of account as required by the Acts;
the holding of regular meetings of directors;
the documentation of all business decisions;
operating tight management of accounts, and
the taking of legal or accounting advice. Directors should also monitor those to whom functions have been delegated and avoid a complete abrogation of responsibility, Ms Reid said. In certain circumstances, directors should stop trading and resign.
Other significant provisions of the Act include the introduction of accountability for insolvency practitioners and a greater emphasis on their investigative role into why companies fail, Mr Carroll said.
But Mr Paul Dobbyn, partner at A&L Goodbody's corporate recovery unit, questioned whether it was fair to lay part of the blame for failure to prosecute in insolvency situations - as the sub-text of some of the changes would suggest - at the feet of insolvency practitioners.
The causes of such failure may not be due primarily to inaction on the part of insolvency practitioners, but to insufficiency of assets in an insolvency company to enable an insolvency practitioner to even cover the costs of prosecution, the costs and of litigation.
