The Office of the Director of Corporate Enforcement (ODCE) has received information of a number of potentially illegal loans for more than €1 million to company directors.
The ODCE has warned that, in some cases, it may take legal proceedings against these directors.
ODCE director, Mr Paul Appleby, has called on company directors and secretaries to take urgent steps to comply with the legal restrictions that govern such loans.
He said that, in the year to date, he had received 200 reports from auditors disclosing suspected breaches of the provisions covering directors' transactions. A substantial majority involved loans to directors or persons connected to directors.
"Based on available figures, approximately one in three of the loans involve sums greater than €100,000, with a small number exceeding €1 million," he said.
Mr Appleby was speaking at the publication by his office of guidance notes on transactions involving directors.
The provisions governing directors' transactions prohibit loans for in excess of 10 per cent of a company's "relevant assets", these being the net assets as per the most recent balance sheet laid before an annual general meeting, or the company's paid-up share capital.
Mr Appleby said company directors occupy a special position vis-à-vis their companies.
"Directors can exercise considerable power over companies' assets, assets which ultimately belong to shareholders and which may be required to discharge debts owed to creditors.
"For that reason, company law contains a number of provisions designed to prevent directors from abusing their positions and thereby, potentially, or actually, adversely affecting shareholders' and/or creditors' interests."
Mr Appleby said instances of abuse of the relevant provisions would be dealt with in a number of ways, including the initiation of civil proceedings with a view to protecting shareholders' and creditors' interests, and criminal proceedings with a view to sanctioning wrongdoing.
Auditors are required to report to the ODCE where they have formed an opinion that there are reasonable grounds for believing that a company, or an officer of that company, has committed an indictable offence under the Companies Acts. The guidance notes are available at www.odce.ie
