I move: "That the Bill be read a Second Time."
As Minister for State with responsibility for trade promotion, digital and company regulation, I am pleased to present the Companies (Corporate Enforcement Authority) Bill 2021 for the consideration of the House. Since taking office the enactment of this Bill has been a priority for myself and for the Tánaiste. Before proceeding, I want to acknowledge the significant work that has been done by those involved, most notably in the past 12 months, to develop the General Scheme of the Bill before the House. I wish to acknowledge and thank the members of the Joint Committee on Enterprise, Trade and Employment for their engagement and consideration of the Bill during pre-legislative scrutiny.
At the outset I would like to give some background and context to the legislation. As I have said before, white-collar crime is a menace to society. It is not victimless and it has huge consequences reputationally for the economy, both nationally and internationally. Consumers and businesses need to have confidence that alleged breaches of company law will be effectively investigated and prosecuted. This is a landmark first step to strengthen and transform the Office of the Director of Corporate Enforcement, ODCE, into a statutory and independent agency with additional resources to investigate and prosecute white-collar crime.
My objective in this legislation is to make sure we are doing everything we can when it comes to having a robust company law framework for the conduct of business in the 21st century. Company law enables entrepreneurs to take risks, enterprises to grow and jobs to be created. It also serves to protect the interests of creditors, investors, employees and the State. The Government is committed to ensuring that the authorities are best equipped to enforce compliance with the law and to investigate instances of malpractice by companies.
This legislation to establish a new corporate enforcement authority is a commitment in the programme for Government. I know that Deputies will be aware that this legislation was developed in the aftermath of the investigation that led to the trial of the DPP v. Seán FitzPatrick and the acquittal of the defendant on all charges, on the direction of Judge Aylmer. Since the time of the investigation, the director has implemented multiple reforms within the ODCE, including staffing and procedural reforms designed to ensure the issues that led to the investigative shortcomings outlined by Judge Aylmer will not happen again.
There has been a focus on identifying further measures to enhance the capacity of the ODCE. The Bill builds on the organisational and procedural reforms undertaken by the director in recent years and ensures that the new authority has the optimum statutory independent structure. This, allied with the financial and human resources allocated to the new authority, will ensure it is well placed to tackle breaches of company law and promote compliance.
I will now turn to the specific provisions of the Bill. The Bill consists of six Parts, 36 sections and two Schedules. An explanatory memorandum has been published and provides a summary of the provisions. While the main purpose of the Bill is to establish the ODCE as an independent agency called the corporate enforcement authority, it also deals with a number of recommendations from the Company Law Review Group, as well as some amendments to the Companies Act 2014.
Part 1, sections 1 to 3, sets out the standard provisions on citation, commencement, definitions and repeals.
Part 2, sections 4 to 13, establishes the new corporate enforcement authority with a commission structure. This structure is modelled on the Competition and Consumer Protection Commission. Sections 4 to 9 contain technical and consequential amendments to the Companies Act 2014 as a result of the establishment of the new authority. Section 10 inserts a new chapter 3A in Part 15 of the Companies Act, the primary purpose of which is to invest the new authority with all the same functions and powers that the Director of Corporate Enforcement has currently, with some modifications to reflect the new commission structure.
The main elements of the new commission structure can be found in section 10 of the Bill at section 944F on membership of the authority. This provides for up to three full-time members and is designed to give the authority the structural flexibility to meet the differing demands of its remit, which includes investigation, prosecution, supervision, and advocacy, and along clear lines of responsibility. Section 944K on staff of the authority gives the authority the ability to appoint its own staff.
Part 2 also carries over the ODCE’s existing functions to the new authority. These include encouraging compliance with the Companies Act 2014, investigations of suspected offences and non-compliance under that Act, prosecution of summary offences, referring indictable offences to the DPP and the exercise of certain supervisory functions with respect to liquidators and receivers. As now, there is provision for secondment of members of An Garda Síochána to the authority.
Sections 944N and 944O introduce new provisions in relation to the accountability of the authority to the Committee on Public Accounts and to other Oireachtas committees.
Part 3 of the Bill, sections 14 to 25, contains amendments to the Companies Act 2014 relating to shares and share capital. These give legislative effect to some of the recommendations that were made in the report by the Company Law Review Group on shares and share capital, which was published in April 2017. These are designed to provide clarity on matters regarding share capital following the repeal, modernisation and restructuring of the Companies Acts 1963 to 2013 into what is now the Companies Act 2014.
Part 4 of the Bill, sections 26 to 30, contains amendments to the Companies Act 2014 which implements recommendations of the Company Law Review Group on corporate governance. These recommendations address issues concerning the administration of company meetings, which also arise from the move from the Companies Acts 1963 to 2013 regime to the current Companies Act 2014.
A further Company Law Review Group report, on the protection of employees and unsecured creditors, published in June 2017, recommended changes to the current law on restriction of directors. Part 5 at section 34 of the Bill provides the High Court with a power to restrict directors on the basis that they have failed to act appropriately in a winding-up situation, for example by failing to convene a general meeting to nominate a liquidator or by failing to give the required notice to employees of an impending liquidation.
Part 5 also makes miscellaneous amendments to the Companies Act 2014. Section 31 provides for the obligation to register resolutions in a creditors’ winding-up with the Registrar of Companies. Section 32 provides the corporate enforcement authority with the power to request evidence from a person that they are qualified to act as liquidators. Section 33 provides that it may be prescribed that liquidators submit statements to the Companies Registration Office more frequently than at six-monthly intervals. Section 35 introduces a requirement for directors of companies to provide their personal public service numbers to the Registrar of Companies. The purpose of this section is to enhance the accuracy of the register of companies.
Part 6, section 36, is a technical amendment which amends references to the Companies Act 2014 and the corporate enforcement authority in section 192 of the Irish Collective Asset-management Vehicles Act 2015. The 2015 Act is amended by the substitution of references to the Companies Act 2014 consequent to this Bill.
I shall now turn to the main purpose of the Bill. There has been lots of discussion, thought and policy analysis put into what is the best framework for combating white-collar crime. I welcomed the joint committee’s support for the establishment of the corporate enforcement authority as an independent, well-resourced agency that works to deliver on company law compliance. I also refer to work undertaken by the Law Reform Commission on regulatory powers and corporate offences. In particular it recommended that there be a new corporate crime agency. The Bill is very similar to the Law Reform Commission’s proposals when it comes to structure, staffing and co-operation with other bodies. The Law Reform Commission’s recommendation also called for a comprehensive response to corporate criminal offences. Accordingly, this was considered in the context of an overall review of Irish anti-fraud and anti-corruption structures. That review was led by Mr. James Hamilton, and the Government approved and published its recommendations in December 2020.
Since then, the Minister for Justice has developed and led on an implementation plan to carry forward these recommendations. My Department and the Office of the Director of Corporate Enforcement, ODCE, are centrally involved in this process. The establishment of the new corporate enforcement authority is a key part of this implementation plan. The plan is cross-government, which is something I wholly support. Corporate and economic crime will only be tackled by a whole-of-government, joined-up approach.
The Bill provides that all the functions of the ODCE will be carried over to the new authority. These include encouraging compliance with the Companies Act 2014, investigations of suspected offences and non-compliance with the Act, prosecution of summary offences, referring indictable offences to the Office of the Director of Public Prosecutions, DPP, and the exercise of certain supervisory functions with respect to liquidators and receivers. The Bill also includes provisions for work already under way at the time of the transfer from the ODCE to the authority.
A well-stocked enforcement toolbox is vital to ensuring the authority can meet the challenges it faces in its investigation and prosecution of alleged breaches of company law. In this regard, the ODCE has the power to issue a range of warning directions or notices, the power to enter and search premises and take documents and other material, and the power to bring summary criminal prosecutions. The current range of powers the ODCE has will also be carried over to the new authority.
I also welcome that criminal justice powers will be further developed under the implementation plan from the Hamilton review group on a cross-cutting basis. It will enable our investigative agencies to have the required powers while balancing the rights of those being investigated. This will ensure the new corporate enforcement authority has access to the necessary powers when developed.
To follow on from what I have said about criminal justice powers, the House will be aware criminal investigations into corporate affairs are often complex and lengthy and require specialist oversight. Rigorous procedural safeguards and due process standards must be maintained to withstand likely court challenges.
As I have said, the Bill invests the new authority with all the same functions and powers the Office of the Director of Corporate Enforcement has. This includes some modifications to reflect the new commission structure. The commission structure with up to three members is designed to give the authority flexibility. The authority will have the ability to appoint its own staff. The authority will be able to determine for itself the skills, and staff it will need to conduct its work, subject to overall budgetary sanction and approval. This structure and flexibility is intended to allow the authority to adapt if its workload expands significantly or if it needs to organise its work into discrete areas or functions.
As the Joint Committee on Enterprise, Trade and Employment noted during its pre-legislative scrutiny, resources are key to the success of this new authority. My Department and the Government carefully considered the committee’s strong views on this matter, and the Government decision establishing the authority referenced the actions need to ensure its resourcing needs. Indeed, the importance of adequately resourcing was also set out in the implementation plan arising from the Hamilton review group. The implementation plan commits to identifying the relevant Garda resources to be seconded to the corporate enforcement authority, and I understand the Garda Commissioner, who is independent in the exercise of his functions, has written to the director committing increased levels of members of An Garda Síochána for the new authority.
The Government decision also supported my Department’s increased budget allocation and staffing sanction to the authority. In preparation for the establishment of the corporate enforcement authority, the budget of the ODCE has increased by circa €1 million on previous levels and has approved sanction for 14 additional civil servants to be assigned to the authority to enable it to undertake its new functions. This represents an increase of 20% in the level of funding to the ODCE and an increase of 35% in the number of Civil Service staff.
The director’s assessment of the authority’s requirements is based on its functions and the number and complexity of cases it will handle. The resources being applied to the authority are in line with his assessment. In preparation for the establishment of the corporate enforcement authority, a number of key senior positions have recently been advertised. These positions include a director of governance and support operations, director of finance and ICT, and director of legal. In addition, a new position of digital forensics manager has also been advertised.
As I have said, the Government supports additional Garda Síochána resources being made available to the corporate enforcement authority based on its statutory functions, its assessment of its resourcing needs, and the Government’s vision for the new authority. The Bill provides for the continued secondment of members of An Garda Síochána to the authority. This is to facilitate the continued implementation of revised procedures within the ODCE whereby members of An Garda Síochána take the lead in all criminal investigations. This procedural reform addresses the investigative shortcomings identified by Judge Aylmer in the area of witness coaching and cross-contamination of witness statements. The members of An Garda Síochána assigned to the corporate enforcement authority will increase from seven to 16. Therefore, the total increase in the overall Garda headcount for the new authority will more than double. Taking the additional civil servant and Garda increases together, the corporate enforcement authority will have a staffing level which has increased by nearly 50% overall.
While the primary objective of the Bill is the establishment of the new corporate enforcement authority, as I have already noted, there are a number of other provisions included in the Bill in the area of company law. The Companies Act 2014 is kept under active review and its provisions are reassessed in the light of changing circumstances, for example, court judgments or where a problem is identified by companies, practitioners or those implementing its provisions. The Act is also reviewed in light of developments in EU legislation.
The Bill also proposes some other changes to company law. These include in particular the verification and transparency measures for the register of companies and the use of personal public service numbers, PPSNs, for directors. Directors will be required to supply their PPSNs at the time of incorporation of a company, in the annual return and if changing director or secretary details. This will assist the registrar to verify the authenticity of the director and assist in removing duplicate information on directors from the register. Other changes to company law are: the implementation of Company Law Review Group recommendations on shares and share capital and corporate governance; closing off an outdated exemption from the requirement to include directors’ names on correspondence; and an amendment to confirm the intention that Chapter 7A of Part 17 of the Companies Act 2014 applies to the securities registered in the name of a central securities depository and those securities that are registered in the name of a nominee of the central securities depository.
This Bill is part of a package of measures designed to ensure Ireland’s reputation as a top-tier country for its business environment is underpinned by a robust framework to combat corporate, economic and regulatory offences.
The establishment of the new corporate enforcement authority is a commitment in the programme for Government and one designed to combat breaches of company law, which are so damaging to our economy, which breed cynicism in our society about there being insufficient attention given to company misbehaviour and which undermine our international reputation.
The Bill, when enacted, will be a milestone in the area of corporate enforcement in Ireland. The new corporate enforcement authority will have more autonomy and resources to investigate suspected wrongdoing and to deal with larger, more complex investigations.