JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT debate -
Tuesday, 19 Jan 2010

Role and Functions: Discussion with ODCE.

Chairman

I welcome Mr. Paul Appleby, Director of Corporate Enforcement, and Mr. Conor O'Mahony, principal officer, and Mr. Seán Ward, principal officer, Department of Enterprise, Trade and Employment, and thank them for their attendance. I note that Mr. Appleby is not in a position to discuss the merits or demerits of individual cases but to give a broad overview of the operation of the Office of the Director of Corporate Enforcement and the particular issues that arise therein.

Before we begin, I wish to draw to the attention of witnesses that members of the committee have absolute privilege, but that same privilege does not apply to witnesses appearing before it. I have no doubt Mr. Appleby will be familiar with this. I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside of the Houses, or an official by name or in such a way as to make him or her identifiable. That usual caveat is given to all witnesses appearing before the committee. I invite Mr. Appleby to make his opening statement.

Mr. Paul Appleby

I thank the Chairman for the invitation to appear before the committee. I am grateful for the opportunity to outline the scope of my work and that of my staff in recent years and to update the committee on our collective impact in discharging our company law remit.

The Companies Acts are a framework of duties, obligations and rights which set out the manner in which companies, company directors and other stakeholders interact with one another on a fair basis. It is the job of our office to ensure as best we can that the balance of responsibilities and rights distributed among company stakeholders operates as the law intends. We see ourselves helping those who want to comply with their legal obligations to do so, discouraging misconduct and pursuing those who may have breached their duties and obligations under the law.

This approach is consistent with the three main functions as set out in the Company Law Enforcement Act 2001, namely, to encourage compliance, to investigate instances of suspected offences under the Companies Acts and to take enforcement proceedings for breaches of company law or duty.

As director, I am independent in the performance of my functions. My staff and I are also under a legal obligation to keep confidential any information obtained by us unless disclosure is required for the performance of my functions. A permitted disclosure of confidential information includes, for instance, a disclosure to a court in pursuing a legal action against a company or other person or to designated regulatory bodies to assist them in performing their functions.

I report annually to the Tánaiste and Minister for Enterprise, Trade and Employment on the performance of the office, and these extensive annual reports are published in late May-early June of each year. I am also obliged to report to an appropriately established committee of the Oireachtas when requested to do so. That is what brings me here today. In any report I make to a Minister or a committee, it is sometimes necessary to withhold the provision of information which could, in my opinion, be likely to prejudice the performance of my functions.

I wish to speak briefly on our compliance, investigative and enforcement work before moving on to speak more generally about our overall impact. In our compliance work, we have always placed considerable emphasis on the importance of informing and educating company directors and others about their duties and powers under the Companies Acts. We regularly publish information and guidance on company law, both in hard copy and electronic form, to assist people in carrying out those responsibilities appropriately. In 2009, we published a new series of quick guides on the duties and powers of various stakeholders. We also issued more than 10,000 copies of a short guide on property management companies. All of these guides were developed in conjunction with the National Adult Literacy Agency and secured the plain English mark. This was an innovation for the office during the course of last year.

Underpinning this publications work is an outreach programme. Office staff make presentations to directors and business professionals around the country. We attend public seminars and conferences, usually on request. This allows us the opportunity to distribute our publications, to engage with company directors and others and to answer any questions they may have about company law obligations. We attended about 50 such events in 2009.

In the early years of the office, much of this work was directed at significant business and professional organisations. More recently however, there has been increasing demand for information from chambers of commerce, county enterprise boards, local authorities and community groups. This is a welcome sign of a growing public recognition of the importance of compliance in the governance of companies, whether big or small.

When it comes to non-compliant behaviours, we are mainly reliant on third parties to inform us of potential misconduct. Auditors are required to report to us in certain circumstances, specifically where they detect that an indictable offence under the Companies Acts may have been committed. A typical report would be a failure by a company to maintain proper accounting or other company records. The liquidators of insolvent companies report to us on the circumstances of the demise of the companies and on the conduct of their directors particularly in the last year of the companies' operations.

We also encourage the public to make known to us their concerns. Arrangements are in place with other public bodies enabling us to share information on matters of mutual concern.

Most of the 1,700 cases we receive annually are dealt with administratively. Some issues are not relevant to our remit and in other cases no action is otherwise merited. For example, in approximately 80% of the liquidator reports we receive we find that High Court proceedings are not warranted against the directors of those companies. Other issues will be corrected voluntarily by the time a report is made to us. This applies particularly in regard to auditor reports.

Quite often, almost in conjunction with the auditor's report, we find we receive notice from the directors and others that sufficient steps have been taken to rectify the default that has been reported. In our review of public complaints, we try to secure the correction of any identified defaults or warn directors and others of the consequences of any repetition or both, for instance where there may have been a failure to hold an annual general meeting of the company, we will usually direct that the meeting be held in preference to taking immediate legal action. Clearly from time to time, we have cause to deploy more intensive investigative measures to examine circumstances of serious or deliberate malpractice relating to company law offences. A very small number of those investigations consume a large amount of office resources, the nature of the offences and the associated standards of proof can involve significant complexity and it may be some time before it is clear in any individual case to what extent enforcement proceedings are sustainable.

To deal with enforcement specifically, I have civil and criminal enforcement powers. I may prosecute company law offences summarily in the District Court and the Office of the Director of Corporate Enforcement has secured approximately 300 convictions against some 120 companies, company directors and others. Many of the convictions have been obtained against people who act as directors in breach of High Court disqualification or restriction orders, people who act as auditors while not qualified to act, companies and directors who fail to keep proper books, and directors who provide false information or falsify company documents.

My civil enforcement powers include the disqualification of company directors and others from involvement in a company for a certain period. I have used these powers in recent years to proceed against directors and officers of entities arising from High Court inspectors' reports and against the directors of insolvent companies where a serious abuse of company law responsibilities was indicated. In all about 80 people have been disqualified in recent years as a direct result of our actions.

I referred earlier to a review of the reports of the liquidators. Where we decided that company directors should appear before the High Court, the liquidators were obliged to seek the restriction of those directors. In the vast majority of cases that were heard by the High Court, the directors in question failed to satisfy the court that they had acted honestly and responsibly and are accordingly restricted. Some 900 directors have been restricted since 2003 and a further 50 or so persons have been disqualified by liquidators for varying periods. In terms of overall impact this complementary compliance investigative and enforcement work has one primary aim, namely to improve standards of corporate behaviour and reduce commercial risk, thereby minimising financial loss and disruption for company stakeholders in general.

We have undertaken market research on an occasional basis to assess the overall impact of our work. The last occasion was in 2007, when we commissioned Millward Brown IMS to carry out the research. A total of 440 respondents were asked for their opinion of the qualitative change in the company law compliance environment in the preceding five years. Some 85% of the directors interviewed were of the opinion that compliance had improved and every one of the accountants and the liquidators interviewed expressed the belief that compliance had improved. We also had the research address public perceptions of the effectiveness of the office. In that context 75% of directors rated the office effective and more than 90% of accountants and liquidators believed us to be so. All of these figures represented improvements on comparable 2005 results. These positive results have given rise to a perception on occasion that our office deals with all cases of suspected cases of corporate misconduct. This is not so. We are not the primary regulator of companies operating in sectors of the economy that are subject to licence. We do not police internal company rules or external codes of corporate governance where they relate to State-owned entities or publicly listed companies. Our role is limited to the Companies Acts and even within that body of legislation, there are options available to company stakehlders to address their perceived grievances by way of civil redress. Given the demands being made of us, and the need to discharge our core statutory functions, we must of necessity disappoint people from time to time who consider that their problems should be our priority. Overall the 2001 Act which set up the office has served its purpose well and at a current annual cost of €5.8 million, the office is delivering significant result in improving market conduct and in reducing the consequential risk of financial loss for business and other community stakeholders. In particular I acknowledge the support we have received from the Tánaiste and Minister for Enterprise, Trade and Employment, and her officials, current and former Ministers, the Oireachtas as a whole, public and professional bodies and the public at large. More remains to be done on several levels and we want to extend our impact over time and continue to support responsible conduct in companies large and small in the public interest.

I want to continue to employ resources for our compliance work, particularly in the SME sector and in the not for profit sector, where stakeholders' understanding of their obligations is relatively weak. Our examination of the conduct of the directors of insolvent companies is an ongoing challenge in the light of the sharp increase in their incidence recently. Investigating complex or difficult cases and tackling areas of persistent misconduct also remain a priority. I will be happy to take questions from committee members on our work, subject to my earlier comments about the necessary constraints on me in providing information that could prejudice the performance of our functions. If there are questions that I am unable to answer today, I will be happy to provide the information in writing after the meeting, where it is appropriate to do so. I thank members for their attention.

Deputy Leo Varadkar

I thank the director for making this presentation to the joint committee. I have three questions, my first questions relates to management companies in apartment developments. I have a copy of the guide on property management companies from theOffice of the Director of Corporate Enforcement.This large book was difficult to read and I did not think it was written in plain English. I know the Office of the Director of Corporate Enforcement received a great many complaints about this issue over the years. The multi-unit development Bill is somewhere in the Oireachtas system. Is the director pursuing residential management companies to hold AGMs as many do not hold AGMs and is the office addressing the issue whereby there is suppression of minority interest because the developer controls the management company through a golden share or by controlling a certain number of the units? I know that one can seek redress in the High Court but that is not a practical course for most apartment owners.

Second, on whistleblowers, I have just come from a press conference organised by Transparency International, which has been calling for a whistleblowers' protection Bill, to apply to the public and private sectors. Protection applies to some sectors, but it certainly does not across the board and I am interested to know whether the director thinks an across the board whistleblowers' protection Bill would aid him in his work and ensure that more people come forward with information.

My third question is probably the most significant and it may be difficult to answer, I was certainly surprised to hear that there will be no further action taken in relation to the DCC v. Fyffes case. Many watching that, particularly members of the public will interpret that judgment fairly or unfairly as further evidence of lax enforcement of white collar irregularities and offences in the State. What impact will this have on investigations in the banking sector? This committee is interested in learning what progress is being made in the banking investigations by the Office of the Director of Enforcement and when a report will issue on what action will be taken in regard to Anglo Irish Bank and the other banks.

Mr. Paul Appleby

In regard to property management companies, there were two publications on property management companies. There was the tome the Deputy has, a detailed handbook regarding the duties of company directors in management companies and the options available to apartment owners to secure their rights. In conjunction with that we produced a much shorter leaflet, which secured the plain English mark, and we are using that essentially as an initial introductory document. That is the document that has been distributed, certainly at public events. That document refers to the much larger handbook we have also produced. For those who want to dig a little deeper, therefore, that document is also available free of charge from our office.

Regarding annual general meetings, many of the complaints we get about management companies have little to do with us. They can range from issues such as the service charges, inadequate fire escapes and various other matters but in respect of discrete company law issues, we act. In 2009 or thereabouts we required approximately 45 annual general meetings to be held in companies where they were not being held. Occasionally, we ensure that the companies in question issue, say, the company's annual accounts to the members because a number of complaints are of that character, namely, that people do not know how their service charge moneys are being spent. That is one frequent and discrete set of actions we take in that area.

On a wider basis, issues of oppression are not offences as such under the Companies Acts. There is provision for members of companies who believe they are oppressed to take civil action and as the Deputy has indicated, that is confined to the High Court. One of our experiences in recent years is that, unfortunately, the Companies Acts currently do not allow for many actions to be taken at a lower level of court than the High Court and many people are dissuaded from seeking legal remedies simply because of the high cost of High Court proceedings. That is an issue I would like to see remedied. There should be a much more ready access by members of companies to the Circuit Court or even the District Court on occasion. Some work needs to be done in terms of defining where those thresholds operate but in terms of improving access to the courts, that is something that needs to be done.

In terms of whistle-blowing legislation, some work has been done on that, initially at the initiative of the Irish Congress of Trade Unions. It was done in the context of the Company Law Review Group, which has been tasked in recent years with the job of producing the heads of a new consolidated companies Bill. The Company Law Review Group examined the area. We were actively involved in undertaking research on behalf of the CLRG in regard to national and international provisions in the whistle-blowing area. We were of the view that there is scope in the Companies Acts for including the whistle-blowing provision. We recommended a particular proposal to the CLRG which we felt was reasonably balanced in encouraging whistle-blowing internally within companies initially to ensure the internal problem could be remedied. It was only if it was not remedied would the whistleblower, in coming to our office or to the Garda generally, be protected from victimisation. We felt that was a reasonable balance in terms of ensuring against abuse of whistleblowing provisions. Public documents are available on the work of the Company Law Review Group and our work, which was undertaken in 2005 or 2006. That is a matter of public record and is of some value.

In so far as DCC is concerned, we got the inspector's report shortly before Christmas. It constituted some of my Christmas reading over the course of the following few weeks. The inspector's report is quite conclusive in indicating that there was what it terms an error of judgment on the part of the then chief executive, specifically in regard to the insider dealing issue and more particularly the value or nature of the information he had at the time. The Supreme Court determined that Mr. Flavin possessed inside information at the time he traded in 2000. The High Court inspector has concluded that he did not intentionally use that information to further DCC's ends.

There are several other dimensions to the inspector's report where we had justified the conduct of the investigation. Again, many of those defaults or issues are indicated by the inspector to have been undertaken, say, with legal advice and although the legal advice in question, at least in one instance, was wrong, nevertheless, the inspector concludes it was reasonable for the directors in question to have followed that advice.

In terms of where we are and the process by which we have got to here, before the office was established in 2000 I understand this issue of insider dealing was investigated by the Garda and no criminal proceedings followed or no decision to prosecute was ever made by the Director of Public Prosecutions. When the civil action started the office monitored the proceedings of the civil insider dealing action. In examining a report from one of my staff at that time, I directed that documentation be sourced from DCC and Fyffes. That was done and, as a consequence of the Supreme Court's decision in 2007, we took the rather unusual step of pointing out both to the Supreme Court and the High Court that they were in a position, on their own initiative, to consider disqualification in the case of any particular individual. No disqualification decision or action resulted from that.

Due to the ongoing issues of concern to me, I believed there was a need in the public interest to clarify a number of issues which had been identified during the course of our investigations. That led me to seek to have the High Court inspector appointed. High Court inspection is the most powerful investigative tool in the Companies Acts. It essentially allows the inspector to obtain all documents, to compel witnesses to attend before him or her and to have people give answers on oath even if those answers incriminate the witnesses in question. That inspector has now reported, having reviewed all the evidence he has received, both in writing and orally. He has effectively determined that DCC and its officers were broadly compliant, and believed there was a strong culture of compliance within the company. In light of the content of that report and all the other actions we have taken over the last while, as far as I can see and certainly in the context of the Companies Acts, we are at the end of the road, so to speak. No further action is warranted.

There is one other detail I should mention with regard to a number of the other company law defaults that we detected, and which the High Court inspector has addressed in his report. A number of years ago we sent a report to the Director of Public Prosecutions, DPP, regarding the discrete issues which did not relate to insider dealing. The DPP decided those offences were not prosecutable.

Overall, we have taken the investigation to its absolute limits. Any decision that has been made has been made on the facts and the conclusions and judgments of the inspector. He is a very expert and well respected commercial lawyer, and we must both respect and accept his conclusions on the issues involved.

Chairman

Obviously, there was a substantial cost element associated with carrying out that inquiry. Has any determination been made as to who should bear that cost?

Mr. Paul Appleby

No, there is no determination yet. The cost of the inspector's work was approximately €1.4 million. The Minister for Enterprise, Trade and Employment has the right under the Act to ask the High Court to have the company or somebody else pick up the bill. The High Court has not yet addressed that issue but I expect it will do so in the course of the next number of weeks.

Deputy Leo Varadkar

I also asked about the banking investigations.

Mr. Paul Appleby

Anglo Irish Bank?

Deputy Leo Varadkar

It is not just Anglo Irish Bank. Obviously, if there are investigations involving Permanent TSB or AIB, we would be interested to know about them too.

Mr. Paul Appleby

Our investigations essentially relate to Anglo Irish Bank. We and the Garda Bureau of Fraud Investigation are investigating a number of matters including, as will have been reported, loans to directors of the bank, the bank's provision of financial assistance for the purchase of its own shares and the disclosed level of customer deposits at the bank. There is a great deal of co-operation between ourselves and the Garda in investigating the events in question. Obviously, we are very much focused on the company law issues while the possibility of wider criminal justice offences is being addressed by the Garda.

From our perspective, the Anglo Irish Bank investigation is the largest and most complex investigation we have undertaken since the office was established. It is a matter of record that we have obtained many hard copy and electronic documents on foot of search warrants and otherwise from the bank and other parties. Our formal seizure of the electronic material had to await the enactment of the Companies (Amendment) Act 2009 due to the weaknesses inherent in the search powers in the existing Companies Acts. There have been many technical and substantive issues which have been, and are being, addressed successfully on an ongoing basis. One example is the issue of legal professional privilege, LPP, and the status that is being claimed with regard to certain hard copy and electronic records. There have been a number of High Court hearings, discussions with Anglo Irish Bank and the appointment of a retired judge to act as an independent assessor to adjudicate on the merits of those LPP claims.

As the committee may be aware, on the last occasion we were before the High Court on an unrelated matter, we were reporting on our evaluation of the electronic documents which we had seized. There are several million documents involved. The High Court, in giving us approval to retain them for a further six months, acknowledged that our evaluation work was, to use the court's language, "a daunting task".

Notwithstanding these issues, we are working well. One third of the staff of the office is examining or is involved in the Anglo Irish Bank investigation. That staff includes gardaí and staff with accounting, administrative, IT and legal expertise. We have received extra staff and other support from the Tánaiste and Minister for Enterprise, Trade and Employment and her Department. The Garda Commissioner has also made additional gardaí available in recent months to support both the Garda and our office's inquiries. I believe our investigations are progressing well. The acquisition of criminal evidence or potential criminal evidence is a painstaking process, and that is particularly the case with respect to large-scale commercial investigations. We have engaged counsel to assist us and we have secured advice from them on a number of occasions.

The Deputy asked about timescales. It is not my policy to put a timescale on completion of office investigations and I will not start doing so now. I am anxious that this work should continue and there is no lack of commitment on my part or on the part of my staff to move forward with this. Much work is ongoing on a weekly basis and many issues are being successfully addressed as they arise.

Deputy Leo Varadkar

Does Mr. Appleby wish to indicate whether this will be months or years? Were some of the transactions only kept in hard-copy records and not in electronic format?

Mr. Paul Appleby

I will not respond directly to that. There are several issues upon which I will refrain from commenting. There are several detailed issues regarding investigations which I do not want to disclose in case of any possible prejudice arising.

Deputy Arthur Morgan

I thank Mr. Appleby and his colleagues for attending today's meeting and for their presentation.

Can he give any indication of the length of time the investigation into Anglo Irish Bank will take? A significant amount of Oireachtas time will be taken up on the subject over the coming days and months. Will Mr. Appleby's investigation into Anglo Irish Bank, and other banks, be finished by Easter, summer or Christmas? Given that Mr. Appleby has had to get search warrants and make substantial efforts to get some material, is Anglo Irish Bank's approach one of non-co-operation and obstruction? There is massive public disquiet over the bank and people would like to know where Mr. Appleby's investigation is at.

In his general presentation, Mr. Appleby said there was significant compliance with corporate law. Has this compliance deteriorated given the economic downturn or is it too soon to say?

Mr. Appleby made recommendations on whistle-blower legislation. Has he made any recommendations on other loopholes he has encountered in legislation which would enhance greater compliance with corporate law?

We know companies wind up; it is a part of doing business. There is, however, a scam in which some companies are wound up overnight with many unpaid creditors. Then the same directors open up again under another trading name and repeat the same with more outstanding bills, leaving many small and medium-sized enterprises to carry the can of significant loss of income. Has Mr. Appleby any information on the extent of such practice? Is there anything substantial that could de done to eliminate such activity?

Management companies can be the bane of Members' lives. Are complaints about management companies to the Office of the Director of Corporate Enforcement greater than any other category of complaint?

Mr. Paul Appleby

I will not give any explicit timeframe about the investigation into Anglo Irish Bank.

Deputy Arthur Morgan

I did not ask for a specific timeframe but just for a general indication.

Mr. Paul Appleby

I can certainly say we are talking about several months' work.

Deputy Arthur Morgan

How much more?

Mr. Paul Appleby

I do not know how many months it will be but it will be several months' more work.

The search warrant option is the standard means of acquiring criminal evidence. It does not necessarily indicate that there has been lack of co-operation in advance of the exercise of the search warrant. In our engagement with Anglo Irish Bank, there has been good co-operation from the board and staff which continues to be the case.

There is no particular evidence in quantitative terms, such as the number of auditor reports or public complaints made to us, that there has been marked deterioration in compliance with corporate law in the economic downturn. They may have been marginally up in 2008 but there has been no marked change.

There has been a large increase in the number of liquidator reports. However, this is simply a function of companies failing rather than any underlying deterioration. The liquidator reports we have examined show a similar pattern of decision-making and the directors in question do not need to explain their conduct before the High Court. There has been no real change in patterns of behaviour in that area to date.

As a result of the work of the Company Law Review Group, my office has and continues to input suggestions for changes in company law which are considered by the Department of Enterprise, Trade and Employment from time to time. We would like to see the introduction of heavier penalties and restriction-and-disqualification undertakings which would preclude the volume of restriction-and-disqualification proceedings in the High Court. This would allow cases where a director voluntarily agrees to restriction or disqualification to be dealt with outside of the courts. Such a procedure would reduce costs overall.

What we term "phoenix companies" is a particular area of focus in the office. Company law provides that the directors of insolvent companies that are struck off the companies register for failing to file annual returns are eligible to be disqualified. We engage to a great degree with the Revenue, in particular, which might, on occasion, be the victim of many of the companies in question. We find that many creditors are dealt with in a particular way. For example, a new phoenix company might involve a businessman reliant on suppliers with whom he had dealings in his previous venture. In such circumstances, a deal would be done quietly with those suppliers and Revenue would usually be left high and dry.

We have pursued approximately 30 to 40 disqualifications in respect of company directors in that area in recent years. In one notorious case, a particular director was disqualified for 12 years by the High Court for a range of assorted behaviours. That is the longest period of disqualification we have secured to date. It is an area of active interest for the office and will continue to be so.

Deputy Morgan inquired about management companies and the percentage of cases relating to them. Approximately one quarter or one third of all cases involving public complaints relate to such companies.

Deputy Arthur Morgan

Mr. Appleby stated that the board and staff of Anglo Irish Bank are co-operating with his office in respect of the investigation being carried out. What is the position with regard to former directors or the previous CEO of the bank? Are they co-operating with Mr. Appleby's office?

Mr. Paul Appleby

If the Deputy does not object, I must decline to answer that question because it indicates——

Deputy Arthur Morgan

Is Mr. Appleby in a position to indicate, in a general sense, that co-operation either has or has not been forthcoming from those to whom I refer?

Mr. Paul Appleby

To date, there has been co-operation from many of the parties we have approached for assistance.

Deputy Arthur Morgan

However, that is not the position with all parties.

Mr. Paul Appleby

It has been forthcoming from many or most of them.

Deputy Arthur Morgan

I am tempted to comment further but I will leave that to others.

Deputy Chris Andrews

I welcome our guests. I understand why Mr. Appleby declined to comment on the matter to which Deputy Morgan refers. He obviously does not wish to prejudice matters. I appreciate that all cases are different, particularly in the context of how they are investigated. However, I imagine there are certain legal aspects of the case relating to Anglo Irish Bank similar to those which arose in respect of other cases. What is the average timeframe with regard to bringing a case to a conclusion? What would Mr. Appleby say to members of the public who are not convinced that justice will be visited upon those who are under investigation? People are sceptical with regard to the envisaged timeline and they require further information in order that their concerns might be laid to rest. If Mr. Appleby could assuage their fears, it would be of assistance.

Mr. Paul Appleby

With regard to the Deputy's specific question, I am not sure——

Deputy Chris Andrews

Perhaps Mr. Appleby will indicate the position with regard to other cases with which his office has dealt.

Mr. Paul Appleby

——I am in a position to offer the type of encouragement to which he refers.

Deputy Chris Andrews

People are seeking information.

Mr. Paul Appleby

In one case, which is currently ongoing and which relates to the National Irish Bank in 1998, there was a High Court inspection which lasted six years.

Deputy Chris Andrews

That is not very encouraging.

Mr. Paul Appleby

There were several legal challenges, at least one of which went before the Supreme Court, in respect of that case. As a result, the inquiry was delayed. Having considered that report, we commenced legal action against nine persons within a year. That would have been 2005. All but two of those legal actions remain ongoing. Most of them are on the way to the Supreme Court. The waiting time in respect of obtaining an appeal in the Supreme Court is approximately 30 months or more at present.

Deputy Chris Andrews

How many months?

Mr. Paul Appleby

Between the High Court and the Supreme Court, there are seven actions still ongoing. In such circumstances, it will take years to pursue that case to its conclusion. However, that was an exceptional case.

The case relating to Anglo Irish Bank is similar to some extent, particularly in the sense that it is a financial institution and the fact that there is a great deal of work involved. I am satisfied that progress is being made. I hope I am not found wanting in this regard but I hope the relevant papers will be supplied to the DPP long before six years have elapsed. The information I have received from the Garda indicates that the investigation is progressing well and perhaps even more quickly than many similar investigations. Overall, I am happy that the investigation is proceeding in a satisfactory manner. There is no shortage of commitment on my part or on the part of my staff to get the job done as fast as possible.

Deputy Chris Andrews

Would Mr. Appleby consider putting to the Government proposals relating to additional powers for his office in respect of dealing with the case involving Anglo Irish Bank?

Mr. Paul Appleby

Last March, when we had executed the search warrant, it became clear that there were weaknesses in the legislation and we secured Government approval for some modification of the law. That modification was catered for in the Companies (Amendment) Act 2009. This was the key issue for us at that stage. Nothing has arisen since then which would justify or give cause for any further changes in legislation.

Deputy Chris Andrews

So Mr. Appleby's office has all the powers it requires at present.

Mr. Paul Appleby

Yes.

Deputy Deirdre Clune

My question with regard to phoenix companies is similar to that posed by Deputy Morgan and I believe Mr. Appleby has already answered it. The Committee of Public Accounts has been investigating this matter from the point of view of non-payment of fiduciary taxes and even redundancy payments due to the Department of Enterprise, Trade and Employment. Is it possible to take action in respect of this matter, particularly in light of concerns regarding company directors walking away from their obligations and establishing new interests? Does Mr. Appleby have any recommendations in that area? Small and medium enterprises are usually the ones with money left owing to them. What avenues are open to those individuals through the Office of the Director of Corporate Enforcement?

Mr. Paul Appleby

First of all, the right action in a sense rests with creditors themselves. If they are unhappy or believe they have been significantly prejudiced, they can appoint a liquidator to take control of the assets and liquidate them so that they get a return as a result. There is a problem with liquidations in the sense that liquidation is quite costly and the formal process is one about which we have some misgivings certainly regarding small and medium-sized enterprises. The office is beginning to contemplate some — I would not say fast-track liquidation — easier means of liquidation which we would like to propose to the Department of Enterprise, Trade and Employment for inclusion in perhaps the companies consolidation Bill.

Deputy Leo Varadkar

That would not be court sponsored. It would be different.

Mr. Paul Appleby

That would not be court sponsored. However, one of the real impediments at the moment is simply the high cost of liquidation not even regarding court liquidations but simply the accountant's or liquidator's fees. In the present environment essentially a director nearly needs to have several thousand euro up front to get a liquidator appointed because the liquidator is faced with the possible prospect of having to take High Court restriction proceedings against those directors. He wants to ensure that if he takes on a job like that, which potentially has enormous legal fees at the end of it, there is money up front available to him to deal with that. That certainly is a fundamental issue that needs to be addressed.

Ultimately, creditors can and do complain to us. However, we are not a debt collection agency and if the complaint relates solely to an outstanding debt, we will not get involved. If there is a specific company law offence indicated, we will certainly look at the complaint. As I indicated in response to Deputy Morgan, where after a period companies, especially insolvent companies, get struck off, there is the possibility of our taking disqualification proceedings. Somewhat surprisingly, in comparative terms we do not get very many complaints from creditors. Quite often we rely on Revenue to point up directors who may have been engaged in misconduct or sharp practice. We would welcome more engagement from creditors who have been disadvantaged so that they might draw our attention to other directors who may have breached their obligations. In the overall context the liquidation issue is a constraint, particularly for smaller businesses simply because of the costs involved.

Chairman

Has Mr. Appleby examined the procedures in other jurisdictions for dealing with phoenix-like companies where directors disappear off the face of the earth from company A today and then arrive in company B next week? That is the area that exercises most ordinary people when they see a company operating the following week, perhaps with different employees involved. Has Mr. Appleby made any recommendations to the Company Law Review Group as to how this might be tackled within the context of the upcoming consolidated legislation?

Would Mr. Appleby recommend that the procedures for winding up and liquidation, which are confined to the High Court, be delegated to the Circuit Court, similar to the way in which restoration of companies to the register of companies can now be done in the Circuit Court? At one time that was the sole purview of the High Court. To minimise costs, surely there is no reason some of those proceedings could not be brought down to the Circuit Court.

Everybody knows of the significant discussion about an investigation into the banks' policies in recent years relating to the wider sphere of financial advice and policy. Has the Government sought any advice or guidance from the Office of the Director of Corporate Enforcement about the areas of investigation that should not become part of such an inquiry because it might impinge on that office's inquiries? Has the Office of the Director of Corporate Enforcement on its own initiative proffered any such advice to the Government to exclude specific areas that might impinge on work the office is doing at this time? As Mr. Appleby said, it would be important that no prejudice or perception of prejudice would arise were an inquiry to take place in an Oireachtas committee that might impinge on the ability of the Office of the Director of Corporate Enforcement to carry out and finalise its work, which will obviously take a considerable period. I believe Mr. Appleby is right not to put any particular timescale on it as it would be putting him in a straitjacket and we could find ourselves back here in six months saying that he told us he would be ready in July. He has indicated that previous cases were more long-winded than that. Does Mr. Appleby have any areas of concern where an inquiry might impinge negatively on inquiries his office has undertaken? Would he be prepared to advise the Government to exclude that particular portion so that it does not restrict, impede or inhibit his office's ongoing inquiries?

Mr. Paul Appleby

Regarding phoenix companies, we were involved with a group of similar international regulators in a study of phoenix companies internationally a number of years ago. It was quite an interesting exercise in the sense that it emerged that every administration was essentially grappling with the same issues. In a general sense Irish legislation was found to have the tools to deal with the issues involved certainly when it came to options like disqualification, etc. We have not as such identified any new legislative provisions that tackled this phenomenon.

Business failure is a fact of life. In the vast majority of cases the directors involved behaved honestly and responsibly. Inquiries or investigations are not warranted in respect of every company that fails and it would be excessively burdensome to undertake that type of exercise. In an overall context we are certainly happy with the range of powers we have and in recent years we have secured some 40 disqualifications or thereabouts in this area. At every opportunity we warn and indicate the consequences in terms of potential enforcement action against them, for directors who fail to comply with their obligations.

I assure the Chairman I have indicated that the default position in respect of any legal actions under the Companies Acts is to the effect that such proceedings are dealt with in the High Court. I have indicated, too, that there is scope for having some of those proceedings dealt with the in the lower courts. Whatever, about disqualifications, there may be scope for such initiatives as regards restrictions which do not carry the same penal sanctions that apply to disqualifications. Certainly, that is something which can be looked at.

On engagement, the Attorney General is well aware of the potential risks and consequences that would arise for a banking inquiry. I have indicated in general terms to the Tánaiste our anxiety to safeguard the integrity of the investigations in any banking inquiry that might be set up. The Government and Members of the Oireachtas, generally, acknowledge that any such inquiry should not prejudice the ongoing Garda and ODCE investigations. Obviously, we very much appreciate the understanding being shown by the Government and the Oireachtas, generally, in that regard. The banking inquiry, overall, probably needs to gain an understanding of the wider domestic and international events which created easy credit, initially, precipitated the subsequent credit squeeze and the associated property market and banking developments. That appears to be the most important function of such an inquiry. It should be focused on the systemic causes of the current economic difficulties, rather than perhaps on personalities.

Chairman

I thank Mr. Appleby very much, along with Mr. Ward and Mr. O'Mahony, for assisting us in today's deliberations. Mr. Appleby and his staff have outlined the issues and assisted us in understanding the strategy of his office and the important work in which it is engaged. The office carries out its functions on behalf of the State to protect the economy and ensure the integrity of the economy. It acts as our watchdog on compliance with the requirements of the Companies Acts. If these Acts are not complied with it acts as a guard dog in seeking appropriate sanctions for any infringements. As Mr. Appleby indicated, any such guard dog must have sufficient "bite" to make any infringement of the regulations sufficiently unattractive, and be a positive deterrent to companies against engaging in sharp practices. The procedures in place to ensure that corporations, large and small, adhere to and accept the regulations are not meant to stifle the market, but to regulate it to the benefit of and for the protection of all.

On behalf of the committee I compliment Mr. Appleby and his staff in achieving this. At one time there was a big question mark as to whether the ODCE had adequate staff to carry out its various functions. With up to one third of its staff now engaged on one aspect of its mandate, does Mr. Appleby still believe he has adequate staff numbers to continue with the rest of the work the office has to deal with?

Mr. Paul Appleby

At the moment the office has sufficient staff. Since 2006 our staffing numbers have increased by about one third and the budget has gone up, accordingly. At a time when the Department of Enterprise, Trade and Employment forecasts a decline of some 15% in its staff, we have been treated quite generously by the Department as regards assisting us in our work. I hope this focus and understanding by the Department will remain for as long as our primary investigations continue.

Chairman

Thank you, Mr. Appleby.

The joint committee adjourned at 3.50 p.m. until 2 p.m. on Tuesday, 2 February 2010.