Companies (Corporate Enforcement Authority) Bill 2021: Second Stage

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Enterprise, Trade and Employment (Deputy Robert Troy)

As Minister for State with responsibility for trade promotion, digital and company regulation, I am pleased to introduce the Companies (Corporate Enforcement Authority) Bill 2021 for the consideration of the Seanad.

A long version of my speech has been circulated which includes details of the provisions in the Bill. I have also made a briefing available to Senators. The primary objective of the Bill is to establish a new corporate enforcement authority, CEA. It is a landmark step to strengthen and transform the Office of the Director of Corporate Enforcement, ODCE, into a statutory and stand-alone agency with additional resources to investigate and prosecute white-collar crime.

A significant amount of work has been done in the last year to develop the legislation before the House. Along with the Tánaiste I engaged in detailed discussions on the general scheme of the Bill with members of the Oireachtas Joint Committee on Enterprise, Trade and Employment as part of the pre-legislative scrutiny in January this year. I am pleased to say that the Bill was welcomed by Deputies in the Dáil and we had a good debate on the policies and principles contained in the legislation. There is strong support for the establishment of the corporate enforcement authority as an independent, well-resourced agency that works to deliver on company law compliance.

By way of background, the legislation at hand reflects the detailed discussions and in-depth policy analysis of the best framework for combatting white-collar crime and tackling breaches of company law. The legislation is a key element of the suite of measures, the white-collar crime package, published by Government in 2017. The package was aimed at enhancing Ireland's ability to combat corporate, economic and regulatory crime. Corruption and white-collar crime damage our economy, breed cynicism in our society and are a threat to our international reputation. It is essential that the State and its agencies have all the powers possible to clamp down and prevent white-collar crime. Ireland has a hard-won reputation as a destination for foreign direct investment and as an international business hub. Stepping up our efforts to tackle white-collar crime will show we are serious about maintaining and building upon that reputation.

This reputation is about setting strong foundations for the new corporate enforcement authority. In that context, I want to focus on three areas. First, an important element of a new authority is its commission structure with up to three full-time members. This is designed to future-proof the new organisation and to ensure it is agile and can respond to changing circumstances. For example, if there are significant increased demands on the authority, it will be possible for it to be scaled up further or organised along specific lines of responsibility. In addition, the new authority will have the ability to appoint its own staff. It will be able to determine for itself the skills and the staff it will need to conduct its work, subject to overall budgetary sanction and approval.

Second, as noted both by the Joint Committee on Enterprise, Trade and Employment during its pre-legislative scrutiny and by Deputies more recently during the Dáil debates, resources are key to the success of this new authority. My Department and the Government fully considered the joint committee's strong views on this matter and the Government decision establishing the CEA referenced the actions needed to ensure the resourcing needs of the authority. The resources now being applied to the authority are in line with the director's own assessment of its requirement, based on its functions and the number and complexity of the cases that it will handle. I understand that the Garda Commissioner, who is independent in the exercise of his functions, has also written to the director committing increased levels of members of An Garda Síochána for the new authority.

In preparation for the establishment of the corporate enforcement authority, the budget of the ODCE has been increased by approximately €1 million on previous levels and approval granted 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 members of An Garda Síochána assigned to the corporate enforcement authority will increase from seven to 16. Taking the Civil Service and Garda increases together, the corporate enforcement authority will have a staffing level that has increased by nearly 50% overall.

Third, this legislation is also a key element of the implementation plan of the review of anti-corruption and anti-fraud structures in criminal justice enforcement, carried out under the chairmanship of Mr. James Hamilton. The Government approved and published its recommendations in December 2020. Since then, the Minister for Justice has developed and led an implementation plan to carry forward these recommendations.

My Department and the ODCE are centrally involved in this process. I support the cross-government nature of the plan. Corporate end economic crime will only be tackled by a whole-of-government, joined-up approach. I welcome that the criminal justice powers will be developed and implemented on a cross-cutting basis to enable all 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 as they are developed.

I will now turn to 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 light of changing circumstances such as court judgments or where a problem is identified by companies, practitioners or those implementing its provisions.

The Bill also proposes other changes to company law. These include, in particular, transparency measures relating to the register of companies and the use of personal public service numbers, PPSNs, for directors, implementation of a Company Law Review Group recommendation on shares and share capital, 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.

The establishment of the new corporate enforcement authority was a commitment in the programme for Government, one designed to combat breaches of company law that are so damaging to the economy and breed cynicism in society in respect of insufficient attention being given to company misbehaviour and which undermine our international reputation. The Bill, when enacted, will be a milestone in the area of corporate enforcement. The new corporate enforcement authority will have more autonomy and resources to investigate suspected wrongdoing and to deal with larger and more complex investigations. My Department is working hard on the practical matters to support this legislation, such as recruitment and accommodation for the new authority. This new authority was promised more than four years ago. As Minister of State with responsibility for company regulation, I want to deliver on this promise, but I can only do so with the support of Senators. I hope to conclude the remaining Stages in the Seanad next week with their assistance. I look forward to hearing the views of Members.

Senator Malcolm Byrne

I thank the Minister of State for coming to the House on the Bill. I thank his officials who have worked on this matter, as well as the members of the joint committee. I know the Minister of State has engaged with my colleague, Senator Crowe, on this issue. As the Minister of State pointed out, the Bill is an important commitment as part of the programme for Government. It is sending out a clear message that we take white collar crime very seriously. There is sometimes a perception that white collar crime is not investigated or pursued to the same extent as other crimes, but white collar crime does have real-world consequences and the Government is serious about addressing it.

With advances in technology, we are seeing new forms of economic crime. It is increasingly sophisticated, so it will be important for this new agency to work hand in glove with the National Cyber Security Centre to address white-collar crime that uses new technology.

An important issue to which the Minister of State referred is that there is no point setting up an agency unless it is properly resourced, not just in terms of staffing numbers but with the level and range of qualifications necessary for it to be established. He will be aware that there have been criticisms of the ODCE. Some of these concerns have merit, such as those relating to staffing levels and the budget that has been provided to date. We are setting up a new agency with clear and strong powers, but my concern is that if it does not have the necessary resources, there will be difficulties. I refer to the example of the Data Protection Commission, DPC. As the Minister of State is aware, several questions are being raised in that regard and much of that is down to the adequacy of the resourcing of the DPC even though that office has many powers.

There are questions relating to the membership of the authority. I am conscious this issue was raised at the joint committee, but also in a submission by Professor Deirdre Ahern of Trinity College Dublin. The committee and Professor Ahern recommended that the minimum number of members of the authority should be increased to two and the maximum number to five. This would represent good practice. I again refer to the DPC. It has only one commissioner, whereas many of its counterparts have three. That would certainly make a lot of sense.

I have noticed a trend in much legislation whereby Members of these Houses are rightly excluded from consideration for appointment as members of the authority, but members of a local authority are also excluded. I have to question why that is necessarily the case. I do not believe that a councillor should be able to tell the Minister that he or she should be appointed, but a person who has the necessary skill set, such as a forensic account, should not be excluded just because he or she happens to be a member of a local authority. This issue does not just relate to this legislation; it is a wider issue in respect of why members of local authorities continue to be excluded from serving on a range of State boards. I am certainly not suggesting that a person be appointed simply because he or she is a councillor, but if the person meets all the other necessary criteria in order to be able to serve, he or she should not be excluded on that ground.

It certainly makes sense to consider increasing the number of members of the authority in order to future proof it, share the load and get the combined wisdom of several members. It also makes sense to consider the resourcing question. Those are key areas. Other than that, this is a good piece of work. It is putting real teeth into this new agency. Its independence is protected, which is a good thing, and it is delivering on a commitment in the programme for Government. I strongly support the legislation.

Senator Garret Ahearn

I welcome the Minister of State to the Chamber. The Bill is part of a package of measures designed to ensure that Ireland's reputation as a top-tier country in terms of its business environment is underpinned by a robust company law enforcement framework. The policy approach underpinning the Bill is that enforcement bodies, in order to be effective, must be statutorily independent, appropriately resourced, accountable and with a well-defined mandate.

I refer to increased funding. In our pre-legislative scrutiny report, the joint committee of which I am a member recommended that the level of resourcing be kept under constant review, with the possibility to increase staffing and other resources when required. An exercise to estimate the budgetary requirements for the establishment of the corporate enforcement authority commenced in 2018 and at that point the annual budget of the ODCE was €5 million. Following an assessment of the CEA resourcing needs upon its establishment, the 2018 baseline was increased by €1 million in 2019 to a budget of slightly more than €6 million. This increased level has been revisited subsequently in anticipation of the establishment of the new authority. As the Minister of State noted, that represents a 20% increase in the level of funding to the ODCE.

It is important to note on the record certain other important provisions in the Bill relating to new grounds for the restriction of company directors. The Bill contains a new ground under section 819 whereby in the case of certain directorial failures, the Director of Corporate Enforcement, the liquidator or the receiver will be able to apply to the court for an order of restriction of a director. These failures include: failure to convene a general meeting of shareholders for the purpose of nominating a named liquidator; failure to table a motion at such a meeting to nominate a named liquidator; and failure to provide the required notice to employees in winding up. The first two of those grounds arise from the CLRG report on the protection of employees.

The Minister of State touched on the issue of transparency in his contribution. The register of companies is a specified body under Schedule 5 to the Social Welfare Consolidation Act 2005. It is a body that may use personal public service numbers. The measure in the Bill will oblige directors of companies to supply their PPSN to the register in certain situations, such as when incorporating a company for the first time, submitting an annual return or notifying the register of a change in director or secretary.

This is proposed to support the accuracy of the register and to deal with the possibility of duplication. This type of procedure is currently implemented under the registry of beneficial ownership. This is a commitment that has been made for the past number of years, by the Minister of State, in particular, since he took up his role in the Department.

There has always been a perception that white-collar crime has not been dealt with as well as it should have been. A famous case involving someone collapsed a number of years ago. On the back of that, certainly from a public perspective, there was a lack of trust in people of a certain type being held to account. The main thrust of this Bill, in addition to putting it into law and having a measure that will tackle this issue, is to increase public trust. I noted that at the end of his contribution the Minister of State said that this will be a milestone. It will be a milestone, in that it is something that has been promised for a number of years.

As Senator Malcolm Byrne said, one of the concerns we hear a lot about is resourcing, in addition to the need for extra resources. The Minister of State said in his contribution that staff will be increased by 50%, which is significant and needs to be acknowledged. That type of resourcing needs to be continually reviewed as we go forward.

I am happy to welcome the debate and to support the Bill with my Fine Gael colleagues.

Senator Paul Gavan

It is nice to see the Minister of State. He is very welcome. On behalf of my party, I welcome this significant legislation. The establishment of a corporate enforcement authority as a stand-alone entity replacing the Office of the Director of Corporate Enforcement is an extremely welcome step. We are on record as having welcomed this on more than one occasion. The ODCE has worked hard within the remit it has been given in recent times but, unfortunately, in the course of its work it has often suffered from a lack of funding and resources on the one hand and a lack of adequate powers on the other. It is ultimately these shortcomings that precipitated the proposal for the establishment of a stand-alone corporate enforcement authority as far back as 2017. This move was proposed by the then Government in November of that year as part of a series of measures intended to address white-collar crime.

The establishment of this new agency is, in part, a response to severe criticism by Judge John Aylmer of the conduct of the ODCE in the prosecution of the former chairman of Anglo Irish Bank. If this new agency is to be able to investigate and respond to complex breaches of company law then, unlike the ODCE, it must have the necessary funding, resources, powers and suitably qualified experts in accountancy, information technology and corporate enforcement in order to do that job effectively. The need for such resources and funding came to the fore when pre-legislative scrutiny of the Bill was conducted earlier this year by the Joint Committee on Enterprise, Trade and Employment. I was a member of that committee and I pay tribute to my colleague, Deputy Quinlivan, who has been chasing this issue for a number of years, in fairness.

There is a perception among the public, which is fairly well founded, that corruption and so-called white-collar crime are not adequately detected and punished. The lack of legislation to tackle corporate and economic crime, and the underfunding and under-resourcing of the agencies investigating white-collar crime, has been de facto Government policy for decades. More than a decade and three successive Governments later, the lack of appetite to legislate for, regulate and properly tackle corporate and economic crime is genuinely shocking. The historical underfunding of the ODCE is a political decision. The office gets its funding directly from the Government. If that funding is insufficient, that represents a political failure.

In 2007, the accounting firm RSM Robson Rhodes estimated that Ireland was losing €2.5 billion a year from economic crime. I like the phrase my colleague, Deputy O'Reilly, used in the Dáil, "Economic cheats cheat us all". If that figure is applied to the past 14 years, that is a potential loss of €35 billion to the Irish economy. The economic and social cost of corruption and white-collar crime far outweigh other forms of crime, yet they have consistently received far less funding resources and political attention from successive Governments. It is time the State takes this crime seriously. As the ODCE transitions to a stand-alone corporate enforcement authority, it is imperative not only that it is given additional funding and resources but additional powers to help keep pace with technological advancements, such as seizing data and information that is stored in the cloud.

I will raise a couple of concerns but, to be clear, we support this Bill. I have a concern in respect of sections 944AE(3)(b) and 944AE(3)(c). Why should a director who is sanctioned by the authorities be able to escape having his or her sanction publicised if such a publication "would jeopardise the stability of financial markets"? Furthermore, section 944AE(3)(c) states that a director who is sanctioned shall not have his or her name published if it "would cause disproportionate damage to the relevant director." These sections seem to offer an almost unlimited get-out for relevant directors who commit offences. I do not think that is the intention, but having this get-out-of-jail card is not a good idea. There is no reason these provisions should be included to allow directors to get away from having their names made public. There is no mechanism for a young working-class man or woman to escape his or her name being splashed in the local newspaper, if a court finds that person guilty of being in possession of a joint, or some other crime. It seems to be a case of the Government looking after its own. I hope the Minister of State will address that particular concern.

I echo what Senator Malcolm Byrne mentioned about Professor Deirdre Ahern's recommendation on the number of members of the new authority. The joint committee recommended between two and five members. I would like to hear the Minister of State's response on that matter.

One of the recommendations the committee made that merits further consideration is the suggestion that non-Garda staff who have expert skills be allowed to attend interviews. This would, in certain circumstances, allow additional knowledge and skills to be available during an interview. I appreciate this would require an alteration to custody regulations. I suggest a feasibility study of such an adjustment be conducted as soon as possible.

We very much welcome this Bill. We recognise the good work that has been carried out and that there is a good start in terms of additional resources but, as others have said, we need to keep this under constant review.

Acting Chairperson (Senator Aisling Dolan)

I very much welcome the start of this new agency, along with the speakers here. It is fantastic to see the transparency that it will bring. It is a very welcome development under the Minister of State's Department.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy Robert Troy)

I thank the Senators who made a contribution to the debate this evening. The recurring theme in the contributions of the three Senators who spoke concerned the area of resources. There is a commitment that this body will be adequately resourced. Senator Gavan said there was political failure by successive Governments. I can only speak about the Government of which I am a member and, in the slightly more than 12 months that I have been in office, we have brought this legislation through the various Stages. This Bill has gone through pre-legislative scrutiny, it has been brought through the Dáil and it is now in the Seanad. We have secured a 20% increase in the budget, a 35% increase in the staffing count and we have engaged with the current director, who has put forward what the needs are to deal comprehensively with the workload this new body will have.

We have repeatedly said that we will keep resources under review to ensure that they keep pace with any potential increased workload. I can only answer for what this Government has done. We have lived up to our promise and commitment in the programme for Government in respect of resources and implementation. Hopefully, with the support of Senators next week, we will see the full enactment of this legislation, which will ensure this corporate enforcement authority will be established in January next year. The fact that we are establishing this as an independent body and giving it autonomy means it will be able to hire the expert staff it deems it needs to run this office well. It has already commenced the recruitment of the necessary staff.

A number of people have said that there is a perception that white-collar crime is not taken as seriously as other crime. I have been very strong in my view on this. White-collar crime is just as serious, if not more serious, than other crime. There can be no getting away from that. Unfortunately, white-collar crime has the potential to affect a much wider range of society in terms of the financial irregularities we have experienced in the past. From my perspective, it does not matter whether someone is wearing a tracksuit or a suit, if that person has committed a crime, that individual should feel the full rigours of enforcement. This new body will ensure that that happens.

Senator Malcolm Byrne mentioned the membership of the body and what was proposed in that regard. The Tánaiste sought the views of the director on the matter. The assessment, having regard to the authority's proposed scale and initial workload, was that there is no current need for the appointment of additional members to the authority. To appoint up to two additional members at this point would mean it would be a very top-heavy organisation, with a ratio of staff to members of approximately 1:20. We are satisfied that the authority at present has the requisite number of people in place and that the existing ratio of members to staff is proportionate. The legislation provides for the capacity to increase the membership of the commission to three. We will keep that under review and examine it at a later stage.

Senator Malcolm Byrne also raised the exclusion of members of local authorities. This is a standard practice. The appointment as a member is full time and not to a post on a board that will have 12 meetings a year. This is a full-time position. Members of the authority are employees, and they will go through a transparent public appointments process. That should alleviate the Senator's fears in that regard.

Regarding Senator Gavan's point, and I am rarely political about an issue, he said that the perception is that we are trying to withhold the name to protect our friends. That could not be further from the truth. The bottom line is that I addressed this matter on three separate occasions with Deputy O'Reilly. We addressed it during pre-legislative scrutiny, on Second Stage in the Dáil and on Committee Stage in the Dáil, and we backed up the reason and the rationale regarding why we could not accept amendments. It seems to suit a narrative that Sinn Féin wishes to portray me or my party as wanting to protect those involved in white-collar crime. That is not true. If it was true, we would not be prioritising this legislation or bringing it through the House this evening. I refute that allegation.

In saying that, I thank the three Senators who turned up this evening and contributed to the debate. With the support of Members, I look forward to ensuring this important legislation can go through its final Stages next week and that, after a long time promising, we can have an independent corporate enforcement body established that will be well resourced and that can tackle white-collar crime without fear and with conviction.

Seanad Éireann díospóireacht - Thursday, 9 Dec 2021

Companies (Corporate Enforcement Authority) Bill 2021: Second Stage

Seanad Éireann díospóireacht -
Thursday, 9 Dec 2021