Companies Report Department of Enterprise,Trade and Employment

Transcription

1 COMPANIES REPORT 2001

2 Companies Report 2001 Department of Enterprise,Trade and Employment Presented to the Oireachtas in accordance with the provisions of the Companies Acts 1963 to 2001

3 Government of Ireland 2002 ISBN BAILE ÁTHA CLIATH ARNA FHOILSIÚ AG OIFIG AN t-soláthair Le ceannach díreach ón OIFIG DHÍOLTASFOILSEACHÁN RIALTAIS TEACH SUN ALLIANCE, SRÁID TEACH LAIGHEAN, BAILE ÁTHA CLIATH 2, nó tríd an bpost ó FOILSEACHÁIN-RIALTAIS, AN RANNÓG POST-TRÁCHTA, 51 FAICHE STIABHNA, BAILE ÁTHA CLIATH 2. (Teil: ; Fax: nó trí aon díoltóir leabhar. DUBLIN PUBLISHED BY THE STATIONERY OFFICE To be purchased directly from the GOVERNMENT PUBLICATIONS SALE OFFICE SUN ALLIANCE HOUSE, MOLESWORTH STREET, DUBLIN 2, or by mail order from GOVERNMENT PUBLICATIONS, POSTAL TRADE SECTION, 51 ST. STEPHEN S GREEN, DUBLIN 2, (Tel: ; Fax: or through any bookseller. Price: 12 PN 11966

4 Department of Enterprise,Trade and Employment Foreword Section 392 of the Companies Act 1963 requires the presentation to the Oireachtas of an annual report on matters relating to the Companies Acts. This is the fifth such Report that I have the pleasure in presenting to the Oireachtas and the 76th in the series was a particularly significant year for developments in company law in that it saw a number of initiatives to improve the operation and Minister Noel Treacy,T.D. enforcement of company law. Company Law Enforcement Act 2001 Following enactment during the year of the Company Law Enforcement Act 2001, the year saw the establishment of the Office of the Director of Corporate Enforcement (ODCE) on the 28th November 2001 with Mr. Paul Appleby appointed as Director. The Company Law Enforcement Act 2001 represents a landmark in the Government's drive to combat corporate crime and malpractice.the Act's provisions are intended to help restore public confidence in the manner in which business is conducted in Ireland. The Office of the Director of Corporate Enforcement is being resourced with legal, accountancy, investigative and administrative expertise to investigate and prosecute offences under the Companies Acts.The establishment of the Office of the Director of Corporate Enforcement with the necessary powers and resources should ensure that company law is properly enforced on an ongoing basis. I would like to take the opportunity to wish Mr. Appleby and his staff every success. Company Law Review Group The Company Law Review Group was established on a statutory basis on 1 October 2001.The purpose of the Review Group is to ensure that Ireland's company law code is appropriate, relevant and as simplified as possible and to make recommendations to the Minister for Enterprise,Trade and Employment on changes that should be made to achieve this. 1

5 Irish Auditing and Accounting Supervisory Authority (IAASA) The regulation of the accounting profession is currently undergoing reform following from the Review Group on Auditing. Legislation to establish a new body to supervise the regulation by the accountancy profession of its members is currently being drafted.the Interim Irish Auditing and Accounting Supervisory Authority (IASSA) Board was established on 26 April, European Company Statute On 8th October 2001, the Regulation to establish a European Company Statute was, after some 30 years in the making, finally adopted by the EU Council of Ministers. Companies which establish themselves as European Companies can establish a legal basis in one Member State and transact business throughout the Union without having to establish a separate legal base in each Member State in which it wishes to operate. Gratitude I wish to express my deepest appreciation to all of the relevant staff for their commitment and professionalism, displayed in the discharge of their many duties over the past five years. Noel Treacy Minister for Science,Technology and Commerce May

6 Contents CHAPTER ONE Legislative and Related Developments COMPANY LAW ENFORCEMENT ACT REPORT OF THE REVIEW GROUP ON AUDITING EU DEVELOPMENTS IN RELATION TO COMPANY LAW CHAPTER TWO Company Law Review Group SIMPLIFICATION OF COMPANY LAW CONSOLIDATION SECOND WORK PROGRAMME WEBSITE CHAPTER THREE Companies Registration Office INTRODUCTION CROLINK ROLE OF THE OFFICE INPUT OUTPUT QUALITY ACCOUNTS CHAPTER FOUR Office of the Director of Corporate Enforcement ESTABLISHMENT OF THE ODCE PROMOTION OF THE ODCE RESOURCES STRUCTURE OF THE OFFICE SERVICES COMPANY LAW COMPLIANCE COMPLAINT EVALUATION COMPANY INVESTIGATIONS COMPANY LAW PROSECUTIONS INSOLVENT COMPANIES CHAPTER FIVE Company Investigations SECTION 19 INVESTIGATIONS SECTION 8 INVESTIGATIONS CHAPTER SIX Enforcement of the Companies Acts PROSECUTIONS UNDER THE COMPANIES ACTS ENFORCEMENT ACTIVITIES CARRIED OUT BY THE CRO RESTRICTION OF DIRECTORS UNDER SECTION 150 OF THE COMPANIES ACT DISQUALIFICATION FROM ACTING AS A DIRECTOR UNDER SECTION 160 OF THE COMPANIES ACT LIQUIDATORS, RECEIVERS, EXAMINERS DISQUALIFIED UNDER SECTION 160 OF THE COMPANIES ACT KEEPING PROPER BOOKS OF ACCOUNT CHAPTER SEVEN Statutory Functions of the Minister for Enterprise,Trade and Employment REGULATION OF AUDITORS SECRETARIES OF PUBLIC LIMITED COMPANIES COMPANIES EXEMPTED FROM SHOWING PARTICULARS OF DIRECTORS ON HEADED PAPER FINANCIAL YEAR OF HOLDING COMPANY AND SUBSIDIARY

7 PROSPECTUSES FOR BUSINESS EXPANSION SCHEMES (BES) COMPANIES LICENSED TO OMIT "LIMITED" FROM THEIR NAMES CHANGE OF COMPANY NAME CHAPTER EIGHT - Irish Stock Exchange ANNUAL REPORT TO THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT PURSUANT TO PART V OF THE COMPANIES ACT ANNUAL REPORT TO THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT PURSUANT TO SECTION 11 OF THE EUROPEAN COMMUNITIES (STOCK EXCHANGE) REGULATIONS OTHER RELEVANT MATTERS RELATING TO THE IRISH STOCK EXCHANGE CHAPTER NINE Irish Takeover Panel REGULATORY OPERATIONS RELEVANT COMPANIES THE RULES ENFORCEMENT OF THE RULES CHAPTER TEN - The CREST System CRESTCO LTD. - OWNERSHIP AND GOVERNANCE IRISH PARTICIPATION IN CREST CREST RULES - SETTLEMENT DISCIPLINE RULES APPENDICES Appendix 1 - Distinguishing Features of Companies and other Related Bodies.. 80 Appendix 2 - Personnel Dealing with Company Law matters in the Department of Enterprise,Trade and Employment Appendix 3 - List of Companies and Business Names Acts, Orders and Regulations Appendix 4 - Company Law and Business Names Legislation enacted in Appendix 5 - Regulations made pursuant to the European Communities Acts, 1972 and Appendix 6 - Other Legislation Affecting the Operation of Companies Appendix 7 - Membership of the Company Law Review Group Appendix 8 - CROLink Membership as at 31 December, Appendix 9 - Fees and Capital Duty Paid to the CRO Appendix 10 - CRO Personnel and Organisation Structure Appendix 11 - CRO Voted Expenditure and 2001 Outturn Appendix 12 - Detailed Statistics relating to the work of the CRO Appendix 13 Investigations under the Companies Acts Appendix 14 - Persons Restricted Appendix 15 - Failure to keep Proper Books of Account Appendix 16 - Companies Licensed in 2001 to Omit "LIMITED" from their Names Appendix 17 - Membership of the Irish Takeover Panel Appendix 18 - Companies subject to Irish Takeover Panel Supervision as at 30 June Appendix 19 - Irish Participation in CREST

8 LEGISLATIVE AND RELATED DEVELOPMENTS 1

9 Chapter One Legislative and Related Developments Company Law Enforcement Act 2001 The Company Law Enforcement Act 2001 (No. 28 of 2001) was signed into law by the President on 9 July, 2001.The primary purpose of the Act is to ensure greater compliance with the requirements of the Companies Acts. The Company Law Enforcement Act 2001 includes a number of substantive provisions aimed at combating the culture of non-compliance. Most importantly, on 28 November, 2001 it established an independent statutory officer, the Director of Corporate Enforcement, with responsibility for the enforcement of company law in Ireland. Mr. Paul Appleby, who was appointed Director, has extensive experience of the company law area and has been closely involved in company investigations undertaken under Part II of the Companies Act The Office of the Director is being resourced with legal, accountancy, investigative and administrative expertise to investigate and prosecute offences under the Companies Acts. The establishment of the Office of the Director of Corporate Enforcement with the necessary powers and resources is seen as the best way to ensure the enforcement of company law on a consistent and independent basis. A separate Chapter is included in this Report on the work of the Office of the Director of Corporate Enforcement in The Company Law Enforcement Act 2001 also contains provisions to improve the enforcement and compliance in respect of companies' filing obligations under the Companies Acts. The Company Law Enforcement Act established, on a statutory basis, the Company Law Review Group on 1 October It is vital to ensure that Ireland, in its continuing efforts to develop a strong economy, has a first class system of company law, which places Ireland to the forefront as a location of international commerce.the establishment of a statutory Company Law Review Group is seen as critical to achieving this objective.the Company Law Review Group will play a vital role in ensuring that a regular legislative programme of company law is developed over time.a separate Chapter is included in this Report on the work of the Company Law Review Group in Report of the Review Group on Auditing In December 2000 the Government endorsed the Report of the Review Group on Auditing and approved the implementation of its recommendations.this involves a fundamental reform of the regulation of and the rules governing the audit and accounting profession. During 2001 this involved drafting new company law provisions in the 6

10 accounting and corporate governance areas and establishing the Irish Auditing and Accounting Supervisory Authority (IAASA), initially on an interim basis. Irish Auditing and Accounting Supervisory Authority (IAASA) In April, 2001 the Tánaiste appointed the 12 member interim Board of IAASA pending the drafting of the necessary legislation to establish IAASA on a permanent statutory basis. IAASA is being set up to supervise the regulation by the accountancy bodies of their members professional standards. The membership of the interim Board represents a broad spectrum of those concerned with financial reporting including users of financial statements, regulators, the social partners and members of the accountancy profession. It is chaired by Mrs Karen Erwin of the Irish Times.The interim Board held its first meeting in May, During 2001 the interim Board provided advice to the Department during the drafting of legislation to give effect to recommendations in the Report of the Review Group on Auditing. Company Law (Audit and Accountancy)(Amendment) Bill The draft scheme of the Company Law (Audit and Accountancy)(Amendment) Bill, was approved by Government in December 2001 and forwarded to the Parliamentary Counsel for drafting.this draft Bill provides for: the establishment of IAASA to supervise the regulation by the professional accountancy bodies of their members and to enforce accounting standards; the funding of IAASA being provided jointly by the Exchequer (40%) and the accountancy profession (60%); the transfer of the powers of the Minister for Enterprise,Trade and Employment in relation to the regulation of auditors under the Companies Acts to IAASA; enhanced regulation of auditors and accountants including new rules governing auditor independence; provisions relating to the EU Insolvency Regulation. The draft scheme of the Bill is available on the Department s website ( 7

11 EU developments in relation to Company Law In 2001 the EU stepped up its activities in relation to company law with the publication and adoption of a new range of legislative proposals in the company law area. Many of these proposals are part of the EU Financial Services Action Plan (FSAP). On 8 October 2001 the EU Council of Ministers adopted a Regulation to establish a European Company Statute (ECS) and a related Directive concerning worker involvement in European Companies.The primary objective of the ECS, which will now become a reality some 30 years after it was first proposed, is to make it easier for business to operate on a pan-european basis. Member States are given until October 2004 to bring the legislation into effect. Arrangements are currently being made to have the Statute transposed into Irish law. The Commission published proposals for a Directive on Prospectuses and a Directive on Insider Dealing and Market Manipulation (Market Abuse) in May 2001.These two proposals represent the start of a whole new approach to EU legislation in the securities area.this approach is based on the recommendations of the Lamfalussy report which were endorsed by the Stockholm European Council. The draft Prospectus Directive published by the Commission seeks to ensure that adequate and equivalent disclosure standards are in place in all Member States when securities are made available for all European investors either through a public offer procedure or admission to trading.a feature of the proposal is the introduction of a new concept: the "single passport" for issuers, i.e. the prospectus approved in one member state will have to be accepted without further conditions or procedures throughout the EU. Ireland is broadly supportive of the aims of the proposal but has specific concerns which we are seeking to have addressed in the ongoing negotiations at Council. Proposals tabled to date on key topics represent a very significant step forward in terms of addressing Irish concerns in these areas but consensus is slow to emerge. Barely six months from date of its publication by the Commission, the EU Council of Finance Ministers (Ecofin) unanimously reached an "orientation agreement" on 14 December, 2001 on the Market Abuse Directive. The impetus for the accelerated progress of this proposal stemmed from September 11th it was seen as an important component of the measures needed to combat the financial activities of terrorist organisations.the Directive is based on the principles of transparency and equal treatment of market participants. It aims to reinforce protection against insider dealing and market manipulation by building one set of rules for all financial markets in the EU. It should heighten investor protection and make European financial markets more attractive to investors.the Council intends to formally adopt this Directive once it has considered the views of the European Parliament. 8

12 Following the European Parliament s rejection of the proposals for a Takeovers Directive in July 2001 the Commission set up a Company Law Experts Group to advise, initially, on three specific issues which had emerged as problem areas in the discussions between Council and Parliament.The primary purpose of EU action in this area is to set down certain general principles and minimum requirements which would govern takeover procedures in the EU with a view to giving adequate protection to minority shareholders across the EU in takeover situations and facilitating corporate restructuring. The Company Law Experts Group delivered its report to the Commission in January 2002, and following consultation with Member States arrangements are now being made to draw up a revised proposal. Simpler Legislation in the Internal Market (SLIM) The SLIM process was launched in 1996 and has facilitated the review of 14 different legislative areas (including company law). Legislation is examined by teams of experts drawn from Member States and users of the legislation such as producers, organisations representing professions, trades unions, and consumer groups. SLIM teams examine Community legislation - directives/regulations - with a view to identifying ways of how best to simplify current rules and procedures thus reducing burdens on businesses and improving the quality of the texts.team recommendations often form the basis for new Commission proposals. The SLIM Company Law proposals relate to the 1st and 2nd Company Law Directives, which provide respectively for disclosure and filing in company registration offices of certain company data and capital maintenance requirements in PLC s. At EU Company Law Working Group level, broad agreement has been reached on the Commission proposals for amendment of the 1st Company Law Directive.The main effect of these amendments will be to provide for the electronic delivery of the requirements of the Directive, though not exclusively. The SLIM proposals on the 2nd Directive are much more complex and these have been referred to the Company Law Expert Group for further consideration/assessment. EU Audit and Accountancy Related Issues The Commission published a proposal for a Regulation on the Adoption of International Accounting Standards in February 2001 and the EU Council of Finance Ministers (Ecofin) reached agreement on the general orientation on the Regulation on the 14 December It should be formally adopted in the first six months of 2002 once the Parliament has given its opinion on the proposal. 9

13 This Regulation will require all companies listed on regulated EU markets to prepare their consolidated accounts on the basis of International Accounting Standards (IASs) rather than national standards from Member States will have the option to extend this requirement to other categories of companies. During 2001 the Commission also commenced discussions with Member States in relation to the Modernisation of the 4th and 7th Accounting Directives to remove any conflicts between the Directives and IASs. It is envisaged that the Commission will publish its proposal during the first six months of The Fair Value Accounting Directive, amending the 4 and 7th Company Directives and the Banking Directives to permit the valuation of certain items in annual accounts at fair value (rather than on a historical cost basis) was adopted by the Internal Market Council on the 31st May.This Directive has to be transposed into national law by January Considerable progress was also made in the EU Committee on Auditing on the text of a Recommendation on Auditor Independence. The Recommendation is expected to be in line with the recommendations of the Report of the Review Group on Auditing in relation to auditor independence. Collective Investment Schemes In December 2001 the EU Council of Finance Ministers (Ecofin) adopted two Directives amending UCITS Directive 85/611/EEC. The first Directive widens the range of financial instruments in which UCITS can invest, while continuing to set risk spreading rules in the interests of investor protection.the second Directive provides management companies with a "European passport" to operate throughout the EU and widens the activities they may engage in as non-core services. It also introduces the concept of a simplified prospectus, which will provide more accessible, comprehensive information to strengthen investor protection. 10

14 COMPANY LAW REVIEW GROUP 2

15 Chapter Two Company Law Review Group From Left: Mr.Thomas B. Courtney, Chairman, An Tánaiste, Mary Harney, Mr. Pat Nolan, Secretary. One of the aims of the Department of Enterprise,Trade and Employment is to bring the companies code in Ireland up to a world-class standard.the overhaul, streamlining and simplification of the companies code are essential to ensure that there is both efficiency and effectiveness in the content and application of the company s code. Such development is essential for Ireland to sustain a competitive position vis-à-vis other economies. The main engine for delivering such change is the Company Law Review Group, which was established on a statutory basis in 2001 under the Company Law Enforcement Act Part 7 of the Company Law Enforcement Act 2001 sets out the role and the advisory responsibilities of the Review Group and the basis on which its members are appointed. The membership of the Review Group brings together the expertise of company law practitioners, Government departments and agencies, recognised professional bodies, regulatory bodies and the social partners. It is chaired by Thomas B Courtney, solicitor. Pat Nolan, Principal Officer, Department of Enterprise,Trade and Employment is secretary to the Group.A list of the Group s members is at Appendix 7. At end-2001 the Company Law Review Group completed its first report which sets out 195 recommendations for the reform and restructuring of the companies code.the report was published in February 2002 and recommends the most radical overhaul of company law since the foundation of the State. 12

16 The first report is the culmination of the Review Group s work programme for As a standing advisory body the Review Group operates on a two-yearly cycle. Every second year the Group is assigned by the Minister for Enterprise,Trade and Employment a work programme of issues for consideration.the first report was achieved on foot of intensive analysis and discussion of the issues referred to the Review Group. The recommendations in the first report, on approval by the Government, will be translated into legislation substantially reforming and amending the companies code and laying the basis for the consolidation of company law.this task is also being progressed by the Company Law Review Section of the Department. In carrying out its work the Review Group functioned as a plenary body which met at monthly intervals. In the period from inception of the Group in February, 2000 to the final meeting in 2001 a total of 83 meetings were held, composed of plenary and committee meetings. Much of the preparatory work, information gathering and report drafting was done in committees.the Group set up dedicated committees for virtually all of the 15 substantive chapters in its first report.the Group also contributed to the development of company law issues at EU level. Simplification of Company Law The focus of the first report of the Review Group is on simplification.the general objectives of the report are that the reformed and streamlined companies code should be effective, intelligible to company law directors and shareholders, and that the law should reflect how business is actually transacted. The report reflects throughout its 195 individual recommendations the Review Group s concern to maintain creditor and shareholder protection.the big idea at the heart of the report is to replace the public company (plc), by the most common type of company, the private company limited by shares, as the standard type of company.this will accord with the actual reality that 89% of all companies are private companies limited by shares.this will bring the advantage, particularly to small and medium sized businesses, of clarity and relative simplicity in the regulatory and compliance regime. Consolidation The first report of the Review Group also maps out the framework for the consolidation of company law.work is ongoing to effect that consolidation once the reform and restructuring recommended in the first report are in place. 13

17 Second work programme Major areas of company law for analysis in the Review Group s second work programme include: shares and share capital; winding-up of companies; and charges and securities. Website The Company Law Review Group website has been set up at The first report and its component chapters can be downloaded from the website.the Review Group s second work programme is also set out on the website. Comments can be made online on the recommendations in the first report. It is also possible to make a submission online on the issues assigned to the Review Group for consideration in the second work programme. 14

18 COMPANIES REGISTRATION OFFICE 3

19 Chapter Three Companies Registration Office The following is the 2001 Annual Report provided by the Registrar of Companies to the Department of Enterprise,Trade and Employment, pursuant to the Autonomy Agreement between the Department and the Registrar. Introduction The Office has recently submitted and published its business plan for 2002, which contains an extensive review of events up to and including 2001 and detailed targets for 2002.The report can be downloaded from the web site at The main statistical components of this annual report have also been submitted. Mr. Paul Farrell, Registrar of the Companies Report. As the Office Business Plan will now become an annual publication it will be prepared next year in conjunction with the annual report. This report completes some of the information in the Business Plan in respect of 2001, in particular the outturn figures on compliance. During 2001 the Office continued to see an increase in the number of companies filing returns due.the Office also managed in a satisfactory manner the turnaround of those documents for public inspection. We concluded planning and much of the testing necessary for electronic filing giving an excellent basis for the expansion of on-line services in The task of backlog clearance remains a major challenge for the Office. It will be necessary in 2002 to put in place the processes necessary to move the Office to realtime document processing. Extensive changes in company law particularly the fundamental changes to the requirements for filing annual returns will place additional pressures on the Office in 2002 but will provide a significantly improved basis for managing compliance and enforcement in the years ahead. We also look forward to the earliest possible implementation of the changes proposed in the report of the Company Law Review Group.That report contains radical proposals across the field of company law and recommends changes that will underpin the move to a fully electronic company registration process in the medium term. 16

20 CROLink CROLink, the Companies Registration Office Users Council, was established in January 1996 to serve as a forum for customer liaison with the Office. Members of the group represent a wide cross-section of the CRO's customer base, and the forum provides a valuable feedback to the CRO on the services that the Office provides to the public. CROLink met on three occasions during The Office wishes to acknowledge the help and advice it has received from the CROLink members during the year.the members of CROLink are listed in Appendix 8. Role of the office The Companies Registration Office is the central location where public statutory information on Irish Companies is to be found.the Office deals with the registration of new companies, the registration and making available for inspection of required statutory documents and the statutory receipt of mortgages and charges. Other activities of the Office are the registration of business names under the Registration of Business Names Act 1963.These activities are encompassed in the main strategic targets of the Office. The Office is charged with the enforcement of certain sections of the Companies Acts, in particular the various requirements to file returns. In recent years we have planned the activities of the Office around three strategic pillars viz. INPUT, OUTPUT and QUALITY.This division of strategic tasks demonstrates the interconnection between the different activities of the Office and it helps to define priorities. The value of service provided by the Office is determined by each of these parameters equally. Each area had however to be tackled separately as it was essential to ensure that we could take in and make available a large number of documents.that meant tackling OUTPUT in the first instance.we have already reported on our success in ensuring improved OUTPUT by the introduction of new procedures and processes. Next we turned to INPUT, i.e. ensuring that companies file returns on time.we consider that the position in 2001 continued to show satisfactory progress.this will be sustained through the application in 2002 of the new late filing fee provisions. Our biggest challenge moving forward is in regard to QUALITY, i.e. ensuring that documents are an accurate and valuable source of company data and that our own internal records accurately reflect the information filed. All of the sections of the Office are responsible for all of the targets as there is an extensive interlocking of functions. In particular line staff need the support of 17

21 administration and IT sections to ensure that work is carried out with maximum efficiency.the staff of the Information Unit, who deal with extensive queries from the public, and Publications Unit, which plays an increasing role in ensuring public awareness, also support the work of the line units. Input An intensive process of enforcement was started in 1999 in an effort to get companies to file their returns on time.this campaign to change the attitude of companies and their professional advisers to the filing requirements set out in the Companies Acts has continued since then. Compliance Rates Annual returns for years up to and including 2001 were deemed, for reporting purposes, to be out of date in March of the following year.the number of companies due to file a return during 2001 on that criterion was 103,657. This figure continues to include about 5,000 companies that have not filed a registered office and had filed no returns for many years.we had intended to strike those companies from the register during 2001 but due to pressure of other work it did not prove possible to carry out this project and it will now be carried out in In March 2002 every company will be assigned a date the Annual Return Date (ARD) which will determine the date its annual return is due in the future.the year 2001, therefore, was the last year where the date an annual return was due was not known to the CRO.The number of companies due to file in 2002 will increase as the ARD comes into effect and as a new requirement to file an annual return six months after the date of incorporation commences in September. The statistics produced in due course for 2002 will, accordingly, not be directly comparable with the figures for earlier years. Strike off The increase in the number of companies due to file in 2001 is due in part to the rollback of the vigorous strike off regime that had been in operation in earlier years. The strike off process was almost completely set aside in 2001 because it had substantially achieved its desired effect in clearing defunct companies from the register and in ensuring compliance from those remaining.we were also conscious of the planned implementation of late filing penalties and wished to determine their effect before resuming strike off if that proved necessary. The strike off process remains a valid response to non-compliance and will be used again if needed. 18

22 Prosecutions 755 companies were successfully prosecuted in 2001 for failure to file annual returns for Fines totalling 326,186 were imposed. In addition 238 directors of companies, which had failed to file their returns for 2000, were successfully prosecuted and fines totalling 60,251 were imposed. Outturn Filing on Time In last year s report we indicated that we would increasingly concentrate on getting companies to file on time.the number of companies filing a return had reached a relatively satisfactory level but on-time filing had remained very low.the following table shows the continued improvement in the number of companies filing their annual returns on time. Year Due to File Filed on Time Percentage ,245 17,801 13% ,461 (est.) 22,345 19% ,676 24,870 25% ,117 34,665 39% ,657 45,293 44% Filing a return in every year The number of companies filing a return has also increased. Here however, the reduced concentration on the strike off process brought about a reduction in the percentage figure for compliance from 92 % to 85 % between 2000 and 2001.This is despite a continued significant rise in the actual number of companies that filed a return. Year Due to File Filed Percentage ,245 49,242 36% ,461 (est.) 51,993 44% ,676 56,305 57% ,117 81,051 92% ,657 88,498 85% 19

23 Output Output involves ensuring that the documents filed are processed through cash, scanned and made available for public access within a tight timeframe. There are three components in OUTPUT:These comprise Scanning, Front Office and Remote Access. The scanning and front office printing functions continue to work well. Remote Access The search facility on the website was closed by Court Order on 17 December 1999, pending the determination of legal proceedings concerning its operation.the Web site search facility continued to be subject to a court injunction at the end of The website itself remained available and is increasingly seen as a valuable source of information for the public. On the reintroduction of the web search facility it will be possible to further improve services, as there is likely to be a reduced demand for counter services. Quality Quality entails ensuring that documents filed are correctly completed and that our database records match the information supplied by the companies. Quality is assured by checking the documents lodged. Submissions Registered Because of the successful enforcement campaign, a very large increase in the number of documents received was experienced and we were not able to reduce the backlog in unregistered documents.we are currently registering changes of director within a few days of receipt and have devised a system in respect of all documents filed whereby each company will be subjected to a thorough quality check once every two years.the number of unregistered submissions on live companies at the end of 2001 was over 300,000. The most important task for 2002 will be to determine the manner and timescale for the disposal of the backlog. Electronic Filing Electronic filing facilitates quality control through freeing staff to check documents more thoroughly. Approximately 85% of applications to register new companies are sent in by the CRODisk disk based incorporation scheme.while the customer service standard for 20

24 these applications is 5 days, it is usually possible to process them within 3 working days.a new upgraded version of CRODisk is due to be launched in February 2002 where it will be possible to file Change of Name, Change of Principal Object, Change of Registered Office and Change of Director/Secretary for the first modification to a CRODisk registered company. There are a number of other electronic filing projects for 2002.The project of greatest significance is that for the paperless filing of annual returns.the full specification of that project was completed in 2001 and testing was well advanced at the end of the year. The take-up of electronic filing has been incentivised in a number of ways. For new companies and charges a quick registration service is provided.the electronic filing of a change of address and changes in the particulars of directors is free.the electronic filing of annual returns is carried out from within clients own software allowing better management of important filing activities. Office Structure The principal activities of the Companies Registration Office are entrusted to seven sections each under the supervision of a Higher Executive Officer.They in turn report to three Assistant Registrars.The registrar is advised by a legal adviser. Pat McCourt; Assistant Registrar Pat McCourt is responsible for the Information/Training Unit, the Information Technology Unit, Electronic Filing Unit and the Public Office/Document Receipt area. The Higher Executive Officers responsible for these areas are Margaret Hannick, Donagh Kelly, Claudine Forrest and Patrick Porter. Brendan Moylan; Assistant Registrar Brendan Moylan is responsible for Post Incorporation Document Section, Enforcement and Business Names. The Higher Executive Officers responsible for these areas are Theresa Fitzpatrick and (from March 2002) Mary Leech. Gerry D Arcy; Assistant Registrar Gerry D Arcy is responsible for the following sections: Administration, Mortgages/Charges, Solvency, External Companies, B-List, Change of Name and New Companies and Publications. The Higher Executive Officers responsible for these areas are Mary Faulkner and Helen Tobin who are job sharing, Eamonn Gallagher,Vincent Breen and Fiona O Dea. 21

25 Accounts Income Filing Fees 7,604,005 Search fees 1,105,793 8,709,799 Expenditure Salaries 3,613,517 Information technology 1,623,791 Other Costs 1,017,353 6,254,661 2,455,138 Other Revenue Late Filing Fees 2,316,444 Total Surplus 4,771,582 A significant proportion of the income of the Office in 2001 related to late filing fees. These are considered separately as the aim of the Office must be to reduce these to zero and not to rely on them to make up a core component of income.they will remain significant in The surplus of the Office remains strong even without late filing fees however was peculiar in that a large number of companies filed a return both at the beginning and at the end of the year the latter filing to avoid the new late filing provisions.that double effect will not be sustained in In light of the requirements of the Capital Taxes Directive it is necessary to keep fees under review to ensure that costs are in line with expenditure.the "surplus" shown above is nominal, as the Office does not meet the costs of pensions, rent or headquarters administration from within its own budget. I do not consider that the surplus shown above warrants a review of fees at this stage. It will be necessary to consider this issue again for 2003 having regard to the take-up in 2001 of the free electronic filing services. 22

26 OFFICE OF THE DIRECTOR OF CORPORATE ENFORCEMENT 4

27 Chapter Four Office of the Director of Corporate Enforcement Establishment of the ODCE The Office of the Director of Corporate Enforcement (ODCE) was established on 28 November 2001 under the provisions of the Company Law Enforcement Act 2001 (No. 28 of 2001).The Tánaiste and Minister for Enterprise Trade and Employment formally appointed Paul Appleby as the Director of Corporate Enforcement on the same date. Prior to 28 November 2001, Mr Appleby acted as Mr. Paul Appleby, Director-Designate of Corporate Enforcement and Director of Corporate Enforcement. worked with a small number of staff in preparing for the formal establishment of his Office.The following material covers the activity of the Director and his staff while the Office was in an interim form and in the post-establishment period between 28 November and 31 December The Director is charged with the following general mandate: to encourage compliance with company law and to take appropriate investigative or enforcement action where suspected breaches of the Companies Acts occur. Relevant Parts of the Company Law Enforcement Act 2001 commenced At the end of 2001, the following Parts of the 2001 Act relating to the exercise by the Director of his functions under the Companies Acts were in operation: Part 2 and the accompanying Schedule to the Act, providing for the establishment of the Director as a statutory authority and the conferring on him of certain powers (including prosecution powers); Part 3 (except sections 25(a) and (c)), dealing with investigations under the Companies Acts ; Part 8, amending provisions relating to the role of auditors under the Acts, and Part 10 (namely sections 90, 91(b), 96, 97, 98, 100, 104, 105, 106, 112 and 113) dealing with the exercise of various functions relevant to the Director s duties. 24

28 Preparations for the Launch of the Office of the Director of Corporate Enforcement The launch of the Office preoccupied the ODCE s work programme in 2001.The particular administrative matters which commanded attention were: the commissioning of the ODCE identity and website; the preparation of a number of ODCE publications; the development of the services of the Office; the management of the ODCE s financial resources; the recruitment of the ODCE s staff; the internal organisation of the Office; the acquisition of suitable accommodation and staff development. Promotion of the ODCE Identity and Website In mid-2001, the Office selected a distinctive corporate identity for the ODCE.This logo is now in use on all Office stationery, reports, publications, brochures, website, etc. A considerable amount of work was undertaken by ODCE staff during the year in developing the structure and content of the ODCE website.the website located at currently offers: general information on the role, powers and activity of the ODCE; basic information on the duties and powers of companies, company directors, company secretaries, members/shareholders, creditors, auditors, liquidators, receivers and examiners under Irish company law; access to the text of the Company Law Enforcement Act 2001, related secondary legislation and earlier companies legislation; associated information materials, including explanatory notes to certain parts of the 2001 Act, and facilities for communicating queries, information and concerns to the Office. Briefings and Speaking Engagements In preparation for the establishment of the ODCE, the Director prepared a number of articles and undertook a series of some twenty speaking engagements to inform professional bodies, firms and other interests of the role and functions of the Office and its likely impact on the company law area. 25

29 The Director and his staff also met with a range of public and private sector bodies and interests, in order to obtain their co-operation and support with the establishment and future work of the Office. Coinciding with the establishment of the Office, the Director gave a number of press briefings and interviews on the role and functions of his Office. Publications During 2001, the Office produced an Introductory Booklet to the ODCE in advance of its launch. Copies of this publication are available free of charge on request from the Office. Resources Financial In 2001, provision for the administration costs of the ODCE was made by way of Subhead A10 within Vote 34 Minister for Enterprise,Trade and Employment.The allocation and outturn for the Office in 2001 was: Allocation 000 Outturn 000 Pay 1, Non-Pay 1, Total 2, Expenditure was less than forecast for the year due principally to the later than anticipated establishment of the Office. Staffing In early 2001, the Director finalised the precise number, grade and responsibilities of the staffing which were required for his Office. An interim ODCE was subsequently established with a skeleton staff. By the end of 2001, the Office comprised 15 of its approved staffing complement of 37 staff.this latter figure includes seven members of the Garda Síochána assigned to the Office to support its criminal investigation and prosecutorial role. Accommodation Pending the move to permanent office accommodation, the Office has temporarily been renting serviced accommodation at Regus House, Harcourt Road, Dublin 2, since September

30 Structure of the office The Director has structured the Office into five main work units as follows: Corporate Services Compliance Evaluation Enforcement Insolvency The work of the Office will be accomplished through a mix of defined staffing assignments to particular functional areas and cross-functional teams, depending on the nature of the work which arises from time to time. Services With effect from its commencement of operations, the ODCE offered the following services to the public: a Compliance Information Service, describing in summary form the main duties and powers of companies, company directors and other persons having a legal relationship with companies via the Companies Acts; a General Information Service, enabling the public to seek information about the Office, its work and company law issues in general; a Company Law Complaints Facility, whereby suspected breaches of company law can be notified to the Office for examination; a Registration Service, permitting persons with an interest in the website to register, so that the Office can advise them when new material is placed on it; a Freedom of Information Service, enabling persons to seek copies of records relating to the general administration of the Office under the Freedom of Information Act 1997; a Consultation Service, providing interested parties with an opportunity to influence draft policy positions published by the Office; a Feedback Service, enabling clients of the Office to comment on the ODCE s services, including the material placed on its website. Company Law Compliance The Director undertook a number of initiatives in this area during the year targeted at informing the non-professional person of the requirements of company law.these included the commissioning of: draft information notes on the duties and powers of companies, company directors, company secretaries, members/shareholders, creditors, auditors, liquidators, receivers and examiners, and 27

31 comprehensive explanatory notes on the implications of the various amendments to company law made by the Company Law Enforcement Act In the case of the draft information notes above, these were available on the ODCE website from the date of establishment of the Office.A draft set of explanatory notes for Parts 1 to 3 of the Company Law Enforcement Act 2001 was also made available on the ODCE website from the date of establishment of the Office.Work on revising and expanding these notes to cover the full Act was ongoing at the end of Complaint Evaluation In order to ensure a good quality of initial complaint, the Office prepared a Complaint Form to help complainants articulate and corroborate the nature of the issues about which they had concerns.this Form has been available for downloading from the ODCE website since 28 November 2001.A copy of the Form is also available on request to the Office. On its establishment, the Office inherited some 32 complaints from the Department of Enterprise,Trade and Employment. One new formal complaint was received in the period up to the end of Six of these complaints were dealt with in that period, leaving 27 complaints on hands at the end of Company Investigations Under the Company Law Enforcement Act 2001, the ODCE has been given responsibility for the evaluation of the final reports of the three High Court investigations on which work has not yet concluded.these relate to: National Irish Bank Ltd; National Irish Bank Financial Services Ltd. and Ansbacher (Cayman) Ltd. During the period 28 November to 31 December 2001, the Director received on a confidential basis a copy of an Interim Report by the Inspectors to National Irish Bank Ltd and National Irish Bank Financial Services Ltd which was submitted to the High Court on 7 December No new company investigations were launched by the Director using the powers contained in Part II of the Companies Act 1990 (as amended) in the five week period up to 31 December

32 Company Law Prosecutions At the launch of the Office, 128 prosecution cases were inherited from the Department of Enterprise Trade and Employment dealing with suspected breaches of the Companies Acts. One further case was considered suitable for prosecution in the period up to the end of No cases were concluded or referred to the Office of the Director of Public Prosecutions in this period. Insolvent Companies As a result of the feedback received from contacts with a broad range of professional bodies, firms, State agencies and individuals during 2001, the Director decided that his Office would consult with a wide range of interests, prior to section 56 of the Company Law Enforcement Act coming into effect.this section imposes a requirement on all liquidators of existing or newly insolvent companies to report to the Director on the conduct of the directors of the failed entities, for the purpose of determining whether or not to exempt liquidators from applying to the High Court for the restriction of the directors of the insolvent company under section 150 of the Companies Act Work was ongoing on the preparation of this draft Consultation Paper at the end of

33 30

34 COMPANY INVESTIGATIONS 5

35 Chapter Five Company Investigations Since the 28th November 2001 responsibility for the investigation of offences under the Companies Acts rests with the Director of Corporate Enforcement. A list of all company investigations that were undertaken at the instigation of the Minister for Enterprise,Trade and Employment up to the end of 2001 is contained in Appendix 13. Section 19 Investigations Five examinations of company books and documents are still ongoing under section 19 of the Companies Act 1990.The companies involved are Celtic Helicopters Ltd., College Trustees Ltd., Guinness & Mahon (Ireland) Ltd., Hamilton Ross Co. Ltd. and Kentford Securities Ltd. Section 34 of the Company Law Enforcement Act 2001 provides for the continuation of these investigations by the authorised officer, Mr. Gerard Ryan, appointed by the Minister for Enterprise,Trade and Employment. Section 8 Investigations There are 3 investigations continuing under section 8 of the Companies Act 1990.While these investigations were commenced by the Court pursuant to an application by the Minister for Enterprise,Trade and Employment, the reports of the investigations will be provided to the Director of Corporate Enforcement, following the commencement of relevant provisions of the Company Law Enforcement Act Ansbacher (Cayman) Limited This investigation, which commenced following an application to the High Court on 22 September, 1999, continued during 2001.The current Inspectors are Mr. Paul Rowan, FCA, Ms. Noreen Mackey, BL, Judge Sean O Leary and Mr. Michael Cush SC.The Inspectors were appointed to investigate and report on the affairs of the company and in particular, inter alia, to: examine and define the nature and extent of the company's Irish business from 1971 to date; identify as far as possible all of the parties who were either officers [including shadow directors] and agents of the company, clients of the company or who otherwise assisted in the carrying out of the business at the relevant time; examine whether the Companies Acts were breached by the company, its officers [including shadow directors], agents or third parties at the relevant time and, if so, to identify the provisions involved and the persons in default in each case. The Inspectors are expected to make their final report to the Court during the course of

36 At the end of 2001, the accumulated costs of this Inquiry amounted to about 2.5 million.the costs are met by the Department of Justice, Equality and Law Reform but there is provision for the Court to seek re-coupment from the parties involved.the staff supporting the Inspectors in their investigation are civil servants seconded to the Inquiry. National Irish Bank Limited and NIB Financial Services Ltd. These High Court inquiries under section 8 of the Companies Act 1990 commenced in 1998.The investigation into NIB and NIBFS came about from allegations made by RTE that NIBFS had been involved in the promotion of life assurance schemes to avoid tax liabilities and NIB by de-frauding its creditors by charging unjustified interest and fees. Inspectors, Judge John Blayney and Mr Tom Grace submitted a further interim report to the High Court on 7 December At the end of 2001, the accumulated costs of these inquiries amounted to about 4.5 million.these costs are being initially paid by the Department of Justice, Equality and Law Reform. The Inspectors are expected to make their final report to the Court during the course of

37 34

38 ENFORCEMENT OF THE COMPANIES ACTS 6

39 Chapter Six Enforcement of the Companies Acts Since the 28th of November 2001 responsibility for the investigation and (where appropriate) the prosecution of suspected breaches of the Companies Acts rests with the Director of Corporate Enforcement.The Director replaces the Minister for Enterprise,Trade and Employment in all respects regarding the enforcement of company law. Some enforcement/prosecution functions (relating to the filing of returns to the Companies Registration Office) rest with the Registrar of Companies. Prosecutions under the Companies Acts In the year 2001, 6 companies, 7 directors and 2 auditors were prosecuted for various offences under the Companies Acts. A total of 32 convictions were obtained during the year Number of convictions Of the 32 convictions recorded in 2001, nine relate to breaches recorded in the Faxhill Homes Ltd. case.these included breaches of section 19 (failure to co-operate with an authorised officer s examination), section 202 (failure to keep proper books) and section 242 (falsification of records) of the 1990 Act. A further 3 convictions were recorded against the auditor to Faxhill Homes Ltd for breach of section 19 (failure to co-operate with an authorised officer s examination). Convictions for failure to maintain proper books and accounts: section 202 of the Companies Act There is a statutory obligation on companies and their directors to keep proper books of account.these books of account must give a true and fair view of the state of the company s affairs and explain its transactions. Convictions were obtained against two companies [six in 2000] and three directors [nine in 2000] for failure to comply with section

40 Convictions were obtained as follows: Company Hamill & Henderson Ltd Outcome On 7/3/2001 the Company was fined 500 and the directors Paul Joseph Hamill and Charles Henderson were fined 250 each plus 432 witness expenses & 500 costs. Faxhill Homes Limited On 21/5/2001 the Company was fined 100 and the director Jack Tierney was fined 100 Failure to hold annual general meetings: section 131 of the Companies Act 1963 Section 131 requires that every company shall hold an Annual General Meeting (AGM) within 18 months of its incorporation and that no more than 15 months should elapse between each subsequent meeting. Four convictions [1 in 2000] were obtained during 2001 for failing to comply with a Ministerial direction to hold an AGM: Company Outcome Muckross Park Hotel On 20/2/2001 the Company was fined 200 and the directors Jackie Lavin and Michael Moriarty were fined 200 each. Witness expenses of 400 were awarded to the State. Executive Management Company Limited On 30/5/2001 the Company was fined

41 Failure to keep a registered office in the State: section 113 of the Companies Act 1963 One company was convicted for failure to keep a registered office in the State to which all communications and notices may be addressed, pursuant to section 113 of the Companies Act 1963, in the year Company Outcome Executive Management Company Limited On 30/5/2001 the Company was fined 100. This is the first time that a company was convicted under section 113. Failure to comply with the register of members: sections of the Companies Act 1963 Sections sets out various provisions regarding a register of members to be kept by every company.the Act requires that the register record the names and addresses of the company s members, the date at which each person was entered in the register as a member and the date at which any person ceased to be a member. One company was convicted for failure to keep a register of its members, pursuant to section 116 of the Companies Act 1963, in the year Company Outcome Executive Management Company Limited On 30/5/2001 the Company was fined 100. Two companies and two directors were convicted for breach of section 119 during Company Outcome Muckross Park Hotel On 20/2/2001 the Company was fined 200 and the directors Jackie Lavin and Michael Moriarty were fined 200 each. Rennington International Associates Limited On 26/2/2001 the Company was fined

42 Failure to provide a copy of the register of directors interests: section 60 of the Companies Act 1990 Section 53 of the Companies Act 1990 obliges a director (executive and non executive) and secretary to disclose their interests in shares and debentures of the company, its subsidiary and holding company. Section 59 of the Act requires every company to keep a register for the purposes of section 53. Section 60 provides, inter alia, that any member may require a copy of the register on payment of relevant fee and the company is required to provide a copy within a period of 10 days. Two companies and one director were convicted for breach of section 60 during Company/Director Outcome Rennington International On 26/2/2001 the Company was Associates Limited convicted and fined 1,000. Costs of 250 were awarded. Executive Management Company Limited On 30/5/2001 the Company was fined 100. Michael Loughnane, Director, Massam Limited On 15/10/2001 the director was fined 100. Failure to produce books and documents to authorised officers: section 19 of the Companies Act Six convictions were obtained in 2001 for failure to co-operate with an authorised officer's examination. In addition costs of 10,000 were awarded to the State against Faxhill Homes Limited. Name Faxhill Homes Ltd. Outcome On 21/5/2001 the Company was convicted of two offences and fined 100 on each occasion Jack Tierney, Director On 21/5/2001 the director was convicted of Faxhill Homes Ltd. one offence and fined 100. Declan Long,Auditor to Faxhill Homes Ltd. On 8/10/2001 the auditor was convicted of three offences and fined 200 on each occasion. 39

43 Failure to comply with the provisions relating to charges and debentures: section 91 of the Companies Act 1963 Three convictions were obtained in 2001 for lack of compliance with the provisions relating to charges and debentures. Company Outcome Faxhill Homes Ltd. On 21/5/2001 the company was fined 50. Jack Tierney, director was fined 50. Jennifer Tierney, director was convicted of one offence and the Probation of Offenders Act was applied. Prosecutions relating to furnishing false information: section 242 of the Companies Act 1990 One conviction was obtained in 2001 for furnishing false information. Company Outcome Faxhill Homes Ltd. On 21/5/2001 the company was fined 100. Failure to comply with a direction to change a company name: section 23 of the Companies Act 1963 Section 23(2) gives the Minister the power to direct a company to change its name where he/she considers that it is registered by a name which is too like the name of a company already registered. It is an offence not to do so. One company [2 in 2000] was convicted for breach of section 23 during Company Outcome Criostal Ghaelach On 15/10/2001 the Company was fined 500 Dhun na ngall Teo. plus costs. 40

44 Prosecutions for acting as an auditor while not qualified: section 187 of the Companies Act 1990 Auditors are the only persons who may provide an audit certificate in respect of a limited liability company. Section 187 of the Companies Act 1990 sets out the qualifications for appointment as auditor. Persons in breach of this section may be prosecuted. One conviction was obtained in 2001 [2 in 2000]: Name Address Outcome T. P. Greene, Bridge Street, Mr Greene was fined 100 T/A Green & Co., Mohill, on each of 3 summonses. Auditors Co Leitrim 50 costs were awarded in each case. Enforcement activities carried out by the CRO Strike Off process Companies dissolved (struck off for failure to file returns) 1,430 Companies dissolved under Section 882 of the Consolidated Finance Acts (Revenue Strike-off) 5,649 Company Prosecutions Number of companies prosecuted 755 Number of companies convicted 748 Total amount of fines imposed 326,186 Average fine imposed Directors Prosecutions Number of directors prosecuted 238 Number of directors convicted 184 Total amount of fines imposed 60,251 Average fine imposed

45 Prosecution of liquidators for failure to file returns During 2000, the CRO initiated a campaign to bring all liquidations on the register up to date.this continued throughout All defaulting liquidators on the register have now been contacted by the Office. Approximately 50 liquidators who failed to keep their returns up to date were served with notices under section 302 of the Companies Act of Files in relation to 18 liquidators who continued to allow their filings remain in arrears were prepared for the Chief State Solicitors Office, with instructions that High Court Orders be sought. As a result of this campaign the register has been brought substantially up to date, and the Office is actively pursuing those liquidators still in default. Restriction of Directors under section 150 of the Companies Act 1990 Section 150 empowers the High Court to declare that a person shall not, for a period of five years or such period as the Court determines, act as a director of a company save where the company meets certain requirements as to its paid-up capital. The requirements in respect of private companies are 20,000 in paid-up share capital and, in the case of PLCs, 100,000 in paid-up share capital. S.I. No. 209 of 1991 requires that any such disqualification or restriction, or variance therefrom, shall be notified to the Registrar by the relevant Court. A total of 118 persons were restricted as at 31 December 2001 and as listed in Appendix 14. Persons Restricted

46 Disqualification from acting as a Director under section 160 of the Companies Act 1990 Under section 160 a person who is convicted on indictment of an indictable offence in relation to a company, or one involving fraud or dishonesty, may be disqualified by the High Court from acting as a director for five years from the date of the conviction, or such other period as the Court may order. Three people are currently disqualified: Name Address Date of Period of Court Order Disqualification Madden, Roseanne Madden,Thomas Clarkin, Niall Sounagh, Ballyshrule, Ballinasloe, Co. Galway 22/10/ Years Sounagh, Ballyshrule, Ballinasloe, Co. Galway 22/10/ Years 40 Springfield Park, Foxrock, Dublin 18 (Formerly of "Woodend", Rosbarnagh, Foxrock, Dublin 18) 26/11/ Years Liquidators, Receivers, Examiners disqualified under section 160 of the Companies Act 1990 One liquidator was disqualified in 2001: Name Address Date of Period of Court Order Disqualification Grimes, Michael Grianan House, Tramore Road, Cork 20/07/ years 43

47 Keeping proper Books of Account Pursuant to section 194 of the Companies Act 1990, the Registrar of Companies must be informed in writing by auditors who have formed the opinion that companies were or had contravened section 202 of the Act. Failure to keep proper books of account The names of the companies concerned are listed in Appendix

48 STATUTORY FUNCTIONS OF THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT 7

49 Chapter Seven Statutory Functions of the Minister for Enterprise,Trade and Employment The Minister for Enterprise,Trade and Employment has a number of statutory functions under the Companies Acts (separate from the former responsibility for the investigation and enforcement of the Companies Acts generally, which is now the responsibility of the Director of Corporate Enforcement).This Chapter reports on the discharge of these functions. Regulation of Auditors Part X of the Companies Act 1990 contains the main provisions concerning accounts and audit. Section 187 provides, inter alia, that a person cannot act as an auditor unless he or she is a member of a body of accountants recognised by the Minister for Enterprise, Trade and Employment or he or she was authorised in an individual capacity by the Minister for Enterprise,Trade and Employment prior to the 3 February Section 191 of the Companies Act 1990 provides for the recognition of accountancy bodies by the Minister for Enterprise,Trade and Employment where he or she is satisfied as to certain matters set out in the section.the Minister for Enterprise,Trade and Employment has no statutory function in relation to accounting matters. Following the Report of the Review Group on Auditing, the Government announced that it is to establish the Irish Auditing and Accounting Supervisory Authority (IAASA) to supervise the regulation by the accountancy bodies of their members professional standards. Legislation to give effect to this decision was in the course of preparation at the year-end. At the end of the reporting period, the following bodies of accountants were recognised by the Minister for auditing purposes under section 191. The Institute of Chartered Accountants in Ireland (ICAI) The Institute of Certified Public Accountants in Ireland (ICPAI) The Association of Chartered Certified Accountants (ACCA) The Institute of Incorporated Public Accountants Ltd. (IIPA) The Institute of Chartered Accountants in England and Wales (ICAEW) The Institute of Chartered Accountants of Scotland (ICAS) 46

50 The Minister s decision to recognise the IIPA in 1996 is the subject of judicial review proceedings in the High Court. During the latter half of the year, the Department of Enterprise,Trade and Employment commenced a detailed review of the practices and procedures of the IIPA.This review was ongoing at year-end. Qualified auditors 3,430 members of accountancy bodies were in practice in the State at the end of This compares with 3,351 in Details of those members of the recognised bodies who are qualified to act as auditor of a limited company within this jurisdiction are retained in the Companies Registration Office and are available for public inspection on payment of the appropriate fee. It is a condition of recognition of the accountancy bodies referred to above that particulars of each member qualified for appointment as auditor of a company or as auditor of a public company are submitted to the Registrar of Companies on an annual basis. In addition, 47 persons are individually authorised to act as auditors by the Minister for Enterprise,Trade and Employment, by virtue of a Ministerial authorisation obtained prior to 3 February

51 Membership of the accountancy bodies Membership of the accountancy bodies is outlined in the table below: 2001 REPORTS OF THE ACCOUNTANCY BODIES ICAI ACCA ICPAI IIPA ICAEW ICAS TOTAL NUMBER OF MEMBERS WORLD-WIDE: At the start of ,890 79,027 2, ,771 14,888 Movement In Membership during , , At end of ,500 86,929 2, ,725 15,042 TOTAL NUMBER OF MEMBERS IN PRACTICE IN THE STATE: At the start of ,414 1, Movement In Membership during At end of ,443 1, TOTAL NUMBER OF RECOGNISED AUDITORS: At the start of 2001 N/A 1, N/A N/A Movement In Auditors during 2001 N/A N/A N/A At end of 2001 N/A 1, N/A N/A TOTAL NUMBER OF RECOGNISED FIRMS IN THE STATE: At the start of N/A N/A 12 1 Movement In Firms during N/A N/A 0 +1 At end of N/A N/A 12 2 Each of the recognised bodies is required to submit an annual report to the Minister giving details of the number of complaints received and the number and outcome of cases dealt with by its Investigation, Disciplinary and Appeals Committees pertaining to members practising as auditors in the State. Based upon these annual reports, the following table provides details of complaints concerning members practising as auditors within the State for the year 2001: 48

52 Total number of complaints received concerning recognised auditors ICAI ACCA ICPAI IIPA ICAEW ICAS Complaints on hands at the start of New complaints received during Complaints concluded during Complaints on hands at the end of The following table indicates at what level within each body the complaints concerning members practising as auditors in the State were handled by each regulatory body in 2001: Complaints Number of complaints handled by committees concerning recognised auditors ICAI ACCA ICPAI Total number of complaints resolved without recourse to the Investigation/ Complaints Committee Total number of complaints concluded by the Investigation/Complaints Committee 20 N/A 1 6 Total number of complaints concluded by the Disciplinary Committee Total number of cases concluded by the Appeals Committee Total number of cases concluded by a Committee of Inquiry (or equivalent) Total number of recognised auditors who were the subject of a complaint concluded by the Disciplinary Committee and who were exonerated in ACCA abolished the Investigation Committee on 1 January

53 Consent Orders Of the above complaints, Consent Orders were offered by the Investigation/Complaints Committees as set out hereunder.a Consent Order is issued under the powers of the Investigating Committee when it has established a case. ICAI ACCA ICPAI Total number of consent orders offered (if applicable) by investigation/complaints committee 11 N/A 5 Total number of consent orders accepted 11 N/A 5 Sanctions Imposed Total number of recognised auditors who were the subject of a complaint concluded by the disciplinary committee and who were disciplined in 2001 by way of: ICAI ACCA ICPAI Reprimand, Fine and Costs Admonishment, Costs and Named in public Censure (Fine and Costs) Severe Reprimand, Fine and Costs Suspension (Fine and Costs, Practising Certificate, Certificate and IIA Certificate Withdrawn) Exclusion, Costs and Named in public Exclusion, Costs, Fine and Named in public Ongoing Monitoring attached to one case of Censure Fine and Cost

54 The reason(s) for the sanctions imposed on members practising as auditors in the State in 2001 were as follows: Basis for determinations made against auditors ICAI ACCA ICPAI Practising Without A Practising Certificate Failure to comply with Auditing standards Poor Service Conduct of liquidation Breach of Ethical Guide Breach Of Irish Companies Acts Breach Of Code Of Professional Conduct Failure To Comply With Mandatory Continuing Professional Education Requirement Failure To Report/Reply To Regulator The following table provides information on the number of, and reason for, monitoring/ quality review visits undertaken by each body of its auditing members during Audit monitoring visits to recognised auditors ICAI ACCA ICPAI IIPA ICAEW ICAS Total number of audit monitoring visits for 2001 to recognised auditing firms, broken down as follows; N/A N/A see next table see next table Routine visits; N/A N/A Carried out resulting from a complaint; 0 1 N/A N/A 0 0 Follow up visits; 0 35 N/A N/A 0 0 Committee ordered; 9 17 N/A N/A 28 1 Visits to listed company auditors 5 0 N/A N/A 35 0 N/A not applicable 51

55 Audit mointoring visits to recognised auditors ICAI ACCA ICPAI IIPA ICAEW ICAS Total number of audit monitoring visits for the year under review to recognised auditors broken down as follows; N/A N/A N/A see above see above see above Routine visits; N/A N/A N/A Carried out resulting from a complaint; N/A N/A N/A Follow up visits; N/A N/A N/A Committee ordered N/A N/A N/A N/A not applicable The recognised bodies have reported as follows on the number of meetings held by their various disciplinary committees: Number of meetings held ICAI ACCA ICPAI IIPA ICAEW ICAS Number of Investigation/ Complaints Committee meetings held 5 N/A Number of Disciplinary Committee meetings held in public in private Number of Appeals Committee meetings held in public in private individuals in the 177 monitored firms 1 ACCA abolished the Investigation Committee on 1 January

56 The Blayney Inquiry A Committee of Inquiry (the Blayney Committee) was established by the Institute of Chartered Accountants in Ireland (ICAI) in September 1997 to enquire into matters arising out of the report of the Tribunal of Inquiry (Dunnes Payments).The Committee completed its work during Its findings were appealed and an Appeal Committee comprising Mr Hugh Kennedy, QC, Chairman, Mr John Hennessy and Mr Maurice Tempany was established.the work of the Appeal Committee was ongoing in Resignation of Auditors Section 185 of the Companies Act 1990 provides for the resignation of auditors.the total number of resignations notified to the CRO in 2001 was 1,054.The following table indicates the number of resignations or removals of auditors over the last four years, as notified to the CRO: Resignation of Auditors ,054 Removal of Auditors Secretaries of Public Limited Companies Section 236 of the Companies Act 1990 places a duty on directors of a PLC to take all reasonable steps to ensure that the secretary of the company has adequate knowledge and experience to discharge the functions of a secretary as laid down by the Act.The section provides that the Minister may recognise relevant bodies for the purpose of the section.the Institute of Chartered Secretaries and Administrators (ICSA) has been so recognised by the Minister. It is not obligatory for a secretary of a plc to be a member of a recognised body. The Institute had total membership levels (as at 31 December, 2001) as follows: World-wide Ireland Fellow Not available 168 Associate Not available 409 Graduate 54,058 (Total) 60 Student 25, Total 79, The Institute has reported that there were no complaints concerning Irish Region Membership, consequently no disciplinary actions have been taken. 53

57 Companies exempted from showing particulars of Directors on headed paper Section 196 (1) of the 1963 Act obliges a company to indicate particulars relating to its directors, including all shadow directors as defined under section 27 of the Companies Act 1990, on its business letters. Section 196 (2) empowers the Minister to grant an exemption to this requirement. Applications for exemption are considered once the company s Annual Returns are up to date, where a company has a history of frequent changes to the board of directors which have been filed with the Companies Registration Office and which would entail the financial burden and inconvenience of repeated revision and printing of company stationery. A review is periodically carried out on all exemptions granted under section 196.Where the Annual Returns are not up-to-date, the exemption is withdrawn if remedial action is not promptly taken. Exemptions from showing Particulars Companies Exempted Applications Rejected Exemptions were granted to the following 2 companies during 2001: Chase Manhatten Bank (Ireland) plc. Life Insurance Association of Ireland. Financial year of Holding Company and Subsidiary The directors of a holding company are required to ensure, except where there are good reasons to the contrary, that the financial year of each of its subsidiaries coincides with the company's own financial year. Under the provisions of section 153 of the Companies Act 1963 as amended by section 61 of the Company Law Enforcement Act 2001 the Minister may, on the application or with the consent of the directors of a company, direct that the holding of an annual general meeting and the submission of its accounts to the meeting may be postponed from one calendar year to the next with a view to enabling the subsidiary's financial year to end with that of the holding company. 54

58 Nine approvals were issued to the following related companies Company Number Date of Direction Darshann Properties Ltd /3/01 Exel Logistics (Ireland) Ltd /3/01 Exel Trade Solutions Ltd /3/01 Exel Walsh Western (Holdings) Ltd /3/01 Exel Walsh Western Ltd /3/01 NFC International Holdings (Ireland) Ltd /3/01 Sydney Cooper (Distribution) Ltd /3/01 Tankclean (Ireland) Ltd /3/01 Tankfreight (Ireland) Ltd /3/01 Prospectuses for Business Expansion Schemes (BES) The function of the Minister for Enterprise,Trade and Employment in relation to BES funds is to ensure that the prospectus and publicity material for a fund give prospective investors the information required to make an objective decision when deciding to invest in a particular fund. Under section 5 of the Designated Investment Funds Act 1985, the Minister for Enterprise,Trade and Employment has to approve the terms of the prospectus and other publicity material for each fund while the Revenue Commissioners look after the tax elements.the 1985 Act requires that each prospectus must clearly include statements: (i) (ii) (iii) (iv) regarding the risks involved that no liability shall attach to the Minister that no right to relief shall arise by reason only of the Minister s approval that before subscribing to a fund a prospective investor should seek professional advice. Ultimately responsibility for assessing the bona fides of a particular fund rests with the investor. 55

59 Seven applications were received in 2001 for approval of prospectus - one application was later cancelled. Title Size of Fund Closing Manager Approved Date The 2001 Davy 1m- 3m 5/4/01 BES Management BES Fund Limited 27/2/01 7th Small Enterprise 0.125m- 1m 5/4/01 Castle Hill Fund Seed Fund Management Limited 2/3/01 6th Expanding 0.75m- 2m 5/4/01 CF Investment Companies Fund Managers Limited 16/2/01 Bloxham 0.75m- 1.5m 5/4/01 Bloxham Technology & Stockbrokers 1/3/01 Growth BES Fund 2001 The 2002 Davy 2m- 4m 31/1/02 BES Management BES Fund Limited 9/11/01 Bloxham BES 0.75m- 3m 31/12/01 Bloxham Fund 2002 Stockbrokers 30/11/01 Companies Licensed to omit "limited" from their names Under the provisions of section 24 of the Companies Act 1963, the Minister may grant a Licence to an association about to be formed as a limited company or to a company already registered as a limited company, which has as its main object the promotion of commerce, art, science, religion, charity or such other useful object, and which applies its profits, or other income in promoting its objects and prohibits the distribution of a dividend among its members. The Licence enables the company to be registered with limited liability but without the word "Limited" or "Teoranta" added to its name. Section 24 of the Companies Act 1963 has been repealed by section 88 of the Company Law Enforcement Act 2001 and responsibility transferred to the Registrar of Companies with effect from 1 March

60 The table below shows the number of Licences granted over the past five years under section 24: Number of licences granted The associations/companies which were granted licences in 2001 are in Appendix 16. One of the requirements of the European Communities (Companies) Regulations, 1973 is that a company, which has a licence to omit the word "Limited" from its name, must show on its business letters and order forms that it is a limited company. Change of Company Name 3 companies were directed to change their name under Section 23 (2) of the Companies Act 1963 in Change of Company Names Section 23 (2) directions by the Minister Company Name Direction issued Advanced Roofing Ltd. 15/02/01 Good Information System (GIS) Ltd. 22/06/01 Overseas Courier Services (Irl) Ltd. 23/05/01 Section 23 of the Companies Act 1963 has been amended by section 87 of the Company Law Enforcement Act 2001 and responsibility transferred to the Registrar of Companies with effect from 1 October

61 58

62 IRISH STOCK EXCHANGE 8

63 Chapter Eight - Irish Stock Exchange Section 120 of the Companies Act 1990 provides that a recognised stock exchange shall furnish to the Minister for Enterprise,Trade and Employment an annual report on the exercise of its functions under Part V of the Companies Act 1990 (Insider Dealing).The European Communities (Stock Exchange) Regulations 1984 provides that a recognised stock exchange shall furnish an annual report to the Minister for Enterprise,Trade and Employment.The following material contains the reports (excluding detailed listings) by the Irish Stock Exchange under these headings. The Minister is empowered to make supplementary regulations under section 121 of the Companies Act 1990 and under section 120(1)(d) to prescribe the inclusion of further material in the Stock Exchange s annual report as the need arises. Draft regulations under section 121(1) have been issued to various parties for comment, including the Stock Exchange and the DPP. Annual Report to the Minister for Enterprise,Trade and Employment pursuant to Part V of the Companies Act 1990 Background Part V of the Companies Act 1990 (the Act) creates an offence of Insider Dealing, and provides for criminal and civil sanctions in relation to contraventions of Part V. Section 115(1) of the Act places a statutory duty on the relevant authority of a recognised stock exchange to furnish the Director of Public Prosecutions with a report where it appears to it that an offence has been committed under the legislation.as amended by the Company Law Enforcement Act 2001 the Act requires that such reports must now also be furnished to the Director of Corporate Enforcement. For the purposes of Part V of the Act, the Irish Stock Exchange Limited, is a recognised stock exchange. Under Section 107 of the Act a relevant authority is defined as being: (i) its board of directors, committee of management or other management body, or (ii) its manager however described Section 120 of the Act requires the Irish Stock Exchange, as a recognised stock exchange, to make an annual report to the Minister for Enterprise,Trade and Employment.This report must include (a) the number of written complaints received concerning possible contraventions of Part V. (b) the number of reports made to the Director of Public Prosecutions under Part V. 60

64 (c) the number of instances in which, following the exercise of powers by authorised persons under Part V. (d) such other information as may be prescribed. Nature of the Investigation Process The investigation of possible contraventions of Part V is undertaken by persons authorised under Section 117 of the Act.The authorised persons plan, perform and report on the results of their investigations in association with a relevant authority of the Stock Exchange, typically the Chief Executive. All cases which give rise to a reporting obligation under Section 115 of the Act are reported to the Director of Public Prosecutions and now also to the Director of Corporate Enforcement as soon as practicable after the investigation has been concluded. The exact nature of the investigation process may vary depending on the particular details of each case. However, the investigation process is structured so as to ensure: a complete review of all facts relevant to the investigation the production of a complete chain of evidence to ensure comprehensive reporting to the Director of Public Prosecutions and to the Director of Corporate Enforcement, if required. Report on the year ended 31 December 2001 In accordance with its obligations under Section 120 of the Companies Act 1990, the Irish Stock Exchange reported to the Minister in relation to its activities during 2001, as follows: (a) Five written complaints [4 in 2000] were received in relation to alleged breaches of Part V of the Act. (b) Two reports [Nil in 2000] were made to the Director of Public Prosecutions in respect of a suspected offence. (c) Authorised persons exercised statutory powers in relation to ten investigations [7 in 2000] into suspected breaches of Part V. In seven of these cases the Chief Executive, in his capacity as a Relevant Authority under Part V of the Act, decided that a report to the Director of Public Prosecutions was not warranted. Six investigations were ongoing at the end of (d) No other information has been prescribed by the Minister under Section 120(1)(d). 61

65 Annual Report to the Minister for Enterprise,Trade and Employment pursuant to Section 11 of the European Communities (stock exchange) Regulations 1984 Introduction The European Communities (Stock Exchange) Regulations 1984 (S.I. No. 282 of 1984) "the Regulations", implemented the Admissions Directive, the Interim Reports Directive and the Listing Particulars Directive of the Council of the European Communities, into Irish Law.The Admissions Directive (Council Directive 79/279/EEC) sets out the conditions for admission of securities to official stock exchange listing.the Listing Particulars Directive (Council Directive 80/390/EEC) sets out the requirements for the drawing up, scrutiny and distribution of the listing particulars to be published for admission of securities to official stock exchange listing.the Interim Reports Directive sets out the information to be published on a regular basis by companies the share of which have been admitted to official stock exchange listing. The Regulations appointed the Irish Stock Exchange as Competent Authority for listing in Ireland and required that it furnish an annual report to the Minister for Enterprise,Trade and Employment on the exercise of its function as Competent Authority. In addition, the European Communities (Transferable Securities and Stock Exchange) Regulations, 1992 "the 1992 Regulations" designated the Irish Stock Exchange as the designated body for the purposes of specified articles contained therein and specified that the exercise of its functions under those regulations be also included in the annual report furnished under the Regulations. The Board of the Irish Stock Exchange Limited (the "Board") presented the seventeenth annual report on the exercise of its functions as Competent Authority in the State during 2001 in accordance with Section 11 (a) to (e) of the Regulations, and in accordance with Sections 90 to 96 of the Companies Act The Regulations General During 2001 the Board continued to carry out the functions of Competent Authority as set out in the Regulations and the 1992 Regulations. In the period, the main Competent Authority functions of the Board were delegated to and carried out by the Listing Committee, the Specialist Products Listing Committee and the Executive of the Irish Stock Exchange. The Irish Stock Exchange applied the conditions for admission to Official Listing in accordance with Council Directive 79/279/EEC. It ensured that the requirements for drawing up, scrutiny and distribution of the Listing Particulars to be published for the 62

66 admission of securities to official Stock Exchange listing in accordance with Council Directive 80/390/EEC were complied with. It ensured that entities, shares of which have been admitted to official Stock Exchange listing, published information as required by Council Directive 82/121/EEC. In addition, the Irish Stock Exchange carried out its functions under the 1992 Regulations, and authorised the omission of information from prospectuses in relevant instances where compliance with the circumstances set out in the 1992 Regulations was demonstrated. The Regulations require the following specific requirements to be addressed: (a) Amendments to Listing Rules or Revisions of the Procedures. The Listing Rules of the Irish Stock Exchange are those of the United Kingdom Listing Authority (UKLA) as modified by the Notes on the Listing Rules ("Green Pages").The Green Pages were updated in 2001 and issued on the 7 August (b) Nature of all securities which are admitted to Official Listing ("OL"), ITEQ, the Developing Companies Market ("DCM") and the Exploration Securities Market ("ESM") A number of types of securities were admitted to Official Listing, ITEQ, the DCM and the ESM during 2001 as follows: States and their regional or local authorities. No such securities were admitted to listing during Companies and issuers other than States and their regional or local authorities. The securities admitted were ordinary capital issues of Irish and foreign registered companies including equities, fixed interest, loan stock, preference stock, debentures, UCITS and investment funds. (c) Rejection of any applications for admission to OL, ITEQ, the DCM and the ESM. In 2001, no application for admission to the Official List was refused. No applications for admission to ITEQ, the DCM or the ESM were refused. 63

67 (d) Suspension or discontinuation of any Official Listing, ITEQ, DCM and ESM quotations. Apart from those Government securities maturing in 2001, the securities whose listing was suspended, cancelled or restored during the period are set below: Securities whose listing was cancelled during 2001 Date Company Market 9/4/01 Tuskar Resources plc ESM 24/4/01 ICC Bank plc OL 4/5/01 Ashquay Group plc OL 8/5/01 Seafield plc OL 9/3/01 Athlone Extrusions plc OL 10/9/01 Reflex Group plc OL 19/9/01 Jermyn Investment Properties plc OL 15/10/01 IRE Tex Group plc OL 26/10/01 Golden Vale plc OL 31/10/01 James Crean plc OL 10/12/01 Eircom plc OL Securities whose listing was suspended during 2001 Date Company Market 24/1/01 Tuskar Resources plc ESM 2/5/01 James Crean plc OL 30/5/01 Reflex Group plc OL 3/12/01 Navan Mining plc OL Securities whose listing was restored during 2001 Date Company Market 20/4/01 Ormonde Mining plc OL 14/8/01 Reflex Group plc OL 64

68 (e) Any special arrangements which have been made with the Member States pursuant to Article 18 of the Admissions Directive or Article 24 of the Listing Particulars Directive. During the period under review, it was necessary to co-operate and communicate with the Competent Authority in the United Kingdom regarding Irish securities listed on that Exchange. On 1 May 2000, the Financial Services Authority (the UK Listing Authority) was appointed as the United Kingdom s "competent authority" to decide on the admission of securities to the Official List.The Irish Stock Exchange has maintained the same relationship with the UK Listing Authority as existed under the previous regime. No other circumstances arose necessitating any special arrangements or co-operation with the Competent Authorities in other Member States. The Companies Act 1990 Sections 90 to 96 of the Companies Act 1990 set out, inter alia, requirements in respect of obligations to notify the Exchange directly in the event that shares are acquired or disposed of with the result that a shareholder s interest in a company on the Official List exceeds or falls below 10%, 25% 50% or 75% threshold and the Exchange s obligations in the event of any apparent non compliance. Section 93 of the Companies Act 1990 requires the Stock Exchange to report on the following specific items: (i) No written complaints were received suggesting possible contraventions of section 91 (obligation to notify certain interests to the Exchange). (ii) No reports were made under section 92 (duty of relevant authority to report to the Director of Public Prosecutions). (iii) No powers of investigation were exercised under section 117, as applied by section 92. Other relevant matters relating to the Irish Stock Exchange Memorandum of Understanding A Memorandum of Understanding between the Central Bank and the Irish Stock Exchange was signed and put in place on 2 October 2001.This formal Memorandum will ensure comprehensive supervision of all aspects of the operation of the Exchange s activities and those of its members. 65

69 Listings The Stock Exchange operates four listings and has provided details of equity issues for 2001 as follows: LISTING AMOUNT RAISED 2001 AMOUNT RAISED 2000 Official Listing 4,239m ( 3,339m) 5,192m ( 4,089 m) Developing Companies Market (DCM) 1m ( 788m) 1.27m ( 1 m) Exploration Stocks Market (ESM) 41m( 32m) 30m ( 23m) ITEQ 213m( 168m) 656m ( 517m) Insider Dealing Court Proceedings At the Dublin District Court on 14 March, 2001 the Managing Director of Dunloe Ewart, Mr. Philip Byrne was charged with two insider dealing offences. It was alleged that in 1997 Mr Byrne sold 260,000 shares in Dunloe House plc (now Dunloe Ewart), while in the possession of information in his capacity as a director of Aviette Ltd, a company associated with Dunloe. It was claimed the information was not generally available, but might reasonably have been expected to be available to him, being a person connected with Dunloe by virtue of the relationship which existed between Aviette and Dunloe.This information, if available, would have been likely to materially affect the price of those shares because discussions had taken place designed to result in the merging of Aviette with another property company, Monarch, leading to the formation of a new entity known as the Crudder Group. Crudder, it was further alleged, was then to be taken over by Dunloe and in order to fund this, Dunloe was being advised to consider a rights issue at a price per share that represented a significant discount on the then price of 34p per share. In January 2002 the Managing Director of Dunloe Ewart, Mr. Philip Byrne, was acquitted. This was the State's first criminal trial for insider dealing. 66

70 IRISH TAKEOVER PANEL 9

71 Chapter Nine Irish Takeover Panel The Irish Takeover Panel is the statutory body responsible for monitoring and supervising takeovers and other relevant transactions in Ireland. It is responsible for monitoring and supervising take-overs and certain other related activity with a view to ensuring fair and equal treatment of all shareholders in such situations and to provide support and credibility for the Irish financial markets. Section 19 of the Irish Takeover Panel Act 1997 requires the Panel to submit to the Minister an Annual Report on its activities not later than four months after the Panel s financial year end.the Panel s fourth report was received in October, 2001.The Report covers the period from 1 July, 2000 to 30 June, In the year to 30 June 2001 operating income fell 12% while expenditure increased by over 21%.The reduction was as a result of reduced income from document charges and the contract note levy.the major reasons for the increase in expenditure related to costs associated with the amendment of the Rules including professional fees and an increase in Directors fees due to the higher number of regulatory Board meetings.the operating surplus of the Panel for the year was 163,408, ( 393,818 in the preceding year). The members of the Panel are representative of bodies professionally involved in the securities markets and in the field of takeovers.the members are listed in Appendix 17. Regulatory Operations During the period from 1 July, 2000 to 30 June, 2001, the Panel supervised the following eight takeovers: Adare Printing Group plc Dunloe Ewart plc Ivernia West plc ICC Bank plc Tullow Oil plc Vislink plc Athlone Extrusions plc Seafield plc Offer by NAPG Limited, a Company backed by funds managed by Allen, McGuire & Partners Limited Scheme of Arrangement to take the company private Transfer, without change of beneficial interests, to a new Canadian registered company, Ivernia West Inc. Offer by Bank of Scotland Transfer, without change of beneficial interests, to a new UK registered company,tullow Oil plc Transfer without change of beneficial interests, to a new UK registered company,vislink plc Offer by Barlo Group plc Offer by Orb Acquisitions II Limited. 68

72 In addition, the following six companies were in an Offer Period at 30 June, 2001, but offers had not been made for any of the companies at that date: Ire-Tex Group plc; James Crean plc; eircom plc Marlborough International plc Golden Vale plc Reflex Group plc In the course of supervising the above transactions, the Panel exercised certain of its powers under the 1997 Act as follows: Rulings: The Panel issued thirty-one Rulings during the year in relation to various aspects of takeover activity, of which thirteen related to the proposed takeover of eircom plc. Waivers: Seven waivers were granted, ie., the Panel's Rules were specified as not being applicable. Derogations: Twenty derogations were granted (i.e., an adjustment to a Rule but not a complete waiver), of which eight related to the proposed takeover of eircom plc and seven related to the takeover of ICC Bank plc. Of the twenty derogations seven were granted in respect of Rule 20 which deals with equality of information. Enquiries: One enquiry was initiated by the Panel under section 9(5) of the Takeover Panel Act whereby the Panel can require a party to a takeover to furnish such information as it may require under the Act. In the view of the Panel, the overall standard of observance of the General Principles and the Rules by parties and their advisers was very satisfactory. Relevant Companies The Panel is responsible for monitoring and supervising takeovers and other transactions in relevant companies in Ireland. Relevant Companies as, defined by the Act, includes public limited companies or other bodies corporate incorporated in Ireland whose securities are currently being traded, or (if they are the subject of a takeover or other proposal) were traded within the previous five years, on a market regulated by the Irish Stock Exchange. Following consultation with the Panel, the Minister for Enterprise,Trade and Employment introduced new Regulations prescribing additional categories of companies as relevant companies in order to secure more fully the protection of their shareholders.the Irish Takeover Panel Act 1997 (Relevant Company) Regulations 2001 came into effect on 26 March 69

73 2001 and extend the definition of relevant company to include companies incorporated in Ireland and whose securities are quoted on the London Stock Exchange, the New York Stock Exchange, Nasdaq, EASDAQ or the Neuer Markt.As a result, the Panel will monitor and supervise takeovers of such companies and other relevant transactions involving such companies.the Regulations recognise that the substantial developments in capital markets in recent years has resulted in such companies seeking listings and raising capital on markets other than the Irish Stock Exchange.The Regulations had the effect of bringing eight new companies under the jurisdiction of the Panel. As at 30 June, 2001, the Panel s remit extended to 79 Irish-registered public limited companies or other body corporates whose instruments are authorised by the Irish Stock Exchange to trade on the Exchange. See Appendix 18 for the full list. The Rules The Panel has a rulemaking function under the Irish Takeover Panel Act (Takeover) Rules, 1997 and the Irish Takeover Panel Act 1997 (Substantial Acquisitions) Rules, 1997 which came into effect on 1 July, 1997.These Rules have been made principally to ensure that takeovers and other relevant transactions comply with the principles set out in the Schedule to the Act.The Rules also provide an orderly framework within which takeovers are conducted.the Panel undertook a general review of the Rules, which were issued by the Panel in 1997, taking account of the experience of the Panel over the last four years. Following a lengthy review process involving, inter alia, public consultation, an amended version of the Rules came into effect on 1 July, 2001.These rules embody amendments to the original rules and also contain three new Rules. One of the more substantial amendments is to Rule 9, which regulates mandatory takeover offers. As a result of an amendment, the permitted acquisition in any twelve-month period is reduced from 1% to 0.05% and the exclusion for persons holding more than 50% of voting rights in a company is limited to single holders of securities, or persons regarded as such under the Rules. In response to the increasing use of inducement fees in takeovers, the Panel has amended Rule 21, which regulates actions which may frustrate takeover offers.the effect of the amendment is to prohibit specifically such fees without the consent of the Panel. Such consent would only be likely to be granted in relation to specific quantifiable third party costs, subject to an upper limit of 1% of the value of the offer, and confirmation to the Panel from the offeree board and its financial adviser that the proposed arrangement is in the best interest of the shareholders of the offeree. The three new Rules which have come into effect regulate dual company transactions, reverse takeover transactions and schemes of arrangement pursuant to section 201 of the Companies Act

74 Enforcement of the Rules The Act gives the Panel statutory authority to make rulings as to whether any activity or proposed activity complies with the General Principles and the Rules.The Panel is also empowered to give directions to any party to a takeover to do or refrain from doing anything specified by the Panel.The Panel has extensive powers under the Act to make rulings and give directions, to hold hearings, to summon witnesses and to require production of documents and other information, where these are appropriate in the discharge of its statutory functions. For the purposes of hearings, the Panel has the same powers, rights and privileges as are vested in the High Court in relation to compelling attendance, examining on oath and compelling the production of documents.the Act also affords witnesses before the Panel the same immunities and privileges as witnesses before the High Court. During the period 1 July, 2000 and 30 June, 2001 the Panel granted twenty derogations (twenty six in the preceding period) of which eight related to the proposed takeover of eircom plc and seven related to the takeover of ICC Bank plc. Of the twenty derogations seven were granted in respect of Rule 20, which deals with equality of information. The Panel may also investigate a person s conduct where it reasonably believes that a contravention of the General Principles or Rules has occurred or may occur. Access to Reports Where it deems it necessary, the Panel (under section 21 of the Act) may require a Court appointed inspector to furnish it with a copy of a report provided to the Court or the Minister under the Companies Act Similarly, the Panel may require a recognised Stock Exchange to furnish it with a copy of any report given to the Director of Public Prosecutions in respect of an insider dealing offence.to date no such requests have been made. Charges In order to defray the expenses incurred in the performance of its function under the Act, the Panel is authorised to impose charges on relevant companies, on offerors who are not relevant companies, on dealings in the securities of relevant companies and on documentation submitted to the Panel in accordance with the Rules or in relation to Panel proceedings.the consent of the Minister to the current level of charges has been obtained. 71

75 72

76 THE CREST SYSTEM 10

77 Chapter Ten - The Crest System The Companies Act 1990 (Uncertified Securities) Regulations, 1996 (S.I. No. 68 of 1996) provide for an electronic share settlement system known as CREST. CREST is owned and operated by CRESTCo Ltd.The system has been operational since July 1996, settling Irish securities since October Participation in CREST is voluntary. Investors or persons who trade securities may choose whether or not to become CREST members and hold their securities in electronic accounts maintained within the CREST system. Members transfer title to their securities by inputting electronic instructions to the system across secure networks established specifically for that purpose.these networks are provided by third party network providers. CRESTCo s role is to accredit the providers against a series of technical specifications. Instructions so input are matched by the system to ensure that the key elements input by buyer and seller agree.at the point of settlement of a transaction: the securities that are the subject of the transaction are debited from the account of the seller and credited to the account of the buyer; CREST and the Bank of England have linked settlement through CREST with inter-bank payments through RTGS on a real-time basis, such that delivery of stock through CREST is simultaneous with the transfer of funds in RTGS; for securities that are ETT eligible (registered in the UK), CREST will confer full legal title to UK securities from the transferor to the transferee; for securities that are not ETT eligible (including Irish securities), an instruction is generated requiring the registrar to amend the register in respect of transfer. Both settlement banks and registrars also therefore interface with CREST for these purposes. As a condition for recognition, the Minister requires CRESTCo to submit an annual report on its activities in the Irish Market.The Fifth Annual Report submitted covers its operations in Ireland from 1 January, 2001 to 31 December,

78 CRESTCo Ltd. - Ownership and Governance CREST is owned and operated by CRESTCo Ltd., a private company incorporated in England and Wales whose shareholders represent a broad range of participants in the securities industry. Its directors are drawn from across the securities industry to represent the interest of different sectors.the directors are as follows: Sir Nigel Wicks Charlotte Black Alastair Clark John Gubert (Chairman), CRESTCo Ltd. Brewin Dolphin Securities Ltd. Bank of England HSBC Holdings plc Julian Leiper Ron Morgan Chris Ring Markus Ruetimann Iain Saville Hugh Simpson Stephan Schuster David Watson Michael Williams Andrew Winckler Pershing Ltd Shore Capital Stockbrokers Phillips and Drew Former Chief Executive, CRESTCo Ltd. (Resigned 28/2/02) Acting Chief Executive, CRESTCo Ltd. Deutsche Bank AG M & G Group UK Debt Management Office Ernst & Young David Wyatt CRESTCo Ltd.(appointed 23/1/02) CRESTCo Board sub-committees: The CRESTCo Board has a number of sub-committees, whose membership includes people co-opted from outside the Board itself.the following representatives of the Irish market participate in the Settlement Discipline Sub-Committee: Brian Healy, Irish Stock Exchange, 28 Anglesea Street, Dublin 2. Graham O'Brien, NCB Stockbrokers Limited, 3 Georges Dock, Dublin 1. CRESTCo s obligations CRESTCo s obligations are set out in the agreements it enters into with its users and participants. Primarily (in very brief summary), its obligation is to provide the settlement services described in the CREST Manual.The CREST Manual sets out the functionality contained in the CREST system. 75

79 Irish participation in CREST The Irish Stock Exchange CRESTCo has entered into an agreement with the Irish Stock Exchange under which the Exchange has appointed CRESTCo to provide settlement services. A Memorandum of Understanding exists under which both parties have agreed to share information with each other which is of mutual interest or importance. Irish Participants A list of the Irish bodies which were CREST participants during 2001 is at Appendix 19. Irish Securities settled in CREST At the 31 December 2001, 95 Irish securities were settling in CREST as compared with 120 at the end of CREST Rules - Registrars Service Standards The Regulations require CREST to have rules relating to registrars processing of registration instructions from CREST.These rules are set out in the Registrars Service Standards.There are seven standards in total covering: the processing of stock deposits; the processing of deliveries within CREST; the processing of stock withdrawals; reconciliations of the records maintained by CRESTCo and Registrars; contingency for a failure of a registrar s system; contingency for a failure of a registrar s site; the transfer of registers between registrars. The Registrars Service Standards were implemented in May, 1997 and have been fully in effect since 1 September, During the course of 2001, Irish registrars incurred an aggregate penalty of 2,214 representing 4.4% of the aggregate penalties for all CREST registrars Aggregate penalty incurred by Irish registrars 8, ,214 % of aggregate penalties for all registrars (UK and Ireland) 37% 6% 1.2% 4.4% 76

80 CREST Rules - Settlement Discipline Rules CRESTCo operates rules relating to matching and settlement performance by members. The rules apply target levels for performance for the matching of transactions and the settlement of sold transactions. Penalties will be levied on members who fail to meet these targets. Settlement performance of CREST members in general has improved during the reporting period. Settlement Discipline Rules The Settlement Discipline Rules include an Appeals Body independent of the CRESTCo Executive.The Irish market is represented on the Appeal Body by: Leonard Abrahamson, Dolmen Butler Briscoe, 4 Earlsfort Terrace, Dublin 2. CREST Rules - Bad Delivery Rules The Regulations require CREST to have rules relating to situations in which a registrar is unable to register a transfer in response to a registration instruction.these rules are set out in CREST Rule 18.The bad delivery reversal procedures were not implemented in respect of an Irish security during Changes to the CREST Rules The CREST Rules were most recently updated in November 2001, which reflected the introduction of Delivery versus Payment in Central Bank Money and Electronic Transfer of Title. Corporate actions The most notable corporate action involving Irish securities during 2001 was the CRH Rights Issue. However this Corporate action did not take place through CREST. European matters (i) The Settlement Finality Directive Directive 98/26/EC of the European Parliament (the Settlement Finality Directive) was implemented in Irish Law in the European Communities (Finality of Settlement in Payment and Securities Settlement Systems) Regulations, 1998 (S.I. No 539 of 1998, the Settlement Finality Regulations ) on 31 December,

81 The Settlement Finality Regulations provide for the automatic designation of bodies which are payment systems within the meaning of section 5 of the Central Bank Act 1997.The CREST system is a payment system for the purposes of the Central Bank Act 1997 and, accordingly, is a designated system pursuant to the Settlement Finality Regulations.Transfers of Irish Securities by means of the CREST system therefore have the benefit of the protection of the Settlement Finality Regulations. (ii) Links between the EU settlement systems CRESTCo has direct links to the Swiss, U.S. and Euroclear settlement systems.through its alliance with SIS, known as The Settlement Network, CREST has indirect links to all other Western European settlement systems. In consequence, Irish investors are able to hold and settle a broad range of Western European and North American securities in their CREST accounts. 78

82 Appendices