ODCE Investigation

Investigatory Powers I

The ODCE may require the production of documents in order to consider the possible exercise of its own powers or an application to the court for the appointment of inspectors. It may require the production of documents. It may apply to the court for a search warrant.

The ODCE or its authorised officers may require the production of documents on foot of a requisition if there are circumstances which suggest that certain grounds apply.

Copies may be taken of documents produced. Persons may be required to give an explanation of the documents. Persons may be required generally, to give all assistance as is reasonably required.

The ODCE has similar powers to require the production of related books and documents held by third parties. In this case, there must be reasonable grounds for believing that the documents are related. The notice must be given to the person concerned relation to the requisition.  They may make submissions within 21 days relating the ODCE’s opinion on the requisite relationship.


Investigatory Powers II

The ODCE may exercise its powers for the purpose of assisting a company law authority, if he has received the request from the authority for assistance in connection with its enquiries or he is satisfied that the assistance is for the purpose of discharge of that body’s supervisory or regulatory functions.

The “company law authority” is an authority outside the State that performs functions of a supervisory or regulatory nature in relation to bodies corporate, undertakings or their officers or persons acting on behalf of such authorities.

It is an offence to fail to comply with requirements made by the ODCE or its authorised officers. Certain defences are available. Where a false or misleading statement is knowingly made in response to a requisition, an offence is committed. It is an offence to destroy, hide, or mutilate books or documents, which are the subject of a requisition.

It is an offence to falsify, conceal, destroy or dispose of documents or records which a person knows or suspects may be relevant to an investigation which he knows or suspects is likely to be carried out by the ODCE into an offence under the legislation.

A warrant may be sought by a designated officer, on the basis that there are reasonable grounds for suspecting that material information is held on a premises. Material information, in this context, includes books and documents the production of which has been required under ODCE powers and those which an officer has reasonable grounds for believing, may provide evidence of the commission of offences under the Companies Act.


Orders to Produce

The ODCE may direct any company, at such time and place, as is specified, to produce such books or documents as it sees fit.  It may do so if there are circumstances suggesting

  • that it is necessary to examine the books and records with a view to determining whether an inspector should be appointed;
  • where the affairs of the company are being conducted with the intent to defraud creditors; creditors of another; or a member;
  • the affairs are being conducted for a fraudulent or unlawful purpose;
  • the affairs of the company are being conducted in a manner that is unfairly prejudicial to the members or some of them or the creditors or some of them;
  • any actual or proposed act or omission or series of acts or omissions would be unfairly prejudicial to any of the above categories or would be unlawful;
  • the company is formed for any unlawful purpose.

When books and records are produced, copies and extracts may be taken.  Persons who produce the books, present or past officers of the company concerned or a person who is employed may be required to give an explanation of any of the books or documents, including an explanation of apparent omissions in them.  If the books are not produced, the person may be required to produce them and to state, to the best of his knowledge, where they are.

It is a category 2 offence to fail to comply with the requirements in relation to the production of books or records.  It is a defence to prove that the books and documents were not in that person’s possession or under his control, or that it was not reasonably practicable for that person to comply with the requirement. Making a false or misleading explanation knowing it to be false, is a category 2 offence.


Third Party Orders I

The Director has the power to require the production of books and records, in the above circumstances, by a third party.  Copies may be required of books and documents which relate to books and documents of the company. The requirement is made by way of direction to the person concerned, specifying the books or records and the time and place at which they are to be produced.

The power to require a third party to produce books and records related to the company’s books and records, applies only if the Director is of the opinion that there are reasonable grounds for believing that they are required to be produced and that the books and documents of the company are related to one another, and the below steps have first been taken.

The Director must first notify the third party, stating that he proposes to require the production of the books and records; giving grounds for the opinion and that submissions may be made within 21 days.


Third Party Orders II

The Director shall have regard to the submissions before deciding whether to require the books and documents. Grounds include grounds related to the relationship between the company and the person required to produce the books; the common origin of the books or documents; or other similar circumstances.

The Director is not obliged to give prior notice, if he considers that to do so, could result in the concealment, falsification, destruction or disposal of the books or the books and documents are merely the originals of books or documents, copies of which have been previously produced.

The third party is not obliged to comply with the requirement to produce books, if the books or records concerned would by virtue of any law or enactment, be entitled to be withheld on the grounds of privilege.  The court may make an order against the third party to require him to produce the books and records, where he fails to do so on foot of a requisition by the Director.


Search and Seizure I

The ODCE has or may be granted by warrant, significant powers of entry and search of premises for the purpose of seeking books, records and material information.  There is power to search and seize documents.  Computers may be operated for the purpose of the search.  Persons on the premises may be required to facilitate access to information and to cooperate in operating the computer concerned.  A warrant may be obtained in respect of records that may be held within a dwelling house.

Where information which may be seized under the power is integrated with other data, the officer’s power of seizure includes the power to seize both seizable information and information from which it is not reasonably practicable to separate it.   The issue of whether it is reasonably practicable to separate the information shall be determined by reference to how long it would take to carry out the separation, the number of persons who would be required, whether it might involve damage to property; the apparatus or equipment that would be necessary to separate, the costs of so doing and whether it would prejudice the use of all or some of the information.

Material information for the purpose of the power includes any books or documents, production of which has been required under ODCE powers and which has not been produced in accordance with that requirement; or books, documents and other things including a computer which a designated officer has reasonable grounds for believing may provide evidence in relation to the commission of an offence under the Act.

A person is guilty of a category 2 offence if he obstructs the exercise of any of the above rights or fails to comply with requirements made.


Search and Seizure II

There are safeguards on the exercise of the ODCE’s extensive powers of search and seizure.   On application to the court by the Director or any person affected, the court may make orders in relation to the investigation, including orders that the seized information be returned and that steps be taken within certain time limits.

It is an offence to falsify, conceal, destroy or dispose of documents or records, knowing or suspecting that an investigation by the Director into an offence is being or is likely to be carried out.

Where on application to the District Court, it is shown that there is reasonable cause to believe that a person while an officer of the company committed an offence in connection with its management and evidence of the offence is to be found in any books, documents or records under the control of the company or a bank insofar as they relate to the company’s affairs, the District Court may make an order authorising inspection of the books and documents.  The District Court may make an order on foot of an application by the ODCE, Superintendent of An Garda Síochána and the DPP.


Publication and Disclosure

No information, book or records relating to a company that has been obtained above shall be published or disclosed unless

  • the company consents to the same;
  • it is required, in the Director’s opinion for certain purposes mentioned below or
  • the publication is to a competent authority below.

Information that has been obtained may be published or disclosed if it is required with a view to

  • investigating any offence under the Companies Act, financial services legislation, insurance legislation or taxes legislation;
  • with a view to the investigation or prosecution of any offence entailing misconduct in relation to the management of the company’s affairs or misapplication or wrongful retainer of its property;
  • for the purpose of assessing liability to tax or sums owed to State authorities;
  • for the purpose of a tribunal of investigation;
  • for the purpose of the performance of a commission of Investigation;
  • for the purpose of facilitating the performance by a Minister of his functions;
  • for the purpose of facilitating an accountancy or other professional organisations disciplinary functions;
  • for the purposes of the Irish Takeover Panel’s functions;
  • for the purpose of Competition Authority’s functions;
  • for the purpose of House of the Oireachtas committee functions;
  • for the purpose of ensuring procedural fairness, to the company, any third party to whom the Director has made an information requirement or any person named in a report or other document prepared by the Director;
  • with a view to the institution of proceedings for winding up;
  • for the purpose of complying with any requirement or exercising or any power imposed by the Act.

Information, books and documents obtained under the above powers may be disclosed to a competent authority without consent including the Minister; the Registrar of Companies; officer authorised by the Minister for Finance; the Revenue Commissioners; the Supervisory Authority; the Central Bank; and foreign Supervisory Authorities dealing with the above categories of matters   (insurance, financial services, tax etc.  and company law compliance).


Privileged and Confidential Material I

There is saving for privileged legal material.  This is material which in the opinion of the court, a person is entitled to refuse to give or produce on the grounds of legal professional privilege. The above powers do not compel disclosure by a person of privileged legal material or authorise its taking.

Disclosure of information may be compelled and possession taken, notwithstanding that it is apprehended that it constitutes privileged legal material, provided that the confidentiality of the information may be maintained as against the person compelling such disclosure, pending the determination by the court of the issue as to whether the information is privileged legal material.

Where information has been disclosed or taken into possession pursuant to the above powers, the person to whom such information has been disclosed or who has taken possession of it shall unless served with a notice of application below, apply to the court for a determination as to whether the information is so privileged.  This shall be done within seven days after the date of disclosure or taking possession.


Privileged and Confidential Material II

A person who is compelled to disclose information or documents may apply to the court for a determination of whether the information is privileged legal material. The court may give interim or interlocutory directions regarding preservation of the information at a safe and secure place and appoint a person with suitable legal qualifications, experience and independence from the interest to be determined between the parties that the court considers appropriate for the purpose of examining the information and preparing for the court, with a view to assisting or facilitating the court in making a determination as to whether the material is privileged.  The application is by way of motion held other than in public.

The ODCE may not under the above powers, require the production of bank records or documents relating to the affairs of a customer unless it considers it necessary for the investigation of the affairs of the person carrying on the business of banking, a customer or other person on whom a requirement has been imposed.  The publication in pursuance of this section of any report, information or document is privileged.


Inspectors

If the ODCE considers that there are circumstances which suggest contravention of the obligations of the directors in relation to share disclosures and dealings, it may appoint one or more inspectors to investigate whether such a contravention has occurred. It may report the results of the investigation to the Director. Group companies may also be investigated for this purpose.

The inspector if directed by the ODCE, shall make interim reports.  A final report shall be written or printed as the Director shall direct.  The expenses shall be defrayed by the Director.  If any person is convicted on indictment in a prosecution instituted as a result of the investigation, the court may, on an application, order that person to pay all or part of the expenses as the court may determine.

The ODCE may appoint an inspector to investigate the membership and ownership of any company, or any other matter in relation to the company, for the purpose of determining the persons who are the true owners or who are or have been financially interested in the company, or who are able to control or materially influence its policy.  Such an appointment may be made if the Director considers it necessary for the effective administration of the companies law, the effective discharge of its functions or in the public interest.

The investigatory provisions are similar to those that apply in a court appointed inspection.  On the application of the Director, the court may direct the company, the subject of the investigation to repay the Director so much of the expenses of and incidental to the investigation, as the court directs.

Where the court convicts on indictment, orders restoration of property or the payment of damages as a result of the investigation, the court may in the same proceedings, order the person convicted or against whom an award is made, to pay to the Director so much of the expenses of and incidental to the investigation as it directs.


Powers re Shares

The ODCE has the power to require information in relation to persons who are interested in shares or debentures, without appointing an inspector.  The Director may require information in relation to the ownership of shares and debentures, from persons whom he believes or has reasonable cause to believe has, or is able to obtain the information.

This requirement may include information about past and present interests in shares and debentures; names and addresses of the persons concerned; and names and addresses of persons who have acted on behalf of the persons. A person “interested” in shares is widely defined to include options and agreements, in relation to the exercise of the shares.

The failure to give the requisite information on request is an offence. The giving of information falsely, knowing it to be false or being reckless as to whether it is false, is an offence. The offences are subject on summary conviction, to up to 12 months’ imprisonment and/or a fine or on conviction on indictment, up to five years’ imprisonment and/ or a fine.


Restriction of Shares

The ODCE may impose restrictions on the transfer of shares. If this occurs, any transfer is void. The voting, financial and other rights in relation to the shares may also be frozen by direction. A person affected by this power may apply to the ODCE or to court to seek to vary or lift the restrictions.

It is an offence for a person to dispose of shares or exercise rights in respect of them in breach of the obligation. This also applies to agreements entered in violation of the restriction. The same penalties as set out above apply.

Where, in connection with a direction or an enquiry requiring information on the beneficial ownership of shares,  the Director considers there is a difficulty in finding out the relevant facts, he may, by notice in writing, direct that the shares be subject to the below restrictions.  The restrictions apply to
  • prevent the transfer of the shares;
  • prevent transfers of rights in relation to the shares;
  • restrict voting rights;
  • restrict further shares issued on foot of those shares; and
  • payments of sums due from the company, by way of dividend or capital.

The direction must be sent to the company, delivered to the CRO and published in Iris Oifigiúil. The court on application of a person aggrieved may lift the restriction imposed on the shares.  The Director may lift the restrictions if he is satisfied that the relevant facts have been disclosed, or that the shares have been sold and the court or the Director approves the sale.


Dealing in Restricted Shares

Where any shares are subject to restrictions, the court may, on application by a person below, of the Director or the company, order that the shares be sold, subject to the approval of the court for the sale and direct that the restrictions imposed shall cease.  On the application, the court may make such order or further order relating to the shares, as it sees fit.

Where shares are sold pursuant to a court order for sale, the proceeds less the costs of sale shall be paid into court for the benefit of the persons who are beneficially entitled to them.  Any such person may apply to the court in whole or in part, for the proceeds to be paid to him.

On the application, the court shall order, if no other person is beneficially entitled to the shares, payment to the applicant of the whole of the proceeds, after deduction of costs awarded and any interest accrued. Where any other person is beneficially interested in the shares, the payment to the applicant of such proportion of the proceeds after deduction of the costs and any interest thereon shall be proportionate to the value of the applicant’s interest in the shares relative to the full shareholding.

It is an offence to exercise or purport to exercise rights in relation to restricted shares.  This includes

  • voting;
  • purporting to dispose of them or an interest in them;
  • failing to notify other persons of the restrictions where the person knows that the other person would be entitled to vote on the shares whether as holder or proxy;
  • entering certain void agreements;
  • dealing with interests in shares and
  • breach of the restrictions.

The above provisions apply equally to restricted debentures.


References and Sources

Primary References

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)   Ch. 28  Courtney

Keane on Company Law 5th Ed. (2016) Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Gore Browne on Companies

Palmer’s Company Law