The Corporate Enforcement Authority has issued an enforcement note on the circumstances  leading to disqualification under the Companies Act 2014.

The note also explains varying instances of disqualification, such as automatic and deemed disqualification.

Last year, 25 were disqualified and, in the ten-year period preceding, a total of 257 directors were disqualified – 114 by way of court order and 143 on foot of the acceptance of disqualification undertakings.

Protect public

The CEA states that the primary purpose of disqualification is to protect the public from those whose record has shown them to be a danger to creditors and others. Disqualification also serves to improve corporate governance generally, as well as act as a deterrent, the CEA states.

The note explains the importance of recent judgments of the superior courts, where lengthy periods of disqualification have been imposed on company directors.

The CEA states that the primary purpose of company law is to facilitate continuity and encourage entrepreneurial activity.

It does so by providing for separate legal personality and limited liability, thereby circumscribing personal exposure to risk.

Strike off by CRO

Part of accountability for companies and their directors is the recent resumption of the Companies Registration Office’s (CRO) strike-off programme.

The CRO’s strike off programme is being rolled out on an incremental basis this year. As a result, the directors of many such companies will face scrutiny by the CEA.

Where there are undischarged debts, enforcement action may be taken leading to disqualification from acting as company director.

The consequences of disqualification are significant and the CEA has issued a reminder on the broader range of circumstances in which a person can be disqualified and the consequences of acting in contravention of a disqualification order.

The CEA has:

• Powers of search and seizure,
• Power of arrest by CEA officers who are seconded members of An Garda Síochána, and
• The right to request the courts to approve certain additional investigative measures.

The CEA enforcement mandate also covers supervising the corporate-insolvency process and conducting financial and related investigations, from SMEs and not-for-profits to companies whose securities are publicly listed.

Enforcement options for non-compliance with company law include:

• Civil responses such as directing companies and their officers to take certain corrective measures or the restriction and disqualification of company officers, and
• Criminal sanction, including prosecuting in the CEA’s name or the referral of matters to the Director of Public Prosecutions (DPP).

A person against whom such a disqualification order is sought will, as of right, have been served with the proceedings.