Oireachtas Joint and Select Committees
Friday, 22 January 2021
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
General Scheme of Companies (Corporate Enforcement Authority) Bill 2018: Discussion
General Scheme of an Employment Permits (Consolidation and Amendment) Bill
Pre-legislative Scrutiny of the General Scheme of Companies (Corporate Enforcement Authority) Bill 2018: Discussion General Scheme of an Employment Permits (Consolidation and Amendment) Bill
I thank all members and witnesses for participating in today's committee meeting in line with the exceptional measures we must take. Apart from myself and members of the committee secretariat, all members and witnesses are participating remotely.
Apologies have been received from Deputy James O'Connor and Senators Róisín Garvey and Marie Sherlock.
Today I am pleased the committee is able to begin its pre-legislative scrutiny of the general scheme of companies (corporate enforcement authority) Bill 2018. The previous committee in the Thirty-second Dáil commenced its consideration of this legislation but its work was far from completed. The matter is one of the priorities for the Tánaiste and Minister for Enterprise, Trade and Employment. I also have a keen interest in seeing its passage through the Oireachtas.
I am pleased we are joined remotely from the Office of the Director of Corporate Enforcement by Mr. Ian Drennan, director, Ms. Suzanne Gunn, enforcement lawyer, Mr. David Hegarty, enforcement manager, Mr. David McGill, digital forensics specialist and Mr. Conor O’Mahony, head of insolvency and corporate services.
In line with normal practice, members have been provided with documentation on this matter, including Mr. Drennan's opening statement, a briefing from the committee secretariat and the Library and Research Service regarding the general scheme, as well as written observations on this matter from several experts and stakeholders.
I must explain some limitations in parliamentary privilege and the practice of the Houses regarding references witnesses may make to another person in their evidence.
Witnesses who are physically present or who give evidence from within the parliamentary precincts are protected pursuant to both the Constitution and statute by absolute privilege. Today's witnesses, however, are giving their evidence remotely from a location outside the parliamentary precincts. As such, they may not benefit from the same level of immunity from legal proceedings as a witness giving evidence from within the parliamentary precincts.
Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of that person or entity.
Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction.
To commence our consideration of this matter, I invite Mr. Drennan to make his opening remarks. As his written statement has been circulated, it would be helpful if he were to highlight the main issues in it. Unfortunately, due to Covid restrictions we are limited in the amount of time we can allow speakers.
Mr. Ian Drennan:
I thank the Chairman and members for the invitation to appear before the committee and for the opportunity to discuss the general scheme of the companies (corporate enforcement authority) Bill 2018.
As referenced in the submission furnished to the committee on 4 December 2020, given the centrality of the Office of the Director of Corporate Enforcement, ODCE, to the general scheme, it is submitted that any assessment of the proposed legislation requires an understanding of the ODCE, that is, what it does, how it does it, the environment within which it operates, the resources at its disposal and the challenges that it faces. My principal functions as director are set out in section 949 of the Companies Act 2014. They include: to encourage compliance with the Act; to investigate instances of suspected offences under the Act; to enforce the Act, including by way of prosecution of offences summarily, by referring cases to the Director of Public Prosecutions, DPP, where there are reasonable grounds for believing that an indictable offence has been committed; and to exercise a supervisory role over the activities of liquidators and receivers in the discharge of their functions under the Act. In the context of the foregoing, it is important to note that the ODCE is independent in the discharge of the statutory functions conferred upon it by the Oireachtas.
Flowing from the aforementioned functions the ODCE has, in broad terms, two remits, namely, advocacy and enforcement. Across those two broad categorisations, the ODCE engages in, among others, the following activities: encouraging compliance with company law through the provision of information and guidance to stakeholders; examining complaints and other expressions of concern be they from members of the public, disclosures under the Protected Disclosures Act 2014, statutory reports, whether from auditors, liquidators or professional bodies, referrals from other law enforcement agencies and internally generated issues; conducting investigations into indications of breaches of company law; resolving lower level breaches of non-compliance in a cost and resource effective manner through a range of non-judicial interventions; examining and adjudicating upon liquidators’ reports in respect of insolvent companies; operating a statutory disqualifications and undertakings regime in respect of directors of insolvent companies; taking disqualification proceedings against directors of unliquidated insolvent companies; prosecuting cases summarily in my name and referring files to the DPP for consideration as to whether charges should be directed on indictment; and engaging in a full range of litigation associated with the foregoing categories of activities as necessary or as otherwise appropriate.
Over the last three years the aforementioned activities have given rise to, among others, the following: the publication of a suite of information and guidance documents aimed at assisting those involved in companies, for example, shareholders and members, directors and creditors, to understand their duties, obligations and rights, respectively; in excess of 100 production orders and requirements being issued to companies and individuals; 18 search warrants being executed by ODCE officers; voluntary cautioned interviews being conducted with 25 individuals; 18 individuals being arrested; on the application of the ODCE, the appointment by the President of the High Court of inspectors to Independent News and Media; 290 directors of insolvent companies being restricted; 88 directors of insolvent companies being disqualified; almost 100 statutory directions being issued requiring liquidators to comply with their statutory obligations; in more than 40 cases in which suspected directors’ loan infringements had been reported by auditors, or had otherwise come to attention of the ODCE, rectifications totalling in the order of €37.6 million; directions to charge summarily or otherwise in respect of five separate investigations; directions being received from the DPP to charge on indictment, or otherwise, in respect of seven separate investigations involving a total of 77 separate criminal charges being preferred as against eight individuals relating to breaches of company law, for example, fraudulent trading and provision of false information and to breaches of criminal justice more broadly, for example, theft, deception and money laundering; facts proved in the District Court as against two individuals relating to breaches of company law; and convictions being secured in the Circuit Court as against four individuals for breaches of the aforementioned categories of offences. As of today High Court inspectors continue to investigate the affairs of Independent News and Media; a number of criminal trials are before the courts; and a number of investigations are ongoing in respect of possible civil breaches of company law and-or criminal offences.
Part 2 of the general scheme is of most relevance to the ODCE, in that it provides for the establishment of the corporate enforcement authority, CEA, and for the transfer of the ODCE’s statutory functions to the CEA. As stated in the submission, the ODCE’s assessment is that the general scheme, as drafted, meets its statuary objectives in that regard.
The ODCE further welcomes the provisions of heads 38, 41, 43, 45 and 46, respectively.
The general scheme has been in gestation for some time, as was alluded to by the Chairman in his opening remarks, and as such it is understandably a priority for Government that it be enacted as soon as practicable. The ODCE fully supports timely enactment but would recommend that immediately following enactment, consideration be given to a number of important emerging issues in order that, where practicable, the CEA's effectiveness might be further enhanced.
Specifically, and as outlined in the submission, early consideration should, it is recommended, be given within company law and elsewhere, as applicable, to legislation to address: certain evolving legal issues in respect of which greater legislative clarity is desirable for investigators; technological advances in the law applying to search and seizure; complexities associated with white-collar investigations; and existing legal processes where scope for further streamlining exists.
The legislative amendments proposed by the ODCE would, in addition to further enhancing the CEA's effectiveness, also serve, to the extent practicable, to future-proof the CEA. I trust that these opening remarks I have read, in conjunction with the submission, are of assistance to the joint committee. My colleagues and I look forward to discussing the general scheme further with members over the course of the meeting.
I thank the witnesses. This is all a bit new to us, that is, having committee meetings by Zoom or Teams, but I am sure we are picking it up as we go along. I have a few questions and if I do not get to ask them all, I will hopefully get a chance to come back in at some stage. Mr. Drennan listed the successes of the office over the past three years in his statement but he has also spoken a lot, not just here, but in other arenas, about resourcing. Can he estimate how many crimes or transgressions might have occurred and gone without investigation due to lack of staff? Does he feel that there are a number of white-collar criminals that are currently walking the streets and walking about freely because they slipped through the cracks due to the fact the ODCE did not have sufficient resources or oversight to pursue them?
Mr. Ian Drennan:
The best way to answer that question is to say that everything that comes into the ODCE in the nature of a complaint or an expression of concern is treated seriously. It is assessed by reference to its respective gravity, seriousness and so on. The suggestion that anything of a serious nature that comes in would not be dealt with is not borne out by the facts. The possibility that serious issues are being brought to our attention but are not being dealt with as a consequence of a lack of resources is something that just does not happen. If it is sufficiently serious, it is dealt with. We obviously prioritise on an ongoing basis and we reprioritise as necessary. We would never simply ignore something if it is serious in nature.
It might be helpful to set out how we go about dealing with the issues that come across our desks. The first thing that happens is that a preliminary assessment is conducted. For those at the less serious end, we try to deal with them in a cost- and resource-effective manner. We do that through, for example, issuing warnings and requiring evidence of remediation, if necessary supported by a third party, for example, an auditor. If that is sufficiently suggestive or if it evidences that the matter has been addressed, and we get an undertaking that the matter will not be repeated, that will generally speaking be sufficient from our perspective. In the event of a recurrence, we will deal with that accordingly.
At the more serious end, we have a range of options at our disposal. These include civil remedies where an application can be made to the court, for example, an order to compel an individual or a company to comply with its obligations. It is only in the most serious cases that we would conduct criminal investigations.
In essence what I am trying to explain is that criminal investigations are very much the top of the pyramid, for want of a better term. We will only deal with the most serious issues that way. There is an awful lot that happens underneath the water, if you like, that gets dealt with otherwise.
Mr. Drennan made a very compelling case in his submission, and I heard him do so earlier, for the need for greater resources. With all due respect, if the office is attending to all of the work that is coming across its desk and it is prioritising and dealing with everything, what is the office going to do with the additional resources?
Mr. Ian Drennan:
The resources that in our estimation are required fall into two categories.
First, as I am sure the Deputy is aware, this legislation, if enacted, will have the effect of converting or transitioning the Office of the Director of Corporate Enforcement, ODCE, from an office to an agency. Without getting into-----
I apologise for cutting across Mr. Drennan but we are tight on time. I am aware of the additional HR and information technology requirements. When the office become a stand-alone entity, it will need all of that. I am talking about the nuts and bolts, the work that is being done. I know there are issues with regard to resources. There is a compelling argument for additional resources if there are issues that are not being dealt with and if there are issues around white-collar crime that Mr. Drennan does not have the resources to get to. I am not suggesting people in Mr. Drennan's office are not doing their work, of course they are. What I am asking is if the office had more people, would it be able to tackle more white collar crime? The logical extension of that is that there is white collar crime there that is not currently being addressed because resources are not there. Is Mr. Drennan saying that all the resources required are only for the additional responsibilities and that those the office now has are fine to transfer over but that it needs information technology, HR, tax-----
Mr. Ian Drennan:
No. There are two categories. I am not going to go into in detail on the first one because the Deputy clearly appreciates that there are additional processes internally and so on. The second is what we have set out. If this organisation is to realise the vision that has been set for it, it will require additional capabilities assigned to it. In the event that we are successful in that, then cases currently at a lesser level of priority can be escalated to a higher level of priority. The more resources one has, the more one can do. I was trying to give assurances to the Deputy that there is no question that things are not being looked at now as a consequence of resources. I want to allay any concerns there might be a suggestion that is the case.
It could not if there were no crime there but there is crime there that, as Mr. Drennan said, needs attention. On Mr. Drennan's points on the tendency of interested parties to litigate - this is not just an issue for Mr. Drennan, it is an issue many people have - before the civil courts, many are very well resourced as are their professional advisers. Does Mr. Drennan feel the parties being investigated have a substantial advantage over his office? I have heard members of An Garda Síochána and other commentators say that drug gangs and other criminals have an advantage over the Garda and it is sometimes down to resourcing.
Can Mr. Drennan expand on the points he made in his submission on the propensity to litigate and the advantages that the people have in terms of their professional advisers? Does it put the office at a disadvantage in that regard?
Mr. Ian Drennan:
The first thing is that any citizen of the State is entitled to litigate on any particular issue that he or she so wishes to defend his or her interests, whether in the context of a civil investigation or criminal proceedings. The point I was making in the submission which the Deputy referenced - the trial court down the line is criminal litigation - was that we find ourselves engaging in quite a lot of civil litigation for a variety of reasons. People are better resourced and better equipped to do that. That is a challenge but by the same token, it is part of the job. It is a part of the job we deal with on a daily basis. The Deputy referenced An Garda Síochána. When one is conducting civil or criminal investigations at this level, dealing with large corporate entities and that have a very significant financial quantum involved, people will defend themselves or seek to defend or vindicate their interests. We see that as part of the job. It is an integral part of the job.
Is one at a disadvantage? One can be, on occasion. If one is hit with large-scale civil litigation, it presents very significant challenges to the organisation. At the same time, it is part of what we do. It is an integral part of it. One deals with it as and when it arises.
I refer to the Deputy's earlier question and my response. That is a perfect example of why one might need to reprioritise something. It is because one needs to mobilise resources to deal with something that is urgent - for example, if one has been issued with proceedings.
That is my concern. I am not suggesting for a moment that people are not doing their work. Clearly, they are. That is not my point. My point is that what makes it necessary to reprioritise in terms of limited resources means that something else is not getting attention. It is not that the office is not prioritising and dealing with urgent issues. Clearly, it is.
Obviously, there are issues that cannot be dealt with if resources need to be shifted in order to deal with an issue which Mr. Drennan described as being at the top of the pyramid? The issues at the top of the pyramid are going to get attention. Nonetheless, there are people at the bottom of the pyramid who are affected by the issues and who would have an interest in ensuring that there are sufficient resources to deal with the whole pyramid.
Mr. Ian Drennan:
We prioritise. It would be an exaggeration to say that we do so on a daily basis because one could come into work, open the newspaper and see something in it that requires us to take action immediately. The point I am making is that it is just a daily part of what we do. If someone serves proceedings on us, that is their entitlement and we deal with the matter accordingly.
How has the Supreme Court judgment in CRH v. Competition and Consumer Protection Commission affected the office's ability to tackle white-collar crime? Can Mr. Drennan provide more information about how the judgment has created difficulties, particularly in the context of differentiating between people's home, personal and work devices? Can he elaborate on the points that are made on page 20 of the submission in the context of amendments. I know that this is a matter that goes beyond the role of the office. There is a discrepancy between what is working and what is not. Obviously, people have the right to switch off but we all use our personal devices for work from time to time. There is something of a grey area in this regard and has that given rise to difficulties for the ODCE?
Mr. Ian Drennan:
I am going to make some preliminary comments on this matter and I will ask my colleague, Ms Gunn, to supplement those. As we touched on in the submission, we all, as citizens, have certain privacy rights. These are fully respected but, on occasion, particularly in the context of criminal investigations, tensions arise between citizens' privacy rights and the duty of the State or us, in that particular iteration of the State, to investigate potential criminal activity. As a result, there are can be tension between the two. The judgments handed down by the Supreme Court to which the Deputy referred have a direct bearing on our work on a daily basis. We put it in the submission because this is a particularly complex issue that creates significant difficulties for us on a day-to-day basis as investigators. If the Deputy does not mind, I will ask Ms Gunn to supplement my remarks so that the Deputy will get a better understanding of the impact.
Ms Suzanne Gunn:
The CRH decision the Deputy referenced really has brought into sharp relief the interaction between the constitutional right of privacy, as it is afforded to individual citizens, within the confines and context of regulatory and, in fact, all criminal prosecutions and-or investigations. I will not go into the granular detail of that particular case because there were three quite detailed judgments from the Supreme Court in respect of it. I will not take up all of the time talking about the case but the nub of it relates to the uptake of an entire email folder by the Competition and Consumer Protection Commission. That folder contained thousands of emails. The contention of the Supreme Court in this regard was that in circumstances in which such a significant volume of material was taken, in the absence of safeguards to protect the interests of non-relevant material to that investigation or material outside the scope of the warrant, this had the potential impact of disproportionately breaching the privacy rights of the individual concerned. So it has wide application but it really creates acute issues when it comes to electronic evidence or electronic devices.
As the Deputy stated, everybody these days carry vast swaths of information around about themselves, their businesses and everything in their pockets, on tablets and in their bags. There is an enormous amount of information contained in those devices. The courts have always held the view that a certain level of material outside of the scope of a warrant is always at risk of being taken up in the course of a search. The issue for the court in the case of CRH was the vast quantities of data involved. How the court delineated that one might deal with that issue was by way of representations or engagement with the person whose rights were affected. It also took into consideration the deletion, destruction and, potentially, the return of material that was outside the scope of the warrant executed.
All of that raises acute issues in the context of criminal investigations and prosecutions. It does not underscore it to say that it has given rise to a significant level of complexity and risk in respect of the investigations in which we are particularly involved. Colleagues in other regulatory bodies have experienced similar issues. As the Deputy has said, some albeit not all of the parties we are investigating are well financed, instructed and advised and they are live to these issues. There is no doubt whatsoever but that it has created complexity and risk in how we navigate through those issues. In the submission that is before the committee, we included our view as to how that might be dealt with, namely, by putting protocols on a statutory footing, such that might outline the obligations of an organisation like ours in respect of navigating those issues. That certainly would create a significant degree of clarity and would offset many of the issues we experience, not daily, but not on an infrequent basis. Without doubt it is an issue that needs to be dealt with. It does affect quite a considerable number of stakeholders. How and by what means that is resolved is a matter for the Deputy's side of the house.
First, I thank Mr. Drennan and his staff for the work that has been done and the progress made in professionalising the area of corporate enforcement. I welcome the changes that are being put into law to give the organisation the status of an independent authority with the ability to recruit staff and have its own strategy, with a stronger collegiate three- or four-member form, or whatever it ends up as.
I have some questions. When the financial crisis hit, it certainly seemed that regulatory failures were not really matched by clear offences and that some of the difficulties in enforcement were due to our laws not having anticipated the sort of abuses that had crept in. From the organisation's perspective, has the 2014 Act fixed that or are there still major areas in which we need clearer or stronger law?
The courts found that the ODCE lacked skills, experience, risk management and various capabilities when the problems arose. Will the control over recruitment, which will be inherent in the new authority, give the organisation the capacity to meet those challenges in a new way?
The third question concerns powers. The witnesses have suggested that there may be a need for more powers for the organisation. Are there powers that should be considered in this particular Bill, as well as the continuing improvement? For example, administrative penalties seem to be a feature of some agencies now and is a new power. Is that something that would be important in any areas of the office's work?
On the issue of the relationship with the Garda, I believe that much closer relationships have been forged now and members have been seconded. Is additional provision in legislation required to ensure that this relationship, which is critical to some of the ODCE's work, is adequately set out?
We all know about the need for surge capacity in other areas of our public service. In the enforcement area, when surge capacity may be needed, for example, in a particularly large case, how does that get catered for in the arrangements the organisation has with the Government?
Do we need to distinguish between the obligations of large companies and the obligations of small companies in the legislative approach? The Office of the Director of Corporate Enforcement, ODCE, obviously has to make risk-based assessments on when to pursue different requirements. In regard to obligations like reporting and filing, and all these sorts of things, do we need to have different expectations as between some operators and others? Those are my questions.
Mr. Ian Drennan:
Deputy Bruton covered quite a lot of territory in those questions. I am conscious he is a former Minister in the Department and probably knows more about some of these matters than I do. I will start towards the back of his questions.
Administrative sanctions, as I am sure the Deputy is aware, are in the nature of fines and so on. In our assessment, they are more suitable and akin to regulatory or supervisory-type bodies, and that is not what the ODCE is or does. We are not a supervisor or a regulator in the same way as, for example, the Central Bank is vis-à-visfinancial institutions. Rather, we are an enforcement body. We do not have any particular burning desire to be conferred with administrative sanctions, to be short on that. I do not think they would necessarily make our lives easier or help us to be any more effective or efficient in what we do.
In terms of surge capacity, I can tell of the practical experience of having been served judicial review proceedings at very short notice. The surge capacity is that everybody rolls up their sleeves and gets stuck in, and we deal with it over the space of 48 or 72 hours in terms of trying to put together a response and a defence to it. As I touched on in response to Deputy O'Reilly's earlier questions, it is part of the job, is part of what we do and is part of the risks associated with what we do that we are always susceptible to judicial review.
Deputy Bruton touched on the question of whether there is the wherewithal to bring in additional people. Whereas there is, on occasion, the reality is that when dealing with something that is highly specialised, they are not necessarily going to be of enormous use to us, and we need people who are fully conversant with the granularity of the issues involved. We engage external counsel on an ongoing basis and we have a very competent team of internal counsel as well. That is primarily how we do it but, on occasion, we need to hire in additional resources and we do that as is required on a short-term basis, primarily in the form of professional third parties.
On the question of small companies versus large companies, as the Deputy will be aware, there are already fairly significant concessions to small companies. For example, they have a different reporting regime and they have the latitude, on occasion, to have audit exemptions and so on. That represents a fairly significant easing of the burden on small business and I know successive Governments in recent years have been very keen to try to reduce the administrative burden on smaller companies. Against that, at the upper end of the spectrum, there are listed companies that have to comply with the full range of Stock Exchange regulations, the combined code and so on. Is there scope for reducing smaller companies’ obligations? To be candid, it is not something we spend a lot of time thinking about and we do not have a strong policy view on it. We just get on with enforcing what comes across our desks. Given there are already very significant concessions in place for smaller companies, we would certainly not be aware, from our engagement with stakeholders, that there is any very strong, burning justification for a further reduction in that sphere.
The Deputy talked about having more powers. Again, what I would like to say is that we have very significant and substantial statutory powers and, for the most part, they serve us well on a day-to-day basis. I think it is important that the committee not be left with a perception that we are looking for significant additional powers. There are additional things we think would be useful and could render the corporate enforcement authority, CEA, more effective. I will give an example of that, which is that we made reference to the custody regulations.
The Office of the Director of Corporate Enforcement, ODCE, is comprised of both civilians and seconded gardaí and those gardaí are with us pursuant to a Government decision that was put in place at the same time as the Company Law Enforcement Act was enacted back in 2001. They carry with them all their powers as sworn members of An Garda Síochána, which gives us the wherewithal to arrest people and so on.
The issue that arises from our perspective is that when we arrest somebody for the purpose of questioning pursuant to the custody regulations, which are the responsibility of the member in charge who is detaining the individual in the relevant Garda station, under our legislative code, it is only members of An Garda Síochána who are permitted to interview the individual concerned. As to the type of work, we are looking at complex financial transactions and voluminous quantities of corporate documentation and, for example, digital forensics where we are dealing with devices and so on. It is, to put it mildly, suboptimal for staff to be sitting outside the room having to try to deal with the answers that have been given to the interviewing gardaí and then trying to formulate supplementary questions arising from those answers, and doing all that in real time. We are up against the clock from the time the individual is detained because there are constraints on the length of time an individual can be detained. They are entitled to rest periods and so on and all of that eats into one's time. If we want to put a significant number of charges to an arrested person, we have to question that person in respect of each charge separately so we very quickly run through the time.
What we are proposing is akin to what the Criminal Assets Bureau and also the Competition and Consumer Protection Commission, CCPC, have in respect of certain matters, namely, that non-gardaí - in this instance, officers of the ODCE, civilian officers, be they accountants, digital forensic specialists or whatever - would be allowed, under the custody regulations, to participate in those interviews and bring the additional expertise to bear. That is not for a moment to suggest that our Garda colleagues do not do that but obviously there are limits to anyone's special expertise. We believe that would confer, as it has done elsewhere, significant additional efficiency and effectiveness benefits and dividends on us in terms of the value we can get from a suspect interview.
Deputy Bruton referred to the financial crisis and so on. He will have been closer to this than I was, but one of the unpalatable issues that arose from that was that certain of the activities that gave rise to where we ended up, for example, mismanagement of the financial institution, taking unnecessary risks or not understanding the risks being taken, do not necessarily constitute criminal behaviour. While they give rise to competency issues, that is a different matter. The ODCE, with a mandate for company law, was only able to investigate certain issues that on their face would appear to have constituted breaches of company law, and it did that. As a former Minister, the Deputy knows that the ODCE, having submitted files to the Director of Public Prosecutions, DPP, subsequently secured a number of criminal convictions on indictment in respect of certain of those matters. To answer his question as to whether the Companies Act 2014 has addressed that issue, the Companies Act 2014 was not really the problem in the first place in that to any extent that other activity that might have been perceived to be, or could have constituted, criminal activity resided in other statutes, be that Central Bank legislation or various other codes of legislation. I am not an expert and I am not in a position to speak to the amendments that have been made to those various codes of statute in the interim. However, I am conscious that the Law Reform Commission, in its report a couple of years ago, recommended the creation of a new offence of egregiously reckless risk-taking which, if memory serves, was consequent upon a recommendation made by a former Governor of the Central Bank. I am aware that a recommendation was made that this would not fall within company law but, rather, would fall to be legislated elsewhere. I am not the best person to speak about where that is at or the potential impact it might have on other regulatory bodies. I think that answers all the questions the Deputy posed.
I welcome our guests. What is the budget of the ODCE? When will it get increased powers, manpower and responsibilities and what will that mean for its budget? What extra resources will it require? Will the witnesses comment on the issue of liquidation?
Companies will be under pressure soon due to what is happening at the moment unfortunately. We have had some discussion in this committee on how liquidations have been carried out in the past. The heads give some additional powers with respect to restricting directors who fail to convene or properly manage the appointment of liquidators of a company. I ask the witnesses to comment on those points. I might come back in later.
Mr. Ian Drennan:
I cannot see on my screen who has posed that question. I would like to defer to my colleague, Mr. O'Mahony, on both those issues as they come within his remit. By way of introduction, Mr. O'Mahony is the head of both corporate services and insolvency. I ask him to speak about our budgets and to deal with the Deputy's questions on insolvencies and liquidations.
Mr. Conor O'Mahony:
Regarding budgets, as the director outlined earlier, we anticipate that we will have a requirement for additional staff to deal with the sort of administrative-type issues that arise for an authority or an agency, as opposed to an office. We have been in discussion with the Department on that. Our budgets were increased in anticipation of that. We got an extra €1 million in 2019 in anticipation that the legislation would be going ahead at that stage, but for various reasons that did not happen. Financially we are probably in pretty good shape. We have that budget, which should be adequate at least in the short to medium term to cover the staffing requirements that we anticipate and some of the other issues. I think that aspect is fairly good.
Deputy Bruton mentioned the financial crisis. After the financial crisis there was a real surge in liquidations and the numbers peaked in 2011 at about 1,400 cases a year. Those numbers have steadily dropped in the interim and we expect just over 400 insolvent liquidations in 2020. That has been a slow and steady reduction. Arising from the impact of the pandemic, there is a general view that the numbers are likely to surge again. The extent of that is quite unknown at this time because obviously, account needs to be taken as to the difference the Government supports will make. There are many different types of supports and many different impacts on different businesses. Some are completely devastated, others are doing okay and managing to get through it. Some of them are greatly helped by the Government supports, the Revenue's deferral of charges and other things of that nature. We are expecting a surge of liquidations and that will be a challenge for the office. We are trying to get ourselves ready to handle that.
The Bill makes provision to deal with companies where a liquidator is not appointed. Thankfully, this is a rare issue. This recommendation came from the Company Law Review Group a few years ago. The opportunity is being taken in the Bill to provide for that. It provides that if the directors allow a liquidation to proceed without a liquidator being appointed, they will face automatic restriction in the context where no liquidator is there to assess their performance, provide a report to us and then for a decision to be taken on whether that matter should go before the courts for restriction. It is a kind of a backstop to incentivise people and let them know there will be consequences if a liquidator is not appointed. We expect that provision, if it is enacted as is, to act as a significant disincentive for anybody to try to game the system by not appointing a liquidator.
I think that deals with the two questions, unless anybody wants to ask anything else.
I call Deputy Paul Murphy. Is Deputy Murphy with us? With the committee's indulgence, we can bring him back in later. Next, then, is Senator Gavan of Sinn Féin. I wish to advise everybody that we are on to the second round now.
I wish to follow up on those last comments from Mr. O'Mahony. I should start by thanking all the guests for their comments and Mr. Drennan for his presentation. This issue of directors not putting insolvent companies into liquidation is a point of particular concern to an awful lot of us. It is an issue of huge frustration for trade unionists, employees and companies. I will not name any companies but I think we are all aware of key examples of what I am talking about, whereby employees have been left facing nothing after years of service. I was a little concerned by one comment Mr. O'Mahony made. I do not want to misquote him but I think he mentioned that the issue of directors not putting insolvent companies into liquidation is rare. I am not sure I would agree with him on that but I do not want to misquote him. Is that what he said?
Mr. Conor O'Mahony:
No. I was referring to a slightly different issue, namely, situations in which the directors of a company convene a liquidator's meeting but do not nominate a liquidator, the creditors do not nominate a liquidator and the resolution is passed putting the company into liquidation but no liquidator is appointed. There is then what one might call a zombie liquidation in place, there is nobody there to prepare a report for us and the normal supervisory role etc. does not flow from that. That is a different situation from what the Senator is talking about. What he is talking about is insolvent companies that are not liquidated and are effectively just left to whither on the vine and usually, eventually, are struck off. In respect of that category of companies, we have a very specific enforcement programme. There is a particular provision of the 2014 Act, section 842(h), not to get too technical about it, which states that if one allows a company to be struck off the register with debts, one is liable to be disqualified. We have an active programme for dealing with those companies. We have in the past three years disqualified more than 60 directors who have been guilty, if one likes, of allowing that situation to arise. We do not go after all companies because some companies might have relatively modest debts or we might not be aware of significant debts. However, once we have evidence that there is a reasonably high level of debts, we will pursue disqualification against directors who allow that to happen. The Company Law Review Group has looked at a separate issue. In 2017 work was also done by the then chairman of the Labour Court, if I am not mistaken, on how the social welfare system deals with such situations, trying to ensure that people who have lost their jobs by virtue of a company ceasing to trade will be given access to the Social Insurance Fund and the protections that flow from that. That particular dimension is not within our remit but, as I said, we do have a programme for dealing with companies that end up being struck off and do not go through a liquidation process at all. That is a different scenario. I hope that clarifies the matter.
It does, and I thank Mr. O'Mahony. I have a follow-on question. Does Mr. O'Mahony's organisation have a role in so-called strategic liquidations, whereby assets are basically moved from one company to another to enable a liquidation that basically saves values in the company but at the employees' expense?
Is that something that his office does or should deal with?
Mr. Conor O'Mahony:
When any company goes into an insolvent liquidation, the liquidator has to report to us. We will review the liquidator's report and any other information available to us in determining whether the directors of that company should face sanction, whether it be restrictions, disqualification or referral to the enforcement side for more serious investigations. We will take all relevant factors into account. If there is evidence that something underhand has been done which appears to us to be irresponsible - there is a lot of jurisprudence which underpins what responsibility and irresponsibility look like - then we will not grant relief in that case, the case will go before the courts and the directors will face restriction. That course of action is open to us but there are things that are possible and permitted under the Companies Acts and not everything that people might be uncomfortable with meets the threshold of every responsibility as defined by the High Court over many years of jurisprudence.
I wish to raise an issue regarding head 38 of the proposed Bill, which deals with liquidation. The Company Law Review Group, CLRG, had a slightly different proposal. It proposed that the director of an insolvent company who failed to take appropriate steps to nominate a named liquidator should be deemed to be subject to a restriction order. What is Mr. O'Mahony's opinion on that? Does he think the CLRG is looking to a higher standard than that in the Bill?
Mr. Conor O'Mahony:
The process or procedure is that the CLRG will review something and make certain recommendations as it sees fit. Those recommendations will go into the Department, the Department will review them, consult with the Attorney General and draft up provisions or not, depending on what is approved by the Minister or Government. They are essentially matters of policy on which it would not be appropriate for us to comment.
Coming back to the first point my colleague, Deputy O'Reilly, made on resources, I have a more specific question. A number of us are interested in the investigation into the Football Association of Ireland, FAI. I think the ODCE seized 280,000 files before Christmas. Does the ODCE have enough resources right now to investigate this important case?
I understand that. I will not comment on an individual case but I echo the comments of my colleague, Deputy O'Reilly. I am conscious of what Professor Deirdre Ahern stated in her submission. She said it is clear that the witnesses' organisation has been under-resourced for some considerable time. I have a concern in this regard. That seems like a huge investigation to undertake. Am I right in saying that the current staffing is around 41 people?
Mr. Ian Drennan:
That is correct. When I took up the position, I undertook an assessment of the ODCE's then capabilities. I identified that we had a significant deficiency in accounting expertise, by which I mean we only had two, one of whom was coming relatively close to retirement. We also had no internal digital forensics capability whatsoever and so were entirely reliant on third-party providers. By digital forensics, I mean when one seizes a device, that one has the ability to image it in an evidentially integral way and so on. As a result of that exercise I referred to, I prepared a document for the Department and sought a significant increase in our resources in those areas. All of that was forthcoming and successive Ministers and their officials have been supportive of our endeavours to further professionalise the organisation and make it more effective at what it does.
We now have an approved core of seven accountants from a variety of backgrounds such as enforcement, the private sector, banking, the public sector, policing and so on. We have a digital forensic accountant who is a leading expert in that field. We have a state-of-the-art digital forensics laboratory, which is bar none in terms of what we can do in it. There has been some very significant investment in the organisation. That said, these are large investigations. As I said earlier in response to Deputy O'Reilly, of course if one has more, one can do more. As I said at the committee previously, my personal philosophy is not about us needing more and more; it is about getting the right people. The right resources are much more important than more resources. It must, however, be balanced. As Deputy O'Reilly referred to, we have outlined in the submission that for reasons associated with the legal change in the structure of the organisation and the vision that has been articulated for the organisation, we will undoubtedly need some extra people. We have been very measured in trying to identify that. We clearly need additional resourcing in the area of digital forensics and legal, for some of the reasons that were outlined earlier.
If I may, I will kill two birds with one stone because it occurs to me that I did not answer one of Deputy Bruton's questions on gardaí. We reach pinch points at any given time and one cannot resource an organisation on the basis that it will always be in surge. One tries to staff and structure an organisation such that one can deal with the day-to-day activities and have a certain amount of redundancy built in so that when surges happen, the organisation can deal with them. Clearly, there are limits to that and it is not credible to go to a Minister or to anybody else looking for resources that one cannot justify on a day-to-day basis. That is a delicate balancing act. An organisation does reach pinch points from time to time. Relatively recently we identified a pinch point with the volume of witness statements that need to be taken. I communicated with the Garda Commissioner and asked him to deploy some additional detective gardaí with us for a certain period on a temporary basis. I am glad he indicated that not only would he do this but that they would be deployed in the very near future. Those pinch points arise from time to time and they have been reflected in the submission. Clearly, one of the areas we could certainly benefit from is additional members of An Garda Síochána, given that they are very important in what we do, as the committee touched upon earlier.
Deputy Bruton asked if we needed any legislative provisions to reflect our important relationship with An Garda Síochána. The short answer to that is "No", but there are some administrative level issues that could be dealt with by way of a memorandum of understanding, MOU, for example, between the new authority and the Commissioner. I have written to the Commissioner in anticipation of the corporate enforcement authority being set up, with a view to try to put in place an MOU that would formalise certain of those issues to make things more efficient and effective in the future. I hope this answers the Senator's questions and addresses Deputy Bruton's earlier question.
Will Mr. Drennan explain what he feels needs to be done to support his work in combating white-collar crime by modernising and updating search powers and having regard to electronic data, and especially data stored in the cloud? I fully take his point on it not just being about quantity and that even if one had 100 people, if they were not suitable they will not be of use. Will he comment on how many people, and what grade, group or category or worker, are needed to perform the other functions, separate from IT? Perhaps he could put a figure on the detailed work that the office needs to do with regard to numbers of accountants, forensic accountants and those IT supports.
Perhaps Mr. Drennan could give us an idea in terms of numbers and grades how many additional personnel will be needed?
Mr. Ian Drennan:
I will take the second part of that question and then I will ask my colleague, Mr. McGill, the aforementioned digital forensics specialist, to talk about the warrants and the IT aspects that the Deputy referenced. Leaving aside HR, finance and so on, to which the Deputy alluded, we have indicated that we will need, by way of additional resourcing of the corporate enforcement authority, a new digital forensics professional who would work with Mr. McGill, another legal professional to work alongside the lawyers we currently have and one administrative support officer to assist them and, in terms of additional gardaí, one additional detective sergeant and eight additional detective gardaí. Can I ask Mr. McGill to deal with the first part of the Deputy's question?
Mr. David McGill:
On the search warrants and the cloud, it is related to the amount of data that is now contained in personal devices and electronic devices in general. In fact, an awful lot of data is stored in cloud storage, which means it does not actually reside on the devices themselves. The current powers under section 787 of the legislation allow us warrants to access these devices while we are on site. The proposed head 46 of the Bill will basically ameliorate these powers to give us the opportunity to balance our need to access these devices and access the information contained within them, with the impact that we are having on the people impacted by the search warrant.
For example, if we are entering a company or private residence we obviously want to minimise the amount of time that we are there because we understand that it is impacting on people's lives. We currently have provisions under section 788 for extended powers of search off site. The provision in head 46 extends that to allow us to do cloud searching off site as well so that we can secure the data as it is and conduct the sift off site in the same way we do with physical documents, but now with electronic documents.
What was alluded to in the submission made as part of this meeting was to consider extra powers outside of this. Currently, we apply for a warrant to search a premises and everything that stems from that is based on the warrant to search a premises. We envisage meeting potential future needs to apply for a warrant to search the cloud itself or to search an account which is the property of an individual or an entity. I hope that answers some of the Deputy's questions.
It does indeed. It does sound complicated and obviously the kind of work for which a huge amount of training is needed. Given that technology very often moves faster than every Department, than politics and than everything else, I fully appreciate the job of work the witnesses have there.
This is a bit speculation but following the collapse of the retrial of Sean FitzPatrick, there was some criticism of the resourcing and the structure of the office. Again I respect that the witnesses might not want to comment on this, but have they a view on whether resources could have been provided in advance to ensure that this did not happen? Commentators have said, and I would tend to agree with them, that the under-resourcing was almost Government policy, and that a concerted effort was made not to give the office the resources that it needed. If it had had the resources, do the witnesses believe that the trial would have collapsed in that way?
Mr. Ian Drennan:
I have to say by way of preliminary comment, certainly to those members who were on the predecessor committee, that there has been inordinate correspondence between the committee and the ODCE over the last couple of years in which I have set out that I would do everything possible to assist the committee in understanding those matters. I am quite happy to do so in due course if the committee really wants to do that.
From our perspective, I have no desire to re-litigate these issues. They occurred approximately 11 or 12 years ago or thereabouts. In short, I could not possibly answer that question in the time allotted here. That is something that would require going back to where we started by making a submission to the committee so that we could fully understand it. I do not know whether anyone has the appetite to do that. For what it is worth, I would seriously question the value of doing that. If that is where the committee wants to go, then so be it but it is not something I can address today because of the complexity of the issue.
I am happy to be advised by Mr. Drennan on that matter. As I said, when one does some research and looks at the ODCE, this case comes up. It is an issue about which there has been a huge amount of commentary. Indeed, there are plenty of people who have a view on the level of funding and resources and who have written much more about this than I have time to read. I fully accept that we do not have the time today nor the scope to do it and that is why I am happy to pass on that question.
I am sorry but the Chair must have missed my hand up. I would like to ask one or two other questions if I can. Head 18 talks about the disclosure of information to the authority. Many of the companies we deal with in Ireland have international links. Can our guests let us know what is the situation regarding getting information internationally? What kind of contacts has the ODCE had with other such bodies internationally? Should head 18, as it stands, be expanded to include any other agencies? That is my first question.
The number of persons on the authority, according to the heads, is one, two or three. One submission recommends that this figure should be five in order to provide flexibility. Mr. Drennan might comment on that.
Deputy O'Reilly and others have spoken about the fact things are changing very fast in respect to technology and how things are happening. Is there anything coming down the tracks? Does Mr. Drennan think that the heads, as set out, give sufficient flexibility to adapt to unanticipated change? Does it provide the flexibility so that the ODCE will not have to come back to the Oireachtas looking for more changes to the proposed legislation?
Mr. Ian Drennan:
Please bear with me while I check head 18. It references disclosure of information to the authority. That is for the most part a re-enactment of the extant legislation. We have a statutory duty of confidentiality and it flows both ways. We can provide information to certain other parties where there is a reason to do so. For example, we can share information with An Garda Síochána if we are satisfied it is relevant to its remit. Head 18 is already on the Statute Book and it permits certain other entities to share information with us. In terms of the way in which that is constituted, I do not think we have anything in particular to say on that. We are quite happy we do not experience on a frequent basis a difficulty with having other people share information with us. Typically, they tend to be professionals, such as other regulatory bodies, law enforcement bodies or professional bodies. We do not have any particular issues with that. There are certain mechanisms in place whereby we can share information with entities outside the State and that is done through mutual legal assistance and other mechanisms like that. We can co-operate with police forces and other entities in other jurisdictions.
Deputy Stanton’s third question was about flexibility. What we have sought to do is highlight and incorporate in our comments certain areas where we think a corporate enforcement authority could be further enhanced in terms of its effectiveness by way of statutory amendments. Having said that, and as I set out in my submission, the Bill is for a particular purpose. The question we were asked by the committee was whether we believed it was fit for purpose and our answer is yes. Clearly, what gets legislated for in due course is a matter for the Minister, the Government and ultimately the members as legislators. I do not think that any piece of legislation can ever entirely future-proof an organisation.
As was talked about earlier, digital forensics, information technology and all those areas are evolving at a very fast pace. My colleague, Ms Gunn, referenced earlier on privacy and the sort of issues that arise there. That is a moveable feast as well and will evolve over time.
Can I guarantee that we will never be going back to the political system looking for amendments? No, but I do not think any other regulatory or enforcement entity could do so on the basis that things evolve. Deputy Stanton's second question, which I am taking last, is on members of the authority. That is clearly a policy matter for the Minister, the Government and ultimately for the Legislature. It would not be appropriate for me to comment on that.
Would anybody else like to contribute? Nobody else seems to have indicated.
On the comments Mr. Drennan made on the question from Deputy O'Reilly on a previous case that collapsed, I would be interested to tease those out with him at another time. I will not do so at this committee but I refer to Mr. Drennan's response to her.
On the Bill we are talking about now, I reiterate how important I believe it is to establish a corporate enforcement authority that will be separate from the Department of Enterprise, Trade and Employment. It is an issue I raised in the last Dáil numerous times and I am pleased we are beginning to make progress on creating this new and important entity. There is a perception that many crimes are not crimes if one wears a suit and that often white-collar crime is never investigated properly or on the scale required. I hope the work of the corporate enforcement agency will show the people that we, as a State, will prosecute crime no matter what resources are at the disposal of the suspected offender.
I have three short questions. My first question is as follows. In the last Dáil I spoke on the Office of the Director of Corporate Enforcement, ODCE, numerous times. One of the big concerns I raised was on staff numbers at the ODCE. In terms of funding, is Mr. Drennan confident that he will have sufficient resources to hire the necessary specialist staff required to maximise the effectiveness of the corporate enforcement agency? My second question is as follows. In a submission, there is reference to existing barriers to maximising the effectiveness of the corporate enforcement agency. Could Mr. Drennan provide some detail as to what those existing barriers to maximising the effectiveness are?
My third question is on whether Mr. Drennan will agree with Professor Ahern's submission that in the proposed membership structure of the corporate enforcement agency, one to three members is too small. It strikes me as being too small. Mr. Drennan might comment on that.
Mr. Ian Drennan:
The first thing I would like to do is to make an observation on the Chair's comment that there is a perception that people who wear suits are not punished for crime or whatever the case may be. What I would say in response to that is that in the last couple of years, we have submitted files to the Director of Public Prosecutions, DPP, who has in turn directed charges, including fraudulent trading, theft and money laundering against individuals who were the subject of investigations in this office. I do not think that one has to wear a suit to engage in criminality under the broad rubric of white-collar crime and, frankly, we do not really care what people are wearing. We have carried out thorough investigations and have submitted them to the DPP and she in turn has deemed it appropriate to prefer very serious charges against those individuals.
On the Chair's question on whether we have enough resources, I refer to the response given to Deputy O'Reilly. The Deputy asked me for details of the additional investigative resources that we have indicated to the Department we believe would be appropriate in trying to assist this entity in realising the vision set for it. Clearly, there are political decisions as to whether those additional resources are granted. In the event they are granted, one would expect the additional resources to discharge the salaries and associate costs that go with those resources would be forthcoming and, similarly, with the members of An Garda Síochána I referenced in my response to Deputy O'Reilly. There is not much more I can say about that.
The Chair sought further information on barriers we see as being potentially problematic in progressing investigations and what they might be. Again, I reference some of what we have previously said during the course of the interaction. I spoke about custody regulations to Deputy Stanton but apologies if that was not to whom I was speaking. Mr. McGill spoke about warrants and the information technology aspects of those. Ms Gunn earlier on spoke about the privacy issues emanating from the Supreme Court judgment in CRH v. Competition and Consumer Protection Commission and the constitutional right to privacy and how that interacts. There is a tension between it and criminal investigation.
We shared with the committee our observations as to how those issues might be dealt with. Finally, the Chairman asked about the membership and size of the authority but that is a policy matter upon which it would not be appropriate for me to comment.
That concludes our consideration of this matter. I thank Mr. Drennan and his colleagues for their assistance to the committee today. The committee will give further consideration to this matter next week when we will engage with the Tánaiste and Minister for Enterprise, Trade and Employment.
Thank you very much. Our next meeting is scheduled to take place on Friday next from 1 p.m. to 3 p.m. but that is subject to change in the context of the current Covid-19 restrictions. I thank members for their participation in today's meeting under exceptional circumstances. The next meeting will be conducted in the same manner and in the meantime, I hope members and their families remain safe in these difficult times.