Annual Report 2022-2023 Case Studies

A complaint was received from a member of the public stating that a company was using the complainant’s residential address as the registered office address for the company without the complainant’s permission. 

Having obtained a contact address for the secretary of the company concerned, the CEA wrote to the company advising it of its obligations under section 50(1) of the Companies Act 2014, which provides that: A company shall, at all times, have a registered office in the State to which all communications and notices may be addressed.  

Following this intervention, compliance was achieved with a new registered office address being filed with the Companies Registration Office.

Subject to certain exceptions, company law requires that, each year (and not more than 15 months apart), a company must hold an Annual General Meeting (AGM) of the company. The AGM is a meeting of the company’s members/shareholders, at which the financial statements and audit report (where applicable) must be presented to the members/shareholders and where, as applicable, director elections take place. As such, it is important that companies’ AGMs are held as required by law.

A complaint was received from a member of the public alleging that a company had failed to hold an AGM and, as a consequence, was late in filing certain documents with the Companies Registration Office.

Following the CEA’s intervention, the company confirmed that an AGM would be held. However, when the notice of the meeting issued to the members of the company, the notice did not include a statement explaining members’ right to appoint a proxy in their place as required under section 181(5)(d) of the Companies Act 2014. 

Following further engagement, the company issued amended notices which complied with company law. As a result of the CEA’s intervention, the AGM took place, thereby vindicating the company members’ rights, and the relevant documents were subsequently filed with the Companies Registration Office.

The CEA received an auditor’s indictable offence report indicating that the company had incorrectly claimed audit exemption, as well as an exemption from preparing consolidated group financial statements for a previous financial year. The auditor’s report also outlined the remedial measures that the company’s directors had taken to rectify the position and the CEA verified the remedial measures taken by the company. 

As the company had taken necessary steps to bring itself back into compliance, a warning letter issued to the company and its directors. In issuing a warning, the CEA made clear that a repetition would likely be dealt with differently.

Company law provides limits on the extent to which company directors can borrow from companies of which they are directors. The purpose of these limits is to protect creditors and shareholders.

The CEA received an auditor’s indictable offence report indicating that a loan made to a director of the company exceeded the statutory limits. In addition, a number of complaints were received from other parties in respect of the same issue, with the sums in question being substantial.

The auditor’s report advised that the auditor had engaged with the relevant director, that there had been partial repayment of the loan, and that the director had agreed to repay the balance within a specified timeframe. 

The CEA sought independent verification of rectification of the director’s loan, which was received from the company’s auditor. The independent verification confirmed that the outstanding balance of the director’s loan has been repaid in full to the company. 

On that basis, a warning letter issued to the company and its directors. In issuing a warning, the CEA made clear that a repetition would likely be dealt with differently.

Under company law, companies are required to file annual returns with the Companies Registration Office. The purpose of an annual return is to provide certain information to the public. As such, compliance with the obligations to file annual returns is important to the public’s ability to assess whether to do business with a company or not. 

The CEA received a complaint that a property management company had not filed its annual return and, as such, the complainant was concerned that the company might be struck off (which could, amongst other things, impact a purchase/sale of an affected property).

Following engagement with the company and its directors, the CEA ensured that the necessary filings had been submitted to the Companies Registration Office, thereby securing compliance with the law, and addressing the complainant’s concerns. 

The CEA received a complaint from a member of the public advising that a registered charity had not filed its annual returns with the Companies Registration Office. 

On examination, it was established that the charity’s returns were, indeed, outstanding. Upon further examination, the CEA established that, in addition, the charity’s website was not in compliance with the requirements of the Companies Act 2014. Specifically, under company law, a company’s website is required to provide details of the legal form of the company, the company’s registered number, and the registered address of the company. This information is required to be displayed in a prominent and easily accessible position on the website.

As a result of engagement with the CEA, the charity’s directors brought its 
statutory filings up to date and made the necessary additions to its website.

The process advisor’s report indicated that, as part of the rescue plan, there was to be a change in the directors of the company. Specifically, one director was to resign and be replaced by a director nominated by the new investor. 

The CEA monitored the company’s filings and, when no changes in directorships had been registered with the Companies Registration Office, the directors were contacted and advised that failure to implement the provisions of a rescue plan which imposes a requirement on the directors of the company is a Category 3 offence. 

Following a second reminder, the necessary documentation was filed with the Companies Registration Office, i.e., evidencing that the required change in directors had occurred, thereby satisfying one of the terms of the rescue plan.

Company law provides that every company is required to maintain a register of members and that, upon payment of the relevant fee, the register of members shall be open to inspection by any person. This is an important aspect of the transparency requirements laid down by company law. 

The CEA received a complaint from a member of the public to the effect that a company had failed to comply with a request by the complainant to inspect the company’s register of members. 

Having reviewed the correspondence that had been exchanged between the complainant and the company, the CEA:

• issued statutory demands to the company and its directors to produce minutes of certain meetings,
• issued a request that certain registers be made available, and
• advised the directors of the relevant offence provisions for failure to comply.

Following unsatisfactory engagement, CEA officers subsequently attended the company’s registered office to inspect certain documents.  

As a result of the CEA’s intervention, the complainant’s right to access the register of members was vindicated.

First liquidator

The company in question was incorporated in 2006. In late 2015, it was wound up by Order of the High Court.The appointed liquidator filed his first section 682 report in June 2016. 

Based on the content of this report, relief was not granted to the liquidator. The directors were offered the opportunity to submit to restriction undertakings but chose not to respond to that offer. Accordingly, the liquidator was advised of his legal obligation to bring restriction proceedings against the directors. However, the liquidator resigned without advising the CEA of that fact.

Second liquidator

A new liquidator was subsequently appointed. The new liquidator was obliged to provide the CEA with a first report within 6 months of their appointment. However, despite being issued with several reminders and formal notices to comply with this obligation, the liquidator failed to meet the statutory deadline to submit the required report. 

In light of the non-compliance, the CEA applied to the High Court for an Order directing the liquidator to comply with the obligation to file the report as required. After the liquidator had been served with the proceedings, the liquidator finally engaged with the CEA and the outstanding report was filed. The matter was then struck out on consent and an Order for costs made in the CEA’s favour.

Had the liquidator complied with their legal obligations to the CEA, a costs Order could have been avoided. The CEA takes a robust approach towards the recoupment of costs Orders

The Companies Act 2014 foresees two means by which a court-appointed Inspector can be appointed to investigate the affairs of a company. The case involving WFS was the first time since the commencement of the Companies Act 2014 that an application was heard by a court under section 747. 

WFS concerned an allegation by a creditor that loans made for the development of a Christmas tree grow and supply business had not been repaid. On the basis of their stated concerns, a creditor petitioned the court for the appointment of a court-appointed Inspector to the company. The company opposed the application. The CEA and the Department of Justice respectively were notified of the making of the application and both made submissions to the Court during the hearing. 

As a notice party, the CEA’s primary role was, as required, to provide assistance to the court. In that context, the CEA adopted a formally neutral stance vis-à-vis the application but did offer the view that:the company appeared to be hopelessly insolvent, accordingly, liquidation might be a more appropriate remedy, an Inspector has relatively few powers available to him/her that a liquidator either doesn’t have themselves or that couldn’t cause to be exercised by a court, and  a liquidator, if appointed, would have a reporting obligation to the CEA (as detailed elsewhere herein).

In directing the appointment of an Inspector, the court considered the relevant evidential threshold, the public interest nature of the application, and that no party had petitioned for the winding up of the company.

In a further hearing, in May 2023, the High Court revisited the issue of whether WFS should be wound up either on the court’s own motion or otherwise, or whether a liquidation and the Inspectorship should run in tandem. The court directed the provision of a further interim report by the Inspector to assist in the making of this determination and, as of writing, the Inspectorship continues.

As part of their transparency obligations, company directors that have been disqualified in another jurisdiction are required to notify the Companies Registration Office of that fact (thereby notifying the public) by filing a declaration to that effect. Making such a filing with the CRO does not disqualify the director in Ireland. However, a failure to do so has the effect of deeming the director, by operation of law, to be disqualified from acting as a company director in Ireland.

Messrs. Sherling and Hudson were directors of both UK and Irish companies who had submitted to disqualification undertakings offered by the UK’s Competition and Markets Authority for breaches of UK competition law. Their company failed to file the relevant declarations with the CRO and the directors were, as a consequence, ultimately deemed disqualified in Ireland. They subsequently sought relief from the High Court.

In an extensive judgment ([2022] IEHC 513) the Court considered the relevant legislative scheme and emphasised the importance of the disqualification regime and that it should not be diluted by applications being granted readily. In its judgment, the Court also dealt extensively (At paragraphs 89-95 of the judgment) with the approach taken by the CEA (as a Notice Party to the proceedings) in securing adequate assurance regarding the companies in respect of which relief was being sought – which included extensive training programmes and evidence of the appointment, and anticipated levels of engagement of, directors appointed for assurance purposes. The steps taken by the CEA in seeking assurance of future compliance with company and competition law resulted in the assurances ultimately given being characterised as ‘comprehensive and impressive’ by the Court.

This judgment provides an authoritative guide as to the level of assurance that would need to be brought before a court before the CEA would consider adopting a neutral position in relation to future such applications. 

Murraywalsh Limited traded in the hospitality sector and had two directors, Mr. Ross Murray, and Mr. Keith Walsh. The High Court appointed a liquidator to the company following the petition by a creditor. 

The company appeared to have been one of a number of companies involved in the licenced trade owned or controlled by the directors and/or persons connected with them. Accounts filed for the company indicated that it was profitable.

The company transferred its trade, including all assets and liabilities, except contingent personal injury awards against the company, to a connected company.  A schedule of the assets and liabilities transferred showed that the net excess of assets over liabilities was €332,000. It appeared that the lease for the premises was also transferred. In addition, the directors indicated to the liquidator that the premises was owned by ‘an unconnected party’ when in fact it was owned by a related party.

The Statement of Affairs presented to the High Court was neither sworn nor signed. It was also incomplete in that awards made against the company in respect of personal injury claims were not included. It appeared that the company did not defend the personal injury proceedings and was not represented at the hearings of the actions. By not defending those cases for the benefit of the company and its creditors, the directors’ actions compromised the financial position of the company.

It appeared that the directors attempted to restructure the business in order to frustrate judgment in relation to the personal injury claims. By agreeing to transfer the company’s assets to a connected company without payment or having any guarantee of payment, the directors preferred the interests of the associated company over the interests of the creditors of the company.

The liquidator initially sought full relief from the obligation to bring restriction proceedings against the directors but, following detailed engagement, the CEA issued a no reliefdecision. Both directors were offered restriction undertakings by the CEA, which they chose not to accept.

At the direction of the CEA, and on the application of the liquidator, the High Court found that, although there was no intention to act dishonestly, there has been a want of responsibility on the part of the directors. The Court therefore made an Order on 12 July 2022 restricting the directors for a period of 5 years. The Order was stayed for 6 months in order to give the directors an opportunity to appeal. No appeal of that Order was brought.

In November 2022, i.e., two months before the Order was due to take effect, the directors brought a motion, on notice to the CEA, seeking to be relieved from restriction. This application was resisted by the CEA on the basis that relief from restriction is an exceptional remedy, and that, due to the stay being placed on the Order, the directors had not yet suffered the consequences of being subject to a restriction Order.

Following extensive engagement with the CEA, and a number of appearances before the High Court, the directors withdrew their application for relief from restriction.

In February 2020, certain material, including hard copy documents and contents of an email folder pertaining to the FAI’s former Chief Executive Officer, Mr. John Delaney, were seized under warrant. Pursuant to a requirement to do so where potentially legally privileged material is involved, an application was made to the High Court within a week of the material being seized. The purpose of that application was, as required by the Act, to ask the court to make a determination in respect of material over which a claim of legal professional privilege (LPP) was apprehended.

Following the application having been made, there followed extensive engagement with the legal representatives of both the FAI and Mr. Delaney (the FAI being the Respondent in those proceedings and Mr. Delaney being immediately joined to the proceedings as a Notice Party).

In addition to apprehended LPP, assertions of privacy were also advanced by Mr. Delaney over certain of the material seized. In June of 2020, and following extensive engagement, an examination strategy for the purposes of privacy and privilege rights was approved by the High Court. Following the approval of this strategy, an initial examination and assessment was performed on the email folder, which contained 675,240 files. After removal of duplicate and immaterial items, the remaining dataset was reduced in size to 285,028 files. 

The process involved multiple court hearings to effect further reduction of the dataset and, after further direction of the Court, Mr. Delaney’s solicitor attended the CEA’s offices over a period of several months, the purpose of such attendance being to review the material for potentially privileged and private material in accordance with Mr. Delaney’s instructions and the court’s directions. 

In parallel with the aforementioned review, a similar (but considerably smaller scale) review was conducted by the FAI’s legal representatives and, by January 2021, the remaining material at issue had been reduced to a total of 3,818 records (1,013 relating to the FAI and 2,805 relating to Mr. Delaney). The High Court subsequently appointed two independent counsel (the Independent Reviewers) to review the remaining material and to make recommendations in that regard to the court, i.e., as to whether the material in question was the subject of a valid claim of LPP. 

An unusual feature of section 795 applications, as opposed to discovery applications, is that investigators did not have access to the records in question (i.e., other than certain metadata). Based on the information that was available, together with other relevant considerations, extensive submissions were made regarding the certain of the Independent 

Reviewers’ recommendations that certain records were the subject of valid claims of LPP. This resulted in the High Court directing Mr. Delaney to substantiate his claims of LPP by particularising, on affidavit, his assertions on a number of specific grounds. 
 
The substantive case was heard in summer 2022 and, in a judgment dated 21 October 2022, the High Court determined that, in respect of each of the remaining 2,805 records, Mr. Delaney had failed to substantiate his assertions of privilege. The CEA was, on that basis, awarded its costs in relation to the High Court proceedings (save regarding one aspect of the case where no order had been sought).

Mr. Delaney appealed this decision to the Court of Appeal and, in a judgment dated 25 September 2023, the Court of Appeal refused the appeal, instead upholding the finding of the High Court in favour of the CEA. A costs Order made in the CEA’s favour by that Court.Mr. Delaney sought leave to appeal the decision of the Court of Appeal to the Supreme Court. However, in January 2024, the Supreme Court issued its determination declining to grant leave. The Supreme Court’s decision brought to finality a process that lasted for approximately 4 years, and which ultimately found that Mr. Delaney’s assertions of privilege over almost 3,000 records were unsubstantiated. 

The judgments of the High Court and the Court of Appeal respectively represent important statements of principle regarding the burden on a party asserting LPP in proceedings under section 795 of the Companies Act 2014 to fully substantiate their assertions rather than offering wholly generic or incomplete information in support of their applications. 

CEA investigations can also give rise to the exercise, by CEA officers who are also members of An Garda Síochána, of non-Companies Act powers that are of relevance to the matters under investigation. 

Arising from a CEA investigation in which the matters being investigated included suspected company law and money laundering offences, an application was made to the District Court to have bank accounts that held several hundred thousand Euro restrained so that the investigation could continue without the risk of the funds in question being dissipated

Following a CEA investigation, in 2018 the DPP directed that Mr. Pearse O’Connor be charged with 1 count of fraudulent trading and 8 counts of using a false instrument contrary to section 26 of the Criminal Justice (Theft and Fraud) Offences Act 2001. Mr. O’Connor pleaded guilty in April 2021.

In January 2022, the Circuit court imposed a sentence of 5 years, fully suspended, in respect of the fraudulent trading conviction and also in respect of 1 count of using a false instrument; 4 years’ imprisonment in respect of 4 of the counts of using a false instrument, again fully suspended, with all sentences to run concurrently. The remaining counts were taken into consideration. 

In circumstances where the injured party had been defrauded in the amount of approximately €370,000, in a course of action that was fully supported by the CEA, the DPP subsequently sought a review of the above sentence on grounds of undue leniency.

The Court of Appeal delivered judgment in December 2023. In the view of the Court, the starting point of five years was correct, but a part suspension which would have required the convicted person to serve a sentence of 18 months or 2 years would have been more appropriate. Giving judgment for the Court, President Birmingham said: “… this was very serious offending. The amount involved, €370,000, was very significant. The offending was not a once-off event, but occurred over a period of several months … pre-planning and deliberation were features of the case…  It seems to us that this was a case where the offending was of such seriousness that the custody threshold was clearly crossed and that a noncustodial disposal was simply not an option. In our view, a fully suspended sentence was not just very lenient, but actually unduly lenient.”

Nevertheless, the Court of Appeal did not overturn the fully suspended sentence. However, the defendant had been disqualified by the Circuit Court from acting as a director or secretary of a company for life. 

Notwithstanding being disappointed that a custodial sentence was not imposed given the seriousness of the offending, the CEA very much welcomes the emphatic statement from the Court of Appeal that custodial sentences are warranted in premeditated cases of fraudulent trading.

Fast Shipping Ireland Limited traded for 27 years in the freight warehousing/transporting sector. It had two directors at the time of liquidation, Mr. Simon Mulvany and Mr. Yvan Vlaminckx. The company was liquidated on foot of a petition to the High Court by Mr. Vlaminckx, on the grounds of the company being unable to pay its debts. 

Mr. Mulvany was found to have failed to maintain proper books and records of the company and to have manipulated entries to give the appearance that the company was solvent when it was not, therefore knowingly continuing to trade while insolvent. He was also found to have altered entries on the company’s bank statements to disguise fraudulent payments and receipts. 

Mr. Mulvany took loans from the company totalling more than €600,000 by falsifying invoices and the company’s books. Mr. Vlaminckx was unaware of these loans. Mr. Mulvany then sold machinery valued at €750,000, which was the property of a third party. Again, invoices and accounts entries were falsified. A further €250,000 was used by Mr. Mulvany for personal purposes. 

Mr. Vlaminckx had commissioned a forensic investigation into Mr. Mulvany’s actions, had brought the winding up petition, and was found to not have participated in the fraudulent activities. On the basis that Mr. Vlaminckx had been found to have acted honestly and responsibly, the CEA granted relief to 
the liquidator in respect of him.

Relief was not granted in respect of Mr. Mulvany and the liquidator took disqualification proceedings against him in the High Court. Mr. Mulvany was disqualified for 6 years. 

Odessa Club and Restaurant Limited was incorporated in 2005 and was involuntary struck off the register in June 2019 for failing to file annual returns. Based on the CEA’s examination, it appeared that, at the date of strike off, the company had undischarged debts.

The company’s sole director, Mr Donal O’Donoghue, was invited to provide evidence that, at the date of strike off, the company had no debts but failed to do so. 

That being the case, the director was offered the opportunity to accept a disqualification undertaking. The director declined and, on that basis, the CEA indicated its intention to make an application for disqualification to the High Court. Shortly before proceedings issued, the director indicated that he would accept an undertaking, and did so in January 2024. As a result, Mr O’Donoghue was disqualified from acting as a company director for a period of 4 years.