Royal Canal Financial Control Services

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Office of the Director of Corporate Enforcement

When it comes to taking money out of your corporate vehicle, not only will the Revenue Commissioners be interested to know that you are doing it within the confines of the tax law, the Office of the Director of Corporate Enforcement will be looking to see that company law is not being broken. Company law can be summarised as a protection for those which interact with the trading entity. This can include shareholders, employees, customers and suppliers. While you may consider yourself self-employed, under company law you are bound to operate your company in the interests of these different groups.

The Office of the Director of Corporate Enforcement (ODCE) is the watchdog for ensuring companies comply with company law. Especially in recessionary times, a company may find itself falling foul of company law in the following areas and being sanctioned by the ODCE:

1. Section 29 of the Companies Act, 1990 requires certain property transactions involving the directors to be approved in a shareholders’ meeting prior to the transaction taking place. If not done, the transaction may be void and the director may have to repay the company for any gain he later made on the disposal of the asset.

2. Section 31 of the Companies Act, 1990 prohibits the advancing of loans to directors or connected persons which are greater than 10% of the relevant net assets. The relevant net assets are the net assets per the balance sheet presented at the previous AGM (or share capital if no AGM). For companies with a shareholder deficit (excess of liabilities over assets), an outright ban would consequently exist.

This prohibition does not preclude a company from advancing expenses to a director (for foreign trips etc. where a time delay may exist until receipts are received by the company). The rules stipulate that such advances must be corrected within 6 months. One should ensure that where funds are being drawn down for expenses, that detailed summaries and receipts are maintained for such expenses.

Breaches of this section may be considered an indictable offence, with sanctions of 5 years imprisonment and fines of up to €12,697. In addition, where it is found that the directors acted recklessly leading to the winding up of an insolvent company, they may be found personally liable for all its debts.