The Companies Act 2014 (the “Act”) contains a formal categorisation of offences ranked on a scale of 1 to 4 for breaches of company law and Directors must be wary of their obligations under the Act or face possible criminal prosecution.
• Category 1 offences include false accounting or fraudulent trading –imprisonment of up to 10 years or a fine of up to €500,000 or both;
• Category 2 offences include dishonest dealings before a company becomes insolvent –imprisonment of up to five years or a fine of up to €50,000 or both;
• Category 3 offences include failure to hold Annual General Meetings and non-filing of Annual Returns –imprisonment of up to six months and a “Class A fine” (or both); and
• Category 4 offences include failure to record within 6 months, the minutes of directors’ meetings – a summary offence only, punishable by the imposition of a Class A fine.
A ‘class A fine’ is defined under the Fines Act 2010 as a fine not exceeding €5,000.
Obligations on Auditors to Report Offences
The Act provides that where in the course of carrying out an audit of the financial statements of the company, information comes into the possession of the auditors that leads them to form the opinion that there are reasonable grounds for believing that the company or an officer or agent of the company has committed a Category 1 or 2 offence, the auditors must notify the Director of Corporate Enforcement and provide the Director with particulars of the grounds on which they have formed that opinion.
What is required of Directors?
Directors must be vigilant with regards to their fiduciary responsibilities under the Act. Furthermore, they must take the appropriate action to ensure that the appropriate policies and procedures are in place in order to discharge their duty.
Compliance with the Act by Directors is not exclusive to large companies, it applies universally to every Director of every registered company regardless of size, activity or level of trading.
For more information, please contact Gráinne Howard, Director of Corporate Governance and Compliance.