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Drop in insolvent liquidations, ODCE report shows
Ian Drennan of ODCE Pic: RollingNews.ie

30 Jun 2022 / business Print

Drop in insolvent liquidations, ODCE report shows

The Office of the Director of Corporate Enforcement (ODCE) brought 62 criminal charges against individuals last year, according to its annual report.

Director Ian Drennan (pictured) said that the charges related to alleged company-law offences of fraudulent trading, and the furnishing of false information, as well as to theft and money-laundering.

During the year, three people were convicted, or facts were found to have been proven, in respect of 12 offences.

At the end of the year, four cases, involving some 60 charges, remained before the District or Circuit Courts, and one file was with the Director of Public Prosecutions (DPP) for consideration.

State supports

The ODCE director said that, during the year, a downward trend in the number of companies entering insolvent liquidation continued.

There was an overall drop of almost 40% in insolvent liquidations. There were 253 creditors’ voluntary liquidations – well down on the 443 in 2020 – and 49 court liquidations.

The ODCE says that insolvent liquidations represent only 17% of total company liquidations.

It cites a number of reasons for the fall-off in insolvent liquidations – including creditor forbearance, the various State supports provided during COVID-19 restrictions, and the temporary amendment to the definition of what constitutes a company being unable to pay its debts contained in the Companies (Miscellaneous Provisions) (Covid-19) Act 2020.

Overall, however, the number of reports the watchdog received from company liquidators was similar to 2020 levels.

Director disqualifications

A breakdown shows that more than a third of initial reports from liquidators were linked to the wholesale-and-retail sector, while 15% related to hotels, bars, and catering.

The ODCE points out that the majority of corporate insolvencies are legitimate business failures deserving of no sanction or enforcement response.

“While it remains to be seen, the prevailing view seems to be that corporate insolvencies have been artificially low in recent years and that, as State supports are withdrawn and temporary legislative provisions unwind, the number of companies entering insolvent liquidation will increase – potentially significantly,” said Drennan.

On foot of undertakings given to the ODCE, 40 directors were restricted, while four were disqualified. The High Court restricted a further 11 directors, while the corresponding figure for disqualifications was 12.

A further 23 directors of dissolved insolvent companies were disqualified by way of undertaking, as a consequence of having allowed companies with outstanding debts to be struck off the register.

New legislation

Late last year, the Companies (Corporate Enforcement Authority) Act 2021 was signed into law by the President.

The ODCE director said that the organisation had been focusing on finalising preparations for the establishment of the new authority, and ensuring that the necessary arrangements were in place to enable Tánaiste Leo Varadkar to sign the necessary commencement orders.

The annual report says that legal costs associated with a High Court inspection into Independent News & Media were higher than anticipated last year.

Drennan said that the inspectors may report their findings to the High Court this year, “in which case the inspectors’ report will be provided to the ODCE for examination”.

Gazette Desk
Gazette.ie is the daily legal news site of the Law Society of Ireland