Company watchdog satisfied with progress of Anglo investigation

THE DIRECTOR of Corporate Enforcement, Paul Appleby, has said his investigation into Anglo Irish Bank is progressing satisfactorily but has declined to say when it will be completed.

Mr Appleby said he expected to engage with the Director of Public Prosecutions in the coming months in relation to the investigation.

His officials were working constructively with the bank, the Financial Regulator and other parties. “Things are moving along well but it will take a lot of time,” Mr Appleby said.

At the launch yesterday of his annual report for 2008, Mr Appleby expressed concern about a four-fold increase, to €134 million, in illegal loans taken out by directors of Irish companies.

He said the rise in excessive directors’ loans, many of them in the construction sector, was extremely worrying and he wanted them repaid as quickly as possible.

The Office of the Director of Corporate Enforcement (ODCE) is currently investigating 161 cases of excessive directors’ transactions last year according to the annual report. The largest loan is for about €10 million.

By law, the aggregate of directors’ loans in a company must not exceed 10 per cent of its assets. The ODCE figures for last year do not include €179 million of directors’ loans in Anglo Irish Bank because that figure did not exceed the legal limit.

Last year also saw the first conviction of a company director for knowingly using company assets in breach of the legal restrictions on director loans, according to the report published yesterday.

“At a time when some companies are failing to pay their creditors, it is difficult to conceive of any valid justification for a decision which results in the depletion of company assets, even on a short-term basis,” Mr Appleby said.

“These types of actions increase the risk of companies not meeting their debts to company creditors and other stakeholders.”

Some €98 million of the total amount of illegal directors’ loans were made to directors of constructions companies, the report says. However, in all company directors repaid €164 million on loans taken out in earlier years.

The office secured 32 convictions, 20 disqualifications and one restriction for breaches of company law, the reports says.

Twelve of the 20 disqualifications arose from investigations into dissolved and insolvent companies.

A record amount of €46,600 in fines was imposed last year. Mr Appleby acknowledged the financial penalties for breaches of company law were low and said the ODCE had made its view on this matter known to the Government. However, he argued that regardless of the level of fine, people were anxious to protect their reputations.

In a further indication of the problems of the economy, the ODCE reported a 42 per cent increase, to 406, in the number of liquidators’ reports it received.

Mr Appleby predicted an even worse performance this year, with more than 800 liquidators’ reports expected.

“It is clear that companies and company directors are coming under pressure as they deal with the current downturn,” he added.

“I wish to urge directors who are dealing with financial difficulties to remain compliant with the law.”

The Office of the Director of Corporate Enforcement had a budget of €4.34 million last year but this is being increased to €5.47 million in 2009, largely to fund the cost of the inspection into DCC.