The companies they keep

Setting up a business in Ireland is designed to be easy. With little more than a photocopy of your passport, a utility bill and a few hundred euro you can go online and set up an Irish-registered company from anywhere in the world. The business can be up and running within a few days, and documentation can be issued within minutes.

Doing business here has been streamlined, helping to attract companies and contributing to economic growth. But data provided to The Irish Times by Duedil, a company-data group, raises questions about how well the sector is regulated, with multiple directorships and companies registered to the same address.

A number of high-profile Irish businesspeople and less well-known company-formation agents hold hundreds of directorships in live companies, and law firms and banking groups are being used as the registered addresses for hundreds of businesses.

For a few hundred euro Irish firms offer a full suite of business services, including virtual offices in Dublin 4, complete with postal addresses and telephone numbers. Some firms will also buy a brass plate for the outside of the building, to make the appearance of a company’s physical presence more realistic, as well as buying company seals, filing company documents and holding company meetings.

There is nothing illegal about registering multiple companies at one address – the practice is used by numerous legal and accounting firms – nor is there is anything illegal about holding multiple directorships in Ireland. The Companies Act allows individuals to hold up to 25 directorships, with exemptions for roles in a range of companies.

The Central Bank of Ireland also has guidelines on the number of directorships that individuals can hold in financial firms.

But these guidelines relate only to individuals in banks and insurance companies, and exemptions in the Companies Act cover most financial vehicles and shadow-banking entities, meaning people who work in financial services can hold hundreds of directorships of such companies.

Liam Carroll, who owned the prominent property group Zoe Developments, is among the people with the most directorships, as are the property developers Johnny Ronan and Richie Barrett, the owners of the now liquidated Treasury Holdings. Many property developers create separate companies for individual buildings or developments, to limit liabilities that could occur if a development goes bankrupt. Carroll, one of the biggest property developers of the Celtic Tiger, is listed as a director of 131 live companies in Ireland. Many are linked to individual developments that formed part of the now liquidated Zoe group. Many of its companies were unable to repay borrowings after the property crash. Carroll is involved in two other big development groups, Dunloe Ewart and Orthanc.

Peter, John and Ivor Queally, brothers from Waterford who own a group of meat-processing companies, are also listed as having numerous directorships, a lot of them relating to their QK Meats businesses.

Prof Niamh Brennan of University College Dublin's centre for corporate governance, says there is a variety of reasons why people might be directors of so many live companies. "Some of those could, for example, be dormant companies that are not trading and literally every year produce a €2 balance sheet where nothing is happening. There are also exemptions for some groups like this, and that could explain why some people hold more than 25 directorships."

Having a high number of long-term directorships could pose problems, and complicated company structures should raise questions for regulators, as was the case with the bankrupt US energy group Enron.

“Obviously,” Brennan says, “it’s physically not possible to be a responsible and effective company director if you are a director of too many companies where the company is significant. The other angle which came to light with Enron was when John C Coffee, one of the great corporate-governance people in the US, observed that the number of subsidiaries Enron had alone should have been a red flag. Sometimes companies have elaborate group structures, possibly for good reasons but possibly for not-so-good reasons, and the groups are used in a way that have not-so-good ulterior motives.”

Hundreds of companies are registered to addresses of law firms and banking groups in Dublin. The law firm Matheson has the highest number of live businesses registered to its address in the International Financial Services Centre, with 434, followed by Deutsche International Corporate Services, with 250. Neither group would comment on the findings.

Brass-plate companies, or businesses that operate with no physical presence at an address other than a nameplate, can provide all of the advantages of the Irish taxation system even if a company may not be based at its registered address.

Such businesses have been a concern for legislators in the past. In 2009 the former minister for finance Brian Lenihan warned that he did not want to see brass-plate companies of little substance setting up in Ireland. All of the companies contacted by The Irish Ti mes denied that they were involved in administering such businesses.

There are ways business formation can be abused. Weaknesses in the due-diligence checks carried out by Irish corporate-service providers was highlighted in a report, Global Shell Games: Testing Money Launderers , which was published by academics from Australia and the United States last year. Investigators using aliases approached several thousand corporate-service providers in more than 100 countries, acting as consultants seeking confidential incorporation.

The research was managed by Daniel Nielson, director of the political economy and development lab at Brigham Young University in Utah. He says Ireland came close to the bottom of the table.

“The only countries that scored worse than Ireland in the study were Kenya, the US, Canada, the Czech Republic, Ghana, the Philippines, which means it’s very easy to get an anonymous shell company, so you don’t have to contact very many firms in Ireland before one is willing to offer incorporation without any identifying documents whatsoever,” he says. “What we learned is that any potential financial criminal could easily establish a shell company that could make it relatively simple to move money illicitly across international boundaries, and that might include people involved in government corruption, someone potentially involved in illegal arms sales, someone who is evading tax and even someone who seeks to finance terrorism.”

Although it is not known which Irish company-formation groups researchers contacted, the research raises questions about how strict businesses in the sector are when it comes to performing complete due-diligence checks on their clients.

The Office of the Directorate of Corporate Enforcement, which investigates possible breaches of company law, restricted the actions of 119 company directors in 2011. The office works primarily on tip-offs, however, rather than by identifying patterns in the data provided by the Companies Registration Office. The Office of the Directorate of Corporate Enforcement says the volume and format of the information accessible through Companies Registration Office make it hard to investigate. As a result, the CRO is considering a new identification system for individual directors.

The Office of the Directorate of Corporate Enforcement says the will further investigate details in today's Irish Times .