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Categories Of Offences Under The Companies Act 2014

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The Companies Act 2014 identifies different types of offences by categorising them as 1 to 4, with Category 1 being the most serious. Directors and officers must be aware of the offences and the penalties that apply for breaches thereof pursuant to Section 871 set out below.

Category 1 offences include offences such as false accounting and fraudulent trading.

A person guilty of an offence under the Act that is stated to be a Category 1 offence shall be liable:

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months or both, or

(b) on conviction on indictment, to a fine not exceeding €500,000 or imprisonment for a term not exceeding 10 years or both.

Category 2 offences range from financial assistance, dishonest dealings before a company becomes insolvent or goes into liquidation, failure to keep adequate accounting records, failure to communicate with and make full disclosure to statutory auditors and other similar offences.

A person guilty of an offence under the Act that is stated to be a Category 2 offence shall be liable:

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months or both, or

(b) on conviction on indictment, to a fine not exceeding €50,000 or imprisonment for a term not exceeding 5 years or both.

Category 3 offences include non-filing of annual returns, failure to hold an AGM and trading under a misleading name or without a trading certificate.

A person guilty of an offence under the Act that is stated to be a Category 3 offence shall be liable, on summary conviction, to a class A fine or imprisonment for a term not exceeding 6 months or both.

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Category 4 offences includes failure to make routine filings, failure to supply a member with a copy of the constitution and any amended version of it, use of incorrect company name, failure to issue share certificates in the prescribed manner or failure to record within 6 months the minutes of directors meetings Category 4 offences do not attract a term of imprisonment but directors may still face fines of up to €5,000.

A person guilty of an offence under the Act that is stated to be a Category 4 offence shall be liable, on summary conviction, to a class A fine.

Obligations on Auditors to Report Offences

Section 393 of 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.

One of the most commonly reported offences is the failure to keep adequate accounting records which is a Category 2 offence and must be reported to the ODCE and the CRO as set out in Section 392.

Section 392(1) states that if the auditors of a company form the opinion that the company is contravening, or has contravened, any of sections 281 to 285 (which relate to accounting records) the auditors must, by recorded delivery, serve a notice in writing on the company stating their opinion, and not later than 7 days after the date of service of notice on the company, notify the Registrar who will forward a copy of the notice to the Director of Corporate Enforcement.

Directors must be vigilant with regard to their fiduciary responsibilities under the Companies Act 2014 and ensure compliance with the Companies Acts. They should take all steps necessary to ensure that appropriate policies and procedures are in place in order to adequately discharge their duties.

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