Governance & Compliance Update: Criminal Prosecutions for Late or Non-filings of Annual Returns
24 October 2017
On 12 October 2017, the Companies Registration Office (CRO) announced that it had begun criminal prosecutions under the Companies Act 2014 (Act) against companies and their directors for late filing or non-filing of annual returns.
Late filing is classed as a category 3 offence under the Act and on conviction the maximum fine is €5,000 and/or up to 6 months imprisonment per offence.
Any fine imposed following prosecution is in addition to late filing fees of €3 per day, capped at €1,200 per annual return, which the CRO will levy. Any director who receives three convictions may be disqualified from acting as a director of any company for up to 5 years.
The CRO has confirmed that once a prosecution of this nature has commenced against a company, the Registrar of Companies will object to any application by that company for an extension of time for filing its annual return.
District Court appearance
A company or director which receives a summons must appear in the District Court to answer the case. Legal representation will have to be engaged. An officer of the company or the director in question should also attend.
All companies, including those that do not trade, are required to file annual returns. Dormant companies should consider whether dissolution under the Act, rather than risking prosecution by the CRO for a late filing, is a better option.
The level of fine, on conviction, is at the discretion of the presiding judge but is capped at a maximum of €5,000. While repeat offenders are most likely to receive a higher fine, any company which is late in filing may have the maximum amount applied. Failure to pay the fine may result in the matter being passed to a collection agency to collect the outstanding fine.
A company will lose its entitlement to claim an audit exemption for that financial year and the following year where it is late in filing its annual return. However, a company may apply to Court to extend its filing deadlines and retain its audit exemption under the Act.
This will no longer be a viable option for a company seeking to retain its audit exemption once the CRO has commenced a prosecution for late filing as the Registrar will object to any Court application to extend a filing deadline. Companies should be aware that late filing of annual return will result in audit exemption being lost for two years.
The CRO’s announcement emphasises the importance for companies to file their annual return on time.
It is expected that persistent defaulters are the most likely group to be prosecuted. However, any defaulting company is at risk and should be fully aware of this.
The cost to a company may be far greater than paying CRO late filing penalties. It can include a fine of €5,000, legal fees for representation in court, related court costs and the potential disqualification for directors on a third conviction. It is also a category 3 offence which carries a risk of up to six months imprisonment.
Once a summons is issued, it must be dealt with. It will not be sufficient to simply file the late return and pay any late filing penalties.
For more information on ensuring your annual return is filed in a timely manner, contact a member of our Corporate Governance & Compliance team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.