White Collar Crime Update: Anti-Bribery and Corruption Reforms for Companies and Directors
22 November 2017
The Irish Government’s “White Collar Crime Package”, announced in early November 2017, identifies a number of initiatives for further strengthening the corporate governance framework. The proposed reforms should ensure Irish companies are run in an accountable and legally compliant manner. The most tangible and immediate changes will be seen in the following areas:
- Modernisation of Ireland’s corruption and anti-bribery laws
- Continued implementation of measures to enhance the system of audit quality and audit oversight in Ireland
- Establishment of a central register for beneficial ownership of Irish companies
- Transposition of the Shareholders’ Rights Directive
The modernisation of Ireland’s corruption and anti-bribery laws
The modernisation of Ireland’s corruption and anti-bribery laws is proposed to be achieved by bringing the Criminal Justice (Corruption Offences) Bill 2017 into force. If enacted, the Corruption Offences Bill will amend or repeal the existing seven Acts dealing with bribery and corruption. It will also introduce new penalties, such as terms of imprisonment of up to 10 years and unlimited fines in certain circumstances, and introduce new offences, for instance, it will now be an offence to make payments knowingly or recklessly to a third party who intends to use them as bribes.
A noteworthy change proposed by the Corruption Offences Bill relates to the criminal liability of companies. The Bill states that a body corporate will be presumed to be guilty of an offence where certain representatives of the body corporate engage in corrupt activities on its behalf with the intention of obtaining or retaining business or to gain an advantage. These representatives include managers, employees, agents or directors, or subsidiaries of that body corporate.
As this offence applies to “bodies corporate”, it potentially affects:
- Irish companies operating anywhere in the world
- Irish activities of non-Irish companies
This offence can extend to a manager, employee, agent or director of these companies where it can be shown that the offence was committed with their consent or that they were aware of the offence being committed and did not take steps to stop it.
A company accused of this type of offence can defend any proceedings brought against it by proving that it took all reasonable steps and exercised all due diligence to avoid the commission of the offence. Therefore, to be able to rely on this defence, companies affected by the proposed legislation need to have suitable bribery and corruption policies and procedures in place to combat the use of bribery and corrupt practices in the conduct of their business.
It is expected that the Corruption Offences Bill will be enacted in Quarter 4 of 2018.
The continued implementation of measures to enhance the system of audit quality and audit oversight in Ireland
In April 2014, the Council of the European Union adopted a legislative package for audit reform in the EU. This package consisted of an Audit Directive (EU Audit Directive 2014/56/EU) and an Audit Regulation (Regulation (EU) No. 537/2014). The Audit Directive impacts all audits to some degree. The Audit Regulation imposes specific requirements on the statutory audits of listed companies, credit institutions, including our banks, and insurance bodies. These entities are collectively known as Public Interest Entities. The objective of the reform was to improve audit quality and restore investor confidence in financial information following the economic crisis.
Both the Audit Directive and the Audit Regulation contained mandatory and optional provisions. The mandatory provisions in the Audit Regulation had direct effect in Ireland without the need for Irish legislation. The mandatory provisions of the Audit Directive and some of the optional provisions of both the Regulation and the Directive became law in Ireland by way of statutory instrument in 2016.
The Companies (Statutory Audits) Bill 2017 now proposes to elevate the 2016 statutory instrument to primary legislation and enact some of the additional options to ensure that there is in place within national law a single coherent body of legislation that clearly aligns the mandatory provisions and the optional provisions of the EU Audit Package.
It is expected that the Statutory Audits Bill will be enacted in Quarter 2 of 2018.
The establishment of a central register for beneficial ownership of Irish companies
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 came into force in November 2016. The Beneficial Ownership Regulations state that non-listed Irish companies and other corporations must hold adequate, accurate and current information on their beneficial owner(s) in their own beneficial ownership register. The next step will require these companies and corporations to file this information with a central beneficial ownership register. It is uncertain whether the information kept in the central register will be accessible by the general public, either under the expected new legislation or in the future.
It had been expected that the launch of the Central Register would take place in Quarter 4 of 2017. It now appears that this has been delayed until Quarter 1 of 2018.
Our most recent update on the establishment of a central beneficial ownership register can be accessed here
The transposition of the Shareholder Rights Directive
On 3 April 2017, the European Council announced that it had adopted a directive which will amend the existing Shareholder Rights Directive. The Directive, which must be enacted by Member States into national law by June 2019, is intended to encourage transparent and active engagement by shareholders of listed companies. The Directive introduces measures aimed at encouraging shareholder long term engagement and increasing transparency.
It is expected that Ireland will initiate public consultation seeking views from stakeholders regarding the transposition of the Shareholder Rights Directive in Quarter 1 of 2018 with transposition expected in Quarter 2 of 2019.
Click here for more information on the Shareholder Rights Directive.
The “White Collar Crime Package” is going to encourage Irish companies to be run in an accountable and legally compliant manner. These measures will strengthen corporate governance in Ireland.
While there is a lot to digest in this update, as an immediate action, we suggest that our corporate clients carry out an assessment of any bribery and corruption risks they may be exposed to and put in place appropriate anti-bribery and corruption policies.
For more information and specialist legal advice, 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.