Defaulting company directors are to be prosecuted by the Companies Registration Office under new legislation on the enforcement of company law, the Attorney General, Mr Michael McDowell, said yesterday.

An office of corporate law enforcement would be established under the new regime, which is due to be in place before the end of next year. Specialist gardai attached to the office would have powers of investigation for serious offences.

Answerable to the Oireachtas, the enforcement office would be independent of the Companies Registration Office. Mr McDowell said a "shadow director" would be appointed before the end of this year to ensure that the office commenced its work as soon as legislation permitted.

The director of corporate law enforcement will have the power to apply to the High Court for injunctions, requiring companies, their officers, receivers and liquidators to comply with the Companies Acts. This will apply in civil and in criminal cases.

"The law relating to disqualification of directors will be modernised and reformed. Restriction orders and disqualification orders will be sought by the director."

Speaking at an Institute of Directors lunch, Mr McDowell said the enforcement director would control the prosecution of all summary offences under the Companies Acts.

"His office will be a multi-disciplinary agency with specialist members of An Garda Siochana attached to it."

The Companies Office will separately be able to apply to the High Court to disqualify non-compliant directors. Companies which fail to produce adequate annual returns will be subject to on-the-spot fines. Mr McDowell said it would be naive to suggest that all was well in relation to compliance and enforcement of company law in the State. "There is public suspicion and disquiet centred on a perception that company law is used to defraud or cheat in commercial matters and that those who have in the past abused their positions as officers and promoters of companies have largely been allowed escape without any degree of accountability - civil or criminal."

The aim of the new legislation was to bring about a "general atmosphere of compliance" in the same way as the introduction of car clamping had transformed respect for the parking laws.

Mr McDowell continued: "It is noteworthy that in something as simple as filing the company's annual return on time, between the years 1994 and 1997, compliance sank from 16 to 13 per cent. If accountants, company secretaries, directors and managers of companies attached any priority to compliance, these figures would have been radically different."

Mr McDowell said limited liability was one of the cornerstones of the market economy. The new regime would help the enforcement director and company creditors "in making accountable and bringing to justice those who consciously abuse the veil of incorporation to perpetrate fraud and to benefit from planned insolvency".