The Cabinet has approved new legislation to curb abuses of Irish-registered non-resident companies (IRNRs).

One of its primary features will be to limit the number of Irish directorships that can be held by any individual at any one time to 25 - any additional directorships will have to be approved by the Registrar of Companies - in a bid to prevent the misuse of the IRNR company structure.

The move follows growing concern that many of the estimated 40,000 IRNRs are being operated for the benefit of individuals involved in fraud, money laundering and other illegal activities. A number of these companies have been established to appear as though they are operating as part of Dublin's International Financial Services Centre.

The Government will also introduce legislative provisions in the forthcoming Finance Bill to bring these companies into the tax net.

And amid continuing controversy over the use of bogus non-resident bank accounts by Irish citizens to evade tax, the Finance Bill is also expected to grant additional powers to the Revenue Commissioners to investigate non-resident bank accounts.

The amendment to company legislation to control the use of IRNRs will stipulate that every company registered in Ireland will have at least one director who is resident within the EU. Existing companies are to be given 12 months to satisfy the criteria from the time the legislation comes into effect early next year. Failure to comply with the new requirements will result in a fine or imprisonment.

The Registrar of companies will have the power to prosecute these offences. The Registrar will also have the discretion to decide whether certain company directors can hold more than 25 such positions, based on certain criteria, for example if the directorship relates to an associated company or one which is regulated by the State authorities, such as in the financial services sector. The Registrar will also be able demand that these companies file all outstanding annual returns within one month or risk being struck off. Separate changes are proposed for the money-laundering provisions of the Criminal Justice Act 1992 which would impose a "know your client" obligation on company formation agencies, obliging them to declare the identity of a company's beneficial owner. The measures are aimed at making it very difficult for undesirable elements to continue to use this structure to hide the proceeds of crime.

Meanwhile, the Cabinet has also approved a change in legislation which will mean small, private, limited companies with turnover of under £100,000 will no longer be required to have annual audited accounts. But the directors of qualifying companies will still have to prepare and file annual accounts and lodge them at the Companies Registration Office.