Directors and connected persons returned approximately €100 million last year that they had out in loans from their companies, the Director of Corporate Enforcement said yesterday.
Mr Paul Appleby said that in many instances the company money was being used by directors and connected persons for personal reasons.
The Office of the Director of Corporate Enforcement (ODCE) announced in November 2003 that it was to examine the issue, stating it had information that some directors had potentially illegal loans for in excess of €1 million from their companies.
There are restrictions under company law limiting the size of loans directors are permitted to draw down from their companies.
The provisions prohibit directors' loans for in excess of 10 per cent of a company's "relevant assets", these being the net assets as per the most recent balance sheet laid before an annual general meeting, or the company's paid-up share capital.
Mr Appleby, in a review statement on 2004, said the use by directors and connected persons of company assets for personal reasons continues to be a major concern.
In 2004, 490 such cases were brought to his attention, compared to 271 in 2003.
The return of the €100 million constituted a significant reduction in credit risk, he said.
"In a number of individual cases these loans were for substantial sums or represented a large part of the value of the company and were very substantially in excess of the permitted limits.
"The investigation of many of these cases has failed to disclose sufficient evidence that the relevant defaulters knew or had reasonable cause to believe that the company would, by entering into the transactions, be contravening the legislative prohibitions, an essential element of a criminal offence."
Mr Appleby said this impediment to successful prosecution should diminish in the future considering the extent to which the ODCE has been to the forefront in raising corporate awareness of these prohibitions.
He said that during 2004 there were 67 convictions secured for company law offences, a 56 per cent increase on 2003. The ODCE itself secured two prosecutions, one for fraudulent trading and one for acting as a director while restricted from doing so.
During 2004, the number of people restricted from acting as directors rose to 470, from 200 at the end of 2003.
"Legal obligations to creditors or employees or the public interest cannot be ignored in order to minimise costs because a regime of non-existent or lax enforcement no longer exists," Mr Appleby said.
"Yet it is clear that we are still a long way from conditions of extensive compliance with legal obligations and duties."
During the year, the ODCE made 100 presentations as part of its advocacy work. Mr Appleby said greater compliance with the law created fairer conditions for competition.
Expenditure by the ODCE in 2004 was €3.07 million.
Mr Appleby said he expected expenditure in 2005 to exceed this.
