Almost 40,000 Companies Face Strike-Off for Ownership Non-Compliance

Almost 40,000 companies risk being struck off due to non-compliance with ownership disclosure laws. The Companies Registration Office (CRO) now has the authority to address this issue, as these firms have failed to submit details regarding their beneficial owners, a requirement established under the EU’s fourth money laundering directive, known as MLD4.

The Register of Beneficial Ownership (RBO) was introduced to enhance transparency across the EU. It mandates that all companies and societies operating within member states provide comprehensive ownership information. The initial deadline for compliance was set for November 2019, yet a significant proportion of entities, estimated at between 10% and 12%, have not filed the necessary details.

Fines for non-compliance can reach up to €500,000, and individuals who knowingly submit false information to the RBO could face imprisonment for up to 12 months. The CRO indicated that the enforcement process will commence shortly, although specific timings for the strike-offs remain undisclosed. Initially, non-compliant entities will receive a warning from the RBO before the CRO proceeds with any strike-off actions.

Despite the large number of firms at risk, prosecutions for failing to file ownership details have been limited. Since the RBO began legal actions against non-compliant entities in the second quarter of 2022, only five companies were charged that year, each convicted and fined €3,000. Additionally, four other companies pleaded guilty, benefiting from the application of the Probation Act. In 2023, cases against 15 entities were heard, resulting in eight convictions and seven guilty pleas, with similar leniency applied.

At a recent stakeholder meeting, the CRO confirmed that the procedure for striking off companies will align with the existing protocol for entities that have failed to submit annual returns. This typically involves a 10-week warning issued via email, followed by a formal strike-off notice sent to the directors at their home addresses.

Public access to the Irish RBO was restricted in 2022 following a landmark ruling by the European Court of Justice, which determined that unrestricted access conflicted with privacy rights under the General Data Protection Regulation. Consequently, the public now has limited access to RBO information, with only one request made last year for details on a firm, which was subsequently denied.

As the CRO prepares to initiate strike-off procedures, the spotlight remains on the significant number of companies that have yet to comply with ownership reporting regulations. This upcoming crackdown aims to enforce transparency and adherence to EU directives, marking a critical step in the ongoing efforts to combat money laundering and enhance corporate governance across the region.