The High Court has agreed to appoint inspectors to Independent News and Media following an application by the Office Director of Corporate Enforcement.
High Court President Mr Justice Peter Kelly said the appointment was "well justified" and "not disproportionate."
However, he agreed not to make a final order until Thursday morning to allow INM to consider his judgement.
The Director of Corporate Enforcement had argued that it was concerned INM's affairs had been conducted in an unlawful manner and it wanted to investigate properly.
Its lawyers submitted there were at least six circumstances under the legislation that warranted the appointment of inspectors. Mr Justice Kelly agreed.
He said the issue of the public interest was one to which he had to give considerable weight in this case.
INM was in a dominant position in the media in Ireland and it was in the public interest to find out what had gone on.
He said this was particularly true in relation to the removal of data from INM and the interrogation of the data by third parties.
He said this was directed by former chairman of INM, Leslie Buckley, and paid for by a company owned by Denis O'Brien.
Mr Buckley had told the board it was done in connection with a cost-cutting exercise relating to a contract for legal services.
Among those whose data was interrogated were journalists, former directors of INM, as well as two senior counsel who acted for the Moriarty Tribunal, which investigated allegations relating to the awarding of the second mobile phone licence to Mr O'Brien's company, Esat.
The judge said it was difficult to see what the interrogation of information concerning at least some of those people had to do with the cost-reduction exercise.
He said their rights and entitlements may have been transgressed in a most serious way.
The judge said considerable mystery still surrounded a number of issues, which the ODCE had been investigating.
It was highly desirable, he said, that the director could get to the bottom of them.
He said he was sceptical that the appointment of inspectors would have the devastating consequences for the company, as suggested by INM.
He said it was difficult to see how much more reputational damage could be caused to the company, given the amount of information already in the public domain.
The judge said activities alleged to have been engaged in by former chairman, Leslie Buckley, were done in his capacity as chairman not as an individual.
He said an investigation by the Data Protection Commission, as well as a potential investigation by the Central Bank, did not prevent the appointment of inspectors.
The judge said the appointment of inspectors was a serious matter and he had previously said that a sledgehammer should not be used to crack a nut, but he said what had been disclosed in the evidence before him was "no nut".
The appointment of inspectors was well justified and not disproportionate. He said it may well be that there was a complete explanation for all of the director's concerns, but if not, what was alleged was "very serious indeed".
The judge agreed to postpone the final making of his order for two days to allow INM to consider the judgment. He will sit again on Thursday, when he will also consider the issue of costs.
He said he would appoint Senior Counsel Seán Gillane and British corporate solicitor Richard Fleck as inspectors and would direct them to furnish their first interim report by 12 April next year.
In a statement afterwards, INM said: "The board will consider the terms of today’s decision and the action that the company might take in the interests of the company and its stakeholders.
"The board and the company’s management intend to remain focused on the business and ensuring that the group’s operations continue, so far as possible, to be conducted as normal."
Director of Corporate Enforcement Ian Drennan said: "The Protected Disclosures Act 2014 is an important piece of legislation that provides a statutory framework within which workers can raise concerns and disclose information regarding potential wrongdoing while enjoying protections against penalisation (such as suspension, dismissal, demotion, disciplinary action etc).
"In this case, protected disclosures were made both internally within INM and directly to the ODCE. The protections afforded by the Protected Disclosures Act 2014 were a key factor in facilitating the ODCE's investigation of the issues that have led to the judgment delivered in the High Court today."