The Office of the Director of Corporate Enforcement (ODCE) has started legal proceedings against the Football Association of Ireland (FAI).
It has filed a High Court affidavit in connection with the Companies Act.
The move follows controversy surrounding a €100,000 loan that former CEO John Delaney gave the association in April 2017.
Mr Delaney stepped down as FAI CEO in March, before immediately taking up a new position at the association as executive vice president.
He subsequently appeared before the Oireachtas Sport Committee, but refused to answer questions about the payment - citing legal advice.
While Sport Ireland announced last month it was to 'suspend and withhold' future funding to the FAI.
It said its board took the decision in light of the admission that the association broke State finding rules.
In a statement at the time, Sport Ireland said: "In making the decision to suspend and withhold funding, the Board of Sport Ireland notes that the FAI has already been paid 50% of its 2019 funding to date and some positive steps taken by the FAI in recent days.
"This decision will be reviewed by the Board of Sport Ireland as a standing item at each of its future meetings."
It said it would consider reinstating funding once all reports commissioned by the FAI have been completed and recommendations adopted.
However, the board said it will need to be satisfied "that all necessary processes and controls are in place to ensure the FAI's ongoing compliance with the Terms and Conditions of Grant Approval".
The FAI receives around €2.7m from Sport Ireland to cover a number of programmes.