We have written about cases before the Courts where directors have been restricted or disqualified to highlight to directors the important role they play in a company and to remind them of their duties and responsibilities. Many of the cases such as the Glenda Gilson case show the directors being restricted or disqualified.
A&L Goodbody have written about a recent case In Murphy -v- O’Flynn & anor [2016] IEHC 197 where a liquidator sought an order from the Court restricting William and Deirdre O’Flynn from acting as directors pursuant to Section 150 of the Companies Act 1990. The second director in this case was not restricted by the High Court.
You can read the full article here
Facts of the Case
Mr. O’Flynn had no objection to an order being made against him. The judge declined to make a declaration of restriction in respect of Mrs O’Flynn as he held that she had satisfied the court that she acted honestly and responsibly in the conduct of the Company’s affairs. She had given uncontroverted evidence to the Court that she had been actively deceived by her husband in relation to the Company’s affairs, to the extent that, when she learned of these issues she moved immediately to retain an independent legal adviser. She subsequently discovered that her signature as a director was forged on a number of identified documents executed on the Company’s behalf.
The Company had to be restored to the register in 2000 and, again, in 2005, having been struck off for failure to file accounts. After the restoration of the Company, the directors again failed to file the appropriate accounts.
The Court was of the view that this demonstrated a persistent failure to comply with the obligations to maintain proper books and records and financial information and amounted to a persistent breach by the Company of its obligation to make returns in accordance with the Companies Acts.
The second issue was that the Company had failed to discharge CGT liabilities in the sum of €93,785 in 2005 and €478,865 in 2006; PAYE and PRSI liabilities amounting to €41,211 between 2008 and 2011 (inclusive); and VAT liabilities in the aggregate sum of €183,340 for the period 2006 to 2011 (inclusive).
The Court was of the view that this demonstrated, at the very least, a lack of commercial probity and want of proper standards on the part of the Company’s directors in using monies due to the Revenue Commissioners, including fiduciary taxes, to keep the Company afloat and in permitting the Company to continue trading while insolvent over an extended period.
This is an important case as it examines the provisions of Sec 819 of the Companies Act 2014 which replaced Sec 150 of the Companies Act 1990. The Judge noted that under the new section, a director must establish that he has acted honestly and responsibly in relation to the conduct of the company’s affairs before or after the company became insolvent. He also noted that the Section now includes an express requirement that the respondent director establish that he or she has, when requested to do so by the liquidator, co-operated as far as could reasonably be expected in the conduct of the winding up. However, Keane J also accepted that there was an argument to be made that these differences added nothing of substance as under both formulations, a director must satisfy the Court that there is ‘no other reason why it would be just and equitable’ to make a restriction order.
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