In the matter of Aventine Resources plc: ODCE v John Liwosz v Anthony Brown, [2014] IEHC 611, High Court, 30 October 2014, Mr Justice Cregan

In this case, the Director of Corporate Enforcement (ODCE) sought a disqualification order under Section 160 of the Companies Act 1990 in respect of two individuals, from acting as company directors.

There was evidence of a long history of poor company law compliance by the two directors who failed, despite repeated demands and requests, to meet certain company law obligations. In addition, there was evidence that they had breached two High Court orders and were therefore in breach of their duties as directors.

The ODCE stated that it had received numerous complaints from shareholders in the company about the conduct of the company. In addition the company, which was admitted to trading on the Alternative Investment Market (AIM) on the London Stock Exchange, was also publicly censured by AIM in 2005 for breaches of a number of AIM rules.

The position at the time the application was brought was: 

  • the financial statements for the company of 2008 had been filed late and were disclaimed by the company’s auditors; 
  • the 2009 accounts had been filed late and were disclaimed by a different set of company auditors; 
  • the 2010 accounts had not been filed; 
  • the 2011 accounts had not been filed; 
  • books of account were not properly kept; 
  • the affairs of the company were conducted in a manner which were unfairly prejudicial to its members with persistent delays in holding AGMs; 
  • the respondents failed to comply with many of their statutory obligations despite persistent pressure from the Director; and 
  • the respondents continued to breach two High Court orders to make good these defaults.

The explanation given by the directors for the persistent failures was that the company was in a perilous financial state and that it had limited funds to meet its auditors' fees. John Liwosz said that the company had difficulty in raising funds and was forced to exhaust all avenues of financing in order to get the funds necessary to complete the filings.

The judge stated that the most noteworthy feature of this application was the fact that the directors were in persistent and continuing breach of not one, but two High Court orders. He described this as "an extraordinary omission on their parts". He said that their behaviour showed a blatant disregard not only for their obligations as directors under company legislation, but also for the express terms of two court orders directing them to comply.

The judge pointed out that for the previous five years, members of the company were unable to ascertain the true financial position of the company, making this is an "intolerable situation" for shareholders in the company or possible investors in the company. The sole responsibility for this state of affairs, he said, lay solely and exclusively with the two directors. As directors of the company, they were charged with ensuring that the company fulfilled its statutory obligations.

The judge imposed disqualification orders against the two directors. He considered the mitigating factors put forward on behalf of the directors and decided upon a disqualification period to reflect the seriousness of the case. It was clear to the court that the directors deliberately refused to comply with two court orders for a protracted period of time, instead of putting the company into liquidation.

The judge disqualified the first director for a period of seven years and the second director for a period of six years.