In the matter of Bovale Developments: Director of Corporate Enforcement v Michael and Thomas Bailey

The High Court has imposed disqualification orders of seven years duration on each of the two directors / shareholders of Bovale Developments. The orders were made under Section 160(2) of the Companies Act 1990.

The judge, Miss Justice Finlay Geoghegan, made the following findings:

  1. The directors were guilty of fraud in relation to Bovale and to the Revenue Commissioners, by reason of the systematic scheme of false accounting and failure to account in its payroll records for remuneration to the directors and associated PAYE/PRSI liabilities over two years in 1996 -1998. The understated gross remuneration in the two years in question exceeded £6m;
  2. The directors were guilty of breaches of duty, in particular in relation to their failure to ensure that Bovale kept proper books of account, contrary to Section 202 of the Companies Act 1990; and 
  3. the conduct of the directors during the two years ending June 1998 made them unfit to be concerned in the management of a company within the meaning of Section 160(2)(d) of the 1990 Act.

Miss Justice Finlay Geoghegan applied the following principles in reaching her decision in the case:

  • A primary but not the only purpose of an order of disqualification is to protect the public against future conduct of companies by persons whose past record has shown them to be a danger to creditors and others;
  • It is also a purpose of an order of disqualification to improve corporate governance;
  • A further purpose of an order of disqualification is that it acts as a deterrent, both in respect of the respondent director and other directors of companies. Hence, the period of disqualification should contain deterrent elements;
  • The period of disqualification should reflect the gravity of the conduct or wrongdoing; and 
  • a period of disqualification in excess of ten years should be reserved for particularly serious cases.

The gravity of the directors' conduct was central to this judgment. The directors pointed out, in mitigation, that the conduct in question had taken place approximately 15 years ago and that in the intervening years, they had reached a tax settlement with the Revenue Commissioners and they have been tax compliant since. They claimed that since 2001, they have ensured that Bovale kept proper books and records. The judge concluded that despite these mitigating factors, there should still be orders of disqualification for a significant period.

She imposed disqualification orders for seven years each.