In the matter of Shellware Limited (In Liquidation) 2014 IEHC 184
On 1 April 2014 Barrett J. refused an application by the Liquidator of Shellware Limited (In Liquidation) for the restriction of Mr Eoghan Breslin, a former director, under Section 150 of the Companies Act 1990. This decision also helpfully provides clarity regarding applications for an extension of time for the filing of a Report by a Liquidator to the Director of Corporation Enforcement under Section 56 of Company Law Enforcement Act 2001 (“Section 56 Report”).
Under Section 150, the Court must grant a restriction order unless satisfied that any of the circumstances contained at Section 150(2) pertain, including
- That the affected person has acted (a) honestly and (b) responsibly in relation to the conduct of the affairs of the company
- That there is no other reason why it would be just and equitable that a restriction order should issue
On the facts presented, the Court found no issue regarding Mr Breslin’s honesty. The substantive issue for determination by the court was whether Mr Breslin had acted “responsibly” in the conduct of the affairs of the Company.
Following a detailed analysis of jurisprudence, Barrett J. held that it was important not to adopt a “formulaic, standardised tick the box” approach” to determining Section 150 applications. In deciding the issue of behaving responsibly, Barrett J. confirmed the Court may of course have regard to Mr. Breslin’s obligations as a director, to general commercial practice and to prior case law but that this should be more to anchor than to determine any decision of the Court as to the responsibility, or otherwise, of his actions.
Mr Breslin’s behaviour was analysed under the following six main headings
- Failure to maintain adequate books and records - Mr Breslin’s actions were held to be open to criticism, but not sufficient to be categorised as irresponsible, in this regard.
- Late/non-payment of certain taxes/selective payment of company liabilities - The Court held that the selective payment of the Company’s liabilities or a total disregard of obligations to the Revenue Commissioners would be indicative of a director acting irresponsibly but that there was no evidence of this in this case and that Mr Breslin’s actions in this regard, although reproachable, were not irresponsible.
- Steps taken when the Company was in financial difficulty - The Court held that Mr. Breslin could be viewed as being guilty of misplaced optimism regarding Shellware’s trading prospects but that he was not guilty of irresponsibility in this regard.
- Making of payments to a related company. The Court didn’t believe Mr Breslin had crossed the line to irresponsible behaviour on this issue on the facts presented.
- Use of company credit cards for personal expenses – The Court found Mr. Breslin’s use of the company credit card facilities was not irresponsible.
- A claimed lack of co-operation with the liquidator - The Court concluded that Mr Breslin had co-operated with the Liquidator.
The Court refused to make the restriction order sought by the liquidator.
An application was also made by the Liquidator for an extension of time for the delivery of his Section 56 Report. In normal circumstances, Barrett J. held that the appropriate course of action was for a liquidator to make a pre-emptive application for an extension if it was likely that the statutory six month time limit for delivery of the Section 56 Report to the Director of Corporate Enforcement could not be complied with. Otherwise, an affected director may be capable of sustaining an objection to a restriction application on the grounds of delay. As it had already been held that a restriction order was not merited in the particular circumstances of this case, Barrett J granted the extension as no purpose would be served in refusing this application.