High Court could disqualify directors who traded 'hopelessly insolvent' firm

High Court could disqualify directors who traded 'hopelessly insolvent' firm

Two directors of a joinery firm which traded while "hopelessly insolvent" could be disqualified from involvement in companies for between five and 10 years, a High Court judge has said.

Ann O'Loughlin of the Irish Examiner writes that Mr Justice Robert Haughton said he would hear submissions later on what period of disqualifications he would impose on Patrick McGowan and Vincent Fox, directors of Wood Products (Longford) Ltd which employed around 12 in its Longford town premises.

Given the "serious but not egregious" nature of their misconduct, the judge's preliminary view was that the appropriate period of disqualification was in the range of five to 10 years with the conduct of Mr McGowan, which was "more blameworthy", attracting a disqualification at the upper end of that range.

Liquidator Tony McBride applied for disqualification or restriction orders, under the Companies Act 2014, on a number of grounds including that it continue to trade while insolvent.

Mr McBride suggested insolvency arose as far back as 2003 but that from then until 2014, it had accumulated around €1.1m in unpaid taxes. This prompted Revenue to apply for its winding up on foot of a demand for a total of €2.4m.

Mr Justice Haughton said both men were "persistently in default" in relation to the requirements of company law. The firm was twice struck off the Companies Register for failing to make annual returns.

The court heard Mr McGowan, who will be 70 on his next birthday, is in receipt of the old age pension and has no plans to work in the future, had not opposed the liquidator's application.

Mr Fox is an accountant who became a director of the company in 2004 after which the firm was restored to the register, having been first struck off in 1999 for failing to file returns.

Mr Fox, whose wife is a sister of Mr McGowan, said he got involved for family reasons and because the company need financial assistance.

Mr Fox, who said he had minimal involvement in the running of the company, disputed claims insolvency went back to 2003.

He had also claimed the company was owed money by government departments, in particular the Department of Finance, for construction work it had done and for services provided.

However, Mr Justice Haughton said, Mr Fox never provided any evidence to back up a threatened counter-claim in relation to this work.

The judge was satisfied that by 2014 the company was hopelessly insolvent and that insolvency probably dated back to at least 2009. There was strong evidence it was permitted by the directors to continue trading while insolvent from at least 2009 onwards.

While Mr Fox had ensured returns were filed upto 2004, it was "astonishing" that no further returns were made after that, the judge said. The firm was struck off the register for a second time in 2011.

The judge said the liquidator had made a number of other complaints including a "most alarming development" in which it appeared those plant and machinery assets from the liquidated firm were being used by former employees of the company in a nearby rented premises which carries out the same business as Wood Products (Longford) did.

A statement of affairs provided by Mr Fox in July 2014 stated the company had trade debtors of some €165,000 but this was misleading because it comprised almost entirely sums from businesses or entities which were in liquidation or already dissolved, the liquidator also said.

Mr Justice Haughton said even if he accepted Mr Fox's assertion he was a passive director, given that he was an accountant and given his reasons for involvement in the firm in the first place, he "cannot sidestep the evidence of misconduct" related to trading while insolvent.

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