The High Court has ruled that a former company secretary at a Kenmare consultancy business was not a shadow director and cannot be subjected to a director restriction order on that basis.
Devona Limited, which traded as D & K Partnership from Reen, Kenmare, provided mechanical and electrical consultancy services for houses and commercial developments. Its liquidator, Conor Pyne, sought restriction orders against four respondents following the company’s liquidation.
The preliminary issue concerned fourth respondent Alfred Schoenmakers. He joined the company as an employee in 2004, later became company secretary and was made redundant in April 2010. The liquidator alleged that he had exercised sufficient influence over the company’s formal directors to amount to a shadow directorship.
The liquidator relied particularly on Schoenmakers’ role in correcting the company’s statement of affairs after liquidation. The amended version added approximately €200,000 in trade debtors and loans or advances. He also pointed to a 2008 report prepared by Schoenmakers on the company’s financial difficulties, his dealings with Revenue and insurers, and his involvement in equipment leases.
Schoenmakers disputed that description. He said he dealt with bookkeeping and office administration, reported to directors, could not sign company cheques, did not choose suppliers or control payments and had no authority to bind the company commercially.
Ms Justice Dunne held that a shadow director is someone whose directions or instructions the actual directors are accustomed to follow. Isolated instances are insufficient. The pattern must be repetitive, customary and part of the company’s usual course of business.
The judge accepted that Schoenmakers held a managerial position and was involved in financial matters. However, his actions were explicable by his roles as employee and company secretary. The evidence did not show that the board habitually acted on his instructions.
The court therefore held that Schoenmakers was not a shadow director and was entitled to succeed on the preliminary issue.