The High Court has ruled that Declan O’Reilly must be subject to a declaration of restriction as a director, after finding it could not be satisfied that he acted responsibly in the final years of T. O’Reilly (Electrical Supplies) Ltd.
The judgment, delivered by Ms Justice Finlay Geoghegan on 17 October 2014, concerned liquidator Tony McBride’s application under section 150 of the Companies Act 1990. The company went into voluntary liquidation in July 2011 after becoming unable to pay its debts. O’Reilly had been a director and managing director and was its principal shareholder.
The court said it was required to make a restriction declaration unless O’Reilly showed that he had acted honestly and responsibly, and that no other reason made restriction just and equitable. The judge said no separate reason arose. The issue was whether the evidence showed responsible conduct. The judgment addressed O’Reilly alone; declarations had already been made against three other respondents in January 2014.
The liquidator attributed the company’s failure mainly to a sharp fall in turnover, bad debts, unsustainable rent costs and loans and an investment in related companies that proved effectively irrecoverable. The judge accepted that O’Reilly and colleagues made strenuous efforts to cut costs and keep the business operating. The liquidator made no general complaint about the company’s books and records or returns, though the judge identified concerns about abridged accounts.
The court found that the 2010 abridged accounts stated there had been no related-party transactions with directors, despite the full accounts listing rents and management fees involving O’Reilly and related companies. The judge rejected O’Reilly’s explanation that the incorrect statement was simply an oversight, concluding it was probably deliberate. The liquidator also showed that related-party transactions had not been disclosed in the 2009 abridged accounts.
The judge accepted the liquidator’s evidence that a management charge was reclassified as a loan despite monthly payments continuing, and that rent reductions were recorded as loans without actual repayments to the company. She said the timing of the management-charge reclassification was unclear, but that was not central to the decision. She did not determine that section 31 had been breached, but found that large loans to related companies were relevant to O’Reilly’s responsibility, particularly as most remained outstanding and had proved irrecoverable. A disputed €100,000 loan repayment was accepted and was not counted against him.
The liquidator’s analysis recorded €125,849 in company-card spending between June 2009 and July 2011 as motor and travel expenses. O’Reilly said the spending was primarily for business but provided no specific explanations. The judge said some items might have been business-related; for others, including payments for sports and television services, healthcare, golf lessons, home furnishings and clothing, the only inference in the absence of explanation was that they were personal.
Considering these matters together, the court was not satisfied that O’Reilly had demonstrated responsible conduct. The judgment states that a restriction declaration was therefore required under section 150. It does not specify the duration or further terms of the restriction.