The High Court has refused to make restriction orders against three directors of Gerdando Limited, which is in liquidation, after finding they acted responsibly in relying in good faith on advice from suitably qualified professional advisers.
The application was brought by Peter Doherty under section 150 of the Companies Act 1990. The court said the directors’ honesty was not in issue and no other basis for an order had been established. The remaining question was whether they acted responsibly, particularly in relation to a 2008 reorganisation.
Gerdando, incorporated in 1995, owned two Eddie Rocket’s restaurants in County Dublin. In the reorganisation, its undertaking was transferred to Terenure Restaurants Limited, which issued shares to Karl Donohue and Ruth Donohue in the same proportions as their Gerdando shareholdings.
The liquidator’s evidence identified two main reasons for Gerdando’s insolvency: the operations company’s failure to pay rent during 2009, and the 2008 reorganisation. The liquidator alleged that the reorganisation involved a distribution in breach of section 45 of the Companies (Amendment) Act 1983 and the directors’ fiduciary duties. The directors said they had engaged experts to advise on the transaction and expected them to address its legal implications.
The judge noted that an independent report commissioned by the directors concluded the reorganisation did not breach section 45, while the liquidator argued that it did. The court said it did not need to decide whether a breach had occurred to determine the restriction application. The differing professional opinions, the judge said, weakened the claim that the directors had acted irresponsibly.
The court also considered ancillary questions about the transaction documents, an inter-company loan and the accounting for Gerdando’s assets. It accepted that the directors’ affidavit offered apparently reasonable answers, including that documentation errors were inadvertent and accounting errors could be remedied.
The judge concluded that the directors had relied in good faith on advice sought in good faith from suitably qualified advisers, and that no other circumstances suggested they were blameworthy. The court therefore declined to make a section 150 order against Karl Donohue, Ruth Donohue or Edith Donohue. The judgment did not determine whether the reorganisation breached section 45.