The High Court has ordered Gary Carolan and Niall Cosgrove to be restricted from acting as company directors for five years, after finding that their conduct during the winding-up of CMC (Ireland) Limited fell below the standards reasonably expected of directors or former directors.
The judgment, delivered by Mr Justice Clarke on 4 March 2005, followed an application by liquidator Ken Fennell under section 150 of the Companies Act 1990. The court said the application did not concern whether the directors had acted honestly and responsibly in running the company before liquidation. The liquidator’s report indicated that the company had kept proper books and records and filed its statutory returns; the application rested on events during and after the winding-up.
The judge considered four matters. First, the directors kept a company forklift for several months after liquidation and did not answer letters seeking information about company assets. They returned it in November 2003, after the liquidator had reported to the Director of Corporate Enforcement. The directors accepted that keeping it was wrong and said they returned it after receiving advice. Their conduct was described at the hearing as “self help” based on their contention that the company owed them money.
Second, the directors did not meet the liquidator until 1 March 2004, nearly a year after the winding-up was resolved and after the restriction proceedings had begun. They said their understanding that they had resigned had influenced their response, and that they sought to cooperate once advised about their obligations. The judge said their failure to cooperate could hinder recovery of assets, delay payment to creditors and increase liquidation costs.
Third, in proceedings in the Netherlands to recover money loaned by the company, the directors submitted statements supportive of the defendant’s case. The judge found those statements at variance with the company’s records and found the directors had not checked the records before making them. He stressed that there is no duty to withhold truthful evidence, but said directors should exercise care when acting in a way that may run against the company’s interests during a winding-up.
The judge was not satisfied there was evidence of inappropriate conduct in relation to company debtors who later became customers of the directors’ new business, and did not consider that allegation further. He concluded that the first three matters, taken together, made restriction orders just and equitable. He described the conduct as serious enough to warrant an order but at the lower end of the seriousness range, noting that assessment could matter if either director later sought relief under section 152.
The judgment records the five-year restriction sought under section 150 and states that an order was justified. It does not reproduce the formal wording of the order.