The High Court declared three former directors of Spur (Liffey Valley) Restaurants Limited restricted under section 819 of the Companies Act 2014, after the company’s liquidator applied following its insolvency. The directors did not appear to oppose the application.
Mr Justice David Keane delivered judgment on 28 October 2016. The company, which operated a restaurant at Liffey Valley Shopping Centre in Clondalkin, went into voluntary liquidation after a members’ resolution in January 2013. The liquidator, Eamonn Leahy, certified that it was unable to pay its debts. The Office of the Director of Corporate Enforcement had told him he was not relieved of his duty to apply for restriction declarations.
The central concern was how the company accounted for debt owed by Trinity Leisure Limited, its 95% shareholder. The company’s 2010 accounts recorded €1,963,989 owed by group undertakings and €1,117,645 in shareholder loans. Its 2011 accounts showed the group debt reduced to €31,200, no shareholder loans, and €825,000 in intangible assets. The directors’ explanation, conveyed to the liquidator, was that the company acquired franchise rights and the lease of its restaurant premises from Trinity for €825,000, leaving a debt of €21,344.
The liquidator said he had not received copies of the franchise agreement, lease or accounting software needed to examine the transactions and their valuations. The court accepted that without supporting evidence it could not be satisfied the transactions were not contrived and backdated. The judgment noted that the company entered liquidation with an estimated net deficiency of €309,116, while the intangible assets recorded in the accounts appeared to have no realisable value in liquidation. The court also treated the directors’ failure to provide requested material as a separate possible basis for restriction.
The judge noted that the company had generally maintained proper records and filed returns, and had traded for about 11½ years. But the directors had not established that they acted honestly and responsibly or that restriction would be unjust. The judgment highlighted questions about compliance with company law, directors’ oversight of the company, and their responsibility for its net deficiency. It also noted the potential conflict arising because the first and second respondents were directors and shareholders of Trinity.
The third respondent’s position differed: he was a non-executive director and appeared to have taken a passive role. The court held that passivity did not exempt a director from restriction. It therefore made a restriction declaration concerning each of the three respondents. The judgment does not set out the duration or further terms of those declarations.