The High Court has declined to restrict three former directors of Doherty Brothers Timber Company Limited, finding they acted honestly and responsibly in the company’s affairs before it went into voluntary liquidation.
Mr Justice David Keane ruled on an application brought by liquidator Eamonn Leahy under section 150 of the Companies Act 1990. The directors were Dermot Doherty, John Doherty and Fergal Doherty. The court’s decision means no restriction declaration was made against them.
The company, a timber merchant and builders’ supplier based in Ashbourne, County Meath, traded from 1993 until March 2011. Its members resolved to wind it up voluntarily in May 2011, and appointed Leahy as liquidator. The directors accepted that the company could not pay its debts when winding up began and that they held office at the relevant time. The court therefore had to make restriction declarations unless satisfied they had acted honestly and responsibly.
The dispute focused on whether the directors had acted responsibly by allowing the company to continue trading from around spring or summer 2010 until March 2011. The liquidator argued that the company was clearly insolvent during that period. The directors said they had cut costs sharply, sought professional advice and pursued discussions with their bank and invoice finance provider to secure funding.
The company had traded profitably until 2008, but its turnover fell from €11.9 million in 2006/07 to €1.8 million in 2010/11. At the start of the winding up, it had estimated assets of €27,792 against preferential and unsecured debts totalling more than €1.9 million, before liquidation costs. It owed Revenue about €189,843 in unpaid VAT and PAYE/PRSI.
The judgment records that the directors sold four of five forklift trucks, reduced overheads, stopped certain payments to directors, brought some services in-house and moved to smaller premises. The judge concluded that, considering their full tenure and their engagement with professional advisers and financial institutions, they had made commercial errors and misjudgements but had acted responsibly.
The liquidator had also raised concerns about the company’s late tax and company filings, but did not argue that those failures alone barred the directors from establishing responsible conduct. A separate suggestion that company credit had been used to favour repayment of a facility personally guaranteed by two directors was denied; the judge found the evidence insufficient to conclude that such conduct had occurred.
The judge criticised aspects of the directors’ conduct after liquidation concerning company servers and backup disks, saying those matters raised more obvious questions about the directors’ conduct than the liquidator’s. However, the liquidator had not pressed for restriction on that basis. The court also left undecided the significance, if any, of delay in bringing the application. It declined the restriction declarations sought.