The High Court declined to disqualify three directors of Walfab Engineering Limited and R.P.B. Products Limited after both companies were struck off the companies register without being formally liquidated. It also made no restriction order against them.
Mr Justice Barrett delivered judgment on 23 July 2014 in an application by the Director of Corporate Enforcement under section 160 of the Companies Act 1990. The court found that the statutory conditions for considering disqualification were met for each respondent. It then considered whether to exercise its discretion to make an order.
The three respondents were directors of Walfab, a metal fabrication and manufacturing company. Brendan and Patrick Walsh were also directors of R.P.B., which imported and installed prefabricated stairways. Walfab ceased trading on or about 1 October 2011, when its three remaining employees left. The court said R.P.B. suffered a similar decline after the construction downturn. Walfab was struck off on 22 May 2011 and R.P.B. on 30 September 2012.
The court said allowing an insolvent company to be struck off rather than wound up can prejudice creditors, including by avoiding the orderly distribution of assets and scrutiny of directors’ conduct. It described the respondents’ failure to file annual returns and their acquiescence in the strike-off process as reproachable.
However, the judge considered the economic conditions following 2008, the scale of the businesses, the directors’ circumstances and the absence of other misconduct brought to the court’s attention. The court accepted evidence from Patrick Walsh that the directors had tried to keep the family businesses operating as market conditions deteriorated. It concluded that disqualification was not warranted in the particular circumstances.
The court separately considered whether to make restriction orders under section 150. It found the respondents had acted responsibly for the purposes of that provision and concluded that no restriction order was required. The judgment did not decide the argument that Catherine Walsh’s passive role as a director independently justified avoiding an order; the court said that issue did not need to be determined.
The judge stressed that the decision should not be read as treating strike-off as an alternative to liquidation. The court made no order under section 160 or section 150 against any respondent.