The High Court has declined to impose company-law restrictions on three directors of Business Interiors and Design (BID) Limited, which was wound up in 2010. Mr Justice Herbert ruled that the evidence did not establish irresponsible management warranting the declarations sought by the company’s liquidator.
The application was brought by official liquidator Aidan Heffernan under section 150 of the Companies Act 1990. The company, which fitted out commercial and office interiors, was wound up on a Revenue Commissioners petition by order of 22 March 2010. The judge delivered his decision on 22 February 2013.
The liquidator argued that the directors should have stopped trading earlier, pointing to unpaid tax, creditor treatment, banking arrangements and the company’s financial position. At a meeting on 2 April 2009, the directors recorded that the company’s net assets were below half its called-up share capital. They decided to continue trading while the managing director pursued a proposed €200,000 personal facility and sought an outside investor.
The company’s current liabilities exceeded its assets by about €408,700 at the end of March 2009. The judge nevertheless found that the decision to continue trading at the start of April was not an unacceptable risk or “wilful and irresponsible self delusion”. He considered the directors’ expectation of obtaining funds, ongoing contracts and prospects of further work, as well as steps to reduce costs and advice from the company’s accountants.
The court found the company became hopelessly insolvent after June 2009, when the proposed €200,000 mortgage advance could not proceed and trading conditions worsened. But it found that from April 2009 until the company’s winding up, the position of the general body of creditors neither improved nor materially deteriorated. It was not satisfied that the decision to continue trading prejudiced creditors or that the directors had failed to act responsibly in managing the company.
The company owed the Revenue Commissioners VAT and payroll-related sums. The judge said the non-payment of deductions from employees’ wages was deplorable, but insufficient by itself, in the circumstances, to justify restrictions. He also found that the failure to file annual returns for 2008 and 2009 did not amount to a lack of responsibility. The claimed ground of non-cooperation with the liquidation process was not pursued at the hearing.
The court declined to make the restriction declarations sought. The ruling concerned this application under section 150; it did not impose restrictions on the respondents.