The Supreme Court has ruled that a body corporate cannot be made the subject of a restriction order under section 150 of the Companies Act 1990, even if it is alleged to have acted as a shadow director of an insolvent company.
The decision arose from a preliminary appeal in proceedings concerning Worldport Ireland Limited, which was in liquidation. Its official liquidator had sought, among other relief, a declaration that the appellant was a shadow director and a five-year restriction order. The appellant was incorporated in the United States.
The High Court had answered two preliminary questions in the affirmative: whether a body corporate could be a shadow director for section 150 purposes, and whether that included a body corporate incorporated outside Ireland. The Supreme Court appeal concerned those points of law, not a finding on the appellant’s conduct.
Justice Fennelly held that a body corporate can fall within the statutory definition of a shadow director, which turns on whether company directors are accustomed to act on that person’s directions or instructions. The prohibition on corporate bodies holding formal directorships did not, by itself, prevent a company from being a shadow director.
But the Court held that section 150 could not accommodate a restriction order against a corporate body. The section requires an order prohibiting specified activities, including acting as a director, while allowing an exception for involvement in companies meeting specified capital requirements. Applying that order to a corporate body would conflict with the separate statutory prohibition on corporate bodies acting as directors. The Court said the section did not allow it to omit only the conflicting parts of the order.
The Supreme Court therefore allowed the appeal and substituted a negative answer to the first preliminary question. It set aside the High Court order on the second question, which it said did not arise. The judgment did not determine whether the appellant was a shadow director or whether any other relief was available in the underlying proceedings.