The High Court has declined, for now, to approve the sale of Derg Marina by Wellingford Construction Limited, setting out conditions under which it would be prepared to consider validating a future sale.
In a judgment delivered on 17 November 2005, Mr Justice Clarke said the court had jurisdiction under section 218 of the Companies Act 1963 to validate a company asset sale while a winding-up petition was pending, even before a winding-up order had been made. Without validation, a sale after presentation of the petition could be at risk of being declared void if the company were later wound up.
The application concerned Derg Marina, a property beside Lough Derg owned by Wellingford. The company’s directors, John Shaw and Patrick Carroll, sought approval to sell it. John Joyce, who holds 45% of the company’s shares, opposed the application. The underlying shareholder oppression proceedings remain unresolved; the judge made no finding on their merits.
The moving parties cited company debts, including about €6 million owed to its bank and just under €500,000 owed to its main contractor. The bank had agreed to roll over its loan until February 2006. The judge accepted that the evidence did not show the bank had been pressing for immediate repayment, but said a contractor’s winding-up petition and the company’s apparent inability to meet debts as they fell due created a high risk of liquidation without a short-term solution to its cash problems.
The judge concluded that, in principle, selling the marina could serve the interests of the shareholders as a whole. A sale at an advantageous price could clear the bank debt and leave proceeds from apartment sales available to address other creditors, potentially reducing the risk of liquidation. He stressed that neither liquidation nor its avoidance was certain.
The court did not approve a sale simply on the basis that it achieved at least €6 million. It said the property should first be marketed by a neutral auctioneer agreed by the parties or nominated by the relevant professional body if they could not agree. The auctioneer should seek the most commercially advantageous contract for the company, weighing price alongside the likely closing date, certainty of completion and the company’s ability to negotiate with creditors.
The judge said the court’s role was not to direct the company to sell. He would consider validating a contract recommended through that process if a sale remained likely to significantly improve the company’s chances of avoiding liquidation. The case was to be mentioned on 24 November 2005 to allow the parties to consider the proposed process. No section 218 order was made at this stage.