The High Court has ruled that a corporate body, including one incorporated outside Ireland, can be a shadow director for the purposes of an application to restrict involvement in companies under section 150 of the Companies Act 1990.
Mr Justice O’Leary delivered the judgment on 16 February 2005. The ruling concerned two preliminary questions raised by Worldport Communications Inc in proceedings arising from the liquidation of Worldport Ireland Limited. The court answered both questions in the affirmative.
The court appointed David M Hughes as official liquidator of Worldport Ireland on 21 October 2002. The liquidator’s application sought restrictions against three entities. Two were natural persons, whose cases were to be considered separately; neither was a party to this preliminary application. The third was Worldport Communications Inc, a US-incorporated company. The liquidator alleged that it had acted as a shadow director of Worldport Ireland.
The company argued that it could not be a shadow director because corporate bodies cannot be appointed as company directors. The liquidator submitted that shadow directorship is a separate status and that the rules barring certain entities from appointment as directors did not prevent them from being shadow directors.
The judge concluded that the legislation treats shadow directors as a status separate from the office of director. He said the restriction law could still have an effect on a corporate entity: a section 150 order can restrict involvement in promoting or forming Irish companies, even where a prohibition on acting as a director would add nothing to an existing bar on corporate bodies holding that office. The judgment also said that statutory exceptions to a restriction would not make an entity eligible for appointment as a director if it otherwise remained disqualified.
The court held that the same reasoning applied to foreign-incorporated companies. The judgment referred to legislation defining a body corporate to include a company incorporated outside the State and found no basis for treating foreign and Irish company promoters differently for this purpose.
The court expressly confined the preliminary hearing to the two legal questions and did not decide whether Worldport Communications Inc had in fact acted as a shadow director or whether a restriction should be imposed. If the application proceeded, those merits would be considered alongside the separate applications concerning the two natural persons. Costs were left to be dealt with at the substantive hearing.