The Director of Corporate Enforcement -v- Walsh & ors, [2014] IEHC 365 (2014)

Docket Number:2014 141 COS
Party Name:The Director of Corporate Enforcement, Walsh & ors
Judge:Barrett J.
 
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THE HIGH COURT[2014 No. 141 COS]

IN THE MATTER OF WALFAB ENGINEERING LIMITED AND IN THE MATTER OF R.P.B. PRODUCTS LIMITED AND IN THE MATTER OF SECTION 160 OF THE COMPANIES ACT 1990

BETWEEN/

THE DIRECTOR OF CORPORATE ENFORCEMENTAPPLICANT AND

BRENDAN WALSH AND CATHERINE WALSH AND PATRICK WALSH RESPONDENTS

JUDGMENT of Mr. Justice Barrett delivered on the 23rd day of July, 2014.

  1. This is yet another case that arrives before the courts following the economic downturn that beset the nation in 2008 and continued in the years following. In this case the Director of Corporate Enforcement is seeking, pursuant to s. 160(2)(h) of the Companies Act 1990, as amended, a disqualification order in respect of each of the respondents. A disqualification order is a severe measure that prevents an affected person from having any involvement whatsoever in the promotion, formation or management of any company for the duration of the disqualification period. So what did the respondents do that the Director of Corporate Enforcement considers them to merit such censure? They were respectively the directors of one or more companies that got into financial difficulties post-2008 and which they allowed to be struck off the register of companies instead of going through a formal liquidation process. The relevant 'strike off process is available to the registrar of companies under s.12 of the Companies (Amendment) Act 1982, as amended, which provides that:-

    "(1) Without prejudice to the generality of section 311 of the Principal Act, where a company does not, for one or more years, make an annual return required by section 125 or 126 of the Principal Act, the registrar of companies may send to the company by post a registered letter stating that, unless all annual returns which are outstanding are delivered to him within I month of the date of the letter, a notice will be published in the Companies Registration Office Gazette with a view to striking the name of the company off the register.

    (2) If the registrar of companies either receives an answer to the effect that the company is not carrying on a business, or does not within 1 month after sending the letter receive all annual returns which are outstanding, he may publish in the Companies Registration Office Gazette a notice stating that, at the expiration of 1 month from the date of that notice, the name of the company mentioned therein will, unless all outstanding returns are delivered to the registrar, be struck off the register, and the company will be dissolved.

    (3) Subject to subsections (1) and (2) of section 12B of this Act, at the expiration of the time mentioned in the notice, the registrar of companies may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Companies Registration Office Gazette and on the publication in the Companies Registration Office Gazette of this notice, the company shall be dissolved."

  2. In essence, s. 12(1) establishes a process whereby the registrar may strike off a company that is in breach of its annual return requirements. This may seem a venial transgression, certainly by reference to some of the abuses that one sees reported in the company law arena. However, such a strike-off has a particular significance for the creditors of an insolvent company, as was noted by Finlay Geoghegan J. in Re Clawhammer Limited; Director of Corporate Enforcement v. McDonnell and others [2005] 1 I.R. 503 at p.510, when she stated that:-

    "There is potential prejudice to creditors of an insolvent company if the directors, by default, permit it to be struck off the register rather than taking steps to wind it up. In such circumstances such assets of the company as remain are not applied, as a matter of course, in the discharge of creditors according to statutory priorities. Even directors who seek to discharge liabilities of the company may do so in accordance with their own preferences and possible perceived future commercial needs or future commercial intentions or to escape liabilities under guarantees. It also may be of benefit to the directors in the sense of escaping the scrutiny of their conduct of the company's affairs which might follow an investigation by a liquidator including the possibility of being fixed with persona/liability for liabilities of the company in circumstances where same is mandated by the Companies Acts. Accordingly, I accept the submission made on behalf of the Director that the Oireachtas regards the fact that directors may have permitted a company to be struck off the...

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