Restriction, Disqualification and the Companies Act 2014: A Reformatory Analysis

• Author: Aaron Sheehan
• Pages: 78-117

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RESTRICTION, DISQUALIFICATION AND THE COMPANIES ACT 2014:

A REFORMATORY ANALYSIS

Aaron Sheehan*

A INTRODUCTION

As Ireland has developed as a legitimate site and source of international business, so too has

the need for an effective corporate legal regime. In turn, the body of law initiated with the

Companies Act 1963 (1963 Act) has grown into a cornerstone of the Irish legal sphere. The

focus of this piece shall not be the law here as a whole, but rather a number of key elements.

These are sections 150 and 160 of the Companies Act 1990 (the 1990 Act), better known as

the restriction and disqualification provisions respectively. With a large body of

developments over the years, the shadow of the financial crisis still looming and the

imminence of a further Companies Act in the near future, these provisions make for

excellent subjects of analysis.

While interrelated in many ways, sections 150 and 160 have nonetheless led distinctive

lives. As such, separate examinations of the specifics of both are warranted. Restriction, for

example, was a completely new creation arising from the 1990 Act, with disqualification

partly deriving from provisions included in the original 1963 Act. With this in mind, it

would do both a great disservice to look at them collectively. Instead, section 150 will be

looked at in detail before moving on to view section 160, separately, in similarly detailed

analysis.

In doing so, this piece aims to provide something more than a bare statement of the law.

Instead, a keen, critical eye will be cast over the legislation, moving from the origins of the

law towards more modern developments. Framing the law with my own views and those of

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various academics in this field is crucial in ensuring the integrity of the piece.

Commentators such as Lynch-Fannon and Murphy have observed that, at ‘the time of their

original enactment’, restriction and disqualification ‘lacked clarity in terms of

enforcement’.

1

Consequently, there is real scope for appraisal, both positive and negative,

throughout the legislation.

A further crucial element is that of the various reforms to have occurred in this sphere. The

corporate legal framework has not existed in a vacuum, and the numerous developments

experienced are of particular interest. Reform has consistently been on the mind of

legislators, as seen in publications such as the McDowell Group Report in 1998, the

Company Law Enforcement Act 2001 (the 2001 Act) and the establishment of the Office of

the Director of Corporate Enforcement (ODCE); all noteworthy contributions to the

corporate legal landscape.

Additionally, sizeable effort has been directed towards the Companies Act 2014 (2014 Act).

Acting to consolidate and revise much of the existing company legislation here, these

reforms are of substantial relevance to this piece. Having covered the existing law, the

objective here is to look at the relevant restriction and disqualification portions of the Act,

consider what they propose to do and provide a critical response. In doing so, it is hoped

that both the successes and failures of the Act will be abundantly clear. Lauded by the

Minister for Jobs, Enterprise and Innovation Richard Bruton as the largest substantive bill

in the history of the State and as ‘part of the Government’s drive to make Ireland the best

*BCL, University Colle ge Cork, LLM (International and European Business Law), Trinity College

Dublin. Sincerest thanks to my mother a nd father, Marie and Tadg, and my sister, Sarah, for their

continued support before, during and after the writing process.

1

Irene Lynch-Fannon and Gerard Murphy, Corporate Insolvency and Rescue (2nd edn, Bloomsbury

Professional 2012) para 11.01.

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small country in the world in which to do business’,

2

the significance of this both

historically and going forward is readily evident.

In all, the dominant intention of this piece is to provide an all-encompassing look at the

restriction and disqualification provisions in Ireland. In considering the origins,

developments and current state of the law, a comprehensive timeline is established. Further

fleshing out these concepts is a consistent deference to reform; whether it is potential,

upcoming or initiated. Having succinctly brought these factors together, it is hoped that an

accurate representation of the achievements of the restriction and disqualification regimes,

but also the challenges still facing these areas, is portrayed.

B RESTRICTION

One of the most prominent methods of acting against directors in terms of company

enforcement is that of restriction under section 150 of the 1990 Act. This denotes that any

person to whom the Act is deemed to apply ‘shall not, for a period of five years, be

appointed or act in any way, whether directly or indirectly, as a director or secretary or be

concerned or take part in the promotion or formation of any company’, with a number of

mitigating factors also set out. The remit of restriction is expanded upon in the preceding

section 149, which sets out that the provisions apply to any company that is unable to pay

its debts ‘at the date of the commencement of its winding-up’ or ‘at any time during the

course of its winding-up the liquidator of the company certifies’. With regard the persons

who may be affected by such an order, section 149 also sets out that restriction provisions

can be applied to any person who acted as a director, shadow or otherwise, ‘at the date of,

or within 12 months prior to, the commencement of its winding-up’.

2

Department of Jobs, Enterprise and Innovation, ‘Press Release’ (2012)

accessed 16 March 2015.