Section 150 of the Companies Act 1990: Some Recent Developments

• Author: Andrew Leyden
• Position: LLB (Ling. Franc.) (Dub), LLM Candidate (College of Europe, Binges)
• Pages: 147-155

SECTION

150

OF

THE

COMPANIES

ACT

1990:

SOME

RECENT

DEVELOPMENTS

ANDREW LEYDEN*

It

is

now

sixteen years

since

the

enactment

of

section

150

of

the

Companies

Act,

1990.

The

section

was

designed

to

combat

the

"Phoenix

Syndrome"

whereby

unscrupulous

directors

of

insolvent companies would

take

advantage

of

corporate

personality

and

deny

creditors their rights

by

re-incorporating

effectively the

same

company

under

a

new

name. The

Act

sought

to

remedy

this

situation

and

to

protect

the

public

by

imposing

restriction

orders

on

such

directors,

which

would

limit

their activities

to

companies

which met

certain

capitalisation

requirements.'

Initially,

the

section

was

largely

ineffective

due to

confusion

over

who exactly

had

standing

to

bring

applications

and

unwillingness

on

behalf

of

liquidators

to

avail

of

it.

However,

by

adopting

the

recommendations

of

the

McDowell

Report,

2

section

56

of

the

Company

Law

Enforcement

Act

2001

radically

overhauled

this

area

of

the

law.

The

cornerstone

of

the new mechanism

is

found

in

the

obligation

incumbent

upon

all

liquidators

of

insolvent

companies

to

report

to

the

Office

of

the

Director

of

Corporate Enforcement

(ODCE)

within

6

months

of

their

appointment, and

to

bring

a

section

150

action

within

a

further

five

months,

unless

relieved

of

this

obligation

by

the

Director.'

Unsurprisingly,

since

the

commencement

of

the

2001

Act,

the

number

of

restrictions

has

increased

dramatically.

The

Register

of

Restricted Persons

listed

581

restricted

directors

by

the

end

of

2005;'

487

were

listed

at

the

end

of

2004.

Most

of

this

activity

is

a

direct

result

of

the new

regime.5 Indeed,

the

2004

LLB

(Ling.

Franc.)

(Dub),

LLM

Candidate

(College

of

Europe,

Binges).

lThese

requirements

are

set

out

in

Section

150(3):

which

provides,

inter

alia,

that

the

nominal

value

of

the

allotted

share

capital

of

the company shall

in

the case

of

a

public limited

company,

be

at

least

£

100,000,

or

in

the

case

of

any

other company,

be

at

least

£20,000.

2

The

Working

Group

on

Company

Law

Compliance

and

Enforcement

Report,

1998.

Hereinafter

'The

McDowell

Report'.

3

Company

Law

Enforcement Act,

2001,

subs.

56(2).

4

Interim

Review

of

ODCE Activity,

2005.

-fileupload/publications/ODCE-interim-Review-2005-Final.pdf>

(visited

3 January 2006).

5Ibid.

© 2006 Andrew

Leyden

and

Dublin

University

Law

Society