Dear a director of other company and if the

Dear Brendan,

This assessment will help you understand why you
might be the subject of a restriction application under the section 150. I’m
going to go through what you did wrong and give examples of cases that apply to
your case.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

First, even though you are not an official director of
the company anymore you still influenced the management of the company.

Under section 184 CA 1963 it can restrict certain
people from becoming directors to prevent the phoenix syndrome where director
who have presided over an insolvent company simply begin a new business with a
new company. Which will cause creditor, shareholders, employees, and the
company to suffer.

The purpose of
section 150 restriction

In Business Communications Ltd vs Baxter (1995),
“the purpose of this section is to prevent the abuse by directors of their
special position to the detriment of outsiders”. The registrar of the companies
will to be told if you are restricted. Section 150 (1), this restriction order
will prohibit you from acting in any way, either directly or indirectly as a
director or secretory of any company for a period of 5 years and you won’t be
able take part in formation or promotion of any company.

A restriction application section 149 is made either
at the start of the winding up or any time during the winding up. If, at the
start of the winding up or anytime during it show that the company is
insolvent. Under the section 214 of the company act 1963, insolvent means that
the company is unable to pay its debts within 21 days or more, an execution on
the company has been returned unsatisfied and it proven in the court that the
company cannot pay its debts.

But just because you are a director of an insolvent
company it doesn’t mean that you are going to be restricted unless you didn’t
abide by the 5 factors which I will be discussing soon. So, the court can
decide that the directors should pay the costs of the section 150 application.
If the application proves successful.

If creditors hear that your company is going into
liquidation their concern will be the liquidation of the assets. The
liquidators must notify the court if the director in question is a director of
other company and if the creditors of that company are in trouble. If they
don’t it’s an offence. 


When the company is wound up and they have proven
that your company is insolvent to section 214 the director is not directly
restricted the director can defend his case and prove his innocence. Now I’m
going to give you examples of two cases that the director has defended their
case and compare it to your company to make sure you understand it.

The first case is the streamline Ltd case in 1998,
where the judge said that if the director can show that he acted “honestly and
responsively” and there are no other reasons to support why he should not be
restricted. But you can be restricted if you acted either irresponsible and

Another case that considers this definition is the
la Moselle clothing Ltd v Souhali (1998), in this case that director had to
show that they acted honestly and responsibly the fact that the company was
insolvent wasn’t enough. Having a broad compliance with the companies acts and
a degree of commercial probity shows that you have not acted irresponsibly. In
the la Moselle Clothing itself Shanley. J concluded that the directors had not
acted honestly or responsibly.  This
decision was made because the directors made no attempts to voluntary wind up the
company or even stop trading even thought they were insolvent. There were
withdrawals and expenses that were unaccounted for. “related companies” had
their debts forgiven. The director was not willing to divulge information about
the books or records of the company during the involuntary liquidation.

In the La Moselle case Shanley, J came up with the 5
factors that would prove if you act honestly and responsible. I am going to
give you a few examples of how those factors were applied in other cases and apply
it to your case. The 5 factors are:

Has the director complied with the companies act?

Has his conduct been incompetent enough to amount to irresponsibility?

How instrumental was he in the company’s insolvency?

How instrumental was he in the “net deficiency” in the company’s assets
at the time of the winding up?

Has he displayed a want of commercial probity and standards, generally?


1.     Compliance with companies acts

This is mostly about the books of accounts of the
company and failure to do so is considered both dishonest and irresponsible.

In the business
communications v Baxter case the judge said that the books must be good
enough, reasonable, to allow the directors to make sound commercial decisions.

In vehicle
imports the judge said that directors cannot completely delegate
responsibility to one book keeping officer. However, Colm O’Neill Engineering
held that book keeping is an executive director duty, not a non-executive
director duty.

In your case Brendan you had two sets of books. The
official version, which was for the perusal of the revenue and the real
version, which was kept for your appraised of how things were going. Also, you
had your nephew and godson do the books for you without paying them which was
informal you need to have a proper bookkeeper. This is considered both
dishonest and irresponsible.

In McLaughlin
v Lannen case
was regarding a breach of section 286 of the companies acts. Sections 286 cover
“fraudulent preferences” this occurs when an officer of the company prefers one
creditor over another, even though the company is insolvent. Instead of keeping
funds for liquidation, examinership etc. the director decides to pay off
certain “favoured” creditors instead of paying them in proper order. Therefore,
creditors who are more entitled. McLaughlin v Lannen held that this single
transaction can be enough to breach the companies acts to justify a
restriction. A single incident can be enough, but it needs to be bad enough.
Irresponsible and or dishonest behaviour is not needed to ground a restriction
under section 150.

I your case Brendan you paid off certain
promising creditors first ahead of their legal entitlement on the basis that
they would not let you down later if things became more difficult. But you are
supposed to pay creditor as they fall due in a chronological order.

amounting to irresponsibility

This factor explains who is responsible
and are all directors equally culpable.

In the Kavanagh
v Delaney case there was 1 executive director and 3 non-executive
directors. The company was clearly insolvent for over 2 years. There was no
board meeting held which was the responsibility of the executive director but
there was no interest shown by the other non-executive directors to help the
company which was their responsibility. So, the court deemed that the executive
directors were incompetent and that the non-executive directors were
irresponsible meaning they could not have completely ignored all directorial
responsibilities. But will both directors be treated the same. This was shown
in the Tralee beef and lamb case but first we will have a look at another case.

Hunting lodges
indicate that all director’s executive and non-executive are equal under the
section 150.

In the sales of “dirty nellies” pup. The husband
fraudulently ensured that he paid less tax by doing an “under the table” sale
of t pub. The wife was aware of the sale, but she claimed she wasn’t really
involved in the financial running of the company. But she was a director and
had to be involved in the financial side of the company to as the company needs
two directors in law. However, she claimed that should no the restricted as she
hadn’t really “taken part” all that often in the day to day running of the
company. But the court said no, and she was responsible. So being a
non-executive director doesn’t exclude you from your responsibilities so
non-executive directors can be restricted. But it is not as simple as you would

In the Tralee
beef and lamb case all directors have duties to do weather they are
executives or non-executives; however, you can’t treat directors of a big,
formal corporation the same as directors of a small family owned bank. As
regards to the Tralee beef and lamb in liquidation v Delaney & Orrs (1st
February 2008, supreme court, www. look it
up and reference this.

in 1996/1997, Tralee beef and lamb limited had
acquired a business of slaughtering cattle and lamb for de-boning and onward
sale. When winding up order was made on 28 January, the company had four
directors. They were Mr John Delaney, the managing director, and three
non-executive directors being Mrs Patricia Delaney, Mr Terry Dunne and Mr Simon
Coyle. Restriction orders were all made for them in the high court against all
four directors.

 Mr. Coyle was
slightly involved in the running of the company. He was part of a government
scheme to promote business and business investments. This scheme needed an
external director to be appointed only for that scheme so it’s not to help
“running the company”. But the director of corporate enforcement and the high
court treated him like a “normal” executive director. They also expected him to
be “honest and responsible” for the day to day running of Tralee Beef and Lamb
Ltd and they based their decision to restrict him on the affidavit of another
executive director who blamed Mr. Coyle for the company’s difficulties.

The supreme court decided that: The La Moselle
factors are good law for deciding if a director should be restricted or not,
but you must treat directors differently if their status requires it. Mr Coyle
won his appeal and was not restricted. So, “puppet” directors are not the same
as non-executive directors.

Halley v Edward Nolan, formally appointed executive
directors, but later said their job was to “sign documents”. Which was not
acceptable and they could be restricted.

In your case Brenden you’re a shadow director
because your sons always listen to you and are regularly in the habit of
following your “advice”. A shadow director is a person who is not a director
but has influence over the company’s director and those directors are
accustomed to acting in accordance with that person’s instructions. A shadow
director has as much legal responsibilities of a director. So, in Mr. Coyle’s
case won’t apply to you because you are more involved in the running of the

3.     Contribution of the impugned director to insolvency of the company

This factor explains how much did this director
contribute to the insolvency of the company.

Usit world Plc, was an insolvent company and the
directors may have been so some extent dishonest and or irresponsible. However,
the actions of the directors did not contribute to the insolvency of the
company. The insolvency was almost entirely attributable to September 11
attacks.  They haven’t acted
irresponsibly or dishonestly.

4.     Contribution of the impugned director to net asset deficiency of the

This factor explains how directors kept trading and
paying off other creditors over others.

In the La Moselle Clothing case itself. The director
made no attempt to wind up the company even though it was clearly insolvent.
For example, €139,000 was withdrawn and €500,000 debt was waived, even though
the company was insolvent. It would have been better if they had made and
effort. Despite the fact that the directors did not completely cause the
insolvency, they certainly contributed to the overall deficiency in the assets
of the company.

So, Brendan you kept trading right up to the last
minute and paid other creditors over other creditors. Every day you traded you
lost more money and created more creditors to lose their money.

5.     General lack of commercial probity

In the La Moselle case itself showed enough lack of
commercial probity to justify a restriction order.

In the Verit Hotels case, the company kept funds and
spent those funds instead of passing them on to the revenue commissioner in the
form of PAYE/PRSI contributions to keep the company running. Clearly, this was
completely without commercial integrity and justified a restriction.

In contrast to the Digital Channel Partners case,
where a limited failure to issue revenue responsibilities was not too bad to
justify restriction application being granted.

Remember Halley v Edward Nolan said earlier that “puppet
directors” (they were only directors to “sign documents”). This lack of
commercial integrity was bad enough to justify restriction.

In 2001 squash Ireland Ltd endorsed (look for a
similar word) the Moselle 5 factors. The objective standard decided that its
crucial. It is not if you Brendan honestly believed you were keeping the
company in good shape or not. It is what a reasonable director in your position
would have thought. The commercial errors and misjudgements are not enough for
a restriction. 

In 2001 Gasco Ltd case, there was 3 directors and
one of them was a shadow director. There was no books and records of the
company made at all. So, there was a clearly implication that they had been
destroyed and evidence of payments to the company. The court couldn’t find
where the evidence of payments made to the company and where they went. So, the
judge decided to restrict them. There’s an example of a shadow director that
was restricted so Brendan since you are a shadow director you can also get
restricted because you still have influence over the company.


But if one director is found to be deserving
restriction all the other will also be deserving restriction if the
irresponsible or dishonest behaviour of the bad directors caused the
insolvency. That is not always the case in the Gasco case one of the director
was found not to have been irresponsible, even though he was overruled he found
serious problems in the company and he helped to create a business plan to fix
the problem but that failed so he decided not to go along with it anymore and

Costello Doors (1995), the continuation of proper
books, accounts and employment of specialists would be good to help show if you
are honestly and responsible.

Also remembering the case of hunting lodges, the
sale of “Dirty Nellie” done fraudulently. Wife said she knew nothing, even
though she was a director. This was not a defence, but it can still be


Therefore, a restriction will last 5 years under the
section 150(1) of the 1990 act. This cannot be made shorter by the court. A
“plea of Migration” will not work. It is “all or nothing” (Business
Communications v Baxter)


A restriction may not always start straight away. A
director might want to start their restriction immediately and he might also
want it to be deferred for some time. Duignan v Carway (2000), the liquidators
started the restriction proceedings against the director. But he took 5 years
before he continued with the case. The director, obviously tried to stop the
restriction application on the grounds of delay. The director in the moment
lived under the shadow of future restriction, without any legal certainty. But
he failed, and the judge allow the restriction to begin whenever the court
wants it to begin.


It is best not to delay a restriction for multiple reasons,
but they can be made. In the Primor v Stokes Kennedy Crowley 1996 case the Supreme Court considered that a Delay is
“inordinate and inexcusable”, the court has a choice to allow the restriction
proceedings to go ahead. This in because of Public Protection that why the Court is allow delay
prejudice to ensure that the innocent third parties are not put in danger. To be able to stop delayed Restriction proceedings you
need to show Specific Prejudice, it can’ be general. So, you will need to able to show that you have been damaged by the
wait and not how you might have been damaged.


In the
section 152 of the 1990 act it allows the restricted person to apply to have
the order lifted. Now the test for the court is if it is or is not “just and equitable” to do so and they can
add other conditions to the lifting of the restriction. But this condition
allows the court to keep what they have on the director and you must make your
application to lift the restriction within 1 year. But the problem about this
is that you won’t be able to prove your
case since you won’t have enough time to
show you have become a responsible director in the interim.

example, the case of Robinson v Forrest (1999)

restriction order was sought for 2 of the directors and one was deemed to be “honest”, but not “responsible” because of this he was
given a “stay” on the burden of the restriction. So, he could continue as a normal
director for the time being. But he decided to use section 152 to try and lift
the whole restriction and it was on “just and equitable” grounds. But proving
yourself honest and responsible takes longer than 1 year.


You are
restricted in your action as a director you are not disqualified. In section
150(3) of the companies act 1990 it sets out the “capital requirements” on companies that have
a restricted director. They’re a minimum set of
financial investment terms that makes sure the director can’t do much damage to the creditors of that company. For a PLC they must
have a minimum of €500,000 and a Private
Ltd company a minimum of €100,000 paid up share
capital which is the amount of money paid into the company by those shares.

 In section 155(5) it compels the restricted
director to give a 14-day notice to the company that he has been restricted.
Also, the company must put the capital requirements into place within a
reasonable time, if they wish to nominate that director. If they don’t a creditor can appeal to the court to have the officer of that company
personally liable for debts that occurred in the company after the restricted
director is chosen.

company loses statutory rights such as the company can’t issue assistance in the purchase of its own shares and can’t sell shares without receiving cash for them. In the section 32-37 of
the companies act statutory duties of directors, there is an exception with regards
to loans, but this won’t exist for restricted
director’s companies. If the
company ends up liquidating within 5 years of nominating a restricted director,
then the director will be disqualified if the court deems it just and


Under the
section 161 of the Companies Act 1990, breach of order is an offence which
leads to a disqualification. Disqualification will be for at least 5 years or
longer if the court decides it needed.

Breach of
order is when you work for a company and if you are not restricted. Maybe they
are not aware that the director is restricted. The company can reclaim all the
monies paid to the restricted person and if the company goes into liquidation
within a year the director can be personally liable.

Company act 2014

There is
a new company act made in 2014. About the amendments to restriction and
disqualification of directors. There is a new addition to the disqualification
routine now the requirement that a director that is disqualified in another
jurisdiction must inform the registrar of that disqualification or else they
will be disqualified from the other jurisdiction also.

chapter 5 of the act contain new features and allows restrictions and
disqualifications to be made by the way of a contract procedure. This will
reduce unnecessary use of resource’s in making court applications and reduce the cost involved in
restriction and disqualification procedures.

But the
main part is the fact that it is no longer a defence to a restriction
application for a director to show that he acted reasonably and honestly in relation to his dealings
with the company and he must also be shown
to have cooperated with the liquidator as far as could reasonably be expected. Also, is the introduction of
restriction and disqualification undertakings.

Recent cases

Dillon Eustace (2016),
in this case the directors were accused to having failed to file their annual
returns for two companies Walfab engineering limited and RPB Product limited.
The directors claimed that they acted honestly and responsibly in their trading
of the companies also when the company became insolvent they didn’t have
enough resources to liquidate the companies. One director argued that she had
never been actively involved in one of the companies or even paid for acting as
a director of the company, but her argument was rejected. But the court decided
to impose a restriction of five years against each of the directors.

McCoy v Courtney (2014),
this case involves the directors of an insolvent company. The liquidator
identifies the grounds which a section 150 can be applicable but there was a
failure by the directors to discharge certain tax liabilities and a deficiency
in mint’s company
books and records and a repayment of some loan monies owed by the Mints to the
directors. This was allowed the court to restrict the directors of the company
under the section 150 of the companies act 1990.


In conclusion, I have
stated out the purpose of a restriction and cases that relates to your case and
information about a restriction. From the assessment that I have made you have
broken some factors that prove that you have not acted honestly and responsibly
and will be restricted on the bases that you had not complied with the
companies act meaning your book were not good enough since you kept the real
version and the official version.

 Also, your conduct has been incompetent enough
to amount to irresponsibility since you chose to pay other creditors over
others who were entitled to it. therefore, Brendan you were also instrumental
in the company’s
insolvency since you kept trading even though the company was in liquidation.
Within a year you can apply to get your restriction lifted but it will be
difficult to prove that you have changed. Most likely you will be restricted
for 5 years.


I'm Dianna!

Would you like to get a custom essay? How about receiving a customized one?

Check it out