The High Court (Binchy J), has recently made restriction orders in respect of directors in two separate applications before it.

In a series of cases the High Court has:

In January 2010 an interim examiner was appointed to Missford Limited, which operated the Residence Club, a private members club in St. Stephen’s Green.

In a written judgment on the costs and expenses of the interim examiner, the court held that the interim examiner “simply did more with the best of motives than his warrant permitted”. The court proceeded to refuse the interim examiner’s application for remuneration in respect of any work carried out in excess of his statutory powers.

The rapid downturn in the economy means company directors are faced with new challenges, possibly on a greater scale and more complex than ever before. Directors are responsible for managing the affairs of a company, identifying risk and ensuring that there is a strategy and a system in place to deal with those risks.

Weak and inadequate management by the directors may contribute to a weak financial performance and can lead to damage to business reputation, adverse media attention and damage to the business itself.

Liquidators will welcome the recent decision of the Director of Corporate Enforcement to reduce their reporting requirement in cases where a decision has been definitively made either to relieve or not relieve them of their statutory obligation to take restriction proceedings against a company's directors.

The Dáil Public Accounts Committee has issued a report which primarily examined the loss of "Fiduciary" taxes (such as PRSI and PAYE) arising from company insolvency. The Committee concluded that there is a need in Ireland to introduce further measures to reduce the amount of Fiduciary taxes that are lost due to the irresponsible behaviour of directors. There is a need, according to the report, for the introduction of a deterrent which will make directors aware of the negative consequences which could arise for them if they wilfully evade paying the company taxes that are due.

The economic turbulence stirred up by our most recent credit crunch has thrown up a myriad of difficult legal questions for financiers everywhere. This anxious economic environment which has restrained the financial independence of many Irish companies from their financiers is fraught with legal conundrums.

Workout Agreements

Under the Companies Acts, the liquidator of every insolvent company is obliged to bring a court application to have the insolvent company’s directors restricted from acting as director or secretary of any other company for a period of five years unless that other company has a paid-up share capital of approximately €63,500. The relevant provision of the Companies Acts (Section 150) applies to any person who was a director of the insolvent company either at the date of or within 12 months of the start of the company’s winding-up. Section 150 also applies to shadow directors.

Recently, the Knesset has passed the Law of Insolvency and Economic Rehabilitation – which is aimed at updating the law on insolvency currently in effect in Israel.

The insolvency laws as they stand today are regulated under archaic legislation, in addition to being outdated and disorganized. This has been detrimental for debtors, creditors, and the entire economy alike. The new Law is designed to rectify the situation and provide the Israeli economy with modern legislation with respect to insolvency.

The Law has three primary objectives:

The case

The receiver of a bankrupt joint-stock company sued its directors before the Court of Rome, in order to ascertain their liability, pursuant to Article 146 of Bankruptcy Law.

More precisely, the bankruptcy was considered the result of a transaction particularly burdensome with respect to the company’s share capital and unjustified in relation to the economic value of the block of shares acquired.

According to decision no. 17441, of 31 August 2016, of the First Division of the Supreme Civil Court, the liability of directors without management power cannot originate from a general failure to supervise – that would be identified in the facts as a strict liability – but must be attributed to the breach of the duty to act in an informed way, on the basis of both information to be released by executive directors and information that non-executive directors can gather on their own initiative.