Restriction Of Directors Essay Flashcards
(18 cards)
What is the main legislative provision governing restriction of directors in Ireland?
Section 819 of the Companies Act 2014.
What is the primary purpose of director restriction?
To protect the public from directors who have shown themselves unfit, not to punish business failure.
(Re Lo-Line Motors Ltd)
What is the duration of a restriction order under s.819?
5 years.
Who can be subject to a restriction order?
Directors, shadow directors, and de facto directors of an insolvent company within 12 months of liquidation.
Can a corporate body be restricted?
No – only natural persons can be restricted.
(Re Worldport Ireland Ltd [2009])
What are the three cumulative defences to a restriction application under s.819(2)?
The director acted honestly and responsibly; Cooperated with the liquidator; No just or equitable reason exists to restrict them.
What is the burden of proof in a restriction case?
The burden is on the director to prove the defences (reverse onus).
What case established the 5-factor test for responsible conduct?
Re La Moselle Clothing Ltd [1998] 2 ILRM 345.
What are the five La Moselle factors?
Compliance with Companies Acts obligations (books, taxes, returns); Conduct so incompetent as to be irresponsible; Director’s responsibility for the insolvency; Director’s responsibility for net asset deficiency; Display of commercial probity or ethical misconduct.
Is the liquidator obligated to bring a restriction application?
Yes – under s.683(2) CA 2014, unless relieved by the Corporate Enforcement Authority (CEA).
What happens if the liquidator does not comply with this obligation?
It is a Category 3 offence under s.683(5).
What did Re Tralee Beef and Lamb criticize about this process?
The mandatory nature of the application and the reverse burden of proof were seen as draconian.
What is required for a restricted director to be involved in a new company?
The new company must have: €100,000 in paid-up capital (private company), €500,000 for PLCs (s.819(3)).
What must a restricted person do before taking a new directorship?
Disclose their restriction to the company within 14 days (s.825(2)).
What if a restricted person breaches their restriction?
It is a Category 2 offence (s.855) and may result in disqualification (s.885).
Can a director voluntarily submit to restriction?
Yes – via a voluntary restriction undertaking under s.852 CA 2014.
Can a restriction order be lifted?
Yes – under s.822, the court can grant full or partial relief if just and equitable.
What is considered in a s.822 relief application?
Post-liquidation cooperation, subsequent conduct, and potential prejudice to the director.
