Two former directors of a Co Donegal restaurant company found to have traded while insolvent have been restricted in their ability to hold directorships over the next five years.
Finding they had not acted reasonably in relation to conduct of the company’s affairs, Mr Justice Michael Quinn made a declaration that brothers John and Neil Blaney shall not be appointed or act as a director or secretary, or be involved in the promotion or formation of another company for five years unless the company meets the requirements set out in section 819 of the Companies Act 2014.
John and Neil Blaney were directors of Inch View, which operated The Water’s Edge restaurant in Rathmullen, at the commencement of its liquidation.
The company ceased trading in September 2013 and Sean Mulhern was appointed liquidator in July 2015.
In a judgment, Mr Justice Quinn said the undisputed evidence shows that Inch View was returning losses since 2010 at the latest, with losses accruing steadily over the following years to culminate in a final deficiency in excess of €975,000.
According to the company’s Statement of Affairs, Donegal County Council was owed some €23,000 for local rates, AIB was owed €602,000 and a further €349,000 was due to unsecured non-preferential creditors, including some €121,000 to Revenue, the judge said.
'Tried desperately to restructure'
In making the declarations, Mr Justice Quinn said he considered that the company failed to comply with its tax obligations over several years and failed to file annual returns in accordance with the Companies Act for 2013 and 2014. The company also continued to trade while insolvent.
The respondents said Inch View encountered trading difficulties like others in the industry at the time, and they claimed they tried desperately to restructure it, the judge noted.
However, he said having made these assertions, the Blaneys offered no evidence as to what actions were taken to protect the interests of creditors.
Section 819 of the Companies Act deals with the restriction of directors where an insolvent company goes into liquidation or receivership and a director of the company fails to satisfy the court that he or she has acted honestly and responsibly and has also cooperated with the liquidator.
Mr Justice Quinn found the respondents acted honestly in relation to the affairs of the company, and they cooperated with the liquidator “as far as could reasonably be expected”.
However, he was not persuaded they acted responsibly in relation to the conduct of the affairs of the company prior to its liquidation, and so he said he was obliged to make the section 819 declaration.
'Grave consequences'
John and Neil Blaney were appointed directors about three months before the company ceased trading in September 2013, but Neil Blaney said he was the de facto director, operating the business for several years before that.
John Blaney said he only became a director when it became necessary to replace his father, who was suffering from poor health at the time.
Neil Blaney owned 80 per cent of Inch View’s shares, while John Blaney said he was never a company shareholder. Their father owned 20 per cent of the shares, the judge said.
Mr Justice Quinn said he was not persuaded by John Blaney’s assertion that he did not act as a director prior to July 31st, 2013 or by the submission that only events after this date are relevant to him.
He said it is clear that events from at least 2010 onwards, when John Blaney’s signature was on the company’s financial accounts, are relevant to the examination of the conduct.
Counsel for John Blaney submitted that a section 819 declaration would lead to the loss of his appointment as a postmaster, having “grave consequences” for his livelihood, the judge added.
Mr Justice Quinn said the court has no discretion but to make the declaration on the restriction since it has already found, on the evidence that the respondents have failed to establish, they acted responsibly regarding the company affairs.
