Directors of 140 failed firms face threat of disqualification

Directors of 140 failed companies could be disqualified from the boardroom for five years.

The directors face High Court proceedings following reports by the liquidators of the firms they ran to the Office of the Director of Corporate Enforcement (ODCE).

While most of the companies are small concerns, they also include USIT World, the former student travel firm founded and chaired by Mr Gordon Colleary, which ran into trouble following the September 11th attacks in the United States.

Tara Television, which transmitted RTÉ programmes to homes in Britain, is another on the list, as is the broadband network service provider 360Networks (Ireland) Ltd.

Directors of a further 13 companies must wait a little longer to find out if they, too, will appear before the court. Mr Paul Appleby, the Director of Corporate Enforcement, has requested a further report from liquidators in these cases, which include well-known companies such as Tilebusters and Rocca Tiles. Business & Finance Media Ltd, the former publisher of Business & Finance magazine, also falls into this category.

Under new regulations brought in by the Company Law Enforcement Act 2001, liquidators are obliged to commence High Court proceedings against directors of insolvent companies unless relieved of that requirement by the regulator. The purpose of the new regime is to stop directors putting companies into liquidation to escape their creditors only to set up new companies.

By the end of 2002, the first full year of the new regime, Mr Appleby had received reports relating to 295 companies.

Full relief was granted in 142 cases where the director's office was "satisfied, on the basis of information provided by the liquidator or otherwise, that the directors of the insolvent company had acted honestly and responsibly in the conduct of the company's affairs".

Among the companies falling into this category was Modern Networks Ltd, the company at the centre of the storm over laying cables along the Iarnród Éireann network, which was subsequently the subject of a Dáil inquiry.

A second category was granted "relief at this time" where it was felt that liquidators needed more time to investigate the circumstances surrounding a company's collapse.

The remaining two categories offer no relief or partial relief. USIT, Tara Television and 360Networks (Ireland) fall into one of these categories.

In cases of no relief, either the liquidator has not sought permission not to bring proceedings against directors or the regulator has not been convinced that the reasons for such a request are sufficient.

In these cases, the liquidators must have made an application to the High Court by the end of last month to have the directors disqualified.

In cases of partial relief, some but not all directors of a given company face High Court hearings.

Mr Appleby's office emphasised yesterday that the fact that no relief from High Court proceedings had been granted in certain cases "does not constitute a finding on my office's part in relation to the honesty and responsibility of the directors concerned.

"It will be a matter for the High Court in due course (having heard the liquidator's evidence and the directors' response) to determine if a restriction declaration should be made in the case of any particular director."