Upmarket hairdressing chain Toni & Guy has sought court protection from creditors owed €3.85 million as it seeks to restructure its business.

Directors of the British-controlled group, which has 14 salons in Ireland, said underperforming franchisees and alleged fraud had led to a situation where the group was not able to meet its debts.

The High Court was told yesterday that Toni & Guy (Ireland) Ltd, which employs 60 people directly in Ireland and another 270 in franchise salons, has debts of €3.85 million arising from a number of factors. This includes a claim for some €1 million arising from an alleged fraud allegedly perpetrated by a former financial controller of the company, Dal Singh.

In an affidavit, company director Alan Boyce said he believed the company had run up costs as a consequence of Mr Singh's mismanagement of fit-out projects.

He alleged that Mr Singh had also attempted to perpetrate a major fraud on the company, resulting in a claim against it for some €1 million, related to an alleged contract for mobile phone handsets which were not required by the Toni & Guy company.

Mr Boyce said he believed his own signature was forged by Mr Singh in relation to that contract, which Mr Singh was not authorised to enter into.

Mr Singh also appeared to have entered into a contract on behalf of the company to lease a Porsche Cayenne motor vehicle, Mr Boyce added.

He said he believed the financial controller, whose current whereabouts are unknown, had misled him about the company's financial position.

Some €326,980 was also due in unpaid taxes to the Revenue, relating mainly to 2006 when the company was under cash-flow pressure, the court was told.

The company was unable, at present, to comply with an instalment plan agreed with the Revenue in that regard.

Because of the various problems outlined, the company was unable to pay its debts as they fell due, the court was told.

However, in the affidavit, Mr Boyce said he believed that, subject to certain conditions being met, the company had a reasonable prospect of survival, either in whole or in part. These conditions included an injection of fresh working capital, stronger financial control management and closure of non-performing franchises.

Mr Justice Peter Kelly yesterday decided it was appropriate to extend court protection to the company via the appointment of an interim examiner, Michael McAteer, of Foster McAteer, and returned the matter to next week.

The application for Mr McAteer's appointment was made by Rossa Fanning, for the directors of the company - Mr Boyce, of Addison Avenue, Glasnevin, Dublin, and Caroline Boyce, of Dunadry, Co Antrim.

The application for interim examinership was grounded on an affidavit by Mr Boyce and a report by an independent accountant, Patrick O'Donovan.

In his affidavit, Mr Boyce said the attitude of Mascolo, the London-based company which controls the Toni & Guy operation worldwide and holds a 24 per cent shareholding in the Irish company, was of obvious importance to the Irish company's prospects of survival.

He said the company was owed some €1.6 million from franchisees before write-offs and provision for bad debt. After those write-offs and bad-debt provision, the company was due some €265,611 from franchisees.

He said the business model utilised between the company and its franchisees was, in retrospect, somewhat loose and ill-considered.