Background

If you have been a director of a company which has been placed into Liquidation, you may find that the Liquidator will take what is called a “Section 819 Application” to have you restricted from acting as a director of any other company. (Under the old companies Acts such applications were known as Section 150 applications.)

If you are unable to persuade the High Court that you acted in an “honest” and “responsible” fashion during your period as director, then the High Court may make an order restricting you from acting as a director of any other company. What the restriction order means is that you will be unable to act as a director of any other company unless it has paid up share capital of €100,000.

Should you defend a Section 819 Application?

If you do not defend a Section 819 Application, then the High Court will make an order restricting you from acting as a director. In addition, the High Court may also order that you pay the Liquidator’s legal costs of the Application.

If you are approaching retirement, and do not intend to take up any other directorships, then it may be cost effective for you to notify the Liquidator directly that you will not be contesting the Section 819 Application. In this way, the Liquidator should be able to achieve a significant saving on his legal costs, which in turn would save you costs.

However, if you feel you are able to demonstrate that you acted “honestly” and “responsibly” then it may be in your interests to vigorously defend the Section 819 Application. If a Liquidator is unsuccessful in achieving a restriction order, then it is less likely that he will be granted an order for all of his costs.

It is worthwhile noting that in “50:50” type situations, the High Court will not make a Restriction Order. Indeed, experience has shown that, depending on the circumstances, it is relatively easy to defend a Section 819 Application.

Our Service

We provide a consultancy service of advising directors/solicitors on how to defend Section 819 Applications. We are fully conversant with High Court Practice and Procedures. In particular, we are familiar with the five areas that the Court will examine in determining the “responsibility” of a director.

In defending a Section 819 Application, it is best to receive advice prior to placing the company into liquidation.

As the decision as to whether a Liquidator should commence a Section 819 Application partially rests with the Office of the Director of Corporate Enforcement (“ODCE”), it is important that the chairman’s statement which is read out at the creditors meeting is professionally drafted, as ODCE will review it in arriving at their decision. ODCE will also review the minutes of the creditors meeting, so these should also be professionally prepared.

Not only will the Chairman’s statement and the minutes of the creditors meeting be reviewed by ODCE, they may also be exhibited, by way of affidavit, in the High Court.

It is important that any correspondence from the liquidator to the directors is appropriately responded to, and we can advise on such correspondence.

In addition to providing consultancy services, we can also prepare supporting affidavits in respect of such matters as to whether the directors kept “proper books and records”. We have prepared a number of expert accountants reports which have been successfully used to defend restriction applications.

For further information please contact Jim Stafford or Tom Murray on 01 661 4066 or jim.stafford@frielstafford.ie or tom.murray@frielstafford.ie