Canadian bidding for Marseille football club to appeal Companies Act restriction

A Canadian businessman who has bid €115 million for Olympique Marseille football club is appealing a ruling restricting him from operating as an Irish company director.

Two years ago the High Court ruled in favour of restricting Dr Jack Kachkar and another director, under the Companies Act, arising out of their directorships of a pharmaceutical company in Roscrea, Co Tipperary.

A Dublin solicitor acting for Dr Kachkar said yesterday the order has been stayed pending an appeal to the Supreme Court. He said the court's findings in fact and in law were not accepted.

Miza Ireland employed 250 people in Roscrea when it was taken over by Dr Kachkar in 2001, but went into liquidation just over a year later.

Creditors owed millions by Miza were never paid under a scheme of arrangement entered into by Dr Kachkar's Miza Inc. Also €2.8 million was transferred to other Miza companies outside Ireland.

Miza liquidator Tom Grace took a successful case against Dr Kachkar and another former Miza director, Robert McClellan Carrigan, under section 150 of the Companies Act. The February 2005 judgment has not been reported on previously.

In the case, Mr Grace contended that creditors were owed €17.3 million when Dr Kachkar took over the Roscrea plant, but were owed a further €9 million by the time it collapsed.

Ms Justice Finlay Geoghegan, in her judgment, said the issues for the two directors were to do with whether they acted responsibly and that, on the facts set out, no issue as to honesty arose.

In May 2001, an examiner was appointed to the Antigen group, which manufactured pharmaceuticals at the Roscrea plant. A scheme of arrangement was proposed involving Miza Inc, and a company called Goldshield, which had earlier dealt with Antigen.

"In essence they (or their subsidiaries) were to provide a total of approximately IR£24 million for the purpose of funding the acquisition of the Antigen Group from George Fasenfeld, the shareholder in Antigen Holdings Limited, for the sum of £6.7 million and to fund the creditors in the scheme of arrangement amounting to £17.3 million. The above scheme of arrangement was approved by the creditors."

Goldshield spent £6.7 million buying licences and other assets from Antigen, and the money was loaned by Antigen to Miza Ireland. The money was then used to buy Mr Fasenfeld's shares in Antigen from him.

Sums were to be paid to creditors over a period ranging from three to 30 months. However, initial payments due in February 2002 were not paid.

Meanwhile, according to the judgment, Miza Inc was involved in a major funding initiative in Canada and Miza's creditors were informed of this. While the Irish operation was given approximately €1 million in August 2002, the following month it apparently transferred €501,526 to Miza Inc and Miza UK, according to the judge. The Canadian financing subsequently failed to go ahead.

Relations with the Irish management broke down and, in October 2002, Dr Kachkar and Mr Carrigan resigned as directors of the Irish Miza companies, according to the judge.

Mr Grace was appointed on the application of the Bank of Ireland and Bank of Scotland (Ireland). In his application to the court in 2005, Mr Grace said that when Miza Ireland agreed to the scheme of arrangement in 2001, its parent, Miza Inc, did not have the funding in place for the investments.

Mr Grace also contended that "Dr Kachkar and Mr Carrigan either permitted or directed the payment from the Irish companies of significant sums of money and assets in the order of €2.8 million. It is contended that these were transferred on the basis of inter-company charges but with no real basis for same, that the companies were insolvent at the time the transfers were made and also at the same time unable to make the payments due to the scheme creditors."

Ms Justice Finlay Geoghegan said the two directors had failed to convince the court that they had acted responsibly as directors of the Irish companies, and in relation to the supervision of their financial affairs.

She said she was satisfied that €2.8 million was transferred out to the non-Irish Miza operations. She said the directors had failed to show they acted responsibly when a debenture creating security over Miza Ireland was given to a company in Canada.

Dr Kachkar is currently chairman and chief executive of Inyx, a pharmaceuticals company which employs 575 people in north America and Europe. It has a plant in the UK which was formerly owned by Miza UK.

In 2003, Israeli/US company Taro Pharmaceutical Industries bought the Roscrea plant from the liquidator and currently employs 58 people.