Court criticises corporate regulator's 'draconian' laws

The Supreme Court has strongly criticised the Office of the Director of Corporate Enforcement (ODCE) and the "draconian" laws on the restriction of company directors. The court yesterday overturned one such order against a non-executive director of a meat slaughtering company, which went into liquidation six years ago with liabilities of more than €5 million.

Mr Justice Adrian Hardiman said the law was "draconian" for two reasons. It compelled liquidators of insolvent companies to bring restriction applications against directors, even when the liquidator believed a director acted honestly and responsibly, and required the courts to make a restriction order unless they were were satisfied the director had acted honestly and responsibly and there was "no other reason" not to make the order. This put the onus of proof on to a director to prove they acted honestly and there was "some doubt" whether this was consistent with fundamental fairness and constitutional justice, the judge said.

In this case, the ODCE had refused, without giving reasons, a request from Tom Kavanagh, official liquidator of Tralee Beef and Lamb Ltd (TBL), to be relieved of his statutory duty to bring the restriction proceedings under Section 150 against Simon Coyle because of Mr Kavanagh's belief that Mr Coyle acted fairly and honestly in relation to the com-pany's affairs.

The judge strongly criticised the ODCE's "rigid policy" of not giving reasons, saying this unloaded the responsibility on to the courts.

This "Delphic posture" of the ODCE had left the case against Mr Coyle in an "unacceptably defined" form, the judge said.

He was gravely concerned about the process leading to the restriction order against Mr Coyle and would allow his appeal. While being restricted under Section 150 was largely symbolic and of little practical effect, requiring only that any new company of which the restricted person was to be a director had to be modestly capitalised, it was "gravely damaging" to any person's reputation, the judge said.

Mr Coyle was a professional and the effect of a restriction in his case would be much greater than if he was a "cowboy" director. He was delivering the three-judge court's unanimous judgment granting the appeal by Mr Coyle, a chartered accountant and former non-executive director of TBL, against an order restricting him for five years from involvement in the promotion or formation of any company unless that company met certain requirements.