Joinery firm directors face disqualification for up to 10 years

Two directors of a joinery firm which traded while "hopelessly insolvent" could be disqualified from involvement in companies for between five and 10 years, a High Court judge has said.

Mr Justice Robert Haughton said he would hear submissions later concerning what period of disqualifications he would impose on Patrick McGowan and Vincent Fox, directors of Wood Products (Longford) Ltd. It employed some 12 people in its Longford town premises.

Given the “serious but not egregious” nature of their misconduct, the judge said his preliminary view was the appropriate period of disqualification was in the range of five to 10 years with the “more blameworthy” conduct of Mr McGowan attracting a disqualification at the upper end of that range.

Liquidator Tony McBride had applied for disqualification or restriction orders, under the Companies Act 2014, on a number of grounds including the firm continue to trade while insolvent.

Mr McBride suggested insolvency arose as far back as 2003 but, from then until 2014, the firm had accumulated about €1.1 million in unpaid taxes. This prompted Revenue to apply for its winding-up on foot of a demand for a total of €2.4 million.

Mr Justice Haughton said both men were “persistently in default” in relation to the requirements of company law. The firm was twice struck off the Companies Register for failing to make annual returns.

The court heard Mr McGowan (69) is in receipt of the old age pension and has no plans to work in the future. He did not oppose the liquidator’s application.

Insolvency claims

Mr Fox is an accountant who became a director of the company in 2004 after which the firm was restored to the register, having been first struck off in 1999 for failing to file returns.

Mr Fox, whose wife is a sister of Mr McGowan, said he got involved for family reasons and because the company needed financial assistance. He said he had minimal involvement in the running of the company and disputed claims insolvency went back to 2003.

He had also claimed the company was owed money by government departments, in particular the Department of Finance, for construction work and services provided.

Mr Justice Haughton said Mr Fox had not provided any evidence to back up a threatened counter-claim in relation to this work.

The judge found, by 2014, the company was hopelessly insolvent and that insolvency probably dated back to at least 2009. There was strong evidence the company was permitted by the directors to continue trading while insolvent from at least 2009 onwards, he said.

While Mr Fox had ensured returns were filed up to 2004, it was “astonishing” no further returns were made after that, he said. The firm was struck off the register for a second time in 2011.

Plant and machinery

The judge said the liquidator had made a number of other complaints including a “most alarming development” in which it appeared plant and machinery assets from the liquidated firm were being used by former employees of the company in a nearby rented premises which carries out the same business as Wood Products (Longford) did.

A statement of affairs provided by Mr Fox in July 2014 stated the company had trade debtors of some €165,000 but this was misleading because it comprised almost entirely sums from businesses or entities in liquidation or already dissolved, the liquidator said.

Mr Justice Haughton said, even if he accepted Mr Fox’s assertion of being a passive director, he cannot, given he is an accountant and his reasons for involvement in the firm in the first place, “sidestep the evidence of misconduct” related to trading while insolvent.