Judgment on Phoenix board may affect examinership petition

A JUDGMENT yesterday that the board of directors of Phoenix Shannon plc was comprised of those members coopted in 1996 will probably mean that a petition for the appointment of an examiner to the company would have to be dismissed, the High Court was told yesterday.

The petition was presented last Friday on behalf of a purported aboard of directors which did not include those members who the court ruled yesterday were still directors. A receiver was appointed to the company on Wednesday, April 30th.

Yesterday, following the judgment of the President of the High Court, Mr Justice Costello, on the dispute about the directors, Mr Bill Shipsey SC, for the petitioners, said it was probable that the judge would now have to dismiss the petition.

Last Friday, Mr Shipsey said that if the judgment went against his clients, they would not have the authority to present the petition for an examiner.

Yesterday, Mr Justice Costello said that he would consider the matter today.

In his judgment, the judge said the action arose from serious disputes between directors. The company at Shannon Industrial Estate, Co Clare, was incorporated in November 1985 and carried on the business of manufacturing and distributing dental products.

In March 1996, Mr George Wolfe was coopted on to the board of directors. He was president of Nen Dental Incorporated, a US wholly owned subsidiary of the company.

On October 21st, 1996, Mr Harold Purkey, Mr Keith Hartley, Mr Philip Platek, Mr Nico Pronk and Mr Benjamin Swirsky were coopted as directors and nominated by the company's merchant bankers, Noble Investment Bankers, and a US corporation, Forum Capital Markets, which had been instrumental in raising $20,000,000 by way of a bond for the company. It was then in serious financial difficulties.

At the time of the second cooption all but three of the existing directors, Mr Ola Johansson Mr Brian Boland and Mr Keith Westrich, resigned. In December 1996, Mr Westrich resigned. This arose from disputes between the six directors coopted in 1996 and the three other directors.

Phoenix Shannon plc, Mr Ola Johansson and Mr Keith Westrich took the action against the six directors coopted in 1996. They claimed that the last a.g.m. was held on November 30th, 1995, and under the Companies Act the company, was required to hold its a.g.m. at intervals of no more than 15 months. They contended that the a.g.m. for 1996 should at the latest have been held on February 28th, 1997.

On March 26th, 1997, Mr Johansson and Mr Boland decided that because the a.g.m. had not been held by February 1997 all the directors coopted in 1996 had automatically vacated office on that day. It was accepted that Mr Johansson was also deemed to have vacated office because of his obligation to retire by rotation at the a.g.m. which should have been held in 1996.

Mr Johansson and Mr Boland concluded that the company had only one director, Mr Boland. The quorum necessary for the transaction of the business of directors was two. Mr Boland appointed Mr Johansson as a director and coopted Mr Westrich, Mr Jason Fensterstock, Mr George Skakel and Mr Hugh Regan. These men claimed they constituted the board of directors. This was contested by the six defendants, who said steps taken by Mr Johansson and Mr Boland were invalid.

Mr Justice Costello said the failure to hold an a.g.m. by February 28th did not mean that the six directors coopted in 1996 or Mr Johansson had vacated office.

Accordingly, since the resignation of Mr Keith Westrich in December 1996, the directors of the company had been and still were the six defendants: Mr Purkey, Mr Hartley, Mr Platek, Mr Pronk, Mr Swirsky and Mr Wolfe, with Mr Johansson and Mr Boland.