The High Court has refused a liquidator's application to impose directorship restrictions on the founder of a company which provided web design and IT strategy consultancy to blue chip clients.
Morgan McKeagney founded IQ Content Ltd, with offices in Ballsbridge, Dublin in 2000 and it had an annual turnover of some €4.5 million before it was voluntarily liquidated in 2014.
Mr Justice John Jordan found Mr McKeagney acted responsibly and with integrity in the affairs of the company.
The “story of intrigue” surrounding the company’s demise would have remained a “largely bald and unsupported narrative” were it not that Mr McKeagney got a court order giving him access to certain documents, the judge said.
Mr McKeagney also opposed a “phoenix solution” by others within the firm to drive IQ into liquidation and set up a new firm as a way out of its financial troubles, the judge said.
This solution involved moving of IQ’s assets “lock, stock and barrel” to a new firm called Each and Other Ltd (E&O) in what was almost, if not completely, a seamless transition, the judge said.
Liquidator David Van Dessel had sought a five-year directorship restriction, under company law and subject to certain conditions, on Mr McKeagney and on his IQ co-director, Paul Fitzsimons.
Mr Fitzsimons did not contest the application and an order restricting him under Section 819 of the Companies Act was made against him in March last year.
Mr McKeagney, representing himself, opposed the application and argued, among other things, that the liquidator failed to recognise the speed, severity and unprecedented nature of the collapse of the company’s revenue in its last six months.
It was quite clear to the judge the “other protaganists in the company” made a decision “to engineer a swoop on the assets”.
Mr McKeagney “utterly opposed” this phoenix solution for reasons including that he believed the company was fundamentally sound, and it was inappropriate to treat creditors in this way. Unfortunately, the judge said, he failed at a time when the firm was in crisis.
Mr Justice Jordan disagreed with the liquidator’s view that Mr McKeagney’s allegations of collusion by his former colleagues did not establish that he (Mr McKeagney) himself acted responsibly.
If those colleagues “had acted as responsibly as he did, then the position would have been entirely different in June 2014 and the company may well have avoided liquidation”, he said
Mr McKeagney said the documents he obtained showed Mr Fitzsimons and other senior members of staff co-ordinated a conspiracy involving creating a secret voluntary liquidation plan and secretly engaging with the company’s bank to fund the new company.
It also involved blocking of attempts to reach a settlement with Revenue on outstanding taxes and the misleading and side-lining of Mr McKeagney in key decisions.
Mr Justice Jordan said the new firm, E&O, had a “somewhat extraordinary and unexplained success” in its first half year of trading. The most logical explanation for that was the the majority of IQ’s sales pipeline was captured by E&O and converted into revenue, he said.
The judge was satisfied Mr Fitzsimons and another senior member of IQ believed they would significantly benefit from the phoenix solution and they actively worked to torpedo Mr McKeagney’s attempts to save the company.
He was also satisfied Mr McKeagney acted responsibly in the last 12 months when the company got into trouble by, among other things, engaging with Revenue to resolve outstanding liabilities and trying at all times to “do the right thing” by both employees and creditors.
The judge also rejected allegations of irresponsibility in relation to the payment of a €90,000 per annum salary for three years to Mr McKeagney’s now ex-wife, Cornelia. The liquidator asserted she did did not have a job and did not attend company premises to carry out any duties.
Mr McKeagney said her salary was always treated as a portion of his €208,000 per annum salary and this was done so he and his wife would have the benefit of the increased standard tax rate band.
The judge accepted this arrangement was put in place after she carried out professional architectural services for the company and that the tax rate band situation gave rise to the division of his salary.
The factual matrix leading up to the demise of the company was convoluted and complex, the judge said.
Mr McKeagney had “paved a highway through the maze” and satisfied the judge that he “acted responsibly and indeed integrity” in relation to the conduct of the company both before and after it became insolvent.