The High Court has ordered the winding up of a family-owned paper and packaging company in a dispute between brother and sister directors concerning what became of most of the proceeds of the sale of its Dublin premises for €1 million.
Leech Papers Ltd, of Shamrock Place, North Strand, Dublin, began as a manufacturer of paper and packaging products and more recently moved into the business of secure shredding of confidential paper documents.
Director Joseph Leech, who along with his wife and fellow director Magdalene Leech own 92 per cent of the shares, says he founded the business and his late father later became involved.
However, the only other shareholder and director, Joseph’s sister Christine Coates, says the business was established by their father.
Ms Coates had worked as the company book-keeper from 1983, was appointed a director on her father’s death in 1988, and became an 8 per cent shareholder in 1999.
In 2016, the Shamrock Place premises was sold to an apartment developer on a “sale and leaseback” arrangement which meant the business could continue in the premises until such time as the new development began.
When Ms Coates learned of the sale, she sought to find out what had happened to the proceeds of just over €1 million which, after fees and expenses were deducted, left some €889,000 to be accounted for. The court heard that €400,000 from the proceeds was put into Mr Leech’s pension.
Ms Coates brought High Court proceedings under the Companies Act alleging shareholder oppression and disregard for her interests. She sought the winding-up of the firm.
Mr and Ms Leech opposed the application and also argued Ms Coates had absented herself from the running of the company for several years.
In a judgment issued in July and published this week, Ms Justice Siobhán Stack ruled that the company should be wound up due to the Leeches’ actions surrounding the sale of the premises and the consequent failure to account for the proceeds.
When a company is wound up, an independent liquidator conducts an investigation into the affairs of the company.
The judge was satisfied that, given the entire proceeds of sale appear to have been dissipated, the affairs of the company were in disregard of Ms Coates’s interests.
This arose because €400,000, almost 50 per cent of the net €889,000 proceeds, was used for Mr Leech’s pension and the remainder cannot be properly accounted for, she said. It seemed probable that Ms Coates’s shareholding has been either significantly reduced or rendered valueless, she said.
While the normal remedy in proceedings like these was an order requiring the buyout of the oppressed shareholder’s interests by the other shareholders, the only remedy in this case was an order winding up the company, the judge said.