Parts 13 / 14 – Restriction and Disqualification

For clarity, the Act sets out the meaning of “disqualification” and “disqualification order” here (Section 838). There is nothing surprising in the definitions.

If a person is convicted on indictment of any offence in the Act, or conviction of any offence involving fraud or dishonesty, that person is automatically disqualified (Section 839).

If a director is disqualified in another state, the Irish company of which he is a director must inform the CRO of this “relevant change”. If the company doesn’t comply with this because the director, for example, does not tell the company, that director will be subject to a period of disqualification in Ireland (Section 840). The period will usually run with the order made in the foreign jurisdiction.

There is almost nothing new in this area, so the most helpful thing might be a recap of the law, with directions to where the provisions are now found:

1. The old Section 160(2) of the Companies Act 1990 is re-enacted in Section 842 of the new Act.

2. As before, the provision is not mandatory. It is a “may” provision. The court may make the disqualification order.

3. The key concept in relation to disqualification is “unfitness”. Certain conduct renders a person unfit to be a director. This is retained, along with all the other categories – (a) to (i).

4. As before, certain parties have standing to bring a disqualification. The DPP may do so in relation to any of the matters set out between (a) and (g). The Registrar of the CRO may do so only in relation to a person who has been persistently in default in relation to the relevant requirements (the various filing obligations). And the greatest amount of people can apply under (a) to (d), which includes the general “unfitness” category. These are members, contributories, officers, employees, creditors and the various kinds of insolvency practitioners who may be acting in relation to the company (Section 844). What is new is that any applicant may be ordered to provide security for costs for the application.

5. As before, if the Court thinks it proper, it can restrict a person instead of disqualifying them (when the application is specifically for disqualification) (Section 845).

6. The Court may order that the disqualified person bear the costs of the application (Section 846), and related costs (where the application is made by the DCE or the DPP).

7. At any stage during the period of disqualification, a disqualified person may apply to court for relief, and if the Court thinks it just and equitable to grant it, it may do so. The procedure for this is set out here (Section 847).

8. If a restricted person is on the board of an insolvent company, and the winding up of that company commences within that person’s 5 year restriction period, the liquidator must report this to the court and the court may disqualify that person. It is a Category 3 Offence for the liquidator to fail to report the matter.