The recent downturn in the Irish economy could result in a large proportion of new Irish companies failing and a new breed of directors facing the inevitable public embarrassment and the loss of valuable personal assets for the first time. In addition to this, new company formations are down 20% on the same period as last year according to the CRO which further shows the effect of the downturn on Irish companies. These were just some of the views expressed by Brian Walker, company law expert and barrister at the launch of his nationwide series of “Crisis Clinics” for company secretaries and directors.
Walker has also highlighted that there may be up to 85,000 so called “Cowboy Directors” in Ireland – enough to fill Croke Park. A “Cowboy Director” can be described as any company director liable to be disqualified and in turn unfit to run a company due to non compliance with company law. “With an estimated 500,000 company directors in Ireland expected to be aware of and comply with 13 different Companies Acts since 1963, the job of the director can prove to be very onerous. Many of these directors fail to comply with these Acts either through lack of knowledge or blatant disregard to Irish Company law”, explains Walker. Non Compliance has already taken effect with the first directors being struck off the register in 2005. “Cautious Trading Limited” failed to file their statutory returns with the CRO which was non compliant with the Companies Acts. The directors of “Cautious Trading Limited” cannot now direct any company for a five-year period nor can they be involved in the management of any company.
“Many of these rogue directors have found loopholes in the law, vanished off the CRO register with unpaid bills and have no intention of ever paying up. With so many "Cowboy Directors", the law has reached its limit in being able to fully protect creditors and legitimate businesses are greatly exposed to bad debt. It's very frustrating for practising barristers in this area to see these "Phoenix Directors" rise from the ashes to run other companies while leaving clients devastated with unpaid bills and little or no real remedies ” explains Walker.
The Company Watchdog, the ODCE are aware of this syndrome which they term the issue of the UIC, “the Unliquidated Insolvent Company”. Walker outlines that while they do a great job there is a lot more needed to be done, “quite simply they don’t have the resources to pursue all these directors who are eligible for disqualification and it's virtually impossible to catch them all.”
As the credit crunch deepens, many directors will be making themselves more aware of their obligations for the first time as business failure becomes more of a reality. “During the Celtic Tiger numerous new directors never took any notice of their obligations. Now many people will feel the effect of a recession for the first time which will leave many directors unable to pay their debts and unaware that court action and seizing of personal assets could be forthcoming. Companies are used to seeing the upside of the economic boom but now that tougher times are upon us directors may come under increasing pressure,” warns Walker.
These alarming figures are bad news for directors and company secretaries and a firmer knowledge of company law is needed to prevent them being struck off the register. According to the companies reports presented to the Oireachtas, over 100,000 companies have been struck off since 1995.”It is vital that company directors and secretaries ranging from private, voluntary and charitable organisations are informed and kept up to date on all company law issues as many of these directors are completely unaware of their wrongdoings and left open to the consequences”
Brian Walker is running a number “Crisis Clinics” across the country starting in Dublin on 8th September that helps company secretaries and directors to better understand company law and could save them the embarrassment of a court order or from being banned as a manager or director. For more information visit http://www.cpdseminars.ie/
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