Warning over 'unscrupulous behaviour' by directors

Peter Flanagan, Irish Independent 14th May 2012

The number of company directors apparently running businesses into the ground and then setting up "phoenix" companies and leaving a trail of creditors in their wake is on the increase, according to a leading business information firm.

Analysis from Business Pro, which publishes the well-known 'Stubbs Gazette', found the number of directors hit with "restricted" orders actually fell last year despite the increase in the number of companies going into liquidation.

In 2011, there were 2,285 company liquidations and 207 petitions for winding up, compared with a total of 2,099 similar actions in 2010. Despite that, the number of directors who were "restricted" during the year fell to 94 from 147.

A "restricted" order on company directors is often considered more serious than a director who is "disqualified", as the restriction order specifically applies to an individual's conduct while acting as a director.

A disqualification order can be applied to some financial crimes that have no bearing on a person's actions as a director.

Business Pro's Greg Connell believes the Office of the Director of Corporate Enforcement should be taking more action against unscrupulous directors.

"The numbers as they are do not seem to add up. When the number of businesses collapsing is going up, it would make sense that the number of restriction orders being enforced should go up," he said.

Mr Connell said that taking into consideration how many business collapses were likely to have resulted in at least a suspicion that the directors might not have acted in the best interests of the company, then the numbers didn't seem to tally.

Sanction

"It seems fairly certain that a great deal of unscrupulous activity is taking place without fear of sanction," he claimed.

"For too long in Ireland, companies that were ultimately liquidated have traded while obviously insolvent until the company is bled white, only for those same directors to rise again in a phoenix-type situation," he added.

Mr Connell said that proving a director had acted criminally rather than incompetently should be a relatively straightforward process.

"If the company didn't keep proper books of account, that in itself would be a criminal offence."

- Peter Flanagan

Irish Independent