The Gazette 1995

GAZETTE

MAY/JUNE

1995

business is the lending of monies or it

so that company employees may

acquire shares in a

bona fide

scheme. The legislation is to prevent

companies covered by section 150(3)

from vitiating the capital requirements

already placed upon it.

Secondly, the provisions of sections

32 to 36 of the Companies

(Amendment) Act, 1983 are applied to

such companies with some

modification and alteration

. The net

result of this is that a section 150(3)

company must have all transactions

independently valued and approved by

ordinary resolution of the company

when such transactions;.

(i) involve the acquisition of non-

cash assets worth at least a tenth

of the company's share capital,

and

(ii) the acquisition is from any

subscriber to the memorandum,

director or promoter.

The time periods laid down by the

1983 (Amendment) Act to such

transactions are also removed

Finally, a company to which s. 150(3)

applies, may not avail of the

exemptions provided for in sections

32 and 37 to the prohibition of loans

to directors, as allowed by section 31

of the 1990 Act

. Once again these

provisions are to ensure that the

capital requirements placed on

companies by section 150 are not

dissipated.

Companies that are subject to the

above restrictions may however obtain

relief,

. . in respect of any act or omission

which, by virtue of that section,

contravened a provision of the

Companies Acts or to any person

adversely affected thereby. . . "

and may be granted by the Court

where it deems it 'just and equitable'

and may be on terms and conditions

deemed fit, yet it may extend to

include exclusion of any such

provision from that company. But,

where a company has been notified by

a person, under the requirements of

section 155(5), that they are under a

restriction declaration, it will not be

afforded any such relief

Liquidator's and Receiver's

Duties

These are set out in section 151 and

provide that if,

". . . it appears to the liquidator of a

company to which this section

applies that the interests of any

other company or its creditors may

be placed in jeopardy by the

relevant matters in subsection (2)

the liquidator shall inform the court

of his opinion forthwith. . . "

The relevant matters of subsection 2

are that a person, though subject to a

restriction declaration, is directly or

indirectly so acting as or has been

appointed a director, secretary or

promoter of that other company. The

court on the receipt of the report can

make whatever order it sees fit,

including presumably a

disqualification order. A liquidator

who fails to report to the court in the

circumstances outlined is liable to a

summary fine of not more than £1,000

with a £50 daily default fine, or not

more than £10,000 with a £250 daily

default fine on indictment

In relation to these provisions the

question arises does the liquidator

only report if, and when he forms the

view that the requisite interests are

being so jeopardised? Also it would

seem that the potential penalties are

very harsh given that a liquidator may

be in no position to gauge whether

those interests are being so imperilled.

The section appears to be aimed at

preventing a person, whom a

liquidator views as being totally

dishonest and irresponsible, from

circumventing a restriction order by

utilising the capital requirements

outlet. Finally the section gives no

time limits and this suggests that the

liquidator must observe persons for

the duration of their restriction.

Relief from a Restriction Order

A person in respect of whom a

restriction order, or any order under

section 151, has been made can apply

to the court for partial or complete

relief

. The applicant must give the

liquidator, if the winding up of the

company is on going, at least 14 days

notice of the intended application and

the application itself must be made

within one year of the restriction

declaration. The liquidator on

receiving this notification must

himself inform any creditor or

contributory of the company, of which

he is aware, that he has received such

a notice. A failure to do this is an

offence

. At the application for relief

the liquidator or any creditor or

contributory can appear and give

evidence. Relief may be granted,

where the court feels that is just and

equitable but will do so on whatever

terms and conditions it sees fit.

Consequently a court may reduce the

required levels of share capital under

section 150(3) or shorten the

restriction period.

Presumably a restricted person can

only apply for relief in the 12 months

after the imposition of the restriction

order to ensure that a liquidator is still

acting in respect of the company as

there is no provision for creditor

notification where no liquidator

subsists. Any grounds an applicant

will adduce for relief will have to be

highly persuasive considering that the

Court will have ordered restriction in

the first place.

Enforcement

A person under a restriction order who

acts in a manner prohibited is guilty of

an offence

and if convicted shall

receive a five year disqualification

or such other period the court may

determine on the prosecutor's

application

. Relief from this

disqualification order is not

available

. A disqualification order,

or discretionary duration, may also be

imposed where a person, though under

restriction, is, or becomes a director of

a second company (either by it

complying with the capital

requirements of section 150(3), or

otherwise in contravention of a

restriction), which itself is caused to

be wound up within five years of the

winding up of the company that lead

to the restriction declaration initially.

In such circumstances if it appears to

the liquidator, or presumably a

receiver, of the second company that

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