The Gazette 1995

GAZETTE

MAY/JUNE 1995

liquidator, creditor or contributory of the company 84 . Any officer appointed to the company after it had met the requirements will not be liable. However there are no indications as to what constitutes a 'reasonable period' of time for compliance and consequently the court will have to decide each case on its facts but presumably it is longer than the 14 day notification period of section 155(5). Finally any director, officer, member o f a committee of management or trustee of a company who acts in accordance with any directions or instructions that are given by a person they know to be under restriction are themselves liable to a disqualification order 85 . The directions or instructions made however must be in contravention of the restriction order. A major flaw in the provisions on restriction is that neither the Act, nor the Rules of the Superior Courts, make any specific reference to the procedure which ought to be adopted in the bringing of a restriction application under section 150 before the Court. However R SC 0 . 7 5B of the Rules adopts procedures in respect of some of the applications that may arise in the restriction area. First by R SC 0 . 7 5B r.3(aa) applications to have a person or officer made personally liable for a company's debts under sections 163(3) or (4), are by way of notice of motion. These will be on notice to the person against whom the order is sought and to the liquidator of the company, if he is not the applicant himself. it appears to the liquidator the interests of another company or its creditors are in jeopardy, s . 1 5 1 ( 1 ); or, (ii) a company is seeking relief in respect of prohibited transaction, s. 157(1); or, (iii) a liquidator wishes to report the 'relevant matters' of s. 161(5). Secondly by R SC 0 . 7 5B r.5 ex parte applications may be brought where; (i) Procedure

by a "financial institution" 79 or a "venture capital company" 80 . However they too are subject to the provision that they act honestly and reasonably and therefore the provisions seem needless.

There is no indication of the procedure which should be followed where a receiver or liquidator wishes to have directors restricted in the first place, yet R S C 0 . 74 r.136 (as amended) provides, "In any winding up an application . . . under any other of the section of the [Companies] Acts not herein expressly provided for, shall, in the case of a winding up by the court by made by motion on notice and in the case of a voluntary winding up by originating notice of motion. " Consequently a liquidator in an insolvent voluntary liquidation should apply by originating notice of motion to High Courts 5 or 6. Murphy J. has expressed the view that the liquidator should notify all the directors of the insolvent company, presumably along with any person who resigned their directorship in the 12 months prior to the winding up, of the Act's provisions regarding mandatory restriction and that such notification be as soon as possible. Therefore in line with Re G. & T. Garvey Limited** such notification should occur in the six weeks between the winding up and the first application by the Liquidator in the Examiner's list. A liquidator therefore, after a search of the Companies Office, to ascertain the directors, should so notify. It would follow that creditors of the company should also be notified, as in the case where a person is seeking relief under s.152, so that they may outline to the court their attitude on the restriction of the director, or otherwise. Early notification would appear to be the preferred course as applications for relief it is on notice to the liquidator and also under section 151 the liquidator is to report to the court if it appears to him that the interests of another company or its creditors are being jeopardised. These provisions would be rendered somewhat otiose if the director appearance and restriction were made at the final order stage, respectively. It would also be more equitable to directors if they could explain their actions at a time when the events of the company's downfall were fresher

Civil Consequences of Acting while under Restriction

Any company may recover as a simple contract debt any consideration, or amount representing its value, paid over to a person who acted in relation to that company while under a restriction declaration 81 . Further if the person is so acting and, ". . . the company concerned commences to be wound up - (i) while he is acting in such a manner or capacity, or (ii) within 12 months they may be made liable for all the debts and liabilities incurred during the period he acted in contravention of a restriction order. An application for such personal liability may be made either by the c ompany 's liquidator or any of its creditors. Consequently the winding up may be after the five year restriction is over. It seems that personal liability may be sought even where the company has been notified o f the restriction, under s. 155(5), though presumably the court in those circumstances will grant some degree o f relief. (1) has been notified of a restriction declaration by a person, (2) continues business without fulfiling the capital requirements of section 150(3) within a reasonable period, and (3) is wound up and at the commencement of the winding up is unable to pay its debts, may themselves be personally liable for all the debts and liabilities of the company if they knew of or ought to have known of the notification to the company, though relief is available 81 . Officers of a company which; of his so acting, and (c) the company is unable to pay its debts. . . " 82

Applications for such personal liability can be brought by a

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