The Supreme Court delivered on the 16th December last, a decision in the case of Worldport Ireland Limited (in Liquidation).  The parent of the Irish entity Worldport Ireland Limited (in Liquidation) was Worldport Communications Inc. a US company.  The US company were the successful appellants in the Supreme Court. 

 

The issue related to whether or not the US parent company of the Irish entity could be restricted by the Court from being appointed or acting as a director or secretary or being concerned in the promotion or formation of any company for a period of 5 years (except in the circumstances where the Irish entity had a certain level of paid up share capital).

Section 150 of the Companies Act 1990 which applies to a person who is a director of an insolvent company being wound up states ...

 

The Court shall… declare that a person to whom this chapter applies shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless…”

 

The Interpretation Act 1937, now Sections 18/20 of the Interpretation Act 2005 extends the meaning of the word ‘person’ to include bodies corporate except where a contrary intention appears. 

 

The Supreme Court held per Fennelly J. that a body corporate can be a shadow director but that Section 150 of the Companies Act 1990 as it relates to a person, cannot be deemed to refer to a corporate body as a contrary intention existed (by virtue of the form of order provided for in the section) to the normal rule of interpretation under the Interpretation Act.

 

A further reason offered by the Supreme Court as appeared in the Judgment of Geoghegan J. was the wording of Section 149(5) applying the Chapter in which Section 150 resides.   Section 149(5) provides “This chapter applies to shadow directors as it applies to directors”.  Geoghan J. said that this can only refer to human directors because of the words “as it applies to directors”.  Section 176 of the Companies Act 1963 prohibits bodies corporate from being company directors.

 

By implication, the judgment in this case also means that no order of disqualification can be made under the Companies Act against a body corporate under Section 160 of the Companies Act 1990 on the same reasoning as applied in relation to Section 150.

 

This is good news for the foreign parents of Irish Companies and will give comfort to foreign multinationals investing in Ireland that should their local Irish subsidiary become insolvent, that there will be no reputational risk to them arising from a restriction or disqualification under the Companies Acts.  Of course Irish parents of insolvent subsidiaries will also escape restriction.

Further Information:

Please contact:

Patrick Rowan- prowan@mckr.ie - Tel: +353 1 670 2990