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14 Cards in this Set
- Front
- Back
Restriction |
Companies Act 1990 introduced measures to restrict/disqualify unscrupulous directors to stop them just starting up a new company. Aim is to protect public from their future company dealings. Not punitive, but in practice quite punitive. Browne-Wilkinson VC in Re Lo-Line Motors Ltd Previous conduct must show them unfit to hold office, represent a danger to potential investors/traders. |
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Restriction requirements section 819 |
1. After insolvency, cannot act as director/secretary/promoter UNLESS you meet requirements set out in subs 3. 2. Restricted UNLESS a) Acted honestly and responsibly(both before and after insolvency) 3. Requirements for sect. 1.: a) Company shall have allotted share capital of over 500k if public, 100k if private. |
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Elaboration |
Courts cognicent that failure is a part of commercial life, does not mean unacceptable behaviour from the directors. Not a "witch hunt". Business Communication Ltd v Baxter & Parsons |
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La Moselle Clothing v Soualhi 5 Stage Test |
1. Extent to which director has(not) complied with obligations set out by Companies Acts. 2. E T W their conduct can be regarded as so incompetent as to amount to irresponsibility 3. E T W responsible for insolvency 4. ETW responsible for net deficiency of assets disclosed 5. ETW director has shown lack of commercial probity/want of proper standards. |
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Tax |
Failure to pay tax properly is often an indicator. Does it automatically constitute irresponsibility? No. Re Digital Channel Partners Ltd. Need something more. |
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Non-executive director's liability |
Re Tralee Beef & Lamb; Kavanagh v Delaney. Inactivity does not constitute acting responsibly. Re Mitek Holdings. Fennelly J implied there's differences between executive and non-executive. Executive owe greater duty, but they rely on the advice of non-executive. Non-executive has duty to familiarise themselves with the running of the company. |
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Co-operating with liquidator |
Re CMC(Irelad) Ltd; Fennel v Carolan & Cosgrave Now part of the 2014 Act |
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Declaration of restriction |
1- Prevent from being director/secretary/involved in formation/promotion of any company for five years unless company is adequately capitalised 2- Public companies- capital requirement of 500k 3- All other companies- 100k |
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Voluntary Restrictions |
s 852. |
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Shadow Directors |
Fyffes v DC Can be other companies. |
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Disqualification Order |
S 839. Automatically disqualified for any offence specified, mainly fraud. S 842- Discretionary. |
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Difference between disqualification and restriction orders |
Scope much wider, and they cannot have any involvement in the company after. The disqualification period is automatically 5 years if they committed a criminal offence, but it can be less when it’s up to full discretion. Has been theorized that it should be in brackets, it’s usually. |
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Burden of Proof in disqualification orders |
Penal nature makes it difficult to achieve these. Re Kentford Securities Ltd. Applicant must satisfy court that one of the provisions under 839 or 842 arises. If latter, court may then exercise discretion.Reversed compared to restriction orders, where the burden of proof is shifted to the director. Civil standard of Proof: Re TMC Mediaworks |
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Voluntary Disqualification |
s 850 |