# Dissolved Company - liabilities of Directors



## mf1

Question asked: if a company is dissolved but members ( its a small very badly run family business) continue to run the business and incur debts ( rates, rent etc,.etc) over an extended period of time, are those debts being incurred by the dissolved company or by the directors/members? 

I've always thought that the directors now become ( automatically) personally liable for any debts incurred in the company name after dissolution but I'm told that it is in fact the dissolved company who holds the liability and that the idea of personal liability for the directors is only a factor if the High Court so finds them? 

Anyone good on company law and have a legal reference/source for any answer?

Many thanks

mf


----------



## Graham_07

MF , I'm not an expert on Company Law, but at a recent CPD seminar I attended the presenter ( Brian Walker BL a barrister specialising in commercial law ) referred to a case called " re cautious trading ltd" ( yes that was the company's name, no joke) and a judgement by Mrs Justice Finlay Geoghegan on 15/03/05. This concerns companies struck off since 2002 and directors obligations for non-filing or not paying debts. Not sure where you'd acces the case but it might be interesting reading and may help answer some of the questions. 

Letting a company be struck off as an laternative to insolvent liquidation is viewed dimly by the ODCE especially. There may be more on their site also. 

Graham


----------



## RonanC

Graham_07 said:


> a judgement by Mrs Justice Finlay Geoghegan on 15/03/05. This concerns companies struck off since 2002 and directors obligations for non-filing or not paying debts. Not sure where you'd acces the case but it might be interesting reading and may help answer some of the questions.


 
[broken link removed]


----------



## whitegrass

It is very difficult to make a Director liable personally for a Company's debts.  A High Court judge will have to be satisfied that the Director acted recklessly or indeed frauduently.  Certain legal people have lead people to  believe that personal liability of Directors is a reality but it is very much an exception rather than the rule.


----------



## csirl

Excuse me if this question sound stupid.

If a company is dissolved, it no longer exists, therefore it cannot trade full stop. 

If former directors of the company continue to trade, then this is a new business legally unconnected with the dissolved one?


----------



## billythefish

csirl said:


> Excuse me if this question sound stupid.
> 
> If a company is dissolved, it no longer exists, therefore it cannot trade full stop.
> 
> If former directors of the company continue to trade, then this is a new business legally unconnected with the dissolved one?



I agree. Once a company is dissolved, its members lose limited liability protection and are trading in their own personal capacity.

See [broken link removed]

I know the information is given in the context of involuntary strike-off but the implications are the same whatever way a company is dissolved.


----------



## jack2009

What is the point of trading a company that has been struck off!  Any money you make belongs to the state!

Also, the directors are open to porsecution unless they apply to have the company restored to the companies registration office.   If they succeed in this application then all transactions carried out while the company was insolvent become valid.


----------



## JQ2002

Ok, I've pulled out the 1963 Companies' Acts. Section 311_Power of Registrar to strike defunct Company off register.

Subsection 6 states "The Liability, if any, of every director, officer and member of the Company shall continue and may be enforced as if the Company had not been dissolved"

Section 311A deals with the restoration of a struck off Company to the Registrer.

Of course,the Registrer struck off the Company because it beleived no trade was being carried on.

All the Directors of the Company would have been notified of the strike off and a notice published in the Gazette.


----------



## mf1

Thanks everyone, all very useful - its a messy situation where new clients ( who have been involved in a  multi generational family business) appear to have failed to grasp even the most basic business concepts so they seem to have been  unaware that the company being dissolved had any personal significance to them. Hard to believe I know - I'm still shaking my head.  

I still can't find an actual source - as in a Judgment or a Statutory reference - that 
is compelling hence the original query. 

mf


----------



## mf1

"The Liability, if any, of every director, officer and member of the Company shall continue and may be enforced as if the Company had not been dissolved"

Thanks for that - its the wording - "if any" - that I'm wondering about.

mf


----------



## jack2009

The "if any" means if the directors did something/anything that they would be laible for if the company was normal then they would still be liable.


----------



## JQ2002

I think you can take it that if any liabilites exist, they are the responsibilites of the Directors.

If the Directors are continuing to use the trade of the dissolved Company, they continue to have obligations, in my opinion.


----------



## jack2009

Think you have to take the view that you must make an applciation to have the company restored.


----------



## JQ2002

jack2009 said:


> Think you have to take the view that you must make an applciation to have the company restored.


 
OP bear in mind you will have significant costs with this, late filings, etc.

Section 311A of 1963 Comapany Acts details that you must apply for a restoration within 12 months after the publication in the Gazette of the notice striking the company from the register. 

Provided all outstanding returns are filed and fees paid, the company maybe restored to the register.

If the period is greater than 12 months, you may have to seek legal advise, as a Court Order requesting restoration maybe required.


----------



## jack2009

Court Order requesting restoration is required if the period is greated than 12 months.  It will not be cheap but it is the advice that should be given as it is the right thing to do.


----------



## billythefish

jack2009 said:


> Court Order requesting restoration is required if the period is greated than 12 months.  It will not be cheap but it is the advice that should be given as it is the right thing to do.



Yeah, I think this works out at about €2k or so. What about just forming a new company altogether instead?


----------



## jack2009

billythefish said:


> Yeah, I think this works out at about €2k or so. What about just forming a new company altogether instead?


 
How does this solve the problem of the existing company?


----------



## JQ2002

Directors simply cannot form a new Company and take over the trade of the old Company. The Directors have obligations under Company Law, if this were to take place the Directors could potentially be fraudulent in their activities.


----------



## billythefish

jack2009 said:


> How does this solve the problem of the existing company?



What existing company? The company doesn't exist as a legal entity.


----------



## jack2009

What have the family been running so?


----------



## oopsbuddy

As most posters above know, a struck-off company has a kind of a half-life, in that although it technically doesn't exist anymore, it can be restored to the Register at any time (certainly up to 20 years after strike-off) upon satisfaction of all statutory requirements (filing of returns and accounts) and payment of all outstanding filing fees etc., so although it's gone, it's not really gone, because it could come back!

If an application to restore the company is made within 12 months of strike-off, it will cost €300 as well as all outstanding filing fees as above. If application is made after 12 months have expired, an application must be made to the High Court, which usually costs very significantly more (I would be very surprised if €2k would get far!) on top of all the other costs and filing fees etc.

An application to restore can be made by the directors, or can be made to the High Court by, for example, creditors, Revenue etc.. If the Court orders the restoration at the application of creditors, it will be at the expense of the directors, who MUST comply with the Court Order, and will not be cheap.

On a different point, if a director continues to trade under teh name of a limited company which has been struck off, it is an offence, in the same way as if he traded under a fictitious company name, and he will be liable (along with his other directors) for any and all liabilities incurred, provided he is prosecuted for, and convicted of, doing so.


----------



## mf1

"and he will be liable (along with his other directors) for any and all liabilities incurred, provided he is prosecuted for, and convicted of, doing so."

OK - thanks everybody. These people have not been prosecuted for anything but judgments ( undefended) have been obtained against them personally for what would be regarded as "business" debts - they did not deal with those proceedings. 

I was asked if it was possible to have those personal judgments set aside on the grounds that the debts were not personal debts but debts of the dissolved company. As the people involved do not intend to restore the company, I felt that a Court would have little or no sympathy for them. So, even though I suspect that  oopsbuddy probably has hit the nail on the head i.e. that the liability is not automatic, that its not a good argument to run. But it does seem as if the people involved could, perhaps,  have successfully defended the original actions. Again, not sure I'd like to run that defence.

mf


----------



## jack2009

Would the business debt have been personally guaranteed?


----------



## Kate10

I would also query in what manner the company was dissolved?  Did the CRO strike it off for failure to file annual returns?  Did the directors make an application for voluntary strike off, in which case they would have had to declare the company solvent?  That would have been fraudulent in this case leading to further problems.

IMO, your clients would have had at best a 50/50 argument that the debts were incurred by the company, if the company did not legally exist when the debts were incurred.  Even if they won this argument, which I think is unlikely, surely trading a dissolved insolvent company over a prolonged period of time, and ignoring various debt collection proceedings while continuing to incur debt is reckless trading at the very least ..in which case they would again be personally liable for the debts.  I don't think your clients have a leg to stand on to tell you the truth.


----------



## JQ2002

What became of the assets of the Company?

Is the name of the Company still being used?


----------



## bond-007

> What became of the assets of the Company?


Property of the state.


----------



## McCrack

MF Courtney's Law of Private Companies is the authoritive text for any matters company.


----------



## bond-007

The problem that I can see here is that when a company is struck off for non filing of returns, it legally ceases to exist in law and the directors are then the directors of nothing. But the company can be restored at any time within 20 years and continue as if nothing had happened. That is why you cannot take the name of a dissolved company until 20 years have elapsed since the dissolution. 

It is the concept that a company ceases to exist is one that many people fail to grasp even government depts such as Revenue don't acknowledge strike offs for failing to file etc. I know of one case where Revenue kept pursuing a struck off company for unpaid VAT. I would assume that any proceedings would fail due to the company's status?


----------



## Harvey76

What would be the position if you had dispute between directors/shareholders and company struck off for failing to file returns.  What would happen if one of the directors was still writing cheques in company name after being struck off?  Would be be personally liable as opposed to the company and what should other directors do to safeguard their position?


----------



## bond-007

The bank should be informed immediately of such a strike off.
If the director continues to write cheques he is spending the states money. A big problem there.


----------



## jack2009

bond-007 said:


> It is the concept that a company ceases to exist is one that many people fail to grasp even government depts such as Revenue don't acknowledge strike offs for failing to file etc. I know of one case where Revenue kept pursuing a struck off company for unpaid VAT. I would assume that any proceedings would fail due to the company's status?


 
The revenue have on many occasions restored the company only to appoint a liquidator with a view to getting paid!


----------



## bond-007

An expensive process for Revenue to undertake.


----------



## jack2009

bond-007 said:


> An expensive process for Revenue to undertake.


 
It is but they do it, I suppose it is their way of tackling unliquidated insolvent companies that they believe either has assets or can hold the directors personally responsible.


----------



## Kate10

That's a really interesting one Bond.  I have a motion for judgement in default pending in the High Court against a company the directors of which put the company into voluntary liquidation within a month a receiving the summons.  I thought we would have to apply to put the company back on the register before seeking judgement but my barrister tells me we can proceed without doing so...


----------



## j26

Kate10 said:


> That's a really interesting one Bond.  I have a motion for judgement in default pending in the High Court against a company the directors of which put the company into voluntary liquidation within a month a receiving the summons.  I thought we would have to apply to put the company back on the register before seeking judgement but my barrister tells me we can proceed without doing so...



Since the company existed at the time of issuing the summons, the liquidator cannot finish the liquidation process until the case is finalised - the company won't be dissolved until all debts are paid.  Dissolution only really happens at the end of the liquidation process.  

In order to go into voluntary liquidation the directors would have had to swear an affidavit that the company had assets to meet all its liabilities - since you got in before the company went into liquidation, that would have had to include the sum you're claiming.  If the funds aren't there, you may have a cause of action against the directors.



On another note, dissolved family companies cause havoc when dealing with land - the former owners of the company squat on the title and then get a shock when they realise that since the property vested in the state it's a 30 year limitation period for adverse possession.


----------



## Kate10

Thanks j26. To be honest am aware of all the above.  The only thing I am surprised about is that we can proceed with our motion while the company is not on the register ...I would have thought that we would first have had to apply to have it put back on.


----------



## bond-007

So they dissolved the company? 

I would be amazed if the judge would give a judgement against a non legal entity.


----------



## DW1

Sort of related question, apologies if this should be elsewhere on the forum. 

Can a company just decide to notify that it is ceasing trading but, using lack of funds as an excuse, not appoint a liquidator so leaving all creditors high and dry? 

I hope not....


----------



## mf1

bond-007 said:


> So they dissolved the company?
> 
> I would be amazed if the judge would give a judgement against a non legal entity.



But if it was a members voluntary liquidation where they swore that they were solvent even though the summons had already been served on them, does that not rather take the wind out of their sails? 

mf


----------



## bond-007

No, as the judgement had not been given against it at that stage.

Would a Judge have the power to restore the company so the judgement could be made against it?


----------



## Kate10

Yes that is my issue.  They were not in a position to voluntarily strike the company off due to our litigation (and possibly other debts - don't know).  They did it anyway, which means they knowlingly swore a false affidavit.  I'm sure no judge would be impressed.  However, I thought we would have to bring a circuit court application to put the company back on the register, before we could get judgement against it.  My barrister tells me that we can proceed with the motion against the company without doing so ...I'm not sure how we can do that, given that the company doesn't exist at the moment!!  Will have to pull out the books on this one!


----------



## Kate10

Bond judge would have the power but I think the application to put a company back on the register is heard by way of motion in the circuit court.  Our current motion is just a standard motion for judgement in default so I can't imagine judge can put company back on register based just on that motion ..


----------



## McCrack

S310 and S311(8) of the CA 1963 is of relevance here Kate and I believe an application can and should be made to the HC to have the company reinstated.

I dont think a motion in default is sufficient.


----------



## Kate10

Thanks very much McCrack - will check those sections.


----------



## oopsbuddy

DW1 said:


> Sort of related question, apologies if this should be elsewhere on the forum.
> 
> Can a company just decide to notify that it is ceasing trading but, using lack of funds as an excuse, not appoint a liquidator so leaving all creditors high and dry?
> 
> I hope not....



Afraid so! To summarise broadly, if a company is insolvent, and has no prospect of recovery, the directors are obliged to cease trading. However if there are insufficient funds to appoint a liquidator (insolvent liquidations are expensive) what are they to do? 

The ODCE and the CRO don't like this process, but it is widely used, and seems to result in a sort of limbo for all involved, but as I said above, what are they to do? They must do the right thing and cease trading....!


----------

