Property developers Michael and Thomas Bailey have been disqualified from acting as directors of Irish companies for seven years due to what the High Court termed as their “particularly serious” misconduct and fraud while acting as directors of Bovale Developments.
The High Court found that there was a systematic scheme of false accounting and failure to account for remuneration to the Baileys for the two-year period ending in June 1998, culminating in a IR£6,000,000 understatement of gross remuneration. It also found that the Baileys had breached their directors’ duties, in particular by failing to ensure that proper books of account were kept for that two-year period. As a result, the High Court decided that the conduct of the Baileys made them unfit to be concerned in the management of companies.
The magnitude of the misconduct was expressed in the High Court by Peter Lacy of PwC (who had examined Bovale’s books for the relevant period) who stated that “during my career in public accounting in Ireland over the last 35 years, I have not encountered a failure to maintain proper books of account that compares with the extent and gravity of the failures in respect of Bovale for the two years ended 30 June 1998”.
Given the gravity of the actions, the High Court initially concluded that a fourteen-year disqualification was appropriate. Mitigating factors reduced the disqualification period to seven years, including that the fraud and misconduct occurred more than 15 years ago, a voluntary disclosure to Revenue had been made in 2000, the directors were subsequently Revenue compliant and had kept proper books of account since 2001 and stated that they had learned from their mistakes and intended to set matters right.
As well as being a requirement of company law, in these times of increased focus on the behaviour of directors, the ongoing maintenance of correct, accurate and consistent books of account can assist directors to prove that they have acted responsibly in the event of any subsequent accusations of wrongdoing.
Contributed by Rachel Prendiville.
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