Disqualification Relief Granted to Directors
For the first time, the Irish High Court (Court) has granted relief to two directors who had been the subject of a “deemed” disqualification order under the Companies Act 2014 (Companies Act).
The applicants were the subject of a “deemed disqualification” under section 840(2) of the Companies Act for failing to notify the Irish Companies Registration Office that they were the subject of a disqualification order under the UK Company Directors Disqualification Act 1986 (foreign disqualification). The foreign disqualification related to infringements of certain competition laws and the entry by the applicants into “competition disqualification undertakings” to the Competition and Markets Authority (CMA) in March 2021.
A person subject to a disqualification order may apply under section 847 of the Companies Act for relief from the disqualification (application for relief). If the Court considers it just and equitable, it may grant such relief in whole or in part, and on such terms and conditions as it deems fit. The applicants in SB Steel Ltd & Ors -v- Companies Act 2014  IEHC 513, sought relief from the Court against the deemed disqualification, to act as directors of three named companies (Applicant Companies).
Director of Corporate Enforcement
An application for relief must be served on the persons who applied for the disqualification order and the Corporate Enforcement Authority (Authority), giving 14 days’ notice of intention to apply for relief. The Authority has a right to appear in relation to disqualification applications for relief. In this case, the Director of Corporate Enforcement (the predecessor to the Authority) adopted a neutral position towards the application. This followed extensive engagement with the applicants and the satisfaction of certain conditions deemed necessary by the Director to protect the public. These conditions included that professional persons of good standing and experience agreed to act as non-executive directors of the Applicant Companies; commitments to ensure high standards of compliance with Irish law; and sufficient corporate succession planning.
Since this was the first recorded application of this type, no Irish authorities were available to the Court on relief from a disqualification order. Mr Justice Quinn considered analogous case law granting relief from the equivalent provision concerning relief from restriction orders under section 822 of the Companies Act (XNet Information Systems Ltd  IEHC 289) and summarised the relevant principles as follows:
- The onus is on the applicant to show that it is just and equitable that relief should be granted.
- The Court has a wide discretion in such applications.
- The Court should not lightly or freely grant relief.
- The Court should examine the events and reasons giving rise to disqualification, or the deemed disqualification, and be satisfied that a risk of repetition is minimised. If so satisfied, the Court should balance the applicants’ and companies’ needs against the “overriding mandate” to protect the public interest.
Quinn J concluded, based on the evidence, that the purpose of Part 14 of the Companies Act (disqualification generally) is to protect the public from the culpable wrongdoing of directors and others. The purpose of the Companies Act would be undermined if relief from sanctions was granted lightly by the Court. Quinn J found that the applicants had taken seriously the lessons learnt from the CMA investigation and the sanctions that followed. They caused the companies to invest in a programme of compliance and prevention of a recurrence of competition law infringement.
Quinn J was satisfied that the failure to notify the CRO of the making of the undertakings to the CMA was not the result of an intention to conceal the disqualification undertakings. In all the circumstances, it was just and equitable to grant the applicants relief under section 847(1) of the Act – granting them leave to act as directors of the Applicant Companies.
The Court’s findings reinforce the importance of engaging and co-operating with the Authority, ensuring effective procedures are in place to minimise the likelihood of a re-occurrence of matters that led to the making of the disqualification order, and taking appropriate action on accountability. Such measures may influence the attitude of the Authority or the original applicant for the disqualification order to such applications, and the ultimate decision of the Court.
Contributed by Gail Nohilly & Alexandra Drummy