Seán Sherlock (Cork East, Labour) | Oireachtas source

The section has some changes when compared with the existing legislation. It deals with the declaration by the court restricting a director of an insolvent company in being appointed or acting as a director. The court will make the declaration restricting the director upon application from the Director of Corporate Enforcement, the liquidator of an insolvent company or a receiver of any property of the company. The restriction is for a period of five years and the restricted person may not be appointed to act in any way, directly or indirectly, as a director or secretary or to be involved in the formation or promotion of a company, unless that company meets the required capitalisation levels.

It provides a defence for directors where they can show that they have acted honestly and responsibly in respect of the conduct of the affairs of the company, whether before or after it became insolvent, and where the court can see no other reason that it would be just and equitable that the director be restricted. The subsection has been amended, and that is as compared with the Companies Act 1990, in so far as a new proviso has been inserted in line with a recommendation from the Company Law Review Group. The additional requirement is that the person concerned "...has when requested to do so by the liquidator... co-operated as far as could reasonably be expected in relation to the conduct of the winding up of the insolvent company". The reason for the insertion of this provision is to promote greater co-operation by the directors and other officers with the liquidator. Subsection (3) sets out the capitalisation requirements for a company which has a restricted person acting as director or secretary or taking part in the formation or promotion of that company.

Provision is made for restrictions involving a guarantee company to ensure that a company may not escape a capitalisation-type requirement by reason of not having a share capital. The requirement here is that at least one of the members of the company must give a guarantee of not less than €100,000, subject to the amendment's being agreed to. In the case of an investment company, subsection (3) will be read as if the requirements are that the value of the issued share capital of the company is not less than €100,000 and that an amount of not less than €100,000 in cash has been paid in consideration for the allotment of shares in the company, subject to the amendment's being agreed to. A person restricted arising from his or her conduct in relation to a company limited by shares is restricted as regards all other company types as well.