Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

Amendment No. 14 is not appropriate as section 7(2) provides for the criminal liability of certain persons connected with a body corporate in certain circumstances in the case of offences under the Bill. Extending liability for the debts of a solvent company through the officers of a company would, I am advised by the Attorney General, be constitutionally suspect and represent a major departure in company law. The overriding principle of company law is that a director’s duties are owed to the company, not to individual shareholders or employees. If there is a breach of duty on their part which causes damage to the company, they can be sued and held liable for damages. Claims can be brought by shareholders or financial institutions or on a director versus director basis.

Liability may arise from lack of care and skill in the performance of a director’s duties, negligent advice or misstatement, any act which goes beyond the limits of the company’s constitution such as extensive borrowing, unauthorised payments, a failure to disclose the full extent of the director’s interests or a failure to comply with requirements that may involve a director or an officer in a personal liability. Company law penalties vary from restriction or disqualification orders to fines and periods of imprisonment.

The Companies Bill 2012 provides for a four-tier categorisation of most offences, with the exception of fraudulent trading and market abuse. The Bill also contains a new provision in section 872 whereby, following conviction for an offence under the companies Act, the trial judge may order that the convicted person should remedy any breach of the companies Act with which he or she was connected.

In effect, the provision of the Companies Bill is more constitutionally robust rewording of section 3(8)(iii) of the 1963 Act, as amended in 2001. From a company law perspective, the proposed amendment challenges the entire principle of company law. If it were to be implemented, the doctrine of separate legal personality would become an exception rather than the rule. Having regard to the foregoing, I am not going to accept this amendment. In the Seanad I will be introducing an amendment to make it an offence to refuse to pay unless the respondent can show he or she is not in a position to pay. Prosecution is also possible under section 7 for conniving. This series of powers and offences goes some of the way, if not all of the way, to meeting the Deputy's concerns.

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