Fraudulent Trading
Companies Act
Civil liability for fraudulent or reckless trading of company
610. (1) If in the course of the winding up of a company or in the course of proceedings under Part 10 in relation to a company, it appears that—
(a) any person was, while an officer of the company, knowingly a party to the carrying on of any business of the company in a reckless manner, or
(b) any person was knowingly a party to the carrying on of any business of the company with intent to defraud creditors of the company, or creditors of any other person or for any fraudulent purpose,
the court, on the application of the liquidator or examiner of the company, a receiver of property of the company or any creditor or contributory of it, has the following power.
(2) That power of the court is to declare, if it thinks it proper to do so, that the person first-mentioned in paragraph (a) or (b) of subsection (1) shall be personally responsible, without any limitation of liability, for all or any part of the debts or other liabilities of the company as the court may direct.
(3) Without prejudice to the generality of subsection (1)(a), an officer of a company shall be deemed to have been knowingly a party to the carrying on of any business of the company in a reckless manner if—
(a) the person was a party to the carrying on of such business and, having regard to the general knowledge, skill and experience that may reasonably be expected of a person in his or her position, the person ought to have known that his or her actions or those of the company would cause loss to the creditors of the company, or any of them, or
(b) the person was a party to the contracting of a debt by the company and did not honestly believe on reasonable grounds that the company would be able to pay the debt when it fell due for payment as well as all its other debts (taking into account the contingent and prospective liabilities).
(4) Notwithstanding anything contained in subsection (2), the court may grant a declaration on the grounds set out in subsection (1)(a) only if—
(a) paragraph (a), (b), (c) or (d) of section 570 applies to the company concerned, and
(b) an applicant for such a declaration, being a creditor or contributory of the company or any person on whose behalf such application is made, suffered loss or damage as a consequence of any behaviour mentioned in subsection (1).
(5) In deciding whether it is proper to make a declaration on the ground set out in subsection (3)(b), the court shall have regard to whether the creditor in question was, at the time the debt was incurred, aware of the company’s financial state of affairs and, notwithstanding such awareness, nevertheless assented to the incurring of the debt.
(6) Where the court makes a declaration under this section, it may provide that sums recovered under this section shall be paid to such person or classes of persons, for such purposes, in such amounts or proportions at such time or times and in such respective priorities among themselves as such declaration may specify.
(7) On the hearing of an application under this section, the applicant may himself or herself give evidence or call witnesses.
(8) Where it appears to the court that any person in respect of whom a declaration has been sought on the grounds set out in subsection (1)(a) has acted honestly and responsibly in relation to the conduct of the affairs of the company or any matter or matters on the ground of which such declaration is sought to be made, the court may, having regard to all the circumstances of the case, relieve him or her either wholly or in part, from personal liability on such terms as it may think fit.
Supplemental provisions in relation to section 610
611. (1) Where the court makes a declaration under section 610 , it may give such directions as it thinks proper for the purpose of giving effect to the declaration.
(2) In particular, and without limiting subsection (1) or section 610 (6), the order providing for a declaration under section 610 , or a supplemental order, may include provision for making the liability of any person under the declaration (the “respondent”) a charge on—
(a) any debt or obligation due from the company to the respondent, or
(b) any mortgage or charge, or any interest in any mortgage or charge, on any assets of the company held by or vested in—
(i) the respondent or any company or other person on the respondent’s behalf, or
(ii) any person claiming as assignee from or through the respondent or any company or other person acting on behalf of the first-mentioned person in this subparagraph.
(3) Where a charge is imposed as mentioned in subsection (2), the court may from time to time make such further order as may be necessary for the purpose of enforcing that charge.
(4) Section 610 (1)(a) shall not apply in relation to the carrying on of the business of a company during a period when the company is under the protection of the court.
(5) Section 610 and this section shall have effect notwithstanding that—
(a) the person in respect of whom the declaration has been sought under section 610 may be criminally liable in respect of the matters on the ground of which such declaration is to be made, or
(b) any matter or matters on the ground of which the declaration under section 610 is to be made have occurred outside the State.
(6) In section 610 “officer”, in relation to a company, includes a statutory auditor or liquidator or provisional liquidator of the company, a receiver of property of the company and a shadow director of it.
(7) In subsection (2)(b)(ii) “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.
Fraudulent trading of company: offence
722. If any person is knowingly a party to the carrying on of the business of a company with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the person shall be guilty of a category 1 offence.
Prosecution of offences committed by officers and members of company
723. (1) If it appears to the court, in the course of a winding up by the court, that any past or present officer, or any member, of the company has been guilty of an offence in relation to the company the court may, either—
(a) on the application of any person interested in the winding up, or
(b) of its own motion,
direct the liquidator to refer the matter to the Director of Public Prosecutions.
(2) Where a direction under subsection (1) is given by the court to the liquidator, the liquidator shall—
(a) provide to the Director of Public Prosecutions such information, relating to the matter in question, as he or she may require, and
(b) give to him or her such access to, and facilities for inspecting and taking any copies of, such documents (being documents in the possession or under the control of the liquidator and relating to the matter in question) as he or she may require.
(3) Where the court gives the foregoing direction to the liquidator, it shall also direct the liquidator to refer the matter concerned to the Director of Corporate Enforcement.
(4) Where a direction under subsection (3) is given by the court to the liquidator, the liquidator shall—
(a) provide to the Director of Corporate Enforcement such information, relating to the matter in question, as he or she may require, and
(b) give to him or her such access to, and facilities for inspecting and taking copies of, such documents (being documents in the possession or under the control of the liquidator and relating to the matter in question) as he or she may require.
(5) If it appears to the liquidator in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of an offence in relation to the company, the liquidator shall forthwith report the matter to the Director of Public Prosecutions.
(6) Where the liquidator reports a matter under subsection (5) to the Director of Public Prosecutions, the liquidator shall—
(a) provide to the Director of Public Prosecutions such information, relating to the matter in question, as he or she may require, and
(b) give to him or her such access to, and facilities for inspecting and taking any copies of, such documents (being documents in the possession or under the control of the liquidator and relating to the matter in question) as he or she may require.
(7) Where a foregoing report is made by the liquidator, the liquidator shall also report the matter to the Director of Corporate Enforcement.
(8) Where a matter is reported by the liquidator under subsection (7) to the Director of Corporate Enforcement, the liquidator shall—
(a) provide to the Director of Corporate Enforcement such information, relating to the matter in question, as he or she may require, and
(b) give to him or her such access to, and facilities for inspecting and taking copies of, such documents (being documents in the possession or under the control of the liquidator and relating to the matter in question) as he or she may require.
(9) In a voluntary winding up, the court, on application being made to it by any person interested in the winding up, or of its own motion, may give the following direction if it appears to the court that—
(a) in the course of the winding up any past or present officer, or any member, of the company has been guilty of an offence in relation to the company, and
(b) no report relating to the matter has been made by the liquidator to the Director of Public Prosecutions under subsection (5) or to the Director of Corporate Enforcement under subsection (7).
(10) That direction of the court is one requiring the liquidator to make the report referred to in subsection (5) or (7) (or both as appropriate) and, on such a report being accordingly made, this section and section 724 shall have effect as though the report had been made under subsection (5) or (7), as the case may be.
Supplemental provisions in relation to section 723 : duty to provide assistance to D.P.P. and Director of Corporate Enforcement
724. (1) If, where any matter is referred or reported under section 723 to—
(a) the Director of Public Prosecutions, or
(b) the Director of Corporate Enforcement,
the Director of Public Prosecutions or, as the case may be, the Director of Corporate Enforcement considers that the case is one in which a prosecution ought to be instituted and institutes proceedings accordingly, it shall be the duty of each of the following persons to give all assistance in connection with the prosecution which he or she is reasonably able to give.
(2) The persons referred to in subsection (1) are the liquidator of the company and—
(a) every officer (past or present) of the company, and
(b) every agent (past or present) of the company, (other than the defendant in the proceedings).
(3) For the purposes of subsection (2)(b) “agent”, in relation to a company, includes—
(a) the bankers and solicitors of the company,
(b) any receiver of the property of the company, and
(c) any persons employed by the company as auditors, accountants, book-keepers or taxation advisers, or other persons employed by it in a professional, consultancy or similar capacity, whether those persons are (or were) or are not (or were not) officers of the company.
(4) If any person fails or neglects to give assistance in the manner required by subsection (1), the court may, on the application of the Director of Public Prosecutions or, as the case may be, the Director of Corporate Enforcement, direct that person to comply with the requirements of that subsection.
(5) Where an application is made under subsection (4) or section 723 (9) in relation to a liquidator, the court may, unless it appears that the failure or neglect to comply was due to the liquidator not having in his or her hands sufficient assets of the company to enable him or her so to do, direct that the costs of the application shall be borne by the liquidator personally.
The text in italics on this page is sourced from the Irish Statute Book and is re-published under the Licence for Re-Use of Public Sector Information made pursuant to Directive 2003/98/EC Directive 2013/37/EU of the European Parliament and of the Council on the re-use of public sector information transposed into Irish law by the European Communities (Re-Use of Public Sector Information) Regulations 2005 to 2015.