Restriction Effect

Restriction Order

If a declaration of restriction is made, it lasts for five years unless varied. A person who is restricted may apply within a year for relief, either in whole or in part, from the restrictions.  The notice of intention to make the application is served on the liquidator.  The Court has broad discretion in an application for relief.

The restricted person may not, for a period of five years, take part in the promotion or formation of a company or act as a director or secretary unless that company complies with certain obligations.  He may not act directly or indirectly as a director or secretary. He must notify the company that he is restricted.

A liquidator must report the activities of a restricted person which are in breach of the declaration of restriction.  He must be of the opinion that the interests of another company may be placed in jeopardy by reason of the restricted person acting in breach of the restriction.

Effect of Restriction

The company must have a minimum capital, which must be fully allotted and paid up.  If the monies are not paid up the person to whom the shares are allotted must pay them with interest.

The whitewash procedure in relation to a company assisting in the purchase of its own shares is not available to a restricted company.  Similarly, the (relatively narrow) exemptions for loans to directors, do not apply to restricted directors.

Generally, it is possible for companies to sell assets to a director for a value, subject to the approval of the shareholders.  A transaction exceeding one-tenth in value of the nominal value of the share capital is not permitted in the case of a restricted director.

The prohibition does not apply where the assets are valued by an independent person, and the terms have been approved by the shareholders within six months.  Assets and non-cash consideration must be valued by an independent person.  Returns are required to the CRO.  Where there has been a breach of Companies Act, the Court may grant relief in certain circumstances where a person or company is adversely affected.

There is a register of restricted persons, kept by the Companies Registration Office.  If the restrictions are breached, the person is guilty of an offence.

Required Capitalisation

The minimum capitalisation required of a company in which a restricted person takes part is €500,000 for public limited companies and €100,000 for private companies. The same limits apply to companies limited by guarantee; at least one of the members must be liable on the guarantee for at least €100,000.

Similar requirements apply to other company types, including

  • investment companies,
  • a designated activity company;
  • an unlimited company;
  • an unregistered company

in which a restricted person is involved.

The capitalisation requirements in respect of an investment company and a company limited by guarantee is €100,000.  The share capital must be paid up in cash in consideration of the allotment of shares.

The Minister may vary the minimum capitalisation amounts, above having regard to changes in the value of money.

Relief from Restriction

On an application by a restricted person, the court may, if it deems it to be just and equitable, grant the person concerned relief either in whole or in part from the restriction or like order. Not less than 14 days’ notice must be given of the intention to apply to the court, to the ODCE and the liquidator.

On receipt of the notice, the liquidator shall as soon as practicable notify such creditors and contributors of the company as have been notified or become known to him.  Each such person is entitled to be heard on the application. Failure to comply is a category 3 offence.

The provisions for relief from restriction were amended by the Companies Act 2014.  There is no time limit for an application for relief from restriction.  Formerly, a one-year time limit applied.

Formerly it was necessary to give notice to the liquidator in such applications.  It is now necessary to give notice to the liquidator and the ODCE.  The ODCE may now appear in relation to the application and be heard.  This reflected former practice by which the ODCE could be allowed to be party to the application.

Disclosure of Restriction

A restricted person must disclose his status in writing to a company before accepting any appointment as director or secretary.  He shall not be appointed or act in any way, whether directly or indirectly, as a director or secretary of a company unless he or she has given the required notice. The failure to do so is an offence.The restricted person must send notice to the registered office of the company within the period of 14 days immediately before the appointment.

Where a company has received notice from a director that he is restricted and carries on business without the minimum capitalisation paid up within a reasonable period of receipt of such notice, and is subsequently wound up in insolvency, then the liquidator or any creditor or contributory may apply to court for an order that certain persons may be made personally liable without limitation of liability for all or part of the debts and other liability of the  company.

The order may be made against a person who was an officer of the company while it carried on business without fulfilling the statutory requirements, where he knew or ought to have known that the company received the notice. In any proceedings, the court may grant such relief as is just and equitable, in whole or in part from the liability.

Non-Cash Assets

The summary approval procedure is not available to a company that has a restricted person involved, whether as an actual or de facto director or secretary or as a person who is involved in its formation.

The de minimis exemptions for loans, quasi-loans, credit transactions and security below certain values or percentages of the total assets, are not available for a company that has a restricted person involved.

A company which has a restricted person (in the above sense) may not acquire non-cash assets worth more than 10% of its paid-up capital, from subscribers, directors or promoters unless certain conditions are complied with.  A non-cash asset is any property or interest in the property, other than cash consideration.

The non-cash asset must be valued. The valuation report must be made to the company within a period of six months before the acquisition.  The acquisition must be approved by ordinary resolution.  Copies of the resolution and report must be circulated to the members. The resolution approving the acquisition is to be filed in the CRO within 28 days.

Valuation of Non-Cash Assets I

The valuation must be made by an independent person, qualified to be a statutory auditor.  Such person may arrange for an independent valuation to be made by an expert or another independent person. The person carrying out the valuation is entitled to require information and explanations from officers of the company.

The report of the independent person is to set out certain particulars regarding the methods of valuation. It must contain a note that sets out the basis of the valuation and confirms that the value of the consideration to be received by the company is not less than the value of the consideration given.

Where a company enters into an agreement for allotment of shares as above, and the relevant procedure is not complied with, the company is entitled to recover an amount equivalent to the value, at the time of the agreement.

The subscriber is liable to pay the company the amount equal to the nominal value of the shares together with the whole of the premium. Any subsequent holder may become liable to pay the same amount unless he is a purchaser for value without actual notice of the contravention.

Valuation of Non-Cash Assets II

An application may be made to relieve any person who becomes liable to pay cash on the shares as above.  The court may grant an exemption from such liability on such terms as it considers to be just and equitable.  Contravention of any of the above obligations constitutes an offence.

The requirement to value does not apply to the following agreements for the transfer of an asset, for consideration to be given by the company;

  • where it is part of the ordinary business of the company to acquire or arrange for other persons to acquire assets of a particular description, an agreement entered into by the company in the ordinary course of its business for the transfer of an asset of that description to it or such a person, as the case may be, or
  • an agreement entered into by the company under the supervision of the court or an officer authorised by the court for the purpose, for the transfer of an asset to the company or to another.

Shares in Company

A company that has a restricted person involved may not issue shares that are not fully paid up. The allottee of the share becomes liable to pay the nominal value together with the whole of the premium and interest. The whole of the nominal value and premium must be received by the company and must be paid. If it is paid after allotment, interest is due from the date of allotment.

The requirement does not apply to bonus shares unless the allottee knew that the shares were or should have known that the shares were allotted. It does not apply to shares issued under an employee share scheme.

Where any person becomes a holder of any shares in respect of which there has been a failure to comply with the capitalisation requirements and by virtue of that failure to comply, another is liable to pay any amount, the first-mentioned person  also shall be liable to pay that amount (jointly and severally with any other person so liable).

The last mentioned provision does not apply

  • if the first-mentioned person is a purchaser for value and at the time of the purchase, he or she did not have actual notice of that non-compliance or
  • he or she derived title to the shares (directly or indirectly) from a person who became a holder of them after that non-compliance and was not so liable.

The court may, if it considers it just and equitable, grant relief to any company that has a restricted person that has contravened any provision of the Act, or any person adversely affected by that contravention.

Consequences of Breach

If a person acts in relation to a company, in a manner or capacity in which he is prohibited by reason of being restricted or disqualified, the company may recover any consideration or an amount representing its value given by the company for any act or service performed while he was so acting.  This may be recovered as simple contract debt.

If a person acts, in relation to a company, in a manner in which is prohibited while the subject of a restriction, declaration or disqualification order or undertakings in that regard, and an insolvent winding up commences within 12 months afterwards, the court may on the application of the liquidator or creditor, declare that the person is personally liable, without limitation for all or part of the debts or liabilities of the company incurred during the period while he so acted.

A person who is convicted on indictment of an offence of acting under the directions of a disqualified or restricted person may be made personally liable, without limitation, for the debts of the company incurred during the period while he was so disqualified.

In any of the above proceedings, persons who would otherwise have unlimited liability may be given relief in whole or in part from such liability by the court on such terms as it sees fit.

References and Sources

Primary References

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)  Ch,27   Courtney

Keane on Company Law 5th Ed. Part VIII (2016) Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington


UK Practitioners Services

Tolley’s Company Law Handbook

Gore Browne on Companies

Palmer’s Company Law