Question 1: Lifting the Corporate Veil
Limited companies in Irish usually enjoy the privilege o incorporation which gives the company a separate legal entity (veil) which prevents the members within the company from being sued by the outsiders. The principal o separation ensures that members within the company enjoy limited liability and cannot be held responsible for the mistakes of the company since it is treated as a legal entity with full rights just like a person. However, the court might “lift the corporate veil” in case of fraud or other grievous offenses to treat the company and the people involved legally responsible for the offense caused. In this case, some managers, directors, and other stakeholders might be held legally responsible or persecuted in the court of law for failing to fulfill the obligations of the company. In most cases, corporate veil is lifted to allow court to enforce the Companies Act 2014, deal with a specific group of companies, and to prevent fraud. Separate legal personality of a company might be ignored due to personal liability involving taxation offenses as outlined in Finance Act 1983, section 94, personal liability for fraudulent activities as outlined in CA 2014, SECTION 722, personal liability for company name indiscretions, personal liability leading to a company trading without certificate to start trading, and other similar personal liability offenses in a company.
Question 2: Insolvency
- The examinership process in Irish law
Examinership process in Irish company involves seeking court protection to secure survival of a company. The actual process has three major stages entry, during, and the closing. During the entry, the company is reported due to insolvency. Examiners usually take between 70 to 100 days to develop a report of arrangements (ex parte application) and Independent Experts Report (IER), which are then submitted to creditors, at least one, or approval. Company auditors are responsible for preparing the IER according to the provisions of Companies Act 2014. The components of the IER include cashflow, funding requirements, pre-petition liabilities, and other financial information. This report seeks to convince the court and other critical stakeholders that the company is entitled to survive. Upon examiners’ signing the court agreement, the report is submitted to court for approval. In the second phase, during the examinership process, the company directors retain their power but examiners strive to secure the company investment by preparing a plan to settle all the debt owed to the company. It also seeks to entice public to invest in the company to boost its financial status. Potential investors are contacted within the shortest time possible and informed to send expression of interest (EOI) after reading the information memorandum. The examiners then submit the report along with a clear copy of the potential funding sources. Upon choosing the best investors the examiners then signs Investment Agreement and the court approves it. The third stage, exit of the examination process, involves reception of investment funds, and then creditors and court are engaged in the meeting to facilitate successful exit.
- The duties of liquidators
Liquidators are official receivers with expertise in insolvency practices that are chosen to facilitate successful dissolution of a company to ensure that all assets are collected and all the claims against the company being liquidated are settled. The core duties of liquidators include; 1) taking control of the business; 2) selling the assets of the company being dissolved; and 3) distributing the proceeds to the company creditors. As such, they ensure that not assets of the company are lost and no debts (loans and other liabilities) go unsettled before the company is closed.
Question 3: A director of an Irish company owes many duties pursuant to law.
In Irish, company directors can be held personally responsible for the company problems including debts and other liabilities. In most cases, legal actions can be taken against such directors since they are directly involved in the running of the company and they owe fiduciary duties to the stakeholders. Any breach on such duties might cause the company director to face legal consequences. It ensures that all directors act in good faith and in the interests of the company, conduct company affairs with integrity and in a transparent manner, comply with the company’s constitution when making decisions, prevent the personal interests of the directors from compromising the interests of the company, and uphold the duty of fiduciary and care.
Question 4: Auditors’ liability in Irish Company Law
In most cases, an auditor can be held legally responsible for any negligence in the professional practice. An auditor is liable in case it is proved that he or she performs their duty with some negligence which might cause damage or loss of assets suffered by the client. Auditors are supposed to demonstrate at most professionalism and expertise in their practice because they are personally responsible for any substandard performance or misstatement which contributed to the loss or damage of a said property, asset, or cost incurred by the client. For instance, untrue statements (misstatements) that are likely to mislead the clients into making wrong investment decisions are taken as an offense and the auditor is held personally responsible for that loss or damage, considering that he or she is a expert in the area concerned and the client is not an expert. It is assumed that the client was compelled to believe in the untrue statements because the auditors is an expert and has a license of practice or certificate of expertise.