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Dáil Éireann díospóireacht -
Thursday, 4 May 1995

Vol. 452 No. 4

Written Answers. - Phoenix Syndrome.

Mary O'Rourke


76 Mrs. O'Rourke asked the Minister for Enterprise and Employment the estimated number of companies or directors that have availed of the Phoenix Syndrome, as outlined by the Company Law Review, to restart businesses; and the action, if any, that has been taken on the Company Law Review's recommendations on examinership law changes and disqualification of company directors. [88202/95]

The provisions of chapter 1 of Part VII of the Companies Act, 1990, which provides for the restriction of directors from becoming directors of other companies, were intended to be a major contribution to the solution of the "Phoenix Syndrome" problem, where the directors, having liquidated one company leaving substantial liabilities owing to creditors, open another company carrying on the same or similar business where the process could be repeated. Restrictions are imposed by the courts normally after application by a liquidator.

A director subject to such restriction shall not be involved as a director of or in the promotion or formation of any other company for a period of five years unless that company meets minimum capitalisation and other requirements.
Under these provisions, the court has declared 24 directors subject to restriction. However, I do not have any information on the estimated number of such directors who have become or remain involved in other companies. Neither do I have details of the number of persons who close one company owing debts and open another, without any restrictions having been imposed on them by the courts under Part VII of the 1990 Act.
The Company Law Review Group has made a number of recommendations which would significantly alter the approach dealing with this issue, emphasising disqualification rather than restriction.
I propose to examine and implement the recommendations of the review group on an incremental or phased basis. I intend to bring forward legislation to deal with the recommendations regarding examinership and the audit of small firms at an early date. This would then be followed by other areas examined by the review group, including the suggested changes regarding restrictions on directors.