Monday 19 August 2019

Directors of firm facing 'phoenix' accusations

Phoenix companies are businesses that have been restarted under a new name after the
original business has gone into liquidation (Stock picture)
Phoenix companies are businesses that have been restarted under a new name after the original business has gone into liquidation (Stock picture)
John Mulligan

John Mulligan

A company whose directors include the chief executive of the Rose of Tralee festival, Anthony O'Gara, has been embroiled in allegations that it was liquidated this year only for the business to be effectively transferred the next day to another individual.

The Revenue Commissioners labels such activity as 'Phoenix Syndrome'.

The company at the centre of the case is Limerick-based Star Elm Frames. In 2013, the company - which made frames for windows and doors - exited examinership after a pledge that a €60,000 loan would be made to it, and an investment of €60,000 made in the business.

Revenue had opposed the scheme of arrangement, but the High Court approved it.

As part of the scheme, Mr O'Gara was to become an executive director of the business. An existing executive director of Star Elm, David Sage, was due to resign as part of the scheme.

In hearing a petition this year by the Revenue Commissioners for the compulsorily winding up of the firm, the High Court said that no loan or investment had been made in the business as per the scheme of arrangement. Details of the ruling have just been released by the court.

It also heard that Mr O'Gara appeared to be acting as a non-executive director, rather than in an executive capacity.

It was also questioned in court as to whether or not Mr Sage had continued to act as a shadow director.

Revenue alleged that it had been misled in relation to the 2013 examinership process. Other complaints made by the Revenue - including that Mr O'Gara had delegated various functions to Mr Sage such that the latter acted as a shadow director - were not denied.

On July 1 this year, the Revenue Commissioners placed public notices that a petition by them to have Star Elm compulsorily wound up would be heard on July 18. In March, the Revenue had issued Star Elm with a demand for almost €590,000.

On July 6, Star Elm ceased trading and, according to the High Court, appeared to have entered into a rental agreement the next day with David Sage. The court said that the Revenue Commissioner characterises that as a transfer of business and a "phoenix operation".

Phoenix companies are businesses that have been restarted under a new name after the original business has gone into liquidation.

Anthony Fitzpatrick was appointed liquidator of Star Elm by its creditors on July 18, but the judge said he had "misunderstood" his role as a voluntary liquidator. The judge added that Mr Fitzpatrick had been "considerably less than forthcoming to Revenue" in a letter on July 20 when he failed to mention a rental agreement that had been signed with Mr Sage on July 7.

Revenue wanted a compulsory winding-up to take the place of the creditors' winding-up. A barrister for the Revenue told the court that Star Elm was "stacked with the very people who require to be investigated", including Mr O'Gara and Mr Sage.

The judge ruled in favour of the Revenue petition and replaced Mr Fitzpatrick as liquidator with Mr Miles Kirby.

Irish Independent

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