What happened in the Powers v Greymountain Management Limited case?
In an Irish High Court ruling in December 2022, the directors of a company were held personally liable for the liabilities of the company, which had been used to facilitate fraud. It was the first time for such a ruling in Ireland. The judge, Mr Justice Twomey, ruled that two directors (along with two other individuals regarded as shadow directors) were personally liable for claims filed by members of the public who lost money in a scam. The Irish company had been used as a vehicle for a series of payments that resulted in many millions of euros in losses. The plaintiff was a member of the public who had lost money due to the liquidation of the company.
While the Irish directors did not know about the fraud and were unwitting participants, the fact that they did not exercise any oversight or supervision at the board level led the court to conclude that they would be held personally liable for any losses incurred. One of the directors was a student who had no involvement in the business at all.
Some Key Learning Points – Before you take on the legal duties of a company director, make sure you:
- Undertake due diligence, so you really know about the company and the other people running it
- Ensure that the company has good insurance in place (including Directors and Officers Liability Cover)
- Really understand the commitment you’re making to oversee the business (whether you’re an Executive Director or a Non-Executive Director)
- Feel able to always put the best interests of the company first (even if that is different from the best interests of shareholders)
Some useful reading –
- How to Lead: Wisdom from the World’s Greatest CEOs, Founders, and Game Changers (Free with Audible)
- The New Directors Handbook: How to become more confident, more effective, more quickly
- Setting Up and Running a Limited Company: A Comprehensive Guide to Forming and Operating a Company as a Director and Shareholder
- A Handbook for New Company Directors