Company Liquidation query

mirrorwall14

This is an odd hypothetical question.

Can a director of a company which is gone into liquidation legally acquire the intellectual property of that company?

That seems a bit off. Couldn’t a director essentially deliberately run a company into the ground, then divest of all debts, employees salaries etc, avoid all redundancy payments getting the state to pay statutory and ultimately come out with all the intellectual property and the ability to easily start over again having screwed everyone in the process?

hullaballoo

A good question. There's a lot to the answer and unfortunately I don't have a huge amount of time but as a starting point, some observations:

All company assets form part of the liquidation including intangible assets like IP. So, assuming the IP actually belonged to the company, it would go into the liquidation.

The realisation of an asset like IP poses practical difficulties for a liquidator. In particular, there is a clear enforcement issue should the former director decide to use the company's IP for his own ends.

Depending on the form of the liquidation, interested parties could dictate how an asset is to be dealt with in practice.

There are numerous remedies against an errant former director available to the liquidator and possibly other parties including the retrieval of assets misappropriated by or on the former directors behalf.

mirrorwall14

hullaballoo wrote: »

A good question. There's a lot to the answer and unfortunately I don't have a huge amount of time but as a starting point, some observations:

All company assets form part of the liquidation including intangible assets like IP. So, assuming the IP actually belonged to the company, it would go into the liquidation.

The realisation of an asset like IP poses practical difficulties for a liquidator. In particular, there is a clear enforcement issue should the former director decide to use the company's IP for his own ends.

Depending on the form of the liquidation, interested parties could dictate how an asset is to be dealt with in practice.

There are numerous remedies against an errant former director available to the liquidator and possibly other parties including the retrieval of assets misappropriated by or on the former directors behalf.

Interesting. So is the onus then on the liquidator to ensure that it’s not misappropriated? Or is it the case that technically it’s allowed if remedies are not applied by the liquidators choice.

This whole area of company law fascinates me. It’s super complex though for a lay person unfortunately

Mr. Incognito

If the Director was responsible for deliberately running it into the ground the liquidator would likely apply to have him restricted and would be unwilling to sell any company assets to him.

There is a lot of law around connected persons and company assets. A comprehensive answer would be too long for this forum

mirrorwall14

Mr. Incognito wrote: »

If the Director was responsible for deliberately running it into the ground the liquidator would likely apply to have him restricted and would be unwilling to sell any company assets to him.

There is a lot of law around connected persons and company assets. A comprehensive answer would be too long for this forum

Fair enough. Maybe its just the Ireland being small kicking in in my imagination where the liquidator potentially could be the original receiver selected by the director in the first place and thus might not be unwilling to sell company assets to him as he originally appointed him.

Its all a bit complicated for me I guess

hullaballoo

It depends on the nature of the liquidation but in most cases where a company has been "run into the ground" the liquidator's duties are predominantly to protect the interests of the company's creditors.

It must be kept in mind that sometimes, pursuing a former director, even one who committed offences in his running of the business, may not represent the best interests of the company's creditors.

In relation to restriction of directors, the ODCE is really the body with decision making powers there. The liquidator's hands are tied by the ODCE's decision. That said, the vast majority of restrictions these days are administrative and don't really represent any real pursuit of the director in the legal sense.

mirrorwall14

Just to update this for anyone reading in the future. In the particular case looked at the intellectual property and physical property of a software company was acquired by one of the company directors. The liquidator did not disclose how much for. They only paid statutory redundancy and statutory wages outstanding payments to staff who were all made redundant.

The company is active on social media and appears to be trading again under the original name.

Fred Swanson

This post has been deleted.

mirrorwall14

Fred Swanson wrote: »

This post has been deleted.

Presumably not but there is no sign of either the original company name or a new company name on the website which is the same

Edit: The posting to social media continued through examinership process and the liquidation process and beyond with no stop at all for the liquidation.