Claim that law helps directors to `evade creditors'

The strike-off policy of the Companies Registration Office is a "Government-sponsored charter" for directors seeking to evade paying creditors, the Tanaiste has been told.

The Irish Institute of Credit Management, in a letter to Ms Harney, has said many companies have been struck off which had both assets and creditors. It called for an immediate halt to the strike-off procedure pending a review.

The institute, an association of credit managers and credit controllers whose members are involved in the credit management industry, said "unscrupulous directors have started to avail of the strike-off provisions and are essentially inviting the registrar of companies to strike off their companies by failing to file the necessary annual returns".

The Companies Registration Office is currently engaged in a "clean out" of the register and has issued notices to nearly 6,000 companies threatening to strike them off for failing to file returns.

While the institute agrees that the policy is prompting increased compliance with company law, it argues it is also allowing directors of insolvent companies to evade their obligation under the law. Directors of such companies are obliged to convene a shareholders' meeting and put the company in liquidation, and then convene a meeting of creditors to allow them select a liquidator.

"We are aware that some companies have failed to convene a creditors' meeting, even in cases where they do have assets, safe in the knowledge that they will be struck off by the registrar, and accordingly do not have to provide any explanations to creditors," the institute told Ms Harney.

One source said that while trade creditors were often able to secure the payment of monies owed from companies which had been struck off, this was not the case with the Revenue. "While the tribunals are investigating past evasion, the vehicle of strike-off is being used to evade paying taxes as you read this letter," Ms Harney was informed.

The institute said the area should be reviewed by the Company Law Review Group before any more companies were struck off. It said it would be making a submission to the group on the matter, suggesting interalia, that directors be fined rather than companies struck off for failure to file returns.