Brothers behind multiple Irish franchises restricted from acting as company directors

Two directors behind various high-profile franchises in Ireland have been restricted in acting as company directors for five years after the High Court found they had failed to act responsibly in their roles as directors of one company, Downtul Ltd, which ultimately went into liquidation.

Downtul Ltd leased a premises to Atercin Liffey Unlimited Company, which operated a Starbucks in a prominent location at St Stephen’s Green in Dublin. Atercin occupied the property rent-free for 2.5 years while also obtaining support from the government to deal with the effects of the Covid pandemic. However, the court noted that during that period Downtul Ltd, the entity responsible for paying the rent, failed to receive any “contribution from Atercin towards the rent owed (or any part of that debt), and, consequently, was unable to pay its debts as they fell due.” The court determined that ultimately the directors had failed to demonstrate responsible conduct with regard to the interests of Downtul as a separate legal entity in the wider group of companies which they owned and controlled.

For a restriction to be imposed by the court, the individual must be a director of a company that is both in liquidation and insolvent. The company had been wound up by way of a creditors’ voluntary liquidation in November 2022. Once the liquidator applies for a restriction, the burden of proof sits with the director to demonstrate that they acted both honestly and responsibly. 

In her judgment (77 pages/ 704KB), Ms Justice Nessa Cahill accepted that the company directors had discharged the burden of proving they acted honestly, but ultimately imposed restrictions on both men for failing to act responsibly.

The brothers, one of whom acts as director of approximately 134 companies and the other of around 170 companies, operate various franchises including several Starbucks cafes, TGI Fridays, Mao and Hard Rock Café. Following the court’s ruling, they will be restricted from acting as company directors or secretaries for these franchisees or any other companies for five years. They will also be restricted from being concerned in or taking part in the formation or promotion of any company. This restriction can only be overcome where a company reaches certain allotted share capital thresholds and requirements – a share capital of at least €100,000 in the case of a company or €500,000 in the case of a public limited company – as defined under Ireland’s Companies Act.

Zara West, a corporate and insolvency law expert at Pinsent Masons in Dublin, said the ruling acted as a warning for company directors to be “acutely aware” of their statutory duties for any companies that fall under their responsibility. “The recent High Court judgment demonstrates that restrictions may be imposed upon directors who failed to act responsibly, even where they acted honestly,” she said. “This decision is an important reminder to directors of Irish companies to meet their duties responsibly, otherwise they may face restrictions.”

Sadhbh Kelleher of Pinsent Masons said the commercial impact of the court’s decision in this case was significant. “Directors must ensure that inter-company arrangements are transparent and that financial obligations are properly managed,” she said. “Failing to do so can lead to restrictions that limit future business opportunities and damage reputations.”

West said the case should serve as a reminder for other companies with multiple directorships to review their governance structures and ensure documentation of financial decisions – particularly those involving responsibilities with other entities – is in order. “The consequences of a failure by a director to act responsibly in respect of any one company in a group can have very serious implications for that director from a restriction perspective,” she said.