Exceptional case of Powers -v- Greymountain Management Ltd (in liquidation)  The IEHC 599 High Court lifted the veil of the company by finding two Irish directors and two shadow directors personally liable in a transnational fraud case. For the first time in Irish company law, Twomey J has justified that protections of incorporation must not act as a shield to protect directors from personal liability in situations involving corporate fraud or the siphoning of funds. I have found that requires
The Irish company at the center of the case, Greymountain Management Ltd (“gray mountain), incorporated in Ireland and traded out of Ireland under the supervision of Mr Liam Grainger and Mr Ryan Coates. It turned out that the Irish company was being used as a fraudulent vehicle for the sole purpose of Both Irish directors claimed to have known nothing of the company’s misconduct and submitted to the court that each was a director in name only. Court lifts corporate veil to impose personal liability on all four individuals due to enormity of fraud facilitated by two directors waiving obligations to her two shadow directors I concluded that there was a need.
Separation of legal personality as a fundamental principle of Irish law
The fundamental importance of the principle of separate legal personality was recognized by the courts. Irish courts have so far opted not to pierce the corporate veil, arguing that they should only be limited to the most serious cases involving fraud.
The relief sought by plaintiff Powers was based on the High Court’s finding that Greymountain and other investors had been deprived of funds they had invested in the belief that binary options trading would be conducted on their behalf. It was to break through the veil of the company. In fact, there were no such investments. Mr. Powers sought orders to hold all four (both directors and shadow directors) personally accountable for the fraud committed by the company.
The court emphasized many things dictator Comments from previous High Court litigation indicating that Irish courts would consider piercing a company’s veil if:
- fraud; misappropriation or misrepresentation of money by directors;
- The directors siphoned so much money from the company that it was unable to meet its obligations.When
- negligence or impropriety;
provided that the facts are established in plenary and not by affidavit and that the parties have an opportunity to properly defend themselves.
Twomey J was satisfied that these conditions were met. In particular, no director or shadow director produced evidence to the contrary to the widespread allegations and evidence of fraud made by Mr. Powers.
The court concluded that the extent of the fraud perpetuated against Mr. Powers required lifting the corporate veil.
Passive Director under Irish Companies Act
The court considered the respective roles played by Mr. Grainger and Mr. Coates as passive directors of Greymountain. Both Grainger and his Coates claimed to know nothing of the fraud conducted via Greymountain.
In the case of the two Irish directors, the court found that as a result of their abandonment of their duties as directors, they appeared to have unwittingly facilitated fraud.
A veteran director, Grainger claimed his role was purely administrative. The court did not agree, and held that Mr. Grainger had sufficient experience as a director of the company and had chosen to abandon his duties entirely and not gain sufficient knowledge of Greymountain’s activities.
Mr. Coates, on the other hand, had little experience and had agreed to assume the role of director only for the purpose of receiving the director’s pay to fund him during his business studies.Twomey J. He sympathized with the series of unfortunate circumstances in which the young “supervisor” found himself, but emphasized that ignorance of the law is not a defense.
Both Irish directors waived their obligations to the shadow directors to use the opportunity to defraud investors, thereby allowing Gray Mountain to be used as an instrument of fraud. of directors guilty of dereliction of duty relating to the operation of the company. The degree of neglect and resulting inadequacy was worth breaking through the corporate veil.
While the court acknowledged that the lifting of the company’s veil only occurs in exceptional circumstances, the case is a useful lesson for directors who assume the role without exercising proper control and oversight.