WHAT CONSTITUTES RECKLESS TRADING?

Law firm Dillon Eustace’s restructuring and insolvency practice regularly secures mandates on a par with any of the top-tier practices. Partner Jamie Ensor has been leading the unit for the past five years, and he notes the recent trend of international private equity money being invested in Ireland through the arrival of specialist international corporate restructuring and insolvency firms.

“They are betting on the Irish restructuring and insolvency market increasing significantly,” Ensor observes.

When a company is in financial difficulty, Ensor says early legal counsel allows directors to make informed decisions with the benefit of as much information and options available to them as possible.

“The longer directors leave it to speak to advisors with experience in the area, the more likely it is that a company may have reached the point of no return. Restructuring through one of the statutory processes may no longer be an option,” he explains.

Every year, hundreds of company directors are restricted due to reckless trading. Ensor notes that cases that relate to actions of directors during the pandemic won’t start to be heard for a number of years.

“The number of successful cases against directors for reckless trading remains relatively low,” Ensor adds. “That is in part because the courts are broadly understanding that it is a feature of business life that directors of companies in financial difficulty face the constant balancing act between trading out of a difficult period, versus trading on but to no

avail, but where additional credit may have been incurred in doing so.” Ensor (pictured below) explains that to be found liable for reckless trading, the courts will require to be satisfied that a director had the knowledge that his or her actions would in fact cause loss to creditors and not that they might cause loss.

“The court must also be satisfied that the loss to the creditors must have been foreseeable to a high degree of certainty,” Ensor adds.