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23 September 2011 - Pension Ombudsman slams abuse by 'Phoenix' type companies

 

Pensions Ombudsman slams abuse by “Phoenix” type companies

A large number of Irish construction companies have gone out of business in recent years but some have managed to stay in business in spite of the difficult trading conditions, and have managed to meet all their obligations.  However, we have evidence in the course of our investigations of a number of “phoenix” type companies and the abuse of limited liability.  It is important to distinguish between regular business failures and inappropriate behaviour by a phoenix entity, which is really where the abuse comes in.  Phoenix type companies are businesses that have been re-started in a new guise by individuals who had previously wound up companies to avoid tax and other liabilities.  In the past week, four such companies have come to our attention.  These have been located in different parts of the country.  These companies have walked away leaving a trail of debt:                        

  • Unpaid taxes and PRSI;
  • Unpaid pension contributions;
  • Unpaid subcontractors;
  • Unpaid suppliers;
  • Unpaid wages;

 - and left the State to pick up the tab for redundancy payments. 

In many cases the controlling directors are back in business in a matter of days, often from the same premises, sometimes employing the same construction workers, and finishing contracts that were the obligation of the old company.

While technically this may not be illegal, clearly there is an issue of morality, compliance with corporate governance and the potential theft in cases where pension contributions were deducted from workers’ wage packets and not remitted to the scheme. 

It is my role as Pensions Ombudsman to give redress to individuals who have suffered financial loss due to maladministration.  I have in some cases in the recent past been able to fix personal liability on the directors of such companies where there is evidence of wrong-doing.  This area is legally complex.  However, given the increase in such cases, it is my duty to highlight this emerging problem.

When confronted with these cases my Office investigates them vigorously and it is my practice to inform the relevant authorities including the Revenue Commissioners and the Director of Corporate Enforcement.  I will continue to safeguard the pension interests of ordinary construction workers, particularly in the current economic climate.

Note for Editors

The Pensions Ombudsman investigates in an independent and impartial manner, complaints of financial loss due to maladministration and disputes of fact or law, in relation to occupational pension schemes, Personal Retirement Savings Accounts (PRSAs) and trust Retirement Annuity Contracts (RACs).  He may award compensation for financial loss.  He is a statutory officer and exercises his functions independently of government and the pensions industry.  He reports to the Houses of the Oireachtas.   There is no cost to the individual complainant for this service.

Paul Kenny is the Pensions Ombudsman.  He was appointed Ombudsman in April 2003. 

For further information contact Mr. Paul Kenny, Pensions Ombudsman at (01) 647 1650, or see www.pensionsombudsman.ie

23rd September 2011

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