A COMPANY director told the High Court yesterday how he planned to rescue his business, employing 14 people, after his brother, who was a co director, apparently misappropriated company funds for his own use.
Miss Justice Laffoy approved a scheme of arrangement for the company, Global Stainless Limited, Togher Industrial Estate, Pouladuff Road, Cork.
The scheme of arrangement was agreed between the company, its creditors and shareholders.
Mr John Gleeson, counsel for the petitioner, company director Mr Humphrey Murphy, said statutory consent for the scheme was necessary if the company was to avoid being placed in liquidation. Both the company's creditors and employees would receive very little if the company was wound up.
The company, which exports 80 per cent of its products to the European market, was incorporated in 1984 and is engaged in the manufacture of components for pipeline systems used in the food, beverage and pharmaceutical industries.
In an affidavit, Mr Humphrey Murphy said the company continued to have a good core business and had continued to trade. A statement of affairs as of March 1996 showed that the company's liabilities exceeded its assets.
Creditors had been paid on a cash basis since April this year but it was clear a scheme of arrangement was urgently needed.
Mr Murphy said the company would find it difficult to survive unless an arrangement was entered into with its creditors, principally because of the deficiencies which had arisen, owing to a revenue debt and the apparent fraud perpetrated on the company by his brother, Mr Tony Murphy.
The scheme approved by Miss Justice Laffoy provides for the payment of a dividend of 20p in the pound to unsecured creditors on their debts as of March 31st last on the basis that 16p would be paid immediately and the balance of 4p on or before January
The preferential debt of the Revenue Commissioners of £46,368 at March 31st, 1996, was to be paid by 24 monthly instalments of £1,932 commencing immediately. A £23,346 loan due to Hygienic Stainless Steels was to be converted into share capital.
In July 1995, Mr Murphy said on affidavit, he received a telephone call from the manager of the bank that was handling the company's accounts who told him he was concerned that certain company cheques were being lodged into the personal account of Mr Tony Murphy.
When he (Mr Humphrey Murphy) questioned his brother, the brother told him he had lodged £4,500 into his own account but that this was a once off as he was under pressure for cash. Mr Humphrey Murphy accepted his brother's explanation.
After the company reopened following its annual holidays in August 1995, his brother failed to return to work and had gone to Britain.
The full scale of the problems with the company's finances only emerged following enquiries after the departure of his brother.