A LARGE loan that breached company law was paid to presidential candidate Seán Gallagher by one of his companies in 2009.
Asked about the matter yesterday Mr Gallagher said it had been brought to his attention by his accountants in 2010 and the money had been repaid.
Illegal loans to company directors was highlighted by the Director of Corporate Enforcement, Paul Appleby, in May 2009 and an amendment to the Companies Act in July 2009 made it easier to prosecute such offences.
Directors who permit or authorise such loans can, on indictment, be liable for a fine of up to €12,700, or up to five years in jail, or both. However, in most instances prosecutions are not proceeded with if the loans are repaid.
Accounts for a company owned by Mr Gallagher, Beach House Training and Consulting Ltd, show he had an €82,829 interest free loan from the company at the end of December 2009. The accounts for the company at that date, show it had net assets of €114,320.
Under company law a director should not have a loan from a company that exceeds 10 per cent of its assets. Mr Gallagher’s loan is for in excess of 70 per cent of his company’s assets.
In 2009 Mr Appleby said illegal loans to directors “increase the risk of companies not meeting their debts to company creditors and other stakeholders.”
Beach House Training was incorporated in November 2008 and its only set of filed accounts are for the period from then to the end of 2009. The directors are Mr Gallagher and his wife. The company is used by Mr Gallagher to charge for personal speaking engagements and to manage an investment he made as part of the Dragon’s Den programme.
The accounts show an issued share capital of €100 and accumulated profits of €114,220. Creditors include the State, with €17,503 being owed in corporation tax and €25,174 being owed in VAT at year’s end.
The company’s accounts were approved by the company’s directors on August 5th, 2010, and make no mention of the loan having been paid off at that date.
“A director’s loan of €82,829 was made available to Seán Gallagher in 2009,” his spokesman said yesterday.
“Upon compiling the accounts for 2009, Mr Gallagher was notified by his accountants that this loan was not in accordance with the Companies Act. Upon being advised of this by his accountants, Mr Gallagher repaid the director’s loan. This will be reflected in the company accounts for 2010.”
Auditors are obliged to report suspected illegal directors’ loans to Mr Appleby’s office. The 2009 Beach House accounts are not audited. Small companies are allowed not have their accounts audited.