A director and major shareholder is the indirect sole shareholder of a private limited company which, until 2014, operated a petrol station and car wash on his private plot of land. After that, operations at that site ceased due to a dispute with the local authority. From August 2015, a shed was erected next to his home without a planning permission. The invoices for concrete, window frames, sheeting and construction work were recorded in the private limited company’s accounts and capitalised on the balance sheet. During a site visit in June 2019, the director and major shareholder stated that he also used the shed for private purposes. That conversation led to an audit of the accounts.
Two stories
On appeal, the director and major shareholder gives a different account. According to him, the shed is intended solely to prepare for a new car wash for the private limited company. The shed is demountable and can be moved back to its original location as soon as the local authority cooperates. The Court of Appeal accepts the first explanation, as the two accounts are mutually incompatible. The shed is intended solely for the director’s own use. There is no commercial basis for this. Both parties are aware of the preferential treatment, and the private limited company has sufficient reserves. The court of appeal even observes a pattern in which the director and major shareholder uses the private limited company for personal purposes.
The full amount
According to the director and major shareholder, only the invoices for €17,000 and €8,000 relate to the warehouse. The Court of Appeal does not agree with this. All the invoices date from the same period and photographs show that there were no other structures on the site at the time. The director is saving costs that he would otherwise have had to bear, including VAT. The benefit is therefore the full amount. Offsetting against the current account fails, as the costs are shown on the balance sheet.