Company Law and Directors’ Duties

               

Roles and Responsibilities of Company Directors

Company Law and Directors’ Duties

Powerpoint Presentation

 

A Company is a separate legal entity

  • Can sue and be sued in its own name
  • Holds assets and incurs liabilities separate from its members/shareholders
  • Confers limited liability on members/shareholders 

    Company Law and Directors’ Duties:

  • Company is managed on behalf of members by Director/Board of Directors
  • Duty under law to the company
  • Board has collective responsibility for all actions (and omissions) by the company
  • Company law focuses on directors as holders of power
  • Specific rules contained in Companies Act Parts 4 and 5 and Constitution
  • Composition of Board
  • Appointment/retirement
  • Quorum, etc.

Roles and responsibilities of boards:

 

  • Primary responsibilities set out in company law
  • Additional duties set out in Constitution
  • These can be amended by members by special resolution
  • Also general duties of loyalty and fidelity (which apply to all staff)

       


 

DIRECTORS DUTIES

COMMON LAW FIDUCIARY DUTIES

 

Section 228, Companies Act:

  • Act in good faith and in company’s interest
  • Act honestly and responsibly in conduct of company affairs
  • Act in accordance with company’s constitution
  • Not use company property/information/opportunity for personal/third party gain without shareholder approval/constitutional support
  • Not fetter judgement unless in company interests/shareholder approval
  • Avoid conflicts of interest
  • Act with due care, skill and diligence
  • Have regard to interests of employees/members
  • Have regard to particular interest of member with entitlement to appoint director

       


 

Breach of duties

  • Not a criminal matter
  • No ODCE involvement
  • Actionable by the company in the High Court
  • Expensive, time consuming
  • Defence has right to seek discovery, can damage all sides

 

Shadow Directors

  • Section 221 Companies Act
  • “a person in accordance with whose directions or instructions the directors of a company are accustomed to act”
  • “shall be treated…as a director of the company”
  • Other than advice given in a professional capacity

     


De Facto directors

 

  • Section 222 Companies Act
  • Person carrying out the role of a director even if not validly appointed

       

 


Shadow Directors/De facto directors

 

  • § Companies Acts apply
  • Company Law offences and sanctions apply
  • However :
      • Practical difficulty in using powers
      • Difficult to defend actions

       


Requirements under Statute

  Three ways of disclosure:

  • At the company’s registered office
  • In the Companies Registration Office,
  • In communications, correspondence, IT

       


Registered Office

 

  • “Brass plate” at the address
  • Location of registers and minutes
  • Publicly accessible
  • Not served with any company notices, Company dissolved?

       


Companies Registration Office

  • Dublin
  • Carlow
  • Annual Return and Financial Statements
  • Changes in directors, registered office,memo and articles etc.
  • All publicly available, www.cro.ie

 


From records to Annual Return

 

  • Accounting records
  • Financial Statements
  • Approved by Board
  • Audited
  • Reviewed at AGM 
  • Sent to CRO

 


Communications

 

  • Letters
  • Emails/electronic correspondence
  • Website

        


Accountability

 

  • As well as disclosure requirements, the law also deals with
  • limits on the powers of directors
  • in particular with insolvency 
  • Prohibition on Loans (subject to SAP)
  • Limits on substantial property transactions
  • Potential accountability in insolvency
  • Mandatory Liquidator reports to ODCE
  • Restriction, disqualification, personal  liability

       


More Common Breaches

  • On the basis of information coming to ODCE attention, the following are some of the more common breaches:
  • transactions with directors - breaches of directors’ loans provisions
  • 85 reports to ODCE
  • bankrupts as directors - 46 reports
  • auditing deficiencies - 35 reports
  • failure to keep proper books of account - 21 reports
  • failure to hold AGM/EGM - 17 reports
  • directors conduct - 17 reports
  • reckless/fraudulent/insolvent trading - 62 reports

       


 

What to do? Advice to Directors

  • Ask questions
  • Don’t assume anything
  • Books & Records - where are they
  • Discuss issues don’t avoid them
  • Seek professional advice
  • Consult your company secretary/auditors/legal advisors
  • Possibility of insurance

       

 


 

 

Companies Act

  • Commenced 1 June 2015
  • Primarily aimed at helping SME’s
  • Main changes for LTDs
  • Single director, separate secretary
  • Elimination of memo and articles
  • Meetings by paper record
  • See www.cro.ie
  • Need to opt in for advantages

       


Sources of Information

  • ODCE publications
  • Information Books and Quick Guides;
  • Specific guidance on new law.
  • ODCE website – www.odce.ie
  • All publications;
  • Corporate governance best practice and access to main reports
  • public notice information e.g. civil enforcement action, prosecutions, insolvency information;
  • access to full complement of company law statutes etc.;
  • information on ODCE services.
  • LO - CALL 1890 315 015, email info@odce.ie, Facebook, Twitter

  

 

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