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