By Andrew Lambe. 14th May 2014
Directors are ultimately responsible for managing the company on behalf of the members (shareholders). In small companies they are typically the same people. Directors of Irish companies must be individuals of at least 18 years of age and it is important for them to be aware that they have a lot of legal responsibility to contend with as directors under Irish and EU legislation and at common law.
Director’s Statutory Duties
It is important to note that statutory duties can differ depending on what business sector the company is in. For example, restaurant owners/directors will need to comply with Health and Safety Legislation, Food Safety Legislation and Employment Law with regard to its employees. Health and Safety Legislation is of particular importance to company directors in the construction trade. The Criminal Justice (Corporate Manslaughter) Bill will create criminal offences for directors should an employee lose their life due to gross negligence.
Companies Acts 1963-2014
A director, as an officer of a company, has a duty to comply with his or her obligations under the Companies Acts and to ensure that the requirements of the Companies Acts are complied with by the company. A director is in breach of this duty where they authorise or permit a default to take place. These duties can be summarised as follows:
Duty to Maintain Proper Books of account and prepare annual statements
Generally, companies (and by extension directors) are required to prepare accounts on an annual basis. Large companies and holding/subsidiary companies need to get audited accounts prepared. All sales and purchase invoices should be kept for a period of 6 years. They also have duties to make certain returns to the Revenue Commissioners such as corporation tax returns, VAT returns, P35 returns.
Duty to maintain the 7 statutory registers
Directors are responsible for ensuring that the following registers and other documentation are maintained by the company:
– register of members
– register of directors and secretaries
– register of directors’ and secretary’s interests
– register of transfers
– register of allotments
– register of debentures
– minute books
– directors’ service contracts
– contracts to purchase own shares
Company Bureau can hold and maintain your statutory registers electronically, so please contact us for further information.
Duty to file certain documents with the Companies Registration Office (CRO)
Company directors are legally obliged to ensure that certain documents are filed with the Companies Registration Office (CRO). Some are required to be filed by every company e.g. the annual return while others are required to be filed only in certain circumstances e.g. change of registered office address.
Duty to hold meetings including the Annual General Meeting
Directors should keep records and minutes of all directors meetings and also for the Annual general Meeting. Under the new Companies Act 2014, some companies can sign a resolution to dispense with the requirement to hold a physical AGM, however it is good practice for an AGM to take place each year.
Duties regarding transactions with the company and disclosure
Directors have responsibilities where they enter into transactions with the company of which they are a director. For example, a director cannot avail of a loan from the company for more than 10% of the net asset value of the company
Directors are also required to disclose personal information to file annual returns and also details of any other directorships or interests in shares of other companies.
Duties of directors of companies in liquidation and directors of insolvent companies
Directors must act diligently and honestly when it is clear that a company is no no longer solvent and they have a duty to its creditors. It should be noted that a director can also be held personally liable for a company’s debts if found to have acted recklessly or fraudulently.
EU legislation in the form of Regulations and Directives would form the bulk of other statutory duties applicable to company directors. For example, EU Anti-money laundering legislation is applicable to casinos and businesses that would take cash sums of €7,500 or more. Other examples of statutory duties that directors would have comes under Waste Management legislation, Revenue law, data protection, central bank legislation (regulated entities), the Criminal Justice Act, Fire services Acts 1988-2003, etc.
Directors’ common law duties
Directors also have duties under Common Law. These can be summarised as follows:
1. Directors must exercise their powers in good faith and in the interests of the company as a whole.
Directors must not abuse their powers. They must exercise their powers in what they honestly believe to be the interests of the company as a whole or the members as a whole rather than in the interests of a particular member or members.
2. Directors are not allowed to make an undisclosed profit from their position as directors
They must also account for any profit which they secretly derive from their position as director. It is not automatically a breach of a director’s duties to be involved in a business which competes with the company of which they are a director. However, where a director has a contract of employment or service contract with the company, it may be in breach of their duties of fidelity and loyalty to the company to do so.
3. Directors are obliged to carry out their functions with due care, skill and diligence.
A director is liable for any loss resulting from their negligent behaviour. However, a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person
For more information on your duties as a company director, please don’t hesitate to contact us at Company Bureau or alternatively please see the website of the Office of Director of Corporate Enforcement (ODCE) www.odce.ie.
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