Being a company director - duties and compliance
I have been asked to become a Director of a Company, can you outline the duties of Company Directors?
Answer: Under the Companies Act 2014, to qualify for appointment as a Company Director, a person:
- Cannot be under the age of eighteen. Any appointment of a minor as a director is void and the minor ceases to have the power to act as a director. (Equally, where a secretary is an individual, he/she must also be over eighteen).
- Cannot be a corporate body.
- Cannot be an undischarged bankrupt.
- Cannot be a director of more than 25 companies unless those other companies are exempted.
- Cannot be disqualified as a previous director.
Minimum number of Directors: Every company is required to have at least 2 directors. There is one exception to this and this is the limited Company Type registered under Part 2 of the Companies Act 2014. This Private limited by shares-LTD company type can have a single director if so desired.
All other company types must have at least two directors-public companies, DACs (Designated Activity Companies), unlimited and guarantee companies. Every company should have an EEA (European Economic Area) resident director.
Fiduciary Duties: The principal fiduciary responsibilities of a director are set out in Part 5 of the Companies Act 2014.
There is a requirement on a director to act in good faith, to act honestly and responsibly and to act according to the company's constitution. There is a requirement for the directors to have regard to the interests of the company's employees as well as to the interest of the members. Under section 231 of the Act, there is a duty on directors to disclose any interest they have in contracts made by the company. The duties set out in the Act are not exhaustive and will still require directors to consider obtaining legal advice concerning compliance with their duties.
Directors of certain relevant companies must supply a compliance statement as part of the directors report that accompanies financial statements submitted to CRO. A relevant company in such a case is one with a Balance Sheet Total in excess of €12.5m and with a Turnover in excess of €25m. Directors of such companies must acknowledge responsibility for securing compliance with its obligations and confirming whether certain things have been done. These certain things are:
1) The drawing up of a Compliance Policy Statement setting out a company's policies regarding obligations
2) Setting out arrangements designed to ensure compliance
3) A review to be conducted of those arrangements during the financial year. If these things are not done this must be stated in the director's report.
Consequences of failure to comply: A failure to include the statement of responsibility or a statement that assurance measures have been undertaken (or explained if not) in the directors' report carries a maximum personal fine for each of the directors of €5000 and/or a maximum prison sentence of six months
For more detailed information in relation to becoming a Company Director log onto the Companies Registration Office in Ireland website www.cro.ie.