Whether you are thinking of becoming or have just been appointed as the company director, one of the first things you need to do is familiarise yourself with the role including the director duties and responsibilities. Following the recent recession and the introduction of new company law (most notably the new Companies Act 2014), greater importance and clarity has been placed on the role of Company Directors and what they are responsible for. The main objectives of these legislative changes are to make sure that mistakes made by companies and their directors throughout the recession are not repeated, and that directors’ duties are simplified and categorised.
Two main types of director duties
A director’s role is essentially the day-to-day running of a limited company. Within this general role, a director agrees on appointment, to the legal duties they are bound to under both common law and company law. Other legislation may be applicable, for example, health and safety legislation if the director is appointed to a construction company, or Anti-Money Laundering legislation if the director is involved in a financial services company. Under both types of duties, there are several elements that must be adhered to.
1. Common Law duties
As the name would suggest, common law is the precedent laid down by the court system which is then used in practice. Common law rules are labelled as such because they are not required to be expressly stated in each case. For example, when you hire a solicitor to represent you in court it is understood that they will look to act in your best interests despite not being expressly stated in a contract. Similarly, as a director, it is understood that you must act in good faith & in the interests of the company, cannot make an undeclared profit – ‘something on the side’ as a director and are obliged to operate with due care, skill and diligence.
2. Companies Act duties
Alongside common law duties, the new Companies Act 2014 covers formal director duties that every limited company director needs to be aware of. These duties are designed to make sure that each company maintains a certain standard that can be applied to all companies. Each of these duties is not subject to interpretation and must be followed by each director. These can roughly be broken down as per the below:
- Financial – adequate accounting records, annual financial statements and audited accounts where required.
- Records – maintain company registers, file changes with the Companies Registration Office, handling of personal data and convening general company meetings.
- Winding-up – directors have certain duties even when a company is in liquidation, is insolvent or closing for whatever reason.
Offences as a Director
Under the Companies Act 2014 there are several levels of offence that can occur when a Director does not fulfil their role correctly. These offences can range from deliberate fraudulent actions to failure to comply with basic functions of a director. They can be outlined as below:
Category 1 Offence – false accounting records and fraudulent trading – penalties of €500,000 and/or 10 years in prison.
Category 2 Offence – can range from dishonest dealings to failing to fully disclose to an auditor or not keeping adequate accounting records – penalties of €50,000 and/or 5 years in prison.
Category 3 Offence – Non-filing of Annual Returns, trading under a misleading or incorrect name and not holding a required meeting – penalties of €5,000 and/or six months in prison.
Category 4 Offence – covers a range of smaller offences like failure to make filings or issue members with correct documentation – carries not prison sentence but can be a fine of up to €5,000.
With recent challenges that have faced companies in Ireland, there has never been more focus on company directors and ensuring duties are fulfilled. In cases where companies have not adhered to these duties, judges are no longer accepting an absence of understanding or ignorance of the rules or a case of not being responsible.
For assistance with any of the above information including directors duties and/or ongoing compliance once a business is operational please don’t hesitate contact the experts at Register a Company in Ireland today on +353 16874519 or complete our contact form.