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Civil liability of directors of a company
From Department of Enterprise, Trade and Employment
Published on
Last updated on
From Department of Enterprise, Trade and Employment
Published on
Last updated on
Under the Companies Act 2014, a director of a company:
There are exemptions to the 25 company limit. Exempted companies, for the purpose of the 25 company rule, include:
Form B74 is required to be completed by any person being appointed as director of an Irish registered company (Form A1), where that person is currently disqualified in a foreign jurisdiction from acting as a director or secretary of a body corporate or an undertaking. The B74 sets out the jurisdiction in which the individual is so disqualified, the date on which he/she became so disqualified and the period for which he/she is so disqualified.
If a person whose appointment as director is notified to the CRO on form B10 is currently disqualified abroad, that person is required to ensure that the B10 is accompanied by a properly completed B74 signed by him/her on its delivery to the CRO.
Form B74a is required to be completed where a person already appointed as a director of an Irish registered company becomes disqualified in a foreign jurisdiction after the notice of appointment. This notice should be filed within 15 days of the disqualification.
Part 5 of the Companies Act 2014 sets out the duties of directors and other officers and apply to every company on the register. Directors Duties have been codified and placed into the Act to provide transparency as to the role of company officers. The Act can only realistically provide core duties of position and case law may determine other requirements/existing requirements.
Every company is required to have 2 directors. There is one exception to this and this is the LTD 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 two directors - public companies, DACs (Designated Activity Companies), unlimited and guarantee companies. Every company should have an EEA (European Economic Area) resident director. (Section 137). An alternate director is insufficient to meet the requirements of the section. There are exceptions.
For further information in relation to the requirement that at least one of the directors of a company be EEA-resident, see Information Leaflet No. 17, Requirement To Have An EEA-Resident Director.
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.
Section 228 states: 1) A director of a company shall—
(a) act in good faith in what the director considers to be the interests of the company;
(b) act honestly and responsibly in relation to the conduct of the affairs of the company;
(c) act in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law;
(d) not use the company’s property, information or opportunities for his or her own or anyone else’s benefit unless—
(i) this is expressly permitted by the company’s constitution; or
(ii) the use has been approved by a resolution of the company in general meeting;
(e) not agree to restrict the director’s power to exercise an independent judgment unless—
(i) this is expressly permitted by the company’s constitution; or
(ii) the case concerned falls within subsection (2);
(f) avoid any conflict between the director’s duties to the company and the director’s other (including personal) interests unless the director is released from his or her duty to the company in relation to the matter concerned, whether in accordance with provisions of the company’s constitution in that behalf or by a resolution of it in general meeting;
(g) exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both—
(i) the knowledge and experience that may reasonably be expected of a person in the same position as the director; and
(ii) the knowledge and experience which the director has; and
(h) in addition to the general duty under section 224 (duty to have regard to the interests of its employees in general), have regard to the interests of its members.
(2) If a director of a company considers in good faith that it is in the interests of the company for a transaction or engagement to be entered into and carried into effect, a director may restrict the director’s power to exercise an independent judgment in the future by agreeing to act in a particular way to achieve this.
(3) Without prejudice to the director’s duty under subsection (1)(a) to act in good faith in what the director considers to be the interests of the company, a director of a company may have regard to the interests of a particular member of the company in the following circumstances.
(4) Those circumstances are where the director has been appointed or nominated for appointment by that member, being a member who has an entitlement to so appoint or nominate under the company’s constitution or a shareholders’ agreement.
Directors of certain relevant companies must supply compliance statement as part of the directors report (section 325) that accompanies financial statements submitted to CRO. A relevant company in such a case is one with 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 (section 225(3)).
Those certain things are – the drawing up a Compliance Policy Statement setting out company’s policies regarding obligations and then setting out arrangements designed to ensure compliance. Thirdly, a review to be conducted of those arrangements during the financial year. If these things are not done this must be stated in the directors report.
Relevant obligations means anything where a failure to comply will result in a category 1/2 offence being committed or a serious Market Abuse offence/Prospectus offence.