One of the directors of your Irish Company must be resident in the European Union, where there is no director of the company whom will be resident in the EU a Non Resident Director Bond can be put in place.
Company Directors’ Duties
As the majority of Irish companies are private companies limited by shares there are a substantial number of companies of which the directors and shareholders are one and the same. Under such circumstances, the distinction between the company’s property and the director/member’s own property can be a matter of some confusion with the result that the directors treat company property as though it was their own.
A company director stands in a special relationship to the company of which they are an officer. This special position is known as a ‘fiduciary position’ and the director is known as a ‘fiduciary’. A fiduciary is required to act in a manner which is legally becoming of their office and which places the interests of the company ahead of their own.
A director’s duties are usually owed in the first instance to the company and not to the members, creditors or employees of the company. Where however, a director expressly undertakes certain obligations to shareholders, he may stand in a fiduciary relationship to them and owe them fiduciary duties. This may particularly be the case in a small private company where shareholders often look to the directors for advice.
A director is also obliged to have regard to the interests of the company’s employees, however, this duty may not be enforced by the employees themselves and is instead owed to the company.
Directors’ Common Law Duties
Directors’ common law duties:
- Directors must exercise their powers in good faith and in the interests of the company
- Directors are not allowed to make an undisclosed profit from their position as directors and must account for any profit which they secretly derive from their position as a director
- Directors are obliged to carry out their functions with skill, due care and diligence
A director is, in general, justified in delegating duties to other officials of the company (e.g. the company’s management) where such duties may properly be left to such officials, having regard to the articles of association of the company and the nature of its business. A director, while not bound to give continuous attention to the affairs of the company, should attend meetings in circumstances where he/she is reasonably able to do so.
Directors’ Statutory Duties
A director, as an officer of a company, is under a duty to comply with his obligations under the Companies Act and to ensure that the requirements of the Companies Act are complied with by the company.
Directors’ statutory duties are:
- Duties as a company officer under the Companies Act
- Duty to maintain proper books of account and prepare annual accounts
- Duty to have an annual audit performed
- Duty to maintain certain registers and other documents
- Duty to file certain documents with the Companies Registration Office
- Duty of disclosure of certain personal information
- Duty to convene general meetings of the company
- Duties regarding transactions with the company
- Duties of directors of companies in liquidation and directors of insolvent companies
A director is in breach of this duty where he authorises or permits a default to take place.
Directors are required to disclose the following:
- Certain personal information in the register of directors. The information required is their first and surname, date of birth, residential address, nationality, occupation and details of all other directorships
- Interests in shares of the company or related companies in the register of directors’ interests
- Payments to be made to them in connection with share transfers
- Directors’ service contracts with the company must be made available for inspection by any member of the company
- Where a director has in any way an interest in a contract or proposed contract with the company, they are required to declare the nature of that interest at a meeting of the directors of the company. For the purposes of this requirement, a general notice given to the other directors is deemed to be a sufficient declaration of that interest
Duty to Maintain Registers
Every company has a legal obligation to maintain certain registers and other documents. Company directors are responsible for ensuring that companies comply with their obligations in this regard and, consequently, directors are responsible for ensuring that these records are maintained, updated as appropriate and made available to the appropriate parties.
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 debenture holders
- Minute books
- Directors’ service contracts
- Contracts to purchase own shares
- Register of interests of persons in its shares (public limited companies only)
Duty to File Documents with the Registrar of Companies
Company directors are legally obliged to ensure that certain documents are filed with the Registrar of Companies. 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. on the death of a director. Accounts are required to be annexed to a companies 2nd and subsequent annual returns.
Below is a list of those documents more commonly required to by filed with the Registrar.
- Annual Return
- Change of registered office
- Notice of increase in nominal (authorised) capital
- Change of director and/or secretary or of their particulars
- Declaration that a person has ceased to be a director or secretary
- Notice that a person holding the office of director or secretary has died
- Nomination of a new annual return date
- Notification of the creation of a mortgage or charge
- Memorandum of satisfaction of charge
- Ordinary resolution
- Special resolution
- Return of allotments
Any transfer of shares is required to be submitted with the Revenue Commissioners. Such transfers should then be recorded in the next annual return.
Directors’ Duties Regarding Transactions
Directors have certain responsibilities and obligations where they enter into transactions with the company of which they are a director. Where a director of a company or its holding company or a person connected with a director acquires an asset from, or sells an asset to, the company and the value of that asset exceeds:
- 10% of the company’s net assets as determined by reference to the accounts prepared and laid before the AGM in respect of the last preceding financial year in respect of which accounts were so laid – or the called up share capital where no accounts have been prepared and laid
The arrangement must first be approved by resolution of the company in a general meeting – this requirement does not apply where the amount in question does not exceed €1,270.
Transactions with Directors
A director, or number of directors acting together, can exercise considerable power over the assets of a company, assets which ultimately belong to the company’s shareholders and which may be required to discharge debts owed to the company’s creditors. Because of this special position, company law contains a number of provisions designed to prevent directors from abusing their positions and thereby potentially, adversely affecting the interests of a company’s shareholders or creditors.
In order to protect shareholders from the abuse of power by directors, company law requires that where the directors of a company wish to purchase an asset from, or sell an asset to the company, the transaction must first be approved by the shareholders. However, in order to minimise the administrative burden on companies, where the value of the asset in question is less than a certain amount, pre-approval is not required.
In the event that the directors enter into such a transaction without the required pre-approval of the shareholders, the company can choose to set the transaction aside and render the transaction void.
Any director or other person who authorises a transaction without the shareholders’ approval is liable to account to the company for any gain made by that person and reimburse the company for any loss suffered by it as a result.
The effect of the prohibition is to make it an offence for company directors to deal in options to buy or sell relevant shares or debentures in a company, any of its subsidiary companies, its holding company or other subsidiaries of its holding company in respect of which dealing facilities are provided by the Stock Exchange.