Most people are aware that directors are appointed to manage the business of a company but many individuals who accept the position of director are oblivious to the onerous duties and obligations that will be imposed on them as directors.

There is no statutory limit in Company Law regarding the maximum number of directors which a company may have but the articles of association of every company usually set out how many directors should be appointed. It should be noted that each company incorporated in Ireland must have at least one EU or EEA resident director and no one can be a director of more than 25 companies at any one time.

The powers of directors are set out in the Companies Acts 1963-2012 and also in the company’s articles of association. The powers granted to directors by the articles of association can only be altered by the passing of a special resolution which requires three quarters of the members to vote in favour for it to take effect.

It is very important that each director understands their role and is aware of and is able to effectively discharge their duties and obligations which arise. In particular section 100 of the Company Law Enforcement Act 2001 states that there is an express statutory duty on each director of a company to ensure that the requirements of the Companies Acts are being complied with by the company. This is a far reaching and onerous obligation on directors many of whom are not familiar with the provisions of the Companies Acts. Directors should also be aware that they are certain common law obligations imposed on directors by virtue of their fiduciary duty to act in the best interests of the company.

Fiduciary duties arise because a company is a separate legal entity and only capable of acting through its directors. The directors therefore are comparable to trustees and must act in the interests of the company ahead of their own personal interests.

In general directors duties are to the company but this can be modified in certain situations e.g directors owing a duty to a company’s creditor when the company is insolvent.

The most important factors which directors should be aware of are:

* Their obligation to hold frequent board meetings and to give sufficient notice of the board meeting to all directors and to record any decisions made and resolutions passed at board meetings;

* Property transactions between companies and its directors are heavily regulated in particular by the Companies Act 1990. This act also regulates the giving of loans, providing guarantees and security by a company to/on behalf of its directors. It is essential that directors are fully aware of these transactions and that they are able to ensure that any such transaction is in compliance with the relevant provisions of the Companies Act 1990;

* To ensure that they are aware of the company’s filing obligations and deadlines to file certain documentation with the Companies Registration Office;

* To ensure the company is not carrying on business with an intent to defraud creditors or carrying on business in a reckless manner; and

* To ensure proper books of account are kept.

If a director is found to be knowingly a party to the carrying on of a business with intent to defraud creditors of the company or if they carry on of any business of the company in a reckless manner personal liability can also be imposed on the director.

Because of the onerous obligations facing directors there is an insurance policy known as ‘Directors and Officers Insurance’ available directors and officers and which will subject policy conditions indemnify them against liability claims which may arise.

This summary demonstrates that any decision to accept the position of director of a company should not be taken lightly.

Breda Sheahan is a trainee solicitor in the commercial department with FitzGerald Solicitors Cork.

FitzGerald Solicitors is one of Munster’s leading commercial law firms located in Lapps Quay Cork.


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