Directors duties under the Companies Act 2014
The new Companies Act 2014 sets out minimum duties for a director under the Act and also sets out the requirements that an individual must fulfil before he or she can act as a company director.
Part 5 of the Companies Act 2014 sets out the fiduciary responsibilities for a company director. These requirements are:
- To act in good faith,
- To act honestly and responsibly,
- And to act according to the companies constitution.
In addition, section 228 of the Companies Act 2014 states:
(1) that a director of a company shall-
- act in good faith and in what the director considers to be in the best interests of the company,
- act honestly and responsibly in the conduct of the affairs of the company,
- act in accordance with the company's constitution and exercise his or her powers only for lawful purposes,
- not use the companies property for his/her own or anyone else's benefit unless this is expressly permitted by the company's constitution or the use has being approved by a resolution of the company in a general meeting,
- not agree to restrict the director's power to exercise an independent judgement unless this is expressly permitted by the company's constitution and the case concerned falls within subsection 2,
- avoid any conflict between the directors duties to the company and the director's other interests (including personal) unless the director is released from his or her duty in relation to the matter concerned, either in accordance with the companies constitution or by a resolution in a general meeting,
- exercise care, skill and diligence that would be exercised in the same circumstances by a reasonable person having both the knowledge and experience that may be reasonably expected of a person in the same position as the director and the knowledge and experience which the director has,
- 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, a director may restrict the director's power to exercise an independent judgement by agreeing to act in a particular way to achieve this.
(3) Without prejudice to the director's duty under subsection (1) to act in good faith in what the director considers to be in the interests of the company, a director may have regard for the interests of a particular member of the company in the circumstances set out in sub section (4).
(4) Those circumstances are where the director has being appointed or nominated for appointment by that member, being a member who has entitlement to so appoint or nominate under the company's constitution or a shareholders' agreement.
Under Section 231 of the Companies Act 2014, there is a duty on directors to disclose any interest they have in contracts made by the company.
Qualification to act as a Company Director:
Under the Companies Act 2014, a director of a company:
- Cannot be under the age of 18.
- Cannot be a body corporate.
- Cannot be an un-discharged bankrupt.
- Cannot be disqualified.
- Cannot be a director of more than 25 companies, except;
- Public Limited Companies,
- where a company files form B67 (statement that a company has a real and continuous link with one or more economic activities that are being carried on in the state),
- where a form B68 is filed (statement that the company is exempted as it holds a licence under Section 9 of the Central Bank Act 1971 or because it is a company falling within the provisions of Schedule 5 to the Companies Act 2014,
- a holding company and its subsidiaries are counted as one company for the purposes of section 142.
Disqualification from abroad
A form B74 is required to be completed by any person being appointed as a director of an Irish company (form A1), where that person is currently disqualified in a foreign jurisdiction from acting as a director or secretary from a body corporate or undertaking. A form B74 should also be submitted if a person whose appointment as a director is notified to the CRO on a form B10 is currently disqualified abroad.
A 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 the appointment. Under the Act this also applies to all Irish companies on the register and a director who currently stands appointed and has become disqualified since their appointment. They should notify the CRO within 3 months of the date of commencement - 1st June 2015.
Minimum number of Directors
Under the Companies Act 2014 every company is required to have a minimum of two directors except the new Limited Company type. This new company can have a single director if so desired. They must still however, have a separate secretary. Existing Limited companies can not take advantage of the single director option unless and until they convert to the new Limited Company type. Until such time as they convert they are governed by the Designated Activity Company rules for the transition period.
Further information is available from the Companies Registration Office or from the Companies Act 2014 section of our website. If you require more detailed information or a second opinion then please contact Shane Grennan.