Director Fiduciary Duties - common sense?

The phrase “Fiduciary Duties of a Director” is used so often but I still meet some Directors who feel inhibited to ask just what does the phrase mean.  

Fiduciary Duties are set out in the Companies Act 2014 and are intended to help a Director comply with his/her duties as a Director.

• Duty to disclose any interest Director may have in contracts made by the company.

• Act in good faith in interests of the company.

• Act in accordance with the Company’s Constitution.  Although not stated in the Companies Act 2014 a Director would also have to act in accordance with Shareholder’s Agreement if applicable.

• Only act in accordance with the law.

• Do not use the company’s property, information or opportunities for his/her own benefit or that of anyone else without specific approval as set out in the Act.

• Cannot restrict a Director’s power to exercise his/her independent judgement without specific approval or permission as set out in the Act.

• Avoid conflict between the Director’s duties to the company and his/her own personal interests.

• Exercise care, skill and diligence. 

• Have regard for the interests of its employees in general and the interests of the members. 

Fiduciary Duties may sound onerous but, they are a key resource in helping us as Directors to focus on our duties and responsibilities to act in the best interests of the company, its members and employees. For me, Fiduciary Duties are just common sense and should help all Directors to manage an effective and progressive company.

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BECOMING A COMPANY DIRECTOR – is it an honour or risk!

Being asked to be a Director of a company can, at first glance, appear an honour. How good for our egos that someone sought us out personally to ask US to be a Director of a company but, there is always a but! 

A Director is required to act in the best interests of the Company, its Members and Employees. The challenge for any Director is proving that he/she has done so. Turning up for a Board Meeting with an eye on the clock in anticipation of the Director’s lunch should be a thing of the past.

Yes, it can be an honour to be asked to be a Director but, if we get it wrong then we potentially face consequences that will impact on our professional and personal life.   So, if you are asked to be a Director ensure you interview the Company just as much as it should be interviewing you.

The first question is to find out if there is an Induction Pack for incoming Directors as it should help to provide answers on basic queries to be considered before becoming a Director.

• Experience and make-up of existing Board and is there a Chairperson.

• How frequently are Board Meeting held and what type of Board Pack is sent out in advance of same.

• Are or should there be Committees in place, e.g. Audit, Risk, etc, and if so how are findings outlined and acted upon by the Board.

• What Policies are in place, e.g. Ethics & Compliance, Health & Safety, etc.

The second question is to ensure the Company operates with good governance which is actively reviewed.

• Ensure all filings in the Companies Registration Office and Central Register of Beneficial Ownership and Revenue Commissioners are made in a timely and current manner.

• Maintain proper books and records which include Statutory Registers and Financial records.

• Ensure compatibility across all documents governing the company, e.g. if there is a Shareholders Agreement or Funding Agreement with a State Body or Bank ensure there is no contradiction between the Agreement(s) and the Company’s Constitution.

• Bank mandates should be current.

• Have appropriate contracts in place, e.g. it is a statutory requirement that all employees have a contract of employment.

• What procedures are in place to ensure registration and/or renewal of IP and Licences.

Only when we understand the Company and how it operates can we then make an informed decision on an invitation to join a Board. It can take new Directors up to a year to feel he/she is part of the Board but, the duty of a Director starts from the moment he/she is appointed.

Honour or risk – you decide. Good luck!

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CRO ENFORCEMENT MEANS BUSINESS

The CRO Enforcement Section mean business as they are now actively pursuing companies for outstanding Annual Return filings at the rate of 1,000 per week.

Yes, that is right 1,000 per week!

It is expected that companies with the greatest number of outstanding Annual Returns will be targeted first. One of the penalties for filing late is the loss of audit exemption. Trying to get a Statutory Auditor at short notice to prepare appropriate Financial Statements is likely to prove both challenging and costly. Combine that with penalty filing fees and affected companies will be experiencing a severe financial pinch to end Q4 2023.

Do not wait for the CRO to catch up with you, act now.

Bring all outstanding Annual Return filings up to date. Engage with your Accountants/Auditors for support on preparing relevant Financial Statements for filing with the outstanding Annual Returns.  

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