If you are an investor interested in opening a company in Ireland, you should know that Irish law has several provisions when naming a director or a board of directors.
When setting up a business in Ireland, the Irish law states that the company must have at least two directors, and one of them has to be a resident of the European Economic Area (European Union and Iceland, Liechtenstein and Norway). Simpler conditions are allowed when an entrepreneur is setting up a private limited company, which requires having one director, as mentioned by the Companies Act 2014. Our attorneys in Ireland can give you more details on these conditions.
The current rules for company directors make it mandatory for these individuals to comply with the qualification requirements, as well as the applicable duties for observing the financial reporting and the fiduciary responsibilities.
Duties and Obligations of the company directors in Ireland
A director must meet several conditions and our attorneys in Ireland can offer you more information on what the Irish law states upon this subject. Below, you can find the most representative duties of a director:
- Duties arising from common law – a director must act in good faith and not exceed his power; he or she should be skillful and have an area of expertise.
- Duties arising under statute – the duties of his position are related to the proper functioning of the company. A director can be given a loan from the company, under the 1963 Act. However, certain limitations are imposed and our Irish law firm can give further details on this topic.
- Duties arising under contract – the duties that must be accomplished by the director are specified in the contract signed with the company.
- A director must also meet the age requirement, and the Irish law stipulates that he or she must be at least 18 years old.
The company director cannot be disqualified, cannot be an undischarged bankrupt and it cannot be a body corporate.
Under the Companies Act, the Irish company director has a fiduciary duty towards the company. The first set of duties, those that refer to acting in good faith, act responsibly and honestly and in the best interests of the company, its members and employees, all fall under the fiduciary requirements.
In addition to the aforementioned, the company director will also disclose any interests he may have in the signed company documents. The individual acting in this capacity is prohibited from using the company’s property or information, or the opportunities of the legal entity, all for his or her own benefit or for the benefit of another party, unless this is expressly stated in the company’s constitution or if the use thereof had been expressly approved through a company resolution following a general meeting.
The company director will also need to be fully aware of the fact that the company he runs is subject to clear annual reporting, bookkeeping and tax requirements. Our Irish accountants offer complete services for companies of all sizes and help company directors not only understand the company’s tax liability, but also with special reports and updates about the company’s financial situation.
Director offences in Ireland
The law requires the directors of some companies to provide additional information in the form of a director’s report. This is done when:
- the total balance sheet of the company is in excess of 12.5 million EUR;
- the turnover of the said company is in excess of 25 million EUR;
- the directors of these companies are required under Section 225 (3) to acknowledge responsibility for securing compliance and confirming certain steps.
Examples of offences include the following:
- Category 1 offences: those related to the manner in which the accounting records are prepared and those referring to the fraudulent trading of the company;
- Category 2 offences: company acquiring its own shares, limiting the offers of securities to the public, prohibiting loans to directors and related persons, etc.
- Offences referring to accounting: these are also category 2 offences, however, relating to the accounting and financial statements such as offences related to making false statements in the company’s returns, financial statements and to the statutory auditors, among others.
The company director is the one who ensures that the legal entity’s annual returns are submitted to the Companies Registration Office. The individual acting in this capacity makes the submission on behalf of the company.
For the purpose of the director’s duties, the annual return is a form which is filled in annually and it is accompanied by the financial statements. These statements are not drafter earlier than 9 months before the date of the return.
In general, the financial statements include copies of the following: the balance sheet, the profit and loss account, the director’s report, the auditor’s report.
When the required documents are not filed in due time, the following penalties apply:
- the late filing fee of EUR 100, in addition to the standard one, of EUR 20 per return;
- a daily delay also applies each day after the fate filing fee was imposed, and this daily fee is EUR 3 afterward;
- the maximum late filing daily fee per return is EUR 1,200.
In addition to the monetary penalties above, the Companies Registration Office also has the right to initiate three important enforcement options: prosecution, court injunction or the strike off of the company.
Irish Directorship Legislation
The Companies Act 2014 is the main source of law regarding the duties of company directors and also of company secretaries. In addition to the ones mentioned above, our team also reminds investors of the following:
- A person can legally be the director of more than one company, but not more than 25 companies at the same time.
- Certain types of companies do not count on the total number of companies to which a person is occupying the director function.
- When a person is the director of two companies and a company is holding the other, according to the Irish law, the directorship is counted just once, but you can find out more on this topic from our Irish lawyers.
As far as the requirement to have at least one EEA-resident director is concerned, this does not apply to a company in Ireland that holds, at that time, a bond to the value of EUR 25,000 (in prescribed form). The existence of the bond makes it possible for the company to pay a fine or penalty which may be imposed (and the said amount is deducted from the value of the bond).
For new companies that do not have a director who is an EEA resident, this bond is mandatory. The prescribed minimum validity of the bond is two years. Moreover, the effective date of the bond cannot exceed four working days prior to the company’s incorporation date.
The responsibility of each company director in Ireland is to ensure that the legal entity on behalf of which he or she acts is in compliance with the provisions of the Companies Registration Office.
Moreover, directors are also expected to follow their fiduciary duties, including but not limited to acting in good faith as the director sees fit to be in the best interests of the company.
Please contact our Irish law firm for more information about the legal responsibilities that company directors in Ireland must meet.