Duties of Directors and Secretaries

Form B74 is required to be completed by any person being appointed as director of an Irish registered company (Form A1), where that person is currently disqualified in a foreign jurisdiction from acting as a director or secretary of a body corporate or an undertaking. The B74 sets out the jurisdiction in which the individual is so disqualified, the date on which he/she became so disqualified and the period for which he/she is so disqualified.

If a person whose appointment as director is notified to the CRO on form B10 is currently disqualified abroad, that person is required to ensure that the B10 is accompanied by a properly completed B74 signed by him/her on its delivery to the CRO.

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 appointment. This notice should be filed within 15 days of the disqualification.

Part 5 of the Companies Act 2014 sets out the duties of directors and other officers and apply to every company on the register.  Directors Duties have been codified and placed into the Act to provide transparency as to the role of company officers. The Act can only realistically provide core duties of position and case law may determine other requirements/existing requirements

Minimum number of Directors

Every company is required to have 2 directors. There is one exception to this and this is the LTD company type registered under Part 2 of the Companies Act 2014. This Private limited by shares  – LTD company type can have a single director if so desired.

All other company types must have two directors – public companies, DACs (Designated Activity Companies), unlimited and guarantee companies. Every company should have an EEA (European Economic Area) resident director. (Section 137). An alternate director is insufficient to meet the requirements of the section. There are exceptions.

• The requirement does not apply to a company which has a bond (€25,000) in place.
• The residency requirement does not apply to a company which has a certificate under section 140 of the Companies Act 2014. This certificate, made after application on a form B67, is in respect of a company having a real and continuous link with one or more economic activities that are being carried on in the State.

For further information in relation to the requirement that at least one of the directors of a company be EEA-resident, see Information Leaflet No. 17, “Requirement To Have An EEA-Resident Director”.

The principal fiduciary responsibilities of a director are set out in Part 5 of the Companies Act 2014.

There is a requirement on a director to act in good faith, to act honestly and responsibly and to act according to the company’s constitution. There is a requirement for the directors to have regard to the interests of the company’s employees as well as to the interest of the members. Under section 231 of the Act, there is a duty on directors to disclose any interest they have in contracts made by the company. The duties set out in the Act are not exhaustive and will still require directors to consider obtaining legal advice concerning compliance with their duties.

Section 228 states: 1) A director of a company shall—

• (a) act in good faith in what the director considers to be the interests of the company;
• (b) act honestly and responsibly in relation to the conduct of the affairs of the company;
• (c) act in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law;
• (d) not use the company’s property, information or opportunities for his or her own or anyone else’s benefit unless—
  • (i) this is expressly permitted by the company’s constitution; or
  • (ii) the use has been approved by a resolution of the company in general meeting;
• (e) not agree to restrict the director’s power to exercise an independent judgment unless—
  • (i) this is expressly permitted by the company’s constitution; or
  • (ii) the case concerned falls within subsection (2);
• (f) avoid any conflict between the director’s duties to the company and the director’s other (including personal) interests unless the director is released from his or her duty to the company in relation to the matter concerned, whether in accordance with provisions of the company’s constitution in that behalf or by a resolution of it in general meeting;
• (g) exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both—
  • (i) the knowledge and experience that may reasonably be expected of a person in the same position as the director; and
  • (ii) the knowledge and experience which the director has; and
• (h) 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 and carried into effect, a director may restrict the director’s power to exercise an independent judgment in the future by agreeing to act in a particular way to achieve this.

(3) Without prejudice to the director’s duty under subsection (1)(a) to act in good faith in what the director considers to be the interests of the company, a director of a company may have regard to the interests of a particular member of the company in the following circumstances.

(4) Those circumstances are where the director has been appointed or nominated for appointment by that member, being a member who has an entitlement to so appoint or nominate under the company’s constitution or a shareholders’ agreement.

Directors of certain relevant companies must supply compliance statement as part of the directors report (section 325) that accompanies financial statements submitted to CRO. A relevant company in such a case is one with Balance Sheet Total in excess of €12.5m and with a Turnover in excess of €25m. Directors of such companies must acknowledge responsibility for securing compliance with its obligations and confirming whether certain things have been done (section 225(3)).

Those certain things are – the drawing up a Compliance Policy Statement setting out company’s policies regarding obligations and then setting out arrangements designed to ensure compliance. Thirdly, a review to be conducted of those arrangements during the financial year. If these things are not done this must be stated in the directors report.

Relevant obligations means anything where a failure to comply will result in a category 1/2 offence being committed or a serious Market Abuse offence/Prospectus offence.

Category 1 Offences:

• Section 286 Accounting records – offences committed under sections 281-285.
• Section 722 fraudulent trading of company.

Category 2 Offences include:

• Section 68 – Limitation on offers of securities to the public
• Section 82 – Financial assistance for the acquisition of shares
• Section 87 – Liability of members in respect of reduced calls.
• Section 101 – Personation of shareholder
• Section 102 – Company acquiring its own shares
• Section 132 – Prohibition of undischarged bankrupt being director or secretary or otherwise involved in company.
• Section 248 – Offence for contravention of s.240 – prohibition of loans etc to directors and connected persons.
• Section 286 – Accounting records – offences committed under sections 282-286.
• Section 291 – Company entity financial statements
• Section 292 – IFRS entity financial statements
• Section 294 – Company group financial statements
• Section 295 – IFRS group financial statements
• Section 324 – Approval and signing of statutory financial statements by board of directors
• Section 330 – Directors report: statement on relevant audit information
• Section 355 – Approval and signing of abridged financial statements
• Section 356 – Special report of the statutory auditors on abridged financial statements
• Section 387 – right to information and explanations concerning company
• Section 388 – right to information and explanations concerning subsidiary undertakings
• Section 389 – offence to make false statements to statutory auditors
• Section 406 – false statement in returns, financial statements etc.
• Section 416 – entries of satisfaction and release of property from charge
• Section 468 – experts report merger
• Section 484 – criminal liability for untrue statements in merger documents
• Section 492 – experts report division
• Section 507 – criminal liability for untrue statements in division documents
• Section 602 – voidance of dispositions of property after commencement of winding up.

The duties of a secretary are duties delegated to the position by the directors. There is no definitive term covering what this will entail. Directors must ensure person is capable of doing the job. For PLCs though, there is reference to categories of qualification as secretary:

• For 3 of last 5 years has been a secretary
• Member of recognised body or
• Appear to be capable of discharging the duties

Please Note: Single-director companies (LTD company model only) must have a separate secretary. The director cannot also act as the secretary. See also Leaflet 16 – Company Secretary. A secretary, where it is an individual, must be over the age of eighteen.

The Directors’ Report shall be approved by the board of directors making the report and signed on their behalf by two directors, where there are two or more directors. Where the company has a sole director, that director must approve and sign the report or reports, as detailed in Section 332(1) of the Companies Act 2014.

Every copy of every director’s Report which is laid before the members in general meeting or which is otherwise circulated, published or issued shall state the names of the persons who signed it on behalf of the board of directors in typed form along with the date of signing, as detailed in Section 332(3) of the Companies Act 2014.

Exemptions
Small companies must file a directors report unless exempted. However there is certain information that is not required by a qualifying small company to submit.

• Under Section 325 (1A) of the Companies Act 2014 as amended by Section 41 of the Companies (Accounting) Act 2017, small companies are not required to include a business review.
• Under Section 326 of the Companies Act 2014 as amended, a small company is exempt from the requirements under subsection 3 – description of the use of financial instruments.
• Under Section 327 of the Companies Act 2014 where a company decides to include a business review they are still exempted from the requirements under subsection 3(b) – an analysis using non-financial key performance indicators.

 
Section 355(6)(b) of the Companies Act 2014 requires that the Directors’ Report must be accompanied by a certificate signed by the Secretary of the company in written or electronic form stating that it is a true copy of the information laid before the members in general meeting. The Certification of the Financial Statements by the Secretary on the B1 Form will satisfy this requirement.

Micro Companies
Micro Companies under the terms of Section 325 of the Companies Act 2014 as amended by Section 41 of the Companies (Accounting) Act 2017, are not required to prepare a directors report provided that the information required under Section 328 of the Companies Act 2014 is included as a note or a footnote to the balance sheet. Section 328 of the Companies Act 2014 refers to acquisition or disposal of own shares.

Micro companies are exempt from the requirements of Section 326(3) of the Companies Act 2014 (financial instruments) and Section 327(1) of the Companies Act 2014 (business review).

Companies Limited by Guarantee and not having a share capital have an exemption from having to provide information on the:

(i) the acquisition and disposal of the company’s own shares; and,
(ii) director’s interests in the company’s own shares and debentures, see Part 18, Chapter 5, Section 1216 of the Companies Act 2014.

 
Public Unlimited Companies without a share capital
Public Unlimited Companies without a share capital also have an exemption from providing the information required by Section 325(1)(c) of the Companies Act 2014 on the acquisition and disposal of the company’s own shares and on the directors’ interests in the company’s own shares and debentures as required by Section 329 of the Companies Act 2014 under the terms of Part 19, Chapter 5, Section 1271 of the Companies Act 2014.

Other than in the case of the above Exemptions, the Directors of a company shall for each financial year, under the terms of section 325 of the Companies Act 2014, prepare a “Director’s Report” dealing with the matters under the following headings:

1. General matters in relation to the company and the directors, as detailed in Section 326 of the Companies Act 2014;
2. A Business Review, as detailed in Section 327 of the Companies Act 2014;
3. Information on the acquisition or disposal of the company’s own shares, as detailed in Section 328 of the Companies Act 2014;
4. Director’s Report: Information on interests in shares or debentures, as detailed in Section 329 of the Companies Act 2014;
5. A statement on any relevant audit information, as detailed in Section 330 of the Companies Act 2014.

 
1. Director’s Report: General Matters in relation to the company and the director’s
(1) The directors’ report for a financial year shall state-

(a) the names of the persons who, at any time during the financial year, were directors of the company,
(b) the principal activities of the company during the course of the year,
(c) a statement of the measures taken by the directors to secure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014, with regard to the keeping of accounting records and the exact location of those records,
(d) the amount of any interim dividends paid by the directors during the year and the amount, if any, that the directors recommend should be paid by way of final dividend.

 
(2) Where relevant in a particular financial year, the directors’ report shall state-

(a) particulars of any important events affecting the company which have occurred since the end of that year,
(b) an indication of the activities, if any, of the company in the field of research and development,
(c) an indication of the existence of branches (within the meaning of Council Directive 89/666/EEC) of the company outside the State and the country in which each such branch is located,
(d) political donations made during the year that are required to be disclosed by the Electoral Act, 1997.

 
(3) Where material for an assessment of the company’s financial position and profit or loss, the directors’ report shall describe the use of financial instruments by the company and discuss, in particular-

(a) the financial risk management objectives and policies of the company, including the policy for hedging each major type of forecasted transaction for which hedge accounting is used, and
(b) the exposure of the company to price risk, credit risk, liquidity risk and cash flow risk.
A small or micro company is exempt from providing information under Subsection(3).

2. Director’s Report: Business Review
(1) The directors’ report for a financial year shall contain-

(a) a fair review of the business of the company, and
(b) a description of the principal risks and uncertainties facing the company.
A small or micro company is exempt from the provisions of subsection (1)

 
(2) The review shall be a balanced and comprehensive analysis of-

(a) the development and performance of the business of the company during the financial year, and
(b) the assets and liabilities and financial position of the company at the end of the financial year, consistent with the size and complexity of the business.

 
(3) The review shall, to the extent necessary for an understanding of such development, performance or financial position or assets and liabilities, include-

(a) an analysis of financial key performance indicators, and
(b) where appropriate, an analysis using non-financial key performance indicators, including information relating to environmental and employee matters.
Where a small or micro company provides information required under point 1 above, it is exempt from the requirements of point (3), part (b).

 
(4) The directors’ report shall, where appropriate, include additional explanations of amounts included in the statutory Financial Statements of the company.

(5) The review shall include an indication of likely future developments in the business of the company.

(6) In this section, “key performance indicators” means factors by reference to which the development, performance and financial position of the business of the company can be measured effectively.

3. Director’s Report: Information on the acquisition and disposal of own shares
Where, at any time during a financial year of a company, shares in the company-

(a) are held or acquired by the company, including by forfeiture or surrender in lieu of forfeiture, or
(b) are held or acquired by any subsidiary undertaking of the company, the directors’ report with respect to that financial year of the company shall state-
(i) the number and nominal value of any shares of the company held by the company or
any subsidiary undertaking at the beginning and end of the financial year together with the
consideration paid for such shares
(ii) a reconciliation of the number and nominal value of such shares from the beginning
of the financial year to the end of the financial year showing all changes during the year
including further acquisitions, disposals and cancellations, in each case showing the value of
the consideration paid or received, if any, and
(iii) the reasons for any acquisitions made during the financial year and
(iv) the proportion of called-up share capital held at the beginning and end of the financial
year.

 
4. Director’s Report: Information on interests in shares or debentures
(1) The directors’ report in respect of a financial year shall, as respects each person who, at the end of that year, was a director of the company-

(a) state whether or not he or she was, at the end of that financial year, interested in shares in, or debentures of, the company or any group undertaking of that company,
(b) state, if he or she was so interested at the end of that year, the number and amount of shares in, and debentures of, the company and each other undertaking (specifying it) in which he or she was then interested,
(c) state whether or not he or she was, at the beginning of the financial year (or, if he or she was not then a director, when he or she became a director), interested in shares in, or debentures of, the company or any other group undertaking, and
(d) state, if he or she was so interested at either of the immediately preceding dates, the number and amount of shares in, and debentures of, the company and each other undertaking, specifying it, in which he or she was so interested at the beginning of the financial year or, as the case may be, when he or she became a director.

 
(2) The reference in part 1 to the time when a person became a director shall, in case of a person who became a director on more than one occasion, be read as a reference to the time when he or she first became a director.

(3) The information required by part 1 to be given in respect of the directors of the company shall also be given in respect of the person who was the secretary of the company at the end of the financial year concerned.

(4) For the purposes of this section, references to interests of a director and secretary in shares or debentures are references to all interests required to be recorded in the register of interests under Section 267 of the Companies Act 2014 and includes interests of shadow directors and de facto directors required to be so registered.

5. Director’s Report: Statement on relevant audit information
(1) The directors’ report in relation to a company shall contain a statement to the effect that, in the case of each of the persons who are directors at the time the report is approved in accordance with Section 332 of the Companies Act 2014-

(a) so far as the director is aware, there is no relevant audit information of which the company’s statutory auditors are unaware, and
(b) the director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company’s statutory auditors are aware of that information.

 
(2) In this section “relevant audit information” means information needed by the company’s statutory auditors in connection with preparing their report.

(3) A director is regarded as having taken all the steps that he or she ought to have taken as a director in order to do the things mentioned in subsection (1)(b) if he or she has-

(a) made such enquiries of his or her fellow directors (if any) and of the company’s statutory auditors for that purpose, and
(b) taken such other steps (if any) for that purpose, as are required by his or her duty as a director of the company to exercise reasonable care, skill and diligence.

 
(4) Nothing in section 330 shall be read as reducing in any way the statutory and professional obligations of the statutory auditors in relation to forming their opinion on the matters specified in Section 336 of the Companies Act 2014.

(5) Where a directors’ report containing the statement required by this section is approved in accordance with Section 332 of the Companies Act 2014 but the statement is false, every director of the company who-

(a) knew that the statement was false, or was reckless as to whether it was false, and
(b) failed to take reasonable steps to prevent the report from being so approved, shall be guilty of a category 2 offence.

 
(6) Under the terms of s.167(3) CA 2014, Directors of a relevant private company (or a holding company and all its subsidiaries together) which has turnover exceeding €50m and a balance sheet total exceeding €25m, must state in their Directors’ Report under section 325 of the Companies Act 2014, (a) whether the company has established an audit committee or decided not to do so and (b) if the company has decided not to established an audit committee, the reasons for that decision.

6. Director’s Report: Copy to be included of any Notice issued under certain banking legislation
The Directors’ Report shall contain a copy of any Disclosure Notice issued in respect of the company under Section 33AK of the Central Bank Act 1942 during the financial year to which the report relates.

This requirement is in addition to other requirements of the Act that apply in certain cases and which require the inclusion of matters in a Directors’ Report namely:

• Statement in accordance with Section 167(3) of the Companies Act 2014 as to the establishment or otherwise of an audit committee in the case of a relevant private limited company, and
• A director’s compliance statement in the case of a company to which Section 225(2) of the Companies Act 2014 relates.

 
Group Director’s Report
Where a holding company prepares group Financial Statements the company shall also prepare a Director’s Report that is a consolidated report (Group Director’s Report) dealing with the company and its subsidiary undertakings included in the consolidation taken as a whole, as detailed in Section 325(3) of the Companies Act 2014.

In relation to a Group Directors’ Report, Section 326, subsections (1)(b) and (c), (2), (3) and 3(a) of the Companies act 2014 shall have effect as if the reference to the company were a reference to the company and its subsidiary undertakings included in the consolidation.

In relation to a Group Directors’ Report, Section 327 of the Companies Act 2014 has effect as if the references to the company were references to the company and its subsidiary undertakings included in the consolidation.

Where group Financial Statements are published with entity Financial Statements it is sufficient to prepare the Group Director’s Report referred to above in Section 325(3) of the Companies Act 2014, provided that any information relating to the holding company only, being information which would otherwise be required to be provided by Section 325(1) or Section 167(3) or 225(2) of the Companies Act 2014 is provided in the Group Directors Report.

Where appropriate a Group Director’s Report may give greater emphasis to matters that are significant to the holding company and its subsidiary undertakings included in the consolidation taken as a whole.

If a director fails to fulfil his or her obligation under Sections 325(1), (3) or (4) of the Companies Act 2014, he or she shall be guilty of a category 3 offence. This includes persons who are shadow directors or de facto directors.

The directors of a company who meet the conditions set out below in respect of the financial year to which the directors report refers, must include in the Directors Report a compliance statement.

The requirements to be met are as follows:

(a) Its balance sheet total for year exceeds
(i) subject to subparagraph (ii), €12,500,000;
(ii) if a higher or lower amount is prescribed for the purposes of the definition of “relevant
company’ in section 167(1) or for the purposes of section 225(7), under section 943(1)(i) by
the Minister – the prescribed amount; and

 
(b) the amount of turnover for the year exceeds-

(i) subject to sub-paragraph (ii), €25,000,000;
(ii) if a higher or lower amount is prescribed for the purposes of the definition of “relevant
company’ in Section 167(1) or for the purposes of Section 225(7), under Section 943(1)(i) by
the Minister – the prescribed amount;

 
Section 225 does not apply to a company that is of a class exempted under the terms of section 943(1)(g) as follows:

(i) qualifying companies within the meaning of section 110 of the Taxes Consolidation Act
1997 (as inserted by section 48 of the Finance Act 2003); and,
(ii) classes of other companies and other undertakings, if the extent to which or the manner in which they are or may be regulated under any enactment makes it, in the Minister’s
opinion, unnecessary or inappropriate to apply those provisions or that provision to them

 
The directors’ compliance statement shall contain the following:

i. An acknowledgement that they are responsible for securing the company’s compliance with its relevant obligations; and
ii. A confirmation that the following matters have been done and if they have not been done specifying the reasons why they have not been done.

(a) the drawing up of a statement (to be known, and in this Act referred to as, a “compliance policy statement”) setting out the company’s policies (that, in the directors’ opinion, are appropriate to the company) respecting compliance by the company with its relevant obligations;
(b) the putting in place of appropriate arrangements or structures that are, in the directors’ opinion, designed to secure material compliance with the company’s relevant obligations; and
(c) the conducting of a review, during the financial year to which the directors’ report referred relates, of any arrangements or structures referred to in paragraph (b) that have been put in place.

 
The arrangements and structures referred to in (b) above may, if the directors of the company in their discretion so decide, include reliance on the advice of one or more persons employed by the company or retained by it under a contract for services, being a person who appears to the directors to have the requisite knowledge and experience to advise the company on compliance with is relevant obligations.

The arrangements or structures referred to in (b) above shall be regarded as being designed to secure material compliance by the company with its relevant obligations if they provide a reasonable assurance of compliance in all material respects with those obligations.
Each director who fails to comply with this section of the Act shall be guilty of a category 3 offence.

The requirement for the Compliance Statement applies to all Public Limited Companies but does not apply to Unlimited Companies.