Duties & Responsibilities of a Company Director

I’ve been asked by a family member to become a director of his private limited company. I’ve never been a director before and I’m not sure what duties or responsibilities might be involved, or if I’m qualified to take on this position. Can you offer any advice?

In terms of your suitability for the position, almost anyone can become a company director; you don’t need any particular qualifications or experience. However, certain people are ineligible for the role e.g. undischarged bankrupts, corporate bodies, the auditor of the company in question and anyone previously disqualified by the Courts from acting as a director.

Currently, a company must have at least two directors who will have certain responsibilities, both under law and the constitution of the company. There are three common law duties which company directors must adhere to. Firstly, they must at all times act in good faith and in the best interests of the company. Secondly, a director may be liable to account for any profits he makes as a result of his office, regardless of whether there has been an abuse of power or breach of office. Finally, a director must always act with due care, skill and diligence. For example, directors should meet regularly to review company finances and correct any problems as they arise.

Directors also have certain statutory duties. They must ensure that the company is compliant at all times with the Companies Acts, as there are potentially significant penalties for a breach of any of the Acts’ provisions. They must ensure that proper books and records are maintained, so the financial position of the company can be determined with reasonable accuracy at any time. They must also make sure that the company’s financial statements are prepared annually and that they are subsequently audited, unless the company is eligible for an audit exemption. The directors are also responsible for the maintenance of company registers, contracts, minute books etc. and for convening the annual general meeting of the company.

Companies are required by law to make certain returns to the Companies Registration Office (CRO) and to ensure that all information held by the CRO on the company is up to date. It is the directors’ responsibility to see that such returns are made correctly and on time. On appointment, they must disclose certain personal information to be recorded by the CRO, such as name, address, date of birth, other directorships, etc.

Last year, the first part of the Companies Consolidation and Reform Bill was published. This draft legislation will consolidate the 16 existing Companies Acts and make radical changes to company law in Ireland. When complete, the Bill will permit private companies to have just one director and will include an exhaustive list of director’s duties, as well as details of criminal offences under company law. Part two is due to be published by the end of 2012, with the Bill expected to be signed into law shortly afterward.

It’s vital that if you decide to become a director, you’re fully aware of all relevant duties and powers involved, to ensure that you don’t suffer penalties under the Office of the Director of Corporate Enforcement or the Companies Registration Office. For further information on directors’ responsibilities; you can review the guidance available on www.odce.ie or www.cro.ie.