The Companies Act 2014 (the Act), which is due to commence on the 1st of June next, will consolidate, reform and amend existing company law legislation. It will impact every Irish company as well as its directors and shareholders.
For the first time the Act codifies directors’ duties drawing on both the common law duties developed by the Courts and existing statutory rules involving directors. The duties listed are non-exhaustive. The obligation to comply with directors' statutory duties and obligations applies to all categories of directors without exception, including executive and non-executive directors and shadow and de-facto directors as well as formally appointed directors.
General Duties of Directors
The general duties which directors owe to the company in the performance of their role include:
- Act in Compliance with legislation.
- Act in the Interests of shareholders and employees.
- Sign a Compliance Statement acknowledging the existence of their duties.
- Ensure that the company secretary is suitably qualified.
- Prepare and deliver a “Section 19” constitution.
- Disclose any interests in contracts made by the company.
- Liable to account and indemnify.
Fiduciary Duties of Directors
The Act contains eight principal fiduciary duties which are set out at Section 228. Pursuant to same a director should:
- Act in good faith and in the interests of the company.
- Act honestly and responsibly.
- (Act in accordance with the company’s constitution and exercise powers only for lawful purposes.
- Not use company property (including company cars, mobile phones and computer equipment), information or opportunities unless approved by constitution or members.
- Not fetter their discretion unless approved or they believe in good faith that it’s in the company’s interests.
- Avoid unauthorised conflicts of interest.
- Exercise Due care, skill and diligence in the performance of his or her duties.
- Have regard to shareholders’ interests and employees’ interests.
Breach of Duties
A breach by directors of their general duties or their fiduciary duties will not invalidate any contract or transaction or its enforceability, other than by the director in breach. However this is without prejudice to the principles of liability of a third party where he or she has been an accessory to a breach of duty or has knowingly received a benefit from the breach in question.
However a court may grant relief to an officer of the company in any proceedings for negligence, default, breach of duty or breach of trust where an officer is shown to have acted honestly and reasonably.
The above information is a very brief overview on directors’ duties under the new Act. If you require further information or advice on the implications for you of the changes in relation to directors' duties or other corporate governance matters post-commencement of the Act or would like advice in relation to any other aspect of the Act, please do not hesitate to contact David Lavelle, Ray Fitzpatrick, Barbara Lydon or Conor Minogue.
28 May 2015