Directors’ responsibilities: What do I need to know?
Directors’ Duties in Ireland
The Companies Act 2014 sets out what are known as the fiduciary duties and the legal responsibilities of company directors in Ireland.
As a director of a company you are ultimately responsible for the overall management/behaviour of the company.
The following are some example of the key fiduciary duties:
- Always act in good faith in the interests of the company
- Act honestly and responsibly
- Obey both company legislation and internal policies and procedures
- Never use company property/information for your own benefit or the benefit of related parties
- Avoid at all times conflicts of interest between your duties as director and your own personal interests
Examples of Directors’ Responsibilities and Duties:
The above listing is quite general but some practical examples of what this involves are:
1. Ensure proper books and records are kept
It is vital that proper financial records are kept. You should know how to read financial reports so that you can stay abreast of what state the company is in. A good accountant will help you if you don’t know how to read financial statements. Failure to keep accurate financial records is considered an offence under the companies act.
2. Approve and file annual tax and accounting returns
Firstly, you will need to make sure that the company is registered properly with the relevant bodies – i.e. Companies Registration Office and Revenue. It will then be your obligation to ensure that accurate accounts and tax returns are filed before the relevant deadlines.
3. Disclose any transactions with connected parties
Your annual financial statements should include details of any transaction – business or otherwise – entered in to by company with the directors or any connected parties e.g. family members
4. Loans to directors are prohibited
You must never take any loan from the company unless the loan is less than 10% of the company’s net assets. You can read more about Directors' Loans here
What are the downsides of becoming a company director in Ireland?
The downsides of being a company director really amount to the fact that there is a raft of rules and legal obligations that you are expected to be aware of and understand. Failure to abide by these can potentially result in fines/penalties while also being barred from acting as a company director in the future.
The key to ensuring you do not fall foul of these rules is to have an accountant in your corner who can guide you though the whole process with the minimum of fuss.
Last updated: 29th July 2021