<ul><li>Corporate Healthcheck for Company Directors </li></ul><ul><li>Presentation to South Tipperary Development Company ...
Company Law and Directors’ Duties <ul><li>Company is a separate legal entity </li></ul><ul><ul><li>Can sue and be sued in ...
Company Law and Directors’ Duties <ul><li>Company is managed on behalf of members by the Board of Directors  </li></ul><ul...
Company Law and Directors’ Duties <ul><li>Specific rules contained in Memo and Articles of Association </li></ul><ul><ul><...
Company Law and Directors’ Duties <ul><li>As a member of the Board you are an officer of the company </li></ul><ul><li>All...
Board of Directors and Management Boards <ul><li>Company Law does not recognise boards, committees, etc. </li></ul><ul><li...
Roles and responsibilities of boards <ul><li>Primary responsibilities set out in company law </li></ul><ul><li>Additional ...
DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES   <ul><ul><li>Act in good faith and in company’s interest </li></ul></ul><ul>...
DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES   <ul><ul><li>Be open and transparent </li></ul></ul><ul><ul><ul><li>May not ...
DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES   <ul><ul><li>Act with due care, skill and diligence </li></ul></ul><ul><ul><...
Breach of duties <ul><li>Not a criminal matter </li></ul><ul><li>No ODCE involvement </li></ul><ul><li>Actionable by the c...
Shadow Directors <ul><li>Section 27 Companies Act 1990 </li></ul><ul><ul><li>“ a person in accordance with whose direction...
De Facto directors <ul><li>Person carrying out the role of a director even if not validly appointed </li></ul>
Shadow Directors/De facto directors <ul><li>Companies Acts apply </li></ul><ul><li>Company Law offences and sanctions appl...
Corporate Healthcheck <ul><li>The basics </li></ul><ul><li>Applies to all companies </li></ul><ul><li>11 groups of questio...
I - Registered Office <ul><li>Where is the registered office of the company? </li></ul><ul><ul><li>Failure to notify CRO o...
II – E-communication <ul><li>Are your website and emails compliant? </li></ul><ul><ul><li>Website must contain company inf...
III – Directors <ul><li>Are you a properly appointed director? </li></ul><ul><ul><li>May not have a capacity to act  </li>...
IV- Books & Records <ul><li>What books and records do you have? </li></ul><ul><li>Where are they kept? </li></ul><ul><ul><...
V – Books of Account <ul><li>Who maintains your accounts, and where? </li></ul><ul><ul><li>Accountancy knowledge required ...
V – Books of Account <ul><ul><ul><li>Details of all day to day receipts & expenditure </li></ul></ul></ul><ul><ul><ul><li>...
VI - Audits <ul><li>Have your books ever been audited? </li></ul><ul><li>When were the books last audited? </li></ul><ul><...
VII – Board Meetings <ul><li>When was your last meeting of directors? </li></ul><ul><ul><li>No prescribed timing of board ...
VIII – General Meetings <ul><li>When was your last AGM/EGM? </li></ul><ul><ul><ul><li>mandatory </li></ul></ul></ul><ul><u...
VIII – General Meetings <ul><ul><li>Ensure that sufficient notice is given </li></ul></ul><ul><ul><li>Required to  </li></...
IX – Annual Returns <ul><li>What is your annual return date (ARD)? </li></ul><ul><li>When did you last submit your annual ...
X - Prohibited Transactions  with Directors <ul><li>Are you taking advantage of your power as a director? </li></ul><ul><u...
X - Prohibited Transactions  with Directors <ul><ul><li>Prohibition on Loans etc.  </li></ul></ul><ul><ul><ul><li>In gener...
X - Prohibited Transactions  with Directors <ul><ul><li>Exceptions: </li></ul></ul><ul><ul><ul><li>Loans between group com...
X - Prohibited Transactions  with Directors <ul><li>Criminal offence </li></ul><ul><li>Breach of the provisions relating t...
XI - Insolvency <ul><li>Are you in financial trouble? </li></ul><ul><ul><li>Criminal Offences  </li></ul></ul><ul><ul><ul>...
Restriction <ul><li>Director of an insolvent company </li></ul><ul><ul><li>Not able to prove that acted honestly and respo...
More Common Breaches <ul><li>On the basis of information coming to ODCE attention, the following are some of the more comm...
What to do? <ul><li>Advice to Directors </li></ul><ul><ul><li>Ask questions </li></ul></ul><ul><ul><li>Don’t assume anythi...
Sources of Information <ul><li>ODCE publications  </li></ul><ul><ul><li>Information Books and Quick Guides; </li></ul></ul...
<ul><li>Question & Answers   </li></ul><ul><li>Thank You </li></ul><ul><li>Follow ODCE on </li></ul>
<ul><li>Where is the registered office of the company? </li></ul><ul><li>Are your website and emails compliant? </li></ul>...
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Corporate Healthcheck ODCE

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Company Law compliance for the not for profit sector, October 2011

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Transcript of "Corporate Healthcheck ODCE"

  1. 2. <ul><li>Corporate Healthcheck for Company Directors </li></ul><ul><li>Presentation to South Tipperary Development Company </li></ul><ul><li>Kevin Prendergast </li></ul><ul><li>Corporate Compliance Manager, ODCE . </li></ul>
  2. 3. Company Law and Directors’ Duties <ul><li>Company is a separate legal entity </li></ul><ul><ul><li>Can sue and be sued in its own name </li></ul></ul><ul><ul><li>Holds assets and incurs liabilities separate from its members/shareholders </li></ul></ul><ul><ul><li>Confers limited liability on members/shareholders </li></ul></ul>
  3. 4. Company Law and Directors’ Duties <ul><li>Company is managed on behalf of members by the Board of Directors </li></ul><ul><li>Duty under law to the company </li></ul><ul><li>Board has collective responsibility for all actions (and omissions) by the company </li></ul>
  4. 5. Company Law and Directors’ Duties <ul><li>Specific rules contained in Memo and Articles of Association </li></ul><ul><ul><li>Composition of Board </li></ul></ul><ul><ul><li>Appointment/retirement </li></ul></ul><ul><ul><li>Board members must be approved by members at AGM. </li></ul></ul>
  5. 6. Company Law and Directors’ Duties <ul><li>As a member of the Board you are an officer of the company </li></ul><ul><li>All company law duties apply to you personally </li></ul><ul><li>You are potentially exposed to penalties under Company Law </li></ul>
  6. 7. Board of Directors and Management Boards <ul><li>Company Law does not recognise boards, committees, etc. </li></ul><ul><li>Only directors have the powers under Companies Acts </li></ul><ul><li>Members/Shareholders/Subcribers have ultimate power in general meeting to hire and fire Board </li></ul>
  7. 8. Roles and responsibilities of boards <ul><li>Primary responsibilities set out in company law </li></ul><ul><li>Additional duties set out in Articles of Association </li></ul><ul><ul><li>These can be amended by members by special resolution </li></ul></ul><ul><li>Also general duties of loyalty and fidelity (which apply to all staff) </li></ul>
  8. 9. DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES <ul><ul><li>Act in good faith and in company’s interest </li></ul></ul><ul><ul><ul><li>Must honestly believe in their decisions </li></ul></ul></ul><ul><ul><ul><li>Interest must be the company’s and members’ interest, not the interest of particular member(s) </li></ul></ul></ul><ul><ul><ul><li>No abuse of powers </li></ul></ul></ul>
  9. 10. DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES <ul><ul><li>Be open and transparent </li></ul></ul><ul><ul><ul><li>May not make an undisclosed profit from acting as a director. Must account for any secret profit derived </li></ul></ul></ul><ul><ul><ul><li>Minimise potential conflicts. Executive directors in particular should not be involved with a competitor </li></ul></ul></ul>
  10. 11. DIRECTORS DUTIES COMMON LAW FIDUCIARY DUTIES <ul><ul><li>Act with due care, skill and diligence </li></ul></ul><ul><ul><ul><li>Related to individual director’s knowledge and experience </li></ul></ul></ul><ul><ul><ul><li>Director is liable for loss resulting from negligence </li></ul></ul></ul>
  11. 12. Breach of duties <ul><li>Not a criminal matter </li></ul><ul><li>No ODCE involvement </li></ul><ul><li>Actionable by the company in the High Court </li></ul><ul><li>Expensive, time consuming </li></ul><ul><li>Defence has right to seek discovery, can damage all sides </li></ul>
  12. 13. Shadow Directors <ul><li>Section 27 Companies Act 1990 </li></ul><ul><ul><li>“ a person in accordance with whose directions or instructions the directors of a company are accustomed to act” </li></ul></ul><ul><ul><li>“ shall be treated…as a director of the company” </li></ul></ul><ul><ul><li>Other than advice given in a professional capacity </li></ul></ul>
  13. 14. De Facto directors <ul><li>Person carrying out the role of a director even if not validly appointed </li></ul>
  14. 15. Shadow Directors/De facto directors <ul><li>Companies Acts apply </li></ul><ul><li>Company Law offences and sanctions apply </li></ul><ul><li>However </li></ul><ul><ul><li>Practical difficulty in using powers </li></ul></ul><ul><ul><li>Difficult to defend actions </li></ul></ul>
  15. 16. Corporate Healthcheck <ul><li>The basics </li></ul><ul><li>Applies to all companies </li></ul><ul><li>11 groups of questions </li></ul><ul><li>Litmus test of Corporate Governance </li></ul><ul><li>Mixture of legislative provisions, common law and common sense </li></ul><ul><li>Breaches of Company Law coming to the attention of the ODCE </li></ul>
  16. 17. I - Registered Office <ul><li>Where is the registered office of the company? </li></ul><ul><ul><li>Failure to notify CRO of change of Registered Office within 14 days is an offence </li></ul></ul><ul><ul><li>“ Brass plate” at the address </li></ul></ul><ul><ul><li>Must be printed on Business Letters (and emails and website) </li></ul></ul><ul><ul><li>Not served with any company notices, Company dissolved? </li></ul></ul>
  17. 18. II – E-communication <ul><li>Are your website and emails compliant? </li></ul><ul><ul><li>Website must contain company information on home page or page immediately accessible from home page (“prominent and easily accessible”) </li></ul></ul><ul><ul><li>Emails (letters in any form) must also disclose information </li></ul></ul><ul><ul><li>Could also include SMS’s and any other forms of communication </li></ul></ul><ul><ul><ul><li>Company Name, number and legal form </li></ul></ul></ul><ul><ul><ul><li>Place of registration (Ireland) </li></ul></ul></ul><ul><ul><ul><li>Address of registered office </li></ul></ul></ul>
  18. 19. III – Directors <ul><li>Are you a properly appointed director? </li></ul><ul><ul><li>May not have a capacity to act </li></ul></ul><ul><ul><li>Must notify CRO within 14 days of appointment of the director & subsequent amendments </li></ul></ul><ul><ul><li>Must disclose home address </li></ul></ul><ul><ul><li>Resident Director (at least one in EU) </li></ul></ul><ul><ul><li>Number of Directorships (25 with exclusions) </li></ul></ul>
  19. 20. IV- Books & Records <ul><li>What books and records do you have? </li></ul><ul><li>Where are they kept? </li></ul><ul><ul><li>Registers etc must be kept in the registered office </li></ul></ul><ul><ul><li>Register of Directors and Secretary </li></ul></ul><ul><ul><li>Register of Directors’ and Secretary’s interests (in the company and related companies) </li></ul></ul><ul><ul><li>Register of Members </li></ul></ul><ul><ul><li>Register of Debenture holders & copies of the debentures </li></ul></ul><ul><ul><li>Directors’ service contracts </li></ul></ul><ul><ul><li>Minutes of general meetings, the board & board sub-committees. </li></ul></ul>
  20. 21. V – Books of Account <ul><li>Who maintains your accounts, and where? </li></ul><ul><ul><li>Accountancy knowledge required if placing reliance on another </li></ul></ul><ul><ul><li>Required to be kept at the registered office or such other place as the directors think fit </li></ul></ul><ul><ul><li>Detailed books of account which </li></ul></ul><ul><ul><ul><li>correctly record and explain the company’s transactions; </li></ul></ul></ul><ul><ul><ul><li>at any time, enable the financial position of the company to be determined with accuracy; </li></ul></ul></ul><ul><ul><ul><li>enable the directors to ensure that the financial statements comply with Companies Acts requirements; </li></ul></ul></ul><ul><ul><ul><li>allow the financial statements to be readily and properly audited. </li></ul></ul></ul>
  21. 22. V – Books of Account <ul><ul><ul><li>Details of all day to day receipts & expenditure </li></ul></ul></ul><ul><ul><ul><li>Details of assets and liabilities </li></ul></ul></ul><ul><ul><ul><li>Detailed records of goods purchased/sold & invoices therefor </li></ul></ul></ul><ul><ul><ul><li>Statements of stock – stocktaking </li></ul></ul></ul><ul><ul><ul><li>Detailed records of services provided and invoices therefor </li></ul></ul></ul>
  22. 23. VI - Audits <ul><li>Have your books ever been audited? </li></ul><ul><li>When were the books last audited? </li></ul><ul><ul><li>Companies are obliged to appoint auditors to audit their books </li></ul></ul><ul><ul><li>Audit exemption available for private companies </li></ul></ul><ul><ul><li>Not for companies limited by guarantee </li></ul></ul><ul><ul><li>Auditors are obliged to report indictable offences </li></ul></ul><ul><ul><ul><ul><li>Section 194(5) Companies Act, 1990 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>191 reports to the ODCE in 2010 </li></ul></ul></ul></ul>
  23. 24. VII – Board Meetings <ul><li>When was your last meeting of directors? </li></ul><ul><ul><li>No prescribed timing of board meetings </li></ul></ul><ul><ul><li>Suggested 2-6 times p.a. </li></ul></ul><ul><ul><li>Failure of the board to maintain control over the affairs of the company is a primary cause of company insolvency & failure </li></ul></ul><ul><ul><li>Must maintain minutes of meetings </li></ul></ul><ul><ul><li>Normally prior to AGM/EGM, provide members with required notice of meetings and, prior to AGM, furnish members with a copy of the financial statements. </li></ul></ul>
  24. 25. VIII – General Meetings <ul><li>When was your last AGM/EGM? </li></ul><ul><ul><ul><li>mandatory </li></ul></ul></ul><ul><ul><ul><li>each calendar year </li></ul></ul></ul><ul><ul><ul><li>not more than 15 months since the last AGM </li></ul></ul></ul><ul><ul><ul><li>generally within the State </li></ul></ul></ul>
  25. 26. VIII – General Meetings <ul><ul><li>Ensure that sufficient notice is given </li></ul></ul><ul><ul><li>Required to </li></ul></ul><ul><ul><ul><li>Review accounts </li></ul></ul></ul><ul><ul><ul><li>Review directors report </li></ul></ul></ul><ul><ul><ul><li>Appoint officers </li></ul></ul></ul><ul><ul><ul><li>Appoint auditors </li></ul></ul></ul><ul><ul><ul><li>Pass resolutions/special resolutions </li></ul></ul></ul><ul><ul><li>37 reports to ODCE in 2010 </li></ul></ul>
  26. 27. IX – Annual Returns <ul><li>What is your annual return date (ARD)? </li></ul><ul><li>When did you last submit your annual return (AR)? </li></ul><ul><ul><li>Every company has an ARD and must submit an Annual Return to be filed within 28 days of the ARD </li></ul></ul><ul><ul><li>Failure to file an annual return is an offence, dealt with by CRO </li></ul></ul><ul><ul><li>Furnishing False Information </li></ul></ul><ul><ul><li>Penalties to file annual return </li></ul></ul><ul><ul><li>Dissolution of the Company </li></ul></ul><ul><ul><ul><li>Application to CRO/High Court </li></ul></ul></ul><ul><ul><ul><li>Personal liability of officers if continue to trade </li></ul></ul></ul><ul><ul><ul><li>Improper use of the word “Limited” is an offence </li></ul></ul></ul>
  27. 28. X - Prohibited Transactions with Directors <ul><li>Are you taking advantage of your power as a director? </li></ul><ul><ul><li>Substantial Property Transactions </li></ul></ul><ul><ul><ul><li>Where a director of a company (or a person connected with that director): </li></ul></ul></ul><ul><ul><ul><ul><li>purchases an asset from, or sells an asset to, the company, and; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>the value of that asset exceeds lesser of €63,500 or 10% of the company’s ‘relevant assets’ (normally its net assets), </li></ul></ul></ul></ul><ul><ul><ul><li>the transaction must be approved in advance by the shareholders in a general meeting of the company. </li></ul></ul></ul>
  28. 29. X - Prohibited Transactions with Directors <ul><ul><li>Prohibition on Loans etc. </li></ul></ul><ul><ul><ul><li>In general, a company is prohibited from making a loan or quasi-loan to a director (or person connected to that director), or from entering into a credit transaction as creditor for a director, entering into a guarantee on behalf of a director (or person connected to the director) or from providing security in respect of a loan or quasi-loan etc. to a director. </li></ul></ul></ul><ul><ul><ul><li>Except if in total within 10% of relevant assets (excluding guarantee/security) </li></ul></ul></ul><ul><ul><li>146 auditors reports to the ODCE in 2010 </li></ul></ul><ul><ul><li>Ordinarily seek repayment/regularisation </li></ul></ul>
  29. 30. X - Prohibited Transactions with Directors <ul><ul><li>Exceptions: </li></ul></ul><ul><ul><ul><li>Loans between group companies </li></ul></ul></ul><ul><ul><ul><li>Directors’ expenses </li></ul></ul></ul><ul><ul><ul><li>Business transactions are also excluded e.g. where the company’s ordinary business involves granting loans. </li></ul></ul></ul><ul><ul><li>Details must also be disclosed in accounts </li></ul></ul>
  30. 31. X - Prohibited Transactions with Directors <ul><li>Criminal offence </li></ul><ul><li>Breach of the provisions relating to directors’ loans etc. is a criminal offence (indictable and therefore reportable). </li></ul><ul><li>Civil consequences </li></ul><ul><li>Breaching either the substantial property transactions provisions or the directors’ loans provisions include having to: </li></ul><ul><ul><li>account to the company for any gain made, and; </li></ul></ul><ul><ul><li>indemnify the company for any loss or damage suffered. </li></ul></ul>
  31. 32. XI - Insolvency <ul><li>Are you in financial trouble? </li></ul><ul><ul><li>Criminal Offences </li></ul></ul><ul><ul><ul><li>Pre liquidation offences reportable by the liquidator </li></ul></ul></ul><ul><ul><ul><li>Post Liquidation Offences </li></ul></ul></ul><ul><ul><ul><li>Fraudulent Trading </li></ul></ul></ul><ul><ul><ul><li>Failure to keep proper books & records leading to the insolvency of the company </li></ul></ul></ul><ul><ul><li>Civil actions </li></ul></ul><ul><ul><ul><li>Restriction </li></ul></ul></ul><ul><ul><ul><li>Personal liability </li></ul></ul></ul><ul><ul><ul><ul><li>Reckless trading </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Fraudulent Preference </li></ul></ul></ul></ul>
  32. 33. Restriction <ul><li>Director of an insolvent company </li></ul><ul><ul><li>Not able to prove that acted honestly and responsibly </li></ul></ul><ul><ul><li>Reverse Burden of proof </li></ul></ul><ul><ul><li>Company need not be in liquidation </li></ul></ul><ul><ul><li>Applies to Shadow Directors (Those in accordance with whose wishes directors ordinarily act) </li></ul></ul><ul><li>Must have minimum capitalisation of Company </li></ul><ul><ul><li>Private company €63,487, plc €317,435 </li></ul></ul><ul><ul><li>Companies limited by guarantee cannot be capitalised, must resign </li></ul></ul><ul><li>Directors can also be disqualified </li></ul>
  33. 34. More Common Breaches <ul><li>On the basis of information coming to ODCE attention, the following are some of the more common breaches: </li></ul><ul><ul><li>transactions with directors - breaches of directors’ loans provisions </li></ul></ul><ul><ul><ul><li>146 reports to ODCE </li></ul></ul></ul><ul><ul><li>auditing deficiencies </li></ul></ul><ul><ul><ul><li>59 reports </li></ul></ul></ul><ul><ul><li>failure to hold AGM/EGM </li></ul></ul><ul><ul><ul><li>37 reports </li></ul></ul></ul><ul><ul><li>failure to keep proper books of account </li></ul></ul><ul><ul><ul><li>36 reports </li></ul></ul></ul><ul><ul><li>unpaid debt issues </li></ul></ul><ul><ul><ul><li>32 reports </li></ul></ul></ul>
  34. 35. What to do? <ul><li>Advice to Directors </li></ul><ul><ul><li>Ask questions </li></ul></ul><ul><ul><li>Don’t assume anything </li></ul></ul><ul><ul><li>Books & Records - where are they </li></ul></ul><ul><ul><li>Discuss issues don’t avoid them </li></ul></ul><ul><ul><li>Seek professional advice </li></ul></ul><ul><ul><li>Consult your company secretary/auditors/legal advisors </li></ul></ul><ul><ul><li>Possibility of insurance </li></ul></ul>
  35. 36. Sources of Information <ul><li>ODCE publications </li></ul><ul><ul><li>Information Books and Quick Guides; </li></ul></ul><ul><ul><li>Specific guidance on new law. </li></ul></ul><ul><li>ODCE website – www.odce.ie </li></ul><ul><ul><li>All publications; </li></ul></ul><ul><ul><li>Corporate governance best practice and access to main reports </li></ul></ul><ul><ul><li>public notice information e.g. civil enforcement action, prosecutions, insolvency information; </li></ul></ul><ul><ul><li>access to full complement of company law statutes etc.; </li></ul></ul><ul><ul><li>information on ODCE services. </li></ul></ul><ul><li>LO - CALL 1890 315 015, email [email_address] , Facebook, Twitter </li></ul>
  36. 37. <ul><li>Question & Answers </li></ul><ul><li>Thank You </li></ul><ul><li>Follow ODCE on </li></ul>
  37. 38. <ul><li>Where is the registered office of the company? </li></ul><ul><li>Are your website and emails compliant? </li></ul><ul><li>Are you a properly appointed director? </li></ul><ul><li>What books and records do you have? </li></ul><ul><li>Who maintains your accounts, and where? </li></ul><ul><li>Have your books ever been audited? </li></ul><ul><li>When was your last meeting of directors? </li></ul><ul><li>When was your last AGM/EGM? </li></ul><ul><li>What is your annual return date (ARD)? </li></ul><ul><li>Are you taking advantage of your power as a director? </li></ul><ul><li>Are you in financial trouble? </li></ul>
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