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Ten most common corporate
governance sins
And how to avoid them
Corporate Governance update
Kevin Prendergast
Head of Enforcement, ODCE.
Company law isn’t rocket science
 There are no hidden surprises
 Most matters can be addressed simply
 The worst thing you can do is ignore an
issue
Corporate Governance Sins
1. Don’t keep accounts
 Breach of the law
 Most prosecuted offence for directors
 No idea if making a profit or loss as a business
 If leads to insolvency, a separate offence
 Could lead to personal liability in insolvency
Corporate Governance Sins
2. Borrow money from your company
 This is a criminal offence
 Your auditor has to report it
 Easier to prosecute since 2009
 Can be resolved without money having to be
paid
Corporate Governance Sins
3. Don’t file your financial statements on time
 Fees and penalties
 Loss of audit exemption for two years
 Risk of strike-off
Corporate Governance Sins
4. Fight with your fellow directors
 Board meetings may not take place
 AGM’s may not take place
 Financial statements may not be signed or filed
 Must be resolved in High Court, public and
expensive
Corporate Governance Sins
5. Don’t have meetings
 No opportunity to take strategic look at the
business
 No opportunity to raise issues
 No record of key decisions taken by the
company
Corporate Governance Sins
6. Don’t keep minutes
 Criminal offence
 No official record of decisions
 No proof if legal disputes between directors
 No defence if facing civil proceedings
Corporate Governance Sins
7. Get struck off the register
 Lose limited liability
 Question mark over legality of contracts
 May be committing an offence
 12 months to get re-registered with CRO
 Thereafter wait for a High Court hearing
Corporate Governance Sins
8. Don’t deal with financial difficulties
 If put into liquidation, liquidator will review
at least last 12 months of trading
 Directors may face restriction or even
disqualification proceedings
 Directors may be made personally liable for
some or all of the debts
Corporate Governance Sins
9. Don’t have a strategy and business plan
 Business will lack direction
 Management and staff will have no guide to
their work
 No awareness of or plan for opportunities and
threats
Corporate Governance Sins
10. Leave it to the accountant
 The legal obligations rest with directors
 Accountants cannot face company law criminal
actions
 Your accountant can advise
What can accountants do?
 Put systems in place to ensure basic
responsibilities are complied with
 Check agenda items for meeting to ensure
they include corporate governance
/compliance matters
 Keep directors informed of new
developments
Systems for filing requirements
 Annually (on ARD)
 Financial statements
 Audit report unless exempt
 B1 Annual return
 When necessary
 Change in directors/registered office
 Change in Memo and Articles
 Register of a charge against company
Current position on Irish Corporate
Governance
 At all levels of business, corporate
governance is a key topic
 For quoted companies, the Corporate
Governance Code has expanded
requirements of Chairmen and Audit
Committees
Current position on Irish Corporate
Governance
 The public sector has its own Code issued
by the Department of Finance
 The not for profit sector has developed its
own three tier code
 Codes for SME’s also available
Current position on Irish Corporate
Governance
 Internationally
 OECD Code on Corporate Governance
 At EU Level
 EU Directives on corporate governance
disclosures for quoted companies
 Continued focus on wider corporate governance
Directives
Current position on Irish Corporate
Governance
 Nationally
 The Companies Act brings major changes for
ordinary private companies
 Single director companies
 Decisions by signature rather than meeting
 Reduced formal structures for corporate governance
 This may not always be for the best
Companies Act
 New form LTD company
 Single director
 No Memo of Association
 Meetings by written record
LTD company
 Corporate governance issues
 No ultra vires – easier to obtain finance?
 Single director – removal of “silent partner”
 Written record of decisions – need to maintain
that record for evidential as well as legal
purposes
Companies Act
 DAC
 Equivalent to current private limited company
 Memo and articles, two directors, formal
meetings
 Current corporate governance issues apply
Companies Act
 CLG
 Company limited by guarantee will also have
Memo and Articles
 2 directors
 1 member (down from current 7)
 Need for formal meetings retained
Companies Act
 New opportunities may be a temptation to
relax adherence to corporate governance
best practice
 This may have long term repercussions
 Insolvency
 Access to finance
Question & Answers
Thank You
Follow ODCE on

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Cima dublin 240215 kevin

  • 1.
  • 2. Ten most common corporate governance sins And how to avoid them Corporate Governance update Kevin Prendergast Head of Enforcement, ODCE.
  • 3. Company law isn’t rocket science  There are no hidden surprises  Most matters can be addressed simply  The worst thing you can do is ignore an issue
  • 4. Corporate Governance Sins 1. Don’t keep accounts  Breach of the law  Most prosecuted offence for directors  No idea if making a profit or loss as a business  If leads to insolvency, a separate offence  Could lead to personal liability in insolvency
  • 5. Corporate Governance Sins 2. Borrow money from your company  This is a criminal offence  Your auditor has to report it  Easier to prosecute since 2009  Can be resolved without money having to be paid
  • 6. Corporate Governance Sins 3. Don’t file your financial statements on time  Fees and penalties  Loss of audit exemption for two years  Risk of strike-off
  • 7. Corporate Governance Sins 4. Fight with your fellow directors  Board meetings may not take place  AGM’s may not take place  Financial statements may not be signed or filed  Must be resolved in High Court, public and expensive
  • 8. Corporate Governance Sins 5. Don’t have meetings  No opportunity to take strategic look at the business  No opportunity to raise issues  No record of key decisions taken by the company
  • 9. Corporate Governance Sins 6. Don’t keep minutes  Criminal offence  No official record of decisions  No proof if legal disputes between directors  No defence if facing civil proceedings
  • 10. Corporate Governance Sins 7. Get struck off the register  Lose limited liability  Question mark over legality of contracts  May be committing an offence  12 months to get re-registered with CRO  Thereafter wait for a High Court hearing
  • 11. Corporate Governance Sins 8. Don’t deal with financial difficulties  If put into liquidation, liquidator will review at least last 12 months of trading  Directors may face restriction or even disqualification proceedings  Directors may be made personally liable for some or all of the debts
  • 12. Corporate Governance Sins 9. Don’t have a strategy and business plan  Business will lack direction  Management and staff will have no guide to their work  No awareness of or plan for opportunities and threats
  • 13. Corporate Governance Sins 10. Leave it to the accountant  The legal obligations rest with directors  Accountants cannot face company law criminal actions  Your accountant can advise
  • 14. What can accountants do?  Put systems in place to ensure basic responsibilities are complied with  Check agenda items for meeting to ensure they include corporate governance /compliance matters  Keep directors informed of new developments
  • 15. Systems for filing requirements  Annually (on ARD)  Financial statements  Audit report unless exempt  B1 Annual return  When necessary  Change in directors/registered office  Change in Memo and Articles  Register of a charge against company
  • 16. Current position on Irish Corporate Governance  At all levels of business, corporate governance is a key topic  For quoted companies, the Corporate Governance Code has expanded requirements of Chairmen and Audit Committees
  • 17. Current position on Irish Corporate Governance  The public sector has its own Code issued by the Department of Finance  The not for profit sector has developed its own three tier code  Codes for SME’s also available
  • 18. Current position on Irish Corporate Governance  Internationally  OECD Code on Corporate Governance  At EU Level  EU Directives on corporate governance disclosures for quoted companies  Continued focus on wider corporate governance Directives
  • 19. Current position on Irish Corporate Governance  Nationally  The Companies Act brings major changes for ordinary private companies  Single director companies  Decisions by signature rather than meeting  Reduced formal structures for corporate governance  This may not always be for the best
  • 20. Companies Act  New form LTD company  Single director  No Memo of Association  Meetings by written record
  • 21. LTD company  Corporate governance issues  No ultra vires – easier to obtain finance?  Single director – removal of “silent partner”  Written record of decisions – need to maintain that record for evidential as well as legal purposes
  • 22. Companies Act  DAC  Equivalent to current private limited company  Memo and articles, two directors, formal meetings  Current corporate governance issues apply
  • 23. Companies Act  CLG  Company limited by guarantee will also have Memo and Articles  2 directors  1 member (down from current 7)  Need for formal meetings retained
  • 24. Companies Act  New opportunities may be a temptation to relax adherence to corporate governance best practice  This may have long term repercussions  Insolvency  Access to finance
  • 25. Question & Answers Thank You Follow ODCE on