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Directors Duties & Responsibilities

The document provides an outline for a seminar on directors' duties and responsibilities under company law. It covers topics such as corporate governance, types of directors, the role of the board, statutory director duties, appointing and removing directors, and future changes to company law. The outline includes subsections on sources of duties, company types, director duties under common law, and the functions and role of the board and members.

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Directors Duties & Responsibilities Update March 2012 Seminar Outline • Introduction to Corporate Governance & Company Law • Types of Directors & Requirements to Be a Director • Role & Function of the Board • “The 10 Statutory Director Commandments” • How to Appoint, Resign or Remove a Director • Consequence of Breaches of Company Law • Future Changes to Company Law 1
Introduction to Corporate Governance • What is Corporate Governance “the systems and processes concerned with ensuring the overall direction, ith i th ll di ti effectiveness, supervision and accountability of an organisation.” Introduction to Corporate Governance • The core concepts of corporate governance are transparency, independence, accountability, responsibility, fairness and social awareness. • C Corporate governance addresses th t dd the relationships between the owners and other stakeholders of a business and those who operate a business in order to achieve good reputation and confidence to grow and develop the business. Introduction to Corporate Governance • Who are the parties involved? - Directors - Company Secretary - Shareholders - Senior Management - Employees - Creditors - Other Stakeholders 2
Introduction to Corporate Governance • Companies are directed and controlled by Directors & Shareholders • Directors delegated power to run company on daily basis by shareholders • Shareholders still retain certain powers Sources of Duties & Responsibilities • Common Law and Equity - decisions handed out by the courts • Companies Acts - 14 Companies Acts 1963 to 2009 • European Law - EU Regulations & Directives • Memorandum & Articles of Association • Shareholders Agreement • Corporate Governance Policy Statement Company Types & Business Structures • Sole Trader • Partnership • Private Limited Company • Public Limited Company • Company Limited by Guarantee • Unlimited Company 3
Company Types & Business Structures • Business Name • Branch • Societies • Credit Unions • Charities • Unincorporated Associations What is a Company? • The word “company” no strictly technical meaning • Number of people combined for some common objectj • Must comply with the Companies Acts • Where the object is gain no group consisting of more than 20 members can be lawfully formed unless registered under the Acts Company Structure Members/Shareholders OmniPro Limited Directors Creditors Employees 4
Characteristics of a Limited Company • Limited Liability - Members liability limited to the amount, if any, unpaid on the shares for which they have subscribed • Corporate Personality - Complete legal capacity • Separate Legal Entity - Distinct from members & directors • Perpetual Succession - Continue in existence Limited Company Requirements • Must have a minimum of 2 directors. Directors cannot be limited entities • At least 1 EEA Resident director • Company secretary – individual or company • At least 1 shareholder – Private 7 members – PLC & Guarantee • Registered office address in the state. Not a PO Box Number • Activity in the State • Memorandum and Articles of Association – Rules of the Company • Comply with headed paper requirements Types of Directors 5
Company Directors • Sec 2 (1) CA, 1963 – “any person occupying the position of director by whatever name called.” • The powers of management are delegated by members to the directors. • While the members in general meeting retain certain powers, it is the BOD who, under the articles of association are deemed to have the important powers of management of the business of the Company Types of Company Directors • Executive Directors – day to day management • Non Executive Directors – External independent perspective • DeFacto Directors – not officially appointed but occupies the position • Shadow Directors – hiding their role in company Who Cannot Become a Director • Other limited companies • Undischarged bankrupts • The Company Auditor • Disqualified directors • Restricted directors – subject to share capital requirements • Over limit on No. of Directorships 6
Director Duties Common Law Duties • Must act honestly, in good faith and in the best interests of the company as a whole • Must not abuse their powers & avoid conflict of interests • Must not make a secret profit from their p p position • Must act with reasonable skill, care and diligence • No requirement for a greater degree of skill • Entitlement to rely on persons to who business has been delegated CLRG – Statement of Fiduciary Duties • Duty of loyalty • Duty of obedience to company constitution • Duty to avoidance of secret profits • Duty of independence of judgement • Duty to avoid conflicts of interest • Duty of care, skill & diligence • Duty to consider interests of third parties • Duty of fairness 7
Tralee Beef & Lamb Ltd • Duty to be informed about company’s affairs and join with co-directors in supervising and controlling the company • Collective and individual duty to acquire and maintain sufficient knowledge of company’s g p y business • Delegation is permitted but does not absolve duty to supervise the delegated functions – to executive directors or management Threats to Directors • Self Interest – unethical behaviour • Self Review – making & reviewing decisions by same person • Advocacy – promoting an opinion not in interests of company • Familiarity – sympathetic or influenced to interests of others • Intimidation – actual or perceived from others in an influential position Safeguards to Threats • Education, training, experience of Directors • Corporate Governance Regulations, Policies & Procedures • Board Evaluation • Monitoring & disciplinary procedures 8
Functions of the Board • Define the company’s purpose & evaluate the performance of the company & that of top executives • To agree the strategies and plans for achieving that purpose • To establish the company’s p p y policies • To review the company internal controls and risk management policies • To appoint the chief executive and to review his performance • The daily management of the CEO is delegated to the Chairperson by the board Successful Boards • Depends on personalities involved and how well they work with each other • Terms of Reference for the board agreed, implemented and reviewed p • Board’s function, make up and talents should continually evolve • Board ensure Management Team runs efficiently – not become involved in daily running – strategic focus Role of Members • Attend & Vote at general meetings • Vote on resolutions put to the members - Receive & Consider Accounts - Re appoint retiring Directors Re-appoint - changes to the corporate structure • Ensure Directors run the company in accordance with Articles of Association 9
Director Meeting Rules • Check Articles of Association • Notice – reasonable notice • Quorum – minimum 7 directors • Voting – 1 director 1 vote • Chairman may have casting vote • Minutes record decisions taken at the meeting Member Meetings Rules • Check Articles of Association • Notice - check type of meeting & resolutions to be passed - AGM – 21 d days - EGM 14 or 21 d days • Check Members entitled to attend & vote • Auditor entitled to notice & attend • Notice to contain resolution to be put to members Member Meetings Rules • Quorum – min 2 members present in person or by proxy • Ordinary or Special Resolutions • Mi t record d i i Minutes d decisions t k at th taken t the meeting • G1 or G2 form filed at Companies Registration Office 10
“The 10 Statutory Company Director Commandments” The Ten Commandments 1. “Thou shall act honestly, responsibly and in the bests interests of the Company” - not create secret profit or advantage - Due care skill and diligence that would care, be reasonably expected for someone in their position - not abuse their powers The Ten Commandments 2. “Thou shall keep proper books & records pursuant to Sec 202 CA, 1990” - Every company shall cause to keep proper books of account - Record & explain transactions - Enable financial position to be determined & audit performed - Prosecuted for default 11
The Ten Commandments 3. “Thou shall prepare Annual Accounts & have an annual audit performed” - Full or abridged accounts - Profit & Loss Account - Balance Sheet - Cashflow Statement - Supporting Notes - Directors Report - Auditors Report The Ten Commandments 4. “Thou shall file an Annual Return & Accounts at the Companies Registration Office every year” - Annual Return Date (“ARD”) ( ARD ) - File within 28 days - Late filing penalties - Strike off or prosecution The Ten Commandments 5. “Thou shall lay accounts before the members at an AGM each year” - Directors Meeting - Notice Consent to Short Notice Proxy Notice, Notice, forms & AGM minutes - 9 months from financial year end - Sec 40 EGM 12
The Ten Commandments 6. “Thou shall maintain statutory registers and minute books” - Every company must keep a statutory register - Sec 145 & 146 CA, 1963 – minutes of general & Directors meetings must be kept - ODCE & general public may inspect register The Ten Commandments 7. “Thou shall file statutory forms with the CRO” - Changes in Directors/Secretary - Changes in Registered Office - Changes in Share Capital - Change of Company Name - Strike off or Liquidation applications The Ten Commandments 8. “Thou shall disclose interests in shares or debentures or in contracts” - Sec 53 CA, 1990 – disclosure of interests in shares & debentures - Sec 194 CA, 1963 – disclosure of interests in Contracts - (84 Table A Part I Plc & 7 Table A Part II Limited Co.) – voting on contracts 13
The Ten Commandments 9. “Thou shall not breach laws regarding Directors Transactions” - Sec 31 CA, 1990 – loans, quasi-loans, credit transactions guarantees & transactions, security - Sec 29 CA, 1990 – buying or selling a non-cash asset from a Director or connected person The Ten Commandments 10. “Thou shall wind up an insolvent company in a timely & correct manner” - Company cannot pay its debts - Duty to co operate with a liquidator co-operate - duty not to misapply company funds or making preferential payments How to Appoint, Resign or Remove a Director 14
Company Director Requirements • Must be an individual • 2 Directors – 1 resident in EEA • In absence of a resident Director - Sec 43 Bond - S 44 R l & C ti Sec Real Continuous Li k Link • Limit of 25 Directorships - PLC’s not included - Group companies counted as 1 • Disqualified & Restricted Directors – may not act Appointing a Director • First Director – Form A1 • Consent to Act as Director – “I herby consent to act as Director of the aforementioned company and I acknowledge that as Director I have legal duties and obligations imposed by the Companies Acts, other enactments and at common law.” Appointing a Director • Existing Company – Board meeting or at a general meeting • Board meeting – “That Joe Bloggs, having consented to act, be appointed as a Director of pp the Company, with effect from close of meeting.” • Form B10 – 14 days • Update Register of Directors & Dir’s Interests, headed paper, bank details, etc • May have to retire a next AGM 15
Resignation of Directors • Board Meeting - Letter of Resignation - B10 to be filed within 14 days • B10 form - Details of resigning Director – “Joe Bloggs resigned as Director of the Company” - Signed by current Director or Secretary • Update Register of Directors, headed paper, bank details, etc. Removal of a Director • Sec 182 CA, 1963 provides a Director can be removed by ordinary resolution of the members • Extended notice of 28 days for EGM • Director can make representations at the meeting • Consider provisions of Sec 205 CA, 1963 if Director is also a shareholder Consequence of Breaches of Company Law p y 16
Indictable & Other Offences • 140 Indictable Offences • 300 Summary Offences • Indictable Offence - €12,700 and/or 5 years imprisonment • Summary Offence - €1,900 and or 12 months imprisonment • Higher sanctions for certain offences including fraudulent trading, reckless trading and insider dealing • ODCE has discretion to impose administrative fines rather than seeking a court prosecution Main Offences • Sec 60(15) CA, 1963 – Giving of financial assistance by a company for the purchase of its own shares • Sec 297 CA, 1963 – Fraudulent Trading g • Sec 40 C(A), 1983 – Net Assets less than half of called up share capital • Sec 22(3) C(A), 1986 – Wilfully providing false information in any return, report, certificate of balance sheet or other document Main Offences • Sec 53 CA, 1990 – directors & secretary’s notification of interest in the Company • Sec 197(1),(3) CA, 1990 – False statements to Auditors, delay in p y providing information g • Sec 202 CA, 1990 – Failure to keep proper books • Sec 242(1), (1A) CA, 1990 – Furnishing false information under the Acts, including to electronic filing agent 17
Main Offences • Sec 243(1) CA, 1990 – Destruction, mutilation, falsification of documents • Sec 33(6) C(A)No.2)A, 1999 – Omission from balance sheet of directors’ statement claiming audit exemption • Sec 37(1) C(A)(No.2)A, 1999 – Wilfully false statements in accounts & returns • Sec 43(13) C(A)(No.2)A, 1999 – Company to have a director resident in the State Restriction of Directors • Directors maybe restricted by the High Court from acting as a Director unless certain amount of share capital paid up • Punish Directors of Insolvent Companies • Application taken by a liquidator • ODCE decide whether Directors go to court • Honestly & Responsibly – only defence Disqualification of Directors • High Court may disqualify Directors for acting – cannot act in any position of management of a Company • Disqualification for min of 5 years • Used in cases of serious breaches • Failure to file an Annual Return & Company is struck off register of companies 18
Personal Liability • Personal Liability of any officer – including Company Secretary g - Reckless Trading - Fraudulent Trading - Failure to Keep Proper Books of Account Reckless Trading • Sec 297A 1A. CA, 1963 “any person, was while an officer of the company, knowingly a party to the carrying on of any business of the company in a reckless manner” • Can occur during examinership or winding up - Activity that they knew or should have known would result in loss - Incurred debt that they knew they wouldn’t be able to pay • Directors can be made personally liable for debts of Company Fraudulent Trading • Sec 297A 1.B. CA, 1963 “if any person is knowingly a party to carrying on of the business of a company with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose.” • Directors can be made personally liable for debts • Sec 297 CA 1963 - criminal offence - Summary – 12 months and or €1,269.74 fine - Indictment – 7 years and or €63,486.90 fine 19
Failure to Keep Books & Records • Sec 204 CA, 1990 if Co.- wound up insolvent, proper books were not kept, Directors may be held personally liable for the Debts • Courts consider failure to keep books has - contributed to the company’s inability to pay all of its debts - resulted in substantial uncertainty to assets & liabilities - has substantially impeded the orderly wind up • Dev Oil & Gas Limited – Landmark Case Future Changes • Companies Consolidation & Reform Bill • Charities Act 2009 • EU Legislation Essential Advice for Directors • Hold frequent Board Meetings to assess the situation • Ensure key financial & trading information is available • Take financial & legal advice • Keep creditors informed • Document all key decisions & advice • Don’t put off difficult decisions 20
OmniPro Company Formations • Standard Formations for €251.00 (incl VAT) • 24 Hour Turn Around • N tD Next Door t th C to the Companies R i t ti i Registration Office • Fast, affordable, friendly • Full Company Pack with Company Seal OmniPro Company Secretarial Services • Shares - Allotment, Transfer, Redemption & Buyback • Voluntary Strike Off • C Company R t ti Restorations • Re-organisations & Estate Planning • Non Filing Accounts Structure • Shareholder Agreements OmniPro Training & Advice • Company Law Query Service • In-house Training • Co Sec Department Setup & Review 21
Contact Details Conor Sweeney csweeney@omnipro.ie 087 2434384 Amy Brennan abrennan@omnipro.ie 059 9183888 Contact Details Unit 3, South Court, Block D, Wexford Road Iveagh Court, Business Park, Harcourt Road, Carlow Dublin 2 059 9183888 01 4110000 info@omnipro.ie www.omnipro.ie 22
COMPANIES ACTS 1963 TO 2009 COMPANY LIMITED BY SHARES Memorandum & Articles of Association Of Name of Company Limited
COMPANIES ACTS 1963 TO 2009 COMPANY LIMITED BY SHARES Memorandum of Association Of Name of Company Limited 1. The name of the Company is 2. The objects for which the Company is established are: - (a)
(b) To carry on any other business (whether manufacturing or otherwise) which may seem to the Company capable of being conveniently carried on in connection with the above objects, or calculated, directly or indirectly, to enhance the value of, or render more profitable any of the Company’s property. (c) To import, export, buy sell, barter, exchange, pledge, make advances on, take on lease or hire or otherwise acquire, alter, treat, work, manufacture, process, dispose of, let on lease, hire or hire purchase, or otherwise trade or deal in and turn to account as may seem desirable goods, articles, equipment, machinery, plant, merchandise and wares of any description and things capable of being used or likely to be required by persons having dealings with the Company for the time being. (d) To carry on any other business except the issuing of policies of insurance, which may seem to the Company capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value of or render profitable any of the Company’s property or rights. (e) To purchase, take on lease or in exchange, hire or by any other means acquire any freehold, leasehold or other property for any estate or interest whatever, and any rights, privileges or easements over or in respect of any property, and any buildings, offices, factories, mills, works, wharves, roads, railways, tramways, machinery, engines, rolling stock, vehicles, plant, live and dead stock, barges, vessels or things, and any real or personal property or rights whatsoever which may be necessary for, or may be conveniently used with, or may enhance the value of any other property of the Company. (f) To build, construct, maintain, alter, enlarge, pull down and remove or replace any buildings, offices, factories, mills, works, wharves, roads, railways, dams, tramways, machinery, engines, walls, fences, banks, sluices, or watercourses, and to clear sites for the same, or to join with any person, firm or company in doing any of the things aforesaid, and to work, manage and control the same or join with others in so doing. (g) To apply for, register, purchase, or by other means acquire and protect, prolong and renew, whether in Ireland or elsewhere, any patents, patent rights, brevets d’invention, licenses, trade marks, designs protections and concessions or other rights which may appear likely to be advantageous or useful to the Company, and to use and turn to account and to manufacture under or grant licenses or privileges in respect of the same, and to expend money in experimenting upon and testing and in improving or seeking to improve any patents, inventions or rights which the Company may acquire. (h) To acquire and undertake the whole or any part of the business, goodwill and assets and liabilities of any person, firm or company carrying on or proposing to carry on any of the business which this Company is authorised to carry on, and as part of the consideration for such acquisition to undertake all or any of the liabilities of such person, firm or company, or to acquire an interest in, amalgamate with or enter into partnership or into any arrangement for sharing profits, or for co-operation, or for limiting competition, or for mutual assistance with any such person, firm or company and to give or accept by way of consideration for any of the acts or things aforesaid or property acquired, any shares, debentures, debenture stock or securities that may be agreed upon, and to hold and retain or sell, mortgage and deal with any share, debentures, debenture stock or securities so received.
(i) To improve, manage, cultivate, develop, exchange, let on lease or otherwise, mortgage, sell, charge, dispose of, turn to account, grant rights and privileges in respect of, or otherwise deal with all or any part of the property and rights of the Company. (j) To invest and deal with the monies of the Company not immediately required in such shares or upon such securities and in such manner as may from time to time be determined. (k) To lend and advance money or give credit to such person, firms or companies and on such terms as may seem expedient, and in particular to customers of and others having dealings with the Company, and tenants, subcontractors and persons undertaking to build on or improve any property in which the Company is interested, and to give guarantees or becomes security for any such person, firms or companies. (l) To borrow or raise money in such manner as the Company shall think fit, and in particular by the issue of debentures or debenture stock, bonds, obligations and securities of all kinds (perpetual or otherwise) and either redeemable or otherwise and to secure the repayment of any money borrowed, raised or owing, by mortgage, charge or lien upon the whole or any part of the Company’s property or assets (whether present or future), including its uncalled capital, and also by a similar mortgage, charge or lien to secure and guarantee the performance by the Company of any obligation or liability it may undertake and to purchase, redeem or pay off ant such securities. (m) To give credit to or to become surety or guarantor for any person or company, and to give all descriptions of guarantees and indemnities, either with or without the Company receiving any consideration to guarantee or otherwise secure (with or without a mortgage or charge on all or any part of the undertaking, property and assets, present and future, and the un-called capital of the Company) the performance of the obligations and repayment or payment of the capital or principal of and dividends or interest on any stocks, shares, debentures, debenture stock, notes, bonds or other securities or indebtedness of any person, authority (whether supreme, local, municipal or otherwise) or company, including (without prejudice to the generality of the foregoing) any company which is for the time being the Company’s holding company as defined by Section 155 of the Companies Act 1963 or any statutory modification or re- enactment thereof or another subsidiary as defined by the said section of the Company’s holding company or a subsidiary of the Company or otherwise associated with the Company in business. (n) To draw, make, accept, endorse, discount, execute and issue promissory notes, bills of exchange, bills of lading, warrants, debentures and other negotiable or transferable instruments. (o) To apply for, promote and obtain any Act of the Oireachtas, Provisional Order or License of the Minister for Enterprise, Trade and Employment or other authority for enabling the Company to carry any of its objects into effect, or for effecting any modification of the Company’s constitution, or for any other purpose which may seem expedient, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the Company’s interests. (p) To enter into any arrangements with any government or authorities (supreme, municipal, local or otherwise) or any companies, firms or persons, that may seem conducive to the attainment of the Company’s objects, or any of them, and to obtain from any such government, authority, corporation, company, firm or person any charters, contracts, decrees, rights, privileges and concessions which the Company may think desirable, and to carry out, exercise and comply with any such charters, contracts, decrees, rights,
privileges and concessions. (q) To subscribe for, take, purchase or otherwise acquire and hold shares or other interests in or securities of any other company having objects altogether or in part similar to those of this Company or carrying on any business capable of being carried on so as, directly or indirectly, to benefit this Company. Subject to the provisions of the Companies Acts, 1963 to 2009, the Company may purchase or otherwise acquire on such terms and in such manner as it thinks fit any shares in the capital of the Company or its Holding Company. (r) To act as agents or brokers, and as trustees or as nominee for any person, firm or company, and to undertake and perform sub-contracts, and also to act in any of the businesses of the Company through or by means of agents, brokers, sub-contractors, trustees or nominees of others. (s) To remunerate any person, firm or company rendering services to this Company, either by cash payment or by the allotment to him, her or them of shares or securities of the Company credited as paid up in full or in part or otherwise as may be thought expedient. (t) To pay all or any expenses incurred in connection with the promotion, formation and incorporation of the Company, or to contract with any person, firm or company to pay the same, and to pay commissions to brokers and others for underwriting, placing, selling or guaranteeing the subscription of any shares, debentures, debenture stock or securities of the Company. (u) To support and subscribe to any charitable or public object, and any institution, society or club which may be for the benefit of the Company or its employees, or may be connected with any town or place where the Company carries on business; to give pensions, gratuities (to include death benefits) or charitable aid to any persons who may have been officers or employees or ex-officers or ex-employees of the Company, or, its predecessors in business, or to the spouses, children or other relatives or dependants of such persons; to make payments towards insurance; and to form and contribute to provident and benefit funds for the benefit of any such person or of their spouses, children or other relatives or dependants. (v) To establish, promote or otherwise assist any other company or companies or associations for the purpose of acquiring the whole or any part of the business or property and undertaking any of the liabilities of this Company, or of undertaking any business or operation which may appear likely to assist or benefit this Company, or to enhance the value of any property or business of this Company, and place or guarantee the placing of, underwrite, subscribe for or otherwise acquire all or any part of the shares or securities of any such company as aforesaid. (w) To sell or otherwise dispose of the whole or any part of the business or property of the Company, either together or in portions, for such consideration as the Company may think fit, and in particular for shares, debentures or securities of any other company whether or not having objects altogether or in part similar to those of this Company. (x) To distribute among the members of the Company in specie any property of the Company, and in particular any shares, debentures or securities of other companies belonging to this Company or of which this Company may have the power of disposing. (y) To procure the Company to be registered or recognised in any foreign country or place.
(z) To do all such other things as may be deemed incidental or conducive to the attainment of the above objects or any of them. It is hereby expressly declared that each sub-clause of this clause shall be construed independently of the other sub-clauses hereof, and that none of the objects mentioned in any sub-clause shall be deemed to be merely subsidiary to the objects mentioned in any other sub-clause. Provided always that the provisions of this clause shall be subject to the Company obtaining where necessary, for the purpose of carrying any of its objects into effect, such license, permit or authority as may be required by law. 3. The liability of the members is limited. 4. The Share Capital of the Company is divided into Ordinary shares of € each, with the power to increase or decrease the share capital. The capital may be divided into different classes of shares with any preferential, deferred or special rights or privileges attached thereto, and from time to time the company’s regulations may be varied so far as may be necessary to give effect to any such preference, restriction or other term.
I/We, the several persons whose names, addresses and descriptions are subscribed, wish to be formed into a Company in pursuance of this Memorandum of Association and we agree to take the number of shares in the capital of the Company set opposite our respective names. Names, Addresses and No. of Shares taken Descriptions of Subscribers by each Subscriber Total number of shares taken: Dated: Witness to the above signatures: Name: Address:
COMPANIES ACTS 1963 TO 2009 COMPANY LIMITED BY SHARES Articles of Association Of Name of Company Limited PRELIMINARY 1. (a) Subject as hereinafter provided, the Regulations contained in Parts I and II of Table A as in the First Schedule to the Companies Act, 1963 (hereinafter referred to as "Table A") together with the European Communities (Single Member Private Limited Companies) Regulations, 1994 (“Single-Member Company Regulations”) shall apply to the Company. (b) Regulations 5, 8, 24, 40-46, 47, 51, 54, 55, 56, 75, 79, 84, 86, 91, and 92 to 100 Part I of Table A and Regulation 7 of Part II of Table A shall not apply. SHARE CAPITAL AND SHARES 2. The Share Capital of the Company is € divided into Ordinary shares of €1 each. 3. When any shares have been forfeited an entry shall forthwith be made in the Register of Members of the Company recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of an entry shall be made of the manner and date of the sale or disposal thereof. 4. No share shall be offered at a discount. 5. (a) The Directors of the Company are generally and unconditionally authorised to exercise all powers of the Company to allot relevant securities (within the meaning of Section 20 of the Companies (Amendment) Act, 1983), up to an amount equal to the authorised but as yet un-issued share capital of the Company on the date of incorporation of the Company. The authority hereby conferred shall expire five years from the date of incorporation of the Company, unless previously renewed, revoked or varied by the Company in general meeting, save that the Company may before such expiry date make an offer agreement which, might require relevant securities to be allotted after the authority has expired and the Directors may allot the relevant securities in pursuance of such offer or agreement as if the authority hereby conferred has not expired. (b) The pre-emption provisions of sub-sections (1), (7) and (8) of Section 23 of the Companies (Amendment) Act, 1983 shall not apply to any allotment by the Company of equity securities (within the meaning of the said Section 23).
6. Subject to the provisions of Part XI of the Companies Act, 1990 the Company may: (a) Issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the holder, on such terms and in such manner as shall be provided by the Articles of Association of the Company provided always that the nominal value of the issued share capital which is not redeemable shall not at any time be less than one tenth of the nominal value of the total issued share capital of the Company. (b) Purchase its own shares. (c) Cancel any of its own shares following purchase. (d) Re-designate any of its own shares following purchase as treasury shares provided always that the nominal value of treasury shares held by the Company, may not at any one time, exceed ten per cent of the nominal value of the issued share capital of the Company. For so long as the Company holds shares as treasury shares: (i) The Company shall not exercise any voting rights in respect of those shares and any purported exercise of those rights shall be void. (ii) No dividend or other payment (including any payment in a winding up of the company) shall be payable to the company in respect of those shares. (e) Cancel or re-issue as shares of any class, any shares held by the Company as treasury shares. (f) Not make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits of the company or the proceeds of a fresh issue of shares. (g) Notice of redemption in writing shall be given in accordance with this sub-paragraph (g) to the holders of Ordinary Shares to be purchased or redeemed. Any notice of purchase or redemption shall specify the number of shares to be purchased or redeemed, the date fixed for purchase or redemption and the place at which the certificates for such shares are to be presented for purchase and upon such date each of the holders of the shares concerned shall be bound to deliver to the Company at such place the Certificates for the shares to be purchased or redeemed. If any certificate so delivered to the Company includes any shares not to be purchased or redeemed on that occasion fresh certificate for such shares shall forthwith be issued to the holder delivering such certificate to the Company. 7. When any shares have been forfeited an entry shall be made in the Register of Members of the Company recording the forfeiture and the terms and date thereof. ALTERATION OF CAPITAL 8. The Company may by Special Resolution: (a) increase its share capital by such sum to be divided into shares of such amount as the resolution may prescribe; (b) consolidate its shares of a larger amount than its existing shares; (c) sub-divide its shares into shares of a smaller amount than its existing shares; (d) cancel any shares which at the date of the passing of the resolution have not been
taken or agreed to be taken by any person; or (e) reduce its share capital in any way, whether by purchase, redemption or otherwise. FINANCIAL ASSISTANCE 9. The Company may give any form of financial assistance which is permitted by the Companies Acts, 1963 to 2009 for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the Company or in the Company’s holding company and Regulation 10 of Part I of Table A will be modified accordingly. TRANSFER OF SHARES 10. The Directors may, in their absolute discretion and without assigning any reason therefore, decline to register any transfer of any share, whether or not it is a fully paid share; and Regulation 24 of Part I of Table A shall be modified accordingly. 11. The instrument of transfer of a fully paid up share need not be signed by or on behalf of the transferee and Regulation 22 of Part I of Table A will be modified accordingly. BORROWING POWERS 12. The Directors may raise or borrow for the purposes of the Company’s business such sum or sums of money as they think fit, and may secure the repayment of, or raise any such sum or sums as aforesaid by mortgage or charge upon the whole or any part of the property and assets of the Company, present and future, including its uncalled and un-issued capital, or by the issue at such price as they may think fit, of bonds or debentures, either charged upon the whole or any part of the property and assets of the Company, or not so charged, or in such other way as the Directors may think expedient. 13. A register of the holders of the debentures of the Company shall be kept at the registered offices of the Company, and shall be open to inspection of the registered holders of such debentures and of any member of the Company, or any other person subject to such restrictions as the Company in general meeting may from time to time impose. The Directors may close such Register for such period or periods as they may think fit, not exceeding in aggregate thirty days in each year. GENERAL MEETINGS 14. No business shall be transacted at a general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, two members present in person or by proxy shall be a quorum. 15. A general meeting may with the written consent of all the members and the Auditors be convened by less than fourteen days notice, and in such manner as the members may think fit, and Regulation 51 of Part I of Table A shall be modified accordingly. The annual general meeting may be held in the state or elsewhere subject to Section 140. 16. In Regulation 70 of Part I of Table A, the words “not less than 48 hours before the time for holding” and “not less than 48 hours before the time appointed for” will be deleted and there shall be substituted therefore the words “before the
commencement of” on both occasions. 17. In accordance with Section 160 of the Companies Act, 1963 relating to the removal of an auditor from office, exercisable by the Company in general meeting under the Companies Acts 1963 to 2009 or otherwise shall be exercisable by the members without the need to hold a general meeting of the Company. 18. Where the members makes a decision, which would be normally be taken by the Company in general meeting he/she must provide the Company with a written record of that decision. Such written record, together with any resolutions passed in accordance with Article 9, shall be retained by the Company in book or some other means suitable for the purpose. 19. Subject to Section 141 of the Act, a resolution in writing signed by all the members for the time being entitled to attend and vote on such resolution at a general meeting (by their duly authorised representative) shall be as valid and effective for all purposes as if the resolution had been passed at a general meeting of the Company duly convened and held, and if described as a Special Resolution shall be deemed to be a Special Resolution within the meaning of the Act. Any such resolution can consist of several signed documents, which together form a resolution. 20. Subject to Section 140 of the Act concerning annual general meetings, all other meetings (including extraordinary general and class meetings of the members of the company) may be conducted by the use of conference telephone or similar facility provided that the members of the Company and the Auditor have been notified of the convening of the meeting and the availability of the conference telephone or similar facility for the meeting can hear and contribute to the meeting and such participation in meeting shall constitute presence in person at the meeting and the members may be situated in any part of the world for any such meeting. DIRECTORS 21. Unless and until the Company in a general meeting shall otherwise determine, the number of Directors shall not be less than two. The first Directors shall be appointed in writing by the subscribers to the Memorandum of Association. 22. A Director shall not require a share qualification but nevertheless shall be entitled to receive notice of and to attend and speak at any general meeting and Regulation 136 of Part I of Table A shall be modified accordingly. 23. The quorum of Directors for transacting business shall, unless otherwise fixed by the Directors, be two. 24. (a) For the purpose of these Articles, the contemporaneous linking together by telephone or other means of communication of a number of Directors not less than the quorum shall be deemed to constitute a meeting of the Directors, and all the provisions in these Articles as to meetings of the Directors shall apply to such meetings. (b) Each of the Directors taking part in the meeting must be able to hear each of the other Directors taking part. (c) At the commencement of the meeting each Director must acknowledge his presence and that he accepts that the conversation shall be deemed to be a meeting of the
Directors. (d) A Director may not cease to take part in the meeting by disconnecting his telephone or other means of communication unless he has previously obtained the express consent of the Chairman of the meeting, and a Director shall be conclusively presumed to have been present and to have formed part of the quorum at all times during the meeting unless he has previously obtained the express consent of the chairman of the meeting to leave the meeting as aforesaid. (e) A minute of the proceedings at such meeting by telephone or other means of communication shall be sufficient evidence of such proceedings and of observance of all necessary formalities if certified as a correct minute by the Chairman of the meeting. 25. A resolution in writing signed by all the Directors for the time being entitled to receive notice of a meeting of the Directors shall be valid as if it had been passed at a meeting of the Directors duly convened and held and may consist of several documents in the like form each signed by one or more Directors. 26. The Directors shall have the power at any time and from time to time appoint another person to be a Director of the Company, either to fill a casual vacancy or as an addition to the board, but so that the total number of Directors shall not at any time exceed the maximum number fixed as herein before mentioned. 27. Provided that he shall have declared the nature of his interest in accordance with Regulation 83 of Part I of Table A, a Director may vote in respect of any contract, appointment or arrangement in which he is interested, and he shall be counted in the quorum present at the meeting. SINGLE MEMBER COMPANY 28. (I) If at any time all the issued shares of the Company are registered in the name of the sole person (whether a natural person or a body corporate), it will be a single- member company within the meaning of the European (Single-Member Private Limited Companies) Regulations, 1994 (the Singe Member Company Regulations). If and so long as the Company is a single member company the following provisions shall apply notwithstanding anything to the contrary in these Articles or Table A: (a) Annual General Meetings The sole member may decide to dispense with the holding of annual general meetings. Such decision will be effective for the year in which it is made and subsequent years, but nevertheless the sole member or the auditors may require the holding of an annual general meeting in any such year in accordance with the procedure laid down in the Single Member Company Regulations. (b) Where a decision to dispense with the holding of an annual general meeting is in force, the accounts and the Directors' and Auditors report that would otherwise be laid before an annual general meeting shall be sent to the sole member as provided in the Single Member Company Regulations, and the provisions of the Companies Acts, 1963 with regard to the annual return and financial statements which apply by reference to the date of the annual general meeting will be construed as provided in the Single Member Company Regulations.
(c) Quorum at General Meetings The sole member, present in person or by proxy, is a sufficient quorum at a general meeting. (d) Resolutions of Shareholders All matters requiring a resolution of the Company in general meeting (except the removal of the auditors from office) may be validly dealt by a decision of the sole member. The sole member must provide the Company with a written record of any such decision or, if is dealt with by written resolution under Regulation 6 of Part II of Table A, with a copy of that resolution, and the decision or resolution shall be recorded and retained by the Company. (e) Contracts with Sole Member (i) Where the Company enters into a contract with the sole member which not in the ordinary course of business and which is not in writing and the sole member also represents the Company in the transaction (whether as a Director or otherwise), the Directors shall ensure that the terms of the contract are forthwith set out in a written recorded in the minutes of the next Directors' meeting. (ii) If and whenever the Company becomes a single-member company or ceases to be a single-member company, it shall notify the Registrar of Companies as provided in the single-member company regulations. DISQUALIFICATION OF DIRECTORS 29. The Office of a Director shall be vacated: (a) If he ceases to be a Director by virtue of Section 180/184 of the Act; or (b) If he becomes bankrupt or insolvent or compound with his creditors; or (c) If he becomes unsound of mind or found to be lunatic; or (d) If he is convicted of an indictable offence (other than an offence under the Road Traffic Act, 1961, or any Act amending the same) unless the Directors otherwise determine; or (e) If he absents himself from the meetings of the Directors for a period of six calendar months without special leave of absence from the other Directors; or (f) If he resigns his office by notice in writing to the Company; or (g) If he is disqualified or restricted pursuant to an Order made under the provisions of the Companies Act, 1990. INDEMNITY 30. In addition to the indemnity contained in Regulation 138 of Part I of Table A, the Company shall indemnify every Director, Secretary or other officer against all costs and expenses incurred or about the execution and discharge of the duties of his office. 31. A Director may hold any office of profit under the Company (other than that of the Auditor) in conjunction with the office of Director and may enter into contracts or arrangements or have dealings with the Company and shall not be disqualified from office thereby, nor shall he be liable to account to the Company for any profit arising
out of such contract, arrangement or dealing to which he is a party, or in which he is interested by reason of his being at the same time a Director of the Company, provided that such Director discloses to the Board at or before the time when such contract, arrangement or dealing is determined upon his interest therein, or if such interest is subsequently acquired, provided that he on the first occasion possible discloses to the Board the fact that he has acquired such interest. But except in respect of any agreement or arrangement to give any indemnity or security to any Director who has undertaken or is about to undertake any liability on behalf of the Company, or of a resolution to allot any shares or debentures to a Director, no Director shall vote as a Director in regard to any contract, arrangement or dealing in which he is interested or upon any matter arising there out, and if he shall so vote his vote shall not be counted, nor shall he be reckoned in estimating a quorum when any such contract, arrangement or dealing is under consideration. MANAGING DIRECTOR 32. The Directors may from time to time entrust to and confer upon the Managing Director all or any of the powers of the Directors (excepting the power to make calls, forfeit shares, borrow money or issue debentures) that they think fit. But the exercise of all such powers by the Managing Director shall be subject to such regulations and restrictions as the Directors may from time to time impose and the said powers may at any time be withdrawn, revoked or varied. NOTICES 33. Where a notice is sent by post it shall be deemed to have been served at the expiration of twenty four hours after it was posted; and Regulation 133 of Part I of Table A shall be modified accordingly. 34. A member who has no registered address in the Republic of Ireland, Northern Ireland or Great Britain, and has not supplied to the Company an address within the Republic of Ireland, Northern Ireland or Great Britain for the giving of notices to him shall not be entitled to receive any notices from the Company. COMPANY SECRETARY 35. The first Company Secretary shall be appointed in writing by the Subscribers to the Memorandum of Association and shall be the person named in the statement delivered pursuant to Section 3 of the Companies (Amendment) Act, 1982.
Names, Addresses and Descriptions of Subscribers Dated: Witness to the above signatures: Name: Address:
Directors Their duties and powers A quick guide
Introduction We have produced this information booklet to explain the role of company directors under the Companies Acts. What is a company director? Company directors control and direct a company in the interests of its owners (known as members). They also have particular responsibilities under the law and the company’s constitution. A company must have at least two directors. These act together on a board of directors. Who can be a company director? People do not need any particular qualifications or experience to be directors. Company directors will often not work for the company in question or own shares in it. To protect the public, some people cannot be directors at certain times. These include bankrupts, who are prohibited from being directors while their debts remain unpaid or until a court excuses them from paying those debts. People whom a court has found guilty of fraud or serious misconduct may also be disqualified from acting as directors for a certain period. If a person is found by a court to have acted dishonestly or irresponsibly in a company that failed to pay its debts, the court may restrict them. A restricted director can only act as a director in certain companies in which the members have invested a significant amount of money. Restrictions are normally for a period of five years. Directors Their duties and powers
Are there different types of director? There are five types of company director. • Executive directors are directors who are involved in managing the company. Examples include the company’s managing director or its sales director. • Non-executive directors are not involved in the company’s management. They may be knowledgeable and experienced people who are appointed to the board to give independent advice. Companies do not have to appoint non-executive directors. • Alternate directors are chosen by directors to act for them in their absence. • De facto directors perform the duties of a director even though they are not formally appointed and registered. They have the same duties as appointed directors. • Shadow directors are not formally appointed as directors but give instructions that are usually followed by the company’s directors. A shadow director has many of the legal responsibilities of an appointed director. Office of the Director of Corporate Enforcement
What are the duties of directors? Directors are trustees or minders of the company’s assets and their duties reflect that responsible position. Executive and non-executive directors have the same duties. Directors do not have to do everything themselves. They may give appropriate tasks to company executives who will report back to the board. Common law duties of directors (the duties created by the courts) The common law duties require that: • directors must act in good faith and in the company’s interest and not use their powers for personal gain or for the benefit of others at the company’s expense - for example directors should pay the market value for company assets; • directors must not profit from being a director and must account for any profit secretly obtained – for example a director who is also a director of a second business cannot use any confidential information they receive as a director of the first company to benefit that second business; and • directors must act with due care, skill and diligence – for example, directors need to meet regularly to review the company’s finances and take action to correct any problems. Directors Their duties and powers
Statutory duties of directors (the duties created by legislation) On their appointment, directors must give the company their name, address, date of birth, nationality and occupation. They must also give details of any shares or debentures (written acknowledgements of a debt) in the company or in related companies that they own or in which they have an interest. They must also give details of any other companies of which they are a director. For as long as they are serving as a director, they should keep the company up to date on any changes to this information. They should also inform the company if they have any interest in a company contract or proposed contract. Directors must ensure that the company keeps proper books of account that record and explain the payments to or from the company or its customers and suppliers and accurately identify its assets and liabilities. Every year, directors must prepare financial statements that give ‘a true and fair view’ of the company’s affairs. These financial statements must be audited (unless the company can decide not to have an audit). Directors must also write a report for the members of the company. This report should include details of: • how the company is doing; • how its business has developed during the year; • any important events affecting the company since the end of the year; and • any likely developments in the business. Office of the Director of Corporate Enforcement
Directors must arrange to call the company’s annual general meeting (AGM) and circulate a draft agenda to the members in good time along with other relevant documents, including the financial statements, the directors’ report and any auditor’s report. Occasionally, directors will have to call an extraordinary general meeting (EGM) of the members to deal with special or urgent business. Directors must arrange to keep minutes of what is said and decided at general meetings and at meetings of the board and its sub-committees. They must ensure that the company keeps certain documents up to date, including the registers of members, directors and secretaries and the interests of the directors and secretaries in the company. Directors must ensure that the company promptly sends certain documents and information to the Companies Registration Office (www.cro.ie). These include, for example: • the company’s annual return and associated financial statements; • notice of a change of registered office, director, secretary or their details; • notice of the creation of a mortgage or charge on the company’s property in return for its receiving a loan; and • a memorandum of satisfaction of a charge (a statement that a loan has been repaid). Directors can be penalised if they or the company are found to have breached the Companies Acts. In cases of serious default, they can be made liable for the company’s debts. Directors Their duties and powers
What are the powers of directors? In general, directors may do anything that is legal and is allowed by the company’s constitution. However, the members have the responsibility to make some company decisions at a general meeting. These include the decision to appoint or reappoint the company’s auditor. What other issues should directors be aware of? Transactions between the company and its directors Some exceptions apply to the general rule that directors cannot use company assets for their own benefit. For example, a company may give loans to directors and people or organisations connected by family or business to the directors if the total loan value does not exceed 10% of the company’s ‘relevant assets’. A company may also engage in a property sale or purchase with a director or connected person in certain circumstances. Key conditions are that the directors must justify the merits of the proposed transaction to the members and that a majority of the members approve of it at a general meeting before the transaction can take place. Solvent liquidation If a company is wound up on the basis that it can pay all of its debts, the directors must make an accurate statement to this effect. Office of the Director of Corporate Enforcement
Trading difficulties If a company finds it difficult to pay its debts, the directors must favour the interests of the people to whom the company owes money (creditors). Reckless trading If directors help to create a company debt knowing that the company will not be able to pay the creditor, they may have to pay some or all of the company’s debts themselves if this is ordered by a court. Insolvent liquidation If a company does not have enough money to pay creditors and the company is later wound up, the directors must prepare a statement of its assets and liabilities and co-operate with the liquidator. Struck off insolvent companies If directors fail to arrange for the liquidation of a company that owes a large debt to one or more creditors, the High Court may disqualify them from acting as directors if the company is later struck off the Companies Register for failing to file its annual returns. Conclusion A more detailed information book on directors is available under Decision Notice D/2002/1 from www.odce.ie. Directors Their duties and powers
Notes Office of the Director of Corporate Enforcement
For further information contact: * Office of the Director of Corporate Enforcement 16 Parnell Square Dublin 1, Ireland ( 01 858 5800 Lo-call 1890 315 015 7 01 858 5801 @ info@odce.ie ¸ www.odce.ie
For more information on plain English go to www.simplyput.ie Transactions Involving Directors - A Quick Guide
Transactions Involving Directors A Quick Guide Contents About this booklet ………………………………………………………2 Who do the rules apply to?………………………………………………2 Directors’ loans……………………………………………………………2 What are the general rules?……………………………………………2 Are there any exceptions?……………………………………………2 What might happen if more money is borrowed than is allowed?..4 Property transactions……………………………………………………4 What is the general rule?………………………………………………4 What is a property asset?……………………………………………5 Which property assets does the rule cover?………………………5 How do I work out when approval is needed?………………………5 What happens if the company’s members do not approve the transaction?……………………………………………………………6 Can members approve a transaction after it has taken place?…6 Where can I get more information?……………………………………6 Office of the Director of Corporate Enforcement
About this booklet We have produced this booklet to give a summary of the strict rules for: • directors who borrow from their companies; and • directors who buy or sell property assets from or to their companies. Who do the rules apply to? The rules apply to company directors and people who are close to them, called ‘connected persons’. This includes parents, children, husbands, wives, civil partners, brothers and sisters. It also includes companies that the directors control. Directors’ loans What are the general rules? Directors and connected persons are not generally allowed to borrow money from the directors’ companies. Where a bank or other person gives a loan to a director or connected person, a company is also not allowed to give a guarantee that the company will repay the loan if the director or connected person fails to repay it. Also, a company is not allowed to give an asset of the company as security for such a loan as this asset could be sold if the loan was not repaid. The purpose of these general rules is to protect the company’s assets in the interests of the business and all its owners and creditors. Are there any exceptions? There are a number of exceptions to these rules. Exception 1 – Amount of the loan This exception says that the loans are legal if all the company loans taken out by all the directors and connected persons total less than one tenth of the company’s ‘relevant assets’. The following examples show how this rule works. 2 Transactions Involving Directors - A Quick Guide
Example 1 In general, the company’s ‘relevant assets’ are the net assets on the company’s balance sheet at its last Annual General Meeting (AGM). If, for example, the stated value of a company’s ‘relevant assets’ is €500,000, then the total of all company loans to all directors and connected persons must be less than €50,000. Example 2 If, on the other hand, there has never been an AGM, the ‘relevant assets’ are the ‘called up share capital’ of the company. Called up share capital means the original cost of the shares of the company, and this is stated on the company’s balance sheet. This figure can be as low as €2. In such a situation, the maximum value of permitted company loans to all directors and connected persons is only 20 cent. Directors should bear in mind that where the value of a company’s ‘relevant assets’ falls and they know that the loans then breach the ‘one tenth’ rule, they must act within two months to correct the situation. This may mean repaying some loans. Exception 2 – Approved arrangements A company can enter into a guarantee or provide security in connection with a loan to a director or connected person if the arrangement is formally approved at a general meeting of the company’s owners by three quarters of those voting. There are a number of other detailed conditions which are explained in the ODCE information book called ‘A Guide to Transactions Involving Directors’. Exception 3 – Loans between companies in the same group Companies can lend money and provide guarantees and security to one another provided they are all controlled by the same company. There are rules that say exactly when a company is part of a group. Our more detailed information book called ‘A Guide to Transactions Involving Directors’ explains these rules. However, if you are not sure, you should talk to a solicitor. Office of the Director of Corporate Enforcement 3
Exception 4 - Expenses The company can cover business expenses that the directors pay for. So, for example, the company can provide money or guarantee a director’s credit card as long as this is used to pay the business expenses of the company. Exception 5 - Lenders If a company (such as a bank) lends money as part of its business, it can lend to its directors as long as the loans are on the same terms as the company would offer to an ordinary person taking out the same loan. What might happen if more money is borrowed than is allowed? Borrowing more than is allowed is a criminal offence. Any director may face prosecution in the courts if they allow their company to provide such a loan. If a director or connected person borrows more than is allowed, the company can decide to cancel the transaction and look for the money back. The company can require repayment of the full amount where the transaction has suffered a loss. It can also demand repayment of the full amount and may also demand any profit earned by the director or connected person on the transaction. If the company cannot pay what it owes and is closed down (goes into liquidation), the court may look at why this has happened. If the directors have borrowed excessive amounts from the company, the court may say that as well as repaying the loans, they have to personally pay some or all of the money that the company itself owes. Property transations What is the general rule? If a director or connected person wants to buy a property asset from the company or sell a property asset to the company, the members (that is, the owners or shareholders) of the company must agree to this at a general meeting before the transaction takes place. 4 Transactions Involving Directors - A Quick Guide
However this rule does not apply to property transfers within the same group of companies. What is a property asset? A property asset is any asset except cash. Examples include land, buildings, machinery, cars and so on. Which property assets does the rule cover? The rule applies to any property asset whose value is greater than: • €1,270; and • either €63,487 or one tenth of the value of the company’s ‘relevant assets’, whichever of these two is the smaller. The meaning of ‘relevant assets’ is explained on page 3 of this guide. How do I work out when approval is needed? This is quite complicated and depends on the value of the company’s ‘relevant assets’. The following examples may help. Example 1 Let’s say that a director’s daughter (a connected person) wants to buy computer equipment owned by the director’s company and valued at €1,100. In this example, the company’s ‘relevant assets’ are valued at €10,000, and one-tenth of this equals €1,000. Even though the equipment’s value of €1,100 is more than this, it is still less than €1,270 which is the minimum value for obtaining members’ approval. Accordingly, the transaction can proceed without needing that approval. Example 2 In this example, the company’s ‘relevant assets’ are valued at €200,000. One-tenth of this equals €20,000. A director wants to sell her car to the company for €40,000. As the value of the car (€40,000) exceeds both the minimum value of €1,270 and the smaller of the €20,000 and €63,487 figures according to the above rules (namely €20,000), the director will need the approval of the company’s members before this transaction takes place. Office of the Director of Corporate Enforcement 5
Example 3 In this case, a director again wants to sell his car to the company for €40,000 where the company’s ‘relevant assets’ are valued at €800,000. One-tenth of this equals €80,000. Although the value of the car (€40,000) exceeds the minimum value of €1,270, it is less than €63,487, the smaller of the two options of €63,487 and €80,000 specified in the rules. Accordingly, this transaction does not need the approval of the company’s members. What happens if the company’s members do not approve the transaction? The company can cancel the transaction and look for either the asset or the money back. Also, if the director or connected person makes a profit from the transaction, they may be obliged to pay back the full amount and account for any profit. Similarly if the company makes a loss on the transaction, the director or connected person is liable for the full amount, including any loss suffered by the company. Can members approve a transaction after it has taken place? The members can agree to the transaction at a general meeting within a reasonable period of the transaction taking place. Where can I get more information? Our detailed information book, ‘A Guide to Transactions Involving Directors’, gives the complete law in this area. It is available from www. odce.ie. Print copies are also available. 6 Transactions Involving Directors - A Quick Guide
Notes Office of the Director of Corporate Enforcement
Notes Transactions Involving Directors - A Quick Guide
Notes Office of the Director of Corporate Enforcement
Restriction of Directors The Director of Corporate Enforcement AND Benedict McGowan AND Mary McGowan AND Keith McGowan. In the matter of Camlin Electric Limited and Tarmonbarry Hydroelectric Limited and in the matter of Section 160 of the Companies Act 1990. Camlin Electric Limited Company Number: 91186 Registered Office: Jamestown, Longford, Co. Longford. Tarmonbarry Hydroelectric Limited Company Number: 382815 Registered Office: Jamestown, Clondra, Co. Longford. Details of Respondents: Benedict McGowan Address: Jamestown, Clondra, Co. Longford Mary McGowan Address: Jamestown, Clondra, Co. Longford Keith McGowan Address: Jamestown, Clondra, Co. Longford Venue: High Court, Dublin. Judge: Justice Mary Finlay Geoghegan The Application: Under Section 160(2)(h) of the Companies Act 1990 (as amended by section 42(b) of the Company Law Enforcement Act 2001), the Director may seek the disqualification of the directors of a company, which has been involuntarily struck off the Register of Companies pursuant to Section 12 of the Companies (Amendment) Act 1982.
Under Section 160(3A), directors may successfully defend such an application for disqualification by demonstrating to the High Court that the company had no liabilities at the time of involuntary strike-off or that any such liabilities were discharged before the date of the making of the disqualification application. Where it deems that a sanction is appropriate, the Court has discretion to either disqualify the director for such period as it deems fit or restrict him or her for a five year period. Outcome: On 19th December 2011, Mary McGowan, who was a director of the company known as Camlin Electric Limited and Keith McGowan, who was a director of the company known Tarmonbarry Hydroelectric Limited at the time that they were struck off the Companies Register, were each restricted for a mandatory period of 5 years from 19th December 2011 pursuant to Section 160(9A) of the Companies Act 1990. The consequence of the High Court restriction is that Mary McGowan and Keith McGowan are both prevented from being a company director or secretary or being involved in the formation or promotion of any company, unless it is adequately capitalised. In the case of a public limited company, the capital requirement is €317,435, and in the case of any other company, €63,487. In both cases, the allotted share capital must be fully paid up in cash.  
Disqualification of Directors The Director of Corporate Enforcement AND Patrick Denagher (Senior) AND William Denagher. In the Matter of P W Denagher Enterprises Limited and In the Matter of Section 160 of the Companies Act 1990. P W Denagher Enterprises Limited Company Number: 414368 Registered Office: Allenwood South, Naas, Co. Kildare. Details of Respondents: Patrick Denagher (Senior) Address: Allenwood South, Naas, Co. Kildare. William Denagher Address: Allenwood, Naas, Co. Kildare Venue: High Court, Dublin. Judge: Mr. Justice Brian McGovern The Application: Under Section 160(2)(h) of the Companies Act 1990 (as amended by section 42(b) of the Company Law Enforcement Act 2001), the Director may seek the disqualification of the directors of a company, which has been involuntarily struck off the Register of Companies pursuant to Section 12 of the Companies (Amendment) Act 1982. Under Section 160(3A), directors may successfully defend such an application for disqualification by demonstrating to the High Court that the company had no liabilities at the time of involuntary strike-off or that any such liabilities were discharged before the date of the making of the disqualification application. Where it deems that a sanction is appropriate, the Court has discretion to either disqualify the director for such period as it deems fit or restrict him or her for a five year period.
Outcome: On 20th February 2012, Patrick Denagher (Senior) and William Denagher, who were directors of the company known as P W Denagher Enterprises Limited at the time it was struck off the Companies Register, were each made the subject of a disqualification order for a period of four years. Costs of €1,000 were awarded to the Director of Corporate Enforcement. The effect of this Order is that Patrick Denagher (Senior) and William Denagher are disqualified from being appointed or acting as auditor, director or other officer, receiver Liquidator or examiner or being in any way whether directly or indirectly concerned or taking part in the promotion, formation or management of any company or society registered under the Industrial Provident Societies Acts 1893 to 1978 for a period of four years effective from the 20th February 2012.  

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Directors Duties & Responsibilities

  • 1.
    Directors Duties & Responsibilities Update March 2012 Seminar Outline • Introduction to Corporate Governance & Company Law • Types of Directors & Requirements to Be a Director • Role & Function of the Board • “The 10 Statutory Director Commandments” • How to Appoint, Resign or Remove a Director • Consequence of Breaches of Company Law • Future Changes to Company Law 1
  • 2.
    Introduction to Corporate Governance • What is Corporate Governance “the systems and processes concerned with ensuring the overall direction, ith i th ll di ti effectiveness, supervision and accountability of an organisation.” Introduction to Corporate Governance • The core concepts of corporate governance are transparency, independence, accountability, responsibility, fairness and social awareness. • C Corporate governance addresses th t dd the relationships between the owners and other stakeholders of a business and those who operate a business in order to achieve good reputation and confidence to grow and develop the business. Introduction to Corporate Governance • Who are the parties involved? - Directors - Company Secretary - Shareholders - Senior Management - Employees - Creditors - Other Stakeholders 2
  • 3.
    Introduction to Corporate Governance • Companies are directed and controlled by Directors & Shareholders • Directors delegated power to run company on daily basis by shareholders • Shareholders still retain certain powers Sources of Duties & Responsibilities • Common Law and Equity - decisions handed out by the courts • Companies Acts - 14 Companies Acts 1963 to 2009 • European Law - EU Regulations & Directives • Memorandum & Articles of Association • Shareholders Agreement • Corporate Governance Policy Statement Company Types & Business Structures • Sole Trader • Partnership • Private Limited Company • Public Limited Company • Company Limited by Guarantee • Unlimited Company 3
  • 4.
    Company Types &Business Structures • Business Name • Branch • Societies • Credit Unions • Charities • Unincorporated Associations What is a Company? • The word “company” no strictly technical meaning • Number of people combined for some common objectj • Must comply with the Companies Acts • Where the object is gain no group consisting of more than 20 members can be lawfully formed unless registered under the Acts Company Structure Members/Shareholders OmniPro Limited Directors Creditors Employees 4
  • 5.
    Characteristics of aLimited Company • Limited Liability - Members liability limited to the amount, if any, unpaid on the shares for which they have subscribed • Corporate Personality - Complete legal capacity • Separate Legal Entity - Distinct from members & directors • Perpetual Succession - Continue in existence Limited Company Requirements • Must have a minimum of 2 directors. Directors cannot be limited entities • At least 1 EEA Resident director • Company secretary – individual or company • At least 1 shareholder – Private 7 members – PLC & Guarantee • Registered office address in the state. Not a PO Box Number • Activity in the State • Memorandum and Articles of Association – Rules of the Company • Comply with headed paper requirements Types of Directors 5
  • 6.
    Company Directors • Sec2 (1) CA, 1963 – “any person occupying the position of director by whatever name called.” • The powers of management are delegated by members to the directors. • While the members in general meeting retain certain powers, it is the BOD who, under the articles of association are deemed to have the important powers of management of the business of the Company Types of Company Directors • Executive Directors – day to day management • Non Executive Directors – External independent perspective • DeFacto Directors – not officially appointed but occupies the position • Shadow Directors – hiding their role in company Who Cannot Become a Director • Other limited companies • Undischarged bankrupts • The Company Auditor • Disqualified directors • Restricted directors – subject to share capital requirements • Over limit on No. of Directorships 6
  • 7.
    Director Duties Common Law Duties • Must act honestly, in good faith and in the best interests of the company as a whole • Must not abuse their powers & avoid conflict of interests • Must not make a secret profit from their p p position • Must act with reasonable skill, care and diligence • No requirement for a greater degree of skill • Entitlement to rely on persons to who business has been delegated CLRG – Statement of Fiduciary Duties • Duty of loyalty • Duty of obedience to company constitution • Duty to avoidance of secret profits • Duty of independence of judgement • Duty to avoid conflicts of interest • Duty of care, skill & diligence • Duty to consider interests of third parties • Duty of fairness 7
  • 8.
    Tralee Beef &Lamb Ltd • Duty to be informed about company’s affairs and join with co-directors in supervising and controlling the company • Collective and individual duty to acquire and maintain sufficient knowledge of company’s g p y business • Delegation is permitted but does not absolve duty to supervise the delegated functions – to executive directors or management Threats to Directors • Self Interest – unethical behaviour • Self Review – making & reviewing decisions by same person • Advocacy – promoting an opinion not in interests of company • Familiarity – sympathetic or influenced to interests of others • Intimidation – actual or perceived from others in an influential position Safeguards to Threats • Education, training, experience of Directors • Corporate Governance Regulations, Policies & Procedures • Board Evaluation • Monitoring & disciplinary procedures 8
  • 9.
    Functions of theBoard • Define the company’s purpose & evaluate the performance of the company & that of top executives • To agree the strategies and plans for achieving that purpose • To establish the company’s p p y policies • To review the company internal controls and risk management policies • To appoint the chief executive and to review his performance • The daily management of the CEO is delegated to the Chairperson by the board Successful Boards • Depends on personalities involved and how well they work with each other • Terms of Reference for the board agreed, implemented and reviewed p • Board’s function, make up and talents should continually evolve • Board ensure Management Team runs efficiently – not become involved in daily running – strategic focus Role of Members • Attend & Vote at general meetings • Vote on resolutions put to the members - Receive & Consider Accounts - Re appoint retiring Directors Re-appoint - changes to the corporate structure • Ensure Directors run the company in accordance with Articles of Association 9
  • 10.
    Director Meeting Rules • Check Articles of Association • Notice – reasonable notice • Quorum – minimum 7 directors • Voting – 1 director 1 vote • Chairman may have casting vote • Minutes record decisions taken at the meeting Member Meetings Rules • Check Articles of Association • Notice - check type of meeting & resolutions to be passed - AGM – 21 d days - EGM 14 or 21 d days • Check Members entitled to attend & vote • Auditor entitled to notice & attend • Notice to contain resolution to be put to members Member Meetings Rules • Quorum – min 2 members present in person or by proxy • Ordinary or Special Resolutions • Mi t record d i i Minutes d decisions t k at th taken t the meeting • G1 or G2 form filed at Companies Registration Office 10
  • 11.
    “The 10 StatutoryCompany Director Commandments” The Ten Commandments 1. “Thou shall act honestly, responsibly and in the bests interests of the Company” - not create secret profit or advantage - Due care skill and diligence that would care, be reasonably expected for someone in their position - not abuse their powers The Ten Commandments 2. “Thou shall keep proper books & records pursuant to Sec 202 CA, 1990” - Every company shall cause to keep proper books of account - Record & explain transactions - Enable financial position to be determined & audit performed - Prosecuted for default 11
  • 12.
    The Ten Commandments 3.“Thou shall prepare Annual Accounts & have an annual audit performed” - Full or abridged accounts - Profit & Loss Account - Balance Sheet - Cashflow Statement - Supporting Notes - Directors Report - Auditors Report The Ten Commandments 4. “Thou shall file an Annual Return & Accounts at the Companies Registration Office every year” - Annual Return Date (“ARD”) ( ARD ) - File within 28 days - Late filing penalties - Strike off or prosecution The Ten Commandments 5. “Thou shall lay accounts before the members at an AGM each year” - Directors Meeting - Notice Consent to Short Notice Proxy Notice, Notice, forms & AGM minutes - 9 months from financial year end - Sec 40 EGM 12
  • 13.
    The Ten Commandments 6.“Thou shall maintain statutory registers and minute books” - Every company must keep a statutory register - Sec 145 & 146 CA, 1963 – minutes of general & Directors meetings must be kept - ODCE & general public may inspect register The Ten Commandments 7. “Thou shall file statutory forms with the CRO” - Changes in Directors/Secretary - Changes in Registered Office - Changes in Share Capital - Change of Company Name - Strike off or Liquidation applications The Ten Commandments 8. “Thou shall disclose interests in shares or debentures or in contracts” - Sec 53 CA, 1990 – disclosure of interests in shares & debentures - Sec 194 CA, 1963 – disclosure of interests in Contracts - (84 Table A Part I Plc & 7 Table A Part II Limited Co.) – voting on contracts 13
  • 14.
    The Ten Commandments 9.“Thou shall not breach laws regarding Directors Transactions” - Sec 31 CA, 1990 – loans, quasi-loans, credit transactions guarantees & transactions, security - Sec 29 CA, 1990 – buying or selling a non-cash asset from a Director or connected person The Ten Commandments 10. “Thou shall wind up an insolvent company in a timely & correct manner” - Company cannot pay its debts - Duty to co operate with a liquidator co-operate - duty not to misapply company funds or making preferential payments How to Appoint, Resign or Remove a Director 14
  • 15.
    Company Director Requirements •Must be an individual • 2 Directors – 1 resident in EEA • In absence of a resident Director - Sec 43 Bond - S 44 R l & C ti Sec Real Continuous Li k Link • Limit of 25 Directorships - PLC’s not included - Group companies counted as 1 • Disqualified & Restricted Directors – may not act Appointing a Director • First Director – Form A1 • Consent to Act as Director – “I herby consent to act as Director of the aforementioned company and I acknowledge that as Director I have legal duties and obligations imposed by the Companies Acts, other enactments and at common law.” Appointing a Director • Existing Company – Board meeting or at a general meeting • Board meeting – “That Joe Bloggs, having consented to act, be appointed as a Director of pp the Company, with effect from close of meeting.” • Form B10 – 14 days • Update Register of Directors & Dir’s Interests, headed paper, bank details, etc • May have to retire a next AGM 15
  • 16.
    Resignation of Directors •Board Meeting - Letter of Resignation - B10 to be filed within 14 days • B10 form - Details of resigning Director – “Joe Bloggs resigned as Director of the Company” - Signed by current Director or Secretary • Update Register of Directors, headed paper, bank details, etc. Removal of a Director • Sec 182 CA, 1963 provides a Director can be removed by ordinary resolution of the members • Extended notice of 28 days for EGM • Director can make representations at the meeting • Consider provisions of Sec 205 CA, 1963 if Director is also a shareholder Consequence of Breaches of Company Law p y 16
  • 17.
    Indictable & OtherOffences • 140 Indictable Offences • 300 Summary Offences • Indictable Offence - €12,700 and/or 5 years imprisonment • Summary Offence - €1,900 and or 12 months imprisonment • Higher sanctions for certain offences including fraudulent trading, reckless trading and insider dealing • ODCE has discretion to impose administrative fines rather than seeking a court prosecution Main Offences • Sec 60(15) CA, 1963 – Giving of financial assistance by a company for the purchase of its own shares • Sec 297 CA, 1963 – Fraudulent Trading g • Sec 40 C(A), 1983 – Net Assets less than half of called up share capital • Sec 22(3) C(A), 1986 – Wilfully providing false information in any return, report, certificate of balance sheet or other document Main Offences • Sec 53 CA, 1990 – directors & secretary’s notification of interest in the Company • Sec 197(1),(3) CA, 1990 – False statements to Auditors, delay in p y providing information g • Sec 202 CA, 1990 – Failure to keep proper books • Sec 242(1), (1A) CA, 1990 – Furnishing false information under the Acts, including to electronic filing agent 17
  • 18.
    Main Offences • Sec243(1) CA, 1990 – Destruction, mutilation, falsification of documents • Sec 33(6) C(A)No.2)A, 1999 – Omission from balance sheet of directors’ statement claiming audit exemption • Sec 37(1) C(A)(No.2)A, 1999 – Wilfully false statements in accounts & returns • Sec 43(13) C(A)(No.2)A, 1999 – Company to have a director resident in the State Restriction of Directors • Directors maybe restricted by the High Court from acting as a Director unless certain amount of share capital paid up • Punish Directors of Insolvent Companies • Application taken by a liquidator • ODCE decide whether Directors go to court • Honestly & Responsibly – only defence Disqualification of Directors • High Court may disqualify Directors for acting – cannot act in any position of management of a Company • Disqualification for min of 5 years • Used in cases of serious breaches • Failure to file an Annual Return & Company is struck off register of companies 18
  • 19.
    Personal Liability • PersonalLiability of any officer – including Company Secretary g - Reckless Trading - Fraudulent Trading - Failure to Keep Proper Books of Account Reckless Trading • Sec 297A 1A. CA, 1963 “any person, was while an officer of the company, knowingly a party to the carrying on of any business of the company in a reckless manner” • Can occur during examinership or winding up - Activity that they knew or should have known would result in loss - Incurred debt that they knew they wouldn’t be able to pay • Directors can be made personally liable for debts of Company Fraudulent Trading • Sec 297A 1.B. CA, 1963 “if any person is knowingly a party to carrying on of the business of a company with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose.” • Directors can be made personally liable for debts • Sec 297 CA 1963 - criminal offence - Summary – 12 months and or €1,269.74 fine - Indictment – 7 years and or €63,486.90 fine 19
  • 20.
    Failure to KeepBooks & Records • Sec 204 CA, 1990 if Co.- wound up insolvent, proper books were not kept, Directors may be held personally liable for the Debts • Courts consider failure to keep books has - contributed to the company’s inability to pay all of its debts - resulted in substantial uncertainty to assets & liabilities - has substantially impeded the orderly wind up • Dev Oil & Gas Limited – Landmark Case Future Changes • Companies Consolidation & Reform Bill • Charities Act 2009 • EU Legislation Essential Advice for Directors • Hold frequent Board Meetings to assess the situation • Ensure key financial & trading information is available • Take financial & legal advice • Keep creditors informed • Document all key decisions & advice • Don’t put off difficult decisions 20
  • 21.
    OmniPro Company Formations •Standard Formations for €251.00 (incl VAT) • 24 Hour Turn Around • N tD Next Door t th C to the Companies R i t ti i Registration Office • Fast, affordable, friendly • Full Company Pack with Company Seal OmniPro Company Secretarial Services • Shares - Allotment, Transfer, Redemption & Buyback • Voluntary Strike Off • C Company R t ti Restorations • Re-organisations & Estate Planning • Non Filing Accounts Structure • Shareholder Agreements OmniPro Training & Advice • Company Law Query Service • In-house Training • Co Sec Department Setup & Review 21
  • 22.
    Contact Details Conor Sweeney csweeney@omnipro.ie 087 2434384 Amy Brennan abrennan@omnipro.ie 059 9183888 Contact Details Unit 3, South Court, Block D, Wexford Road Iveagh Court, Business Park, Harcourt Road, Carlow Dublin 2 059 9183888 01 4110000 info@omnipro.ie www.omnipro.ie 22
  • 23.
    COMPANIES ACTS 1963TO 2009 COMPANY LIMITED BY SHARES Memorandum & Articles of Association Of Name of Company Limited
  • 24.
    COMPANIES ACTS 1963TO 2009 COMPANY LIMITED BY SHARES Memorandum of Association Of Name of Company Limited 1. The name of the Company is 2. The objects for which the Company is established are: - (a)
  • 25.
    (b) To carry on any other business (whether manufacturing or otherwise) which may seem to the Company capable of being conveniently carried on in connection with the above objects, or calculated, directly or indirectly, to enhance the value of, or render more profitable any of the Company’s property. (c) To import, export, buy sell, barter, exchange, pledge, make advances on, take on lease or hire or otherwise acquire, alter, treat, work, manufacture, process, dispose of, let on lease, hire or hire purchase, or otherwise trade or deal in and turn to account as may seem desirable goods, articles, equipment, machinery, plant, merchandise and wares of any description and things capable of being used or likely to be required by persons having dealings with the Company for the time being. (d) To carry on any other business except the issuing of policies of insurance, which may seem to the Company capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value of or render profitable any of the Company’s property or rights. (e) To purchase, take on lease or in exchange, hire or by any other means acquire any freehold, leasehold or other property for any estate or interest whatever, and any rights, privileges or easements over or in respect of any property, and any buildings, offices, factories, mills, works, wharves, roads, railways, tramways, machinery, engines, rolling stock, vehicles, plant, live and dead stock, barges, vessels or things, and any real or personal property or rights whatsoever which may be necessary for, or may be conveniently used with, or may enhance the value of any other property of the Company. (f) To build, construct, maintain, alter, enlarge, pull down and remove or replace any buildings, offices, factories, mills, works, wharves, roads, railways, dams, tramways, machinery, engines, walls, fences, banks, sluices, or watercourses, and to clear sites for the same, or to join with any person, firm or company in doing any of the things aforesaid, and to work, manage and control the same or join with others in so doing. (g) To apply for, register, purchase, or by other means acquire and protect, prolong and renew, whether in Ireland or elsewhere, any patents, patent rights, brevets d’invention, licenses, trade marks, designs protections and concessions or other rights which may appear likely to be advantageous or useful to the Company, and to use and turn to account and to manufacture under or grant licenses or privileges in respect of the same, and to expend money in experimenting upon and testing and in improving or seeking to improve any patents, inventions or rights which the Company may acquire. (h) To acquire and undertake the whole or any part of the business, goodwill and assets and liabilities of any person, firm or company carrying on or proposing to carry on any of the business which this Company is authorised to carry on, and as part of the consideration for such acquisition to undertake all or any of the liabilities of such person, firm or company, or to acquire an interest in, amalgamate with or enter into partnership or into any arrangement for sharing profits, or for co-operation, or for limiting competition, or for mutual assistance with any such person, firm or company and to give or accept by way of consideration for any of the acts or things aforesaid or property acquired, any shares, debentures, debenture stock or securities that may be agreed upon, and to hold and retain or sell, mortgage and deal with any share, debentures, debenture stock or securities so received.
  • 26.
    (i) To improve, manage, cultivate, develop, exchange, let on lease or otherwise, mortgage, sell, charge, dispose of, turn to account, grant rights and privileges in respect of, or otherwise deal with all or any part of the property and rights of the Company. (j) To invest and deal with the monies of the Company not immediately required in such shares or upon such securities and in such manner as may from time to time be determined. (k) To lend and advance money or give credit to such person, firms or companies and on such terms as may seem expedient, and in particular to customers of and others having dealings with the Company, and tenants, subcontractors and persons undertaking to build on or improve any property in which the Company is interested, and to give guarantees or becomes security for any such person, firms or companies. (l) To borrow or raise money in such manner as the Company shall think fit, and in particular by the issue of debentures or debenture stock, bonds, obligations and securities of all kinds (perpetual or otherwise) and either redeemable or otherwise and to secure the repayment of any money borrowed, raised or owing, by mortgage, charge or lien upon the whole or any part of the Company’s property or assets (whether present or future), including its uncalled capital, and also by a similar mortgage, charge or lien to secure and guarantee the performance by the Company of any obligation or liability it may undertake and to purchase, redeem or pay off ant such securities. (m) To give credit to or to become surety or guarantor for any person or company, and to give all descriptions of guarantees and indemnities, either with or without the Company receiving any consideration to guarantee or otherwise secure (with or without a mortgage or charge on all or any part of the undertaking, property and assets, present and future, and the un-called capital of the Company) the performance of the obligations and repayment or payment of the capital or principal of and dividends or interest on any stocks, shares, debentures, debenture stock, notes, bonds or other securities or indebtedness of any person, authority (whether supreme, local, municipal or otherwise) or company, including (without prejudice to the generality of the foregoing) any company which is for the time being the Company’s holding company as defined by Section 155 of the Companies Act 1963 or any statutory modification or re- enactment thereof or another subsidiary as defined by the said section of the Company’s holding company or a subsidiary of the Company or otherwise associated with the Company in business. (n) To draw, make, accept, endorse, discount, execute and issue promissory notes, bills of exchange, bills of lading, warrants, debentures and other negotiable or transferable instruments. (o) To apply for, promote and obtain any Act of the Oireachtas, Provisional Order or License of the Minister for Enterprise, Trade and Employment or other authority for enabling the Company to carry any of its objects into effect, or for effecting any modification of the Company’s constitution, or for any other purpose which may seem expedient, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the Company’s interests. (p) To enter into any arrangements with any government or authorities (supreme, municipal, local or otherwise) or any companies, firms or persons, that may seem conducive to the attainment of the Company’s objects, or any of them, and to obtain from any such government, authority, corporation, company, firm or person any charters, contracts, decrees, rights, privileges and concessions which the Company may think desirable, and to carry out, exercise and comply with any such charters, contracts, decrees, rights,
  • 27.
    privileges and concessions. (q) To subscribe for, take, purchase or otherwise acquire and hold shares or other interests in or securities of any other company having objects altogether or in part similar to those of this Company or carrying on any business capable of being carried on so as, directly or indirectly, to benefit this Company. Subject to the provisions of the Companies Acts, 1963 to 2009, the Company may purchase or otherwise acquire on such terms and in such manner as it thinks fit any shares in the capital of the Company or its Holding Company. (r) To act as agents or brokers, and as trustees or as nominee for any person, firm or company, and to undertake and perform sub-contracts, and also to act in any of the businesses of the Company through or by means of agents, brokers, sub-contractors, trustees or nominees of others. (s) To remunerate any person, firm or company rendering services to this Company, either by cash payment or by the allotment to him, her or them of shares or securities of the Company credited as paid up in full or in part or otherwise as may be thought expedient. (t) To pay all or any expenses incurred in connection with the promotion, formation and incorporation of the Company, or to contract with any person, firm or company to pay the same, and to pay commissions to brokers and others for underwriting, placing, selling or guaranteeing the subscription of any shares, debentures, debenture stock or securities of the Company. (u) To support and subscribe to any charitable or public object, and any institution, society or club which may be for the benefit of the Company or its employees, or may be connected with any town or place where the Company carries on business; to give pensions, gratuities (to include death benefits) or charitable aid to any persons who may have been officers or employees or ex-officers or ex-employees of the Company, or, its predecessors in business, or to the spouses, children or other relatives or dependants of such persons; to make payments towards insurance; and to form and contribute to provident and benefit funds for the benefit of any such person or of their spouses, children or other relatives or dependants. (v) To establish, promote or otherwise assist any other company or companies or associations for the purpose of acquiring the whole or any part of the business or property and undertaking any of the liabilities of this Company, or of undertaking any business or operation which may appear likely to assist or benefit this Company, or to enhance the value of any property or business of this Company, and place or guarantee the placing of, underwrite, subscribe for or otherwise acquire all or any part of the shares or securities of any such company as aforesaid. (w) To sell or otherwise dispose of the whole or any part of the business or property of the Company, either together or in portions, for such consideration as the Company may think fit, and in particular for shares, debentures or securities of any other company whether or not having objects altogether or in part similar to those of this Company. (x) To distribute among the members of the Company in specie any property of the Company, and in particular any shares, debentures or securities of other companies belonging to this Company or of which this Company may have the power of disposing. (y) To procure the Company to be registered or recognised in any foreign country or place.
  • 28.
    (z) To do all such other things as may be deemed incidental or conducive to the attainment of the above objects or any of them. It is hereby expressly declared that each sub-clause of this clause shall be construed independently of the other sub-clauses hereof, and that none of the objects mentioned in any sub-clause shall be deemed to be merely subsidiary to the objects mentioned in any other sub-clause. Provided always that the provisions of this clause shall be subject to the Company obtaining where necessary, for the purpose of carrying any of its objects into effect, such license, permit or authority as may be required by law. 3. The liability of the members is limited. 4. The Share Capital of the Company is divided into Ordinary shares of € each, with the power to increase or decrease the share capital. The capital may be divided into different classes of shares with any preferential, deferred or special rights or privileges attached thereto, and from time to time the company’s regulations may be varied so far as may be necessary to give effect to any such preference, restriction or other term.
  • 29.
    I/We, the severalpersons whose names, addresses and descriptions are subscribed, wish to be formed into a Company in pursuance of this Memorandum of Association and we agree to take the number of shares in the capital of the Company set opposite our respective names. Names, Addresses and No. of Shares taken Descriptions of Subscribers by each Subscriber Total number of shares taken: Dated: Witness to the above signatures: Name: Address:
  • 30.
    COMPANIES ACTS 1963TO 2009 COMPANY LIMITED BY SHARES Articles of Association Of Name of Company Limited PRELIMINARY 1. (a) Subject as hereinafter provided, the Regulations contained in Parts I and II of Table A as in the First Schedule to the Companies Act, 1963 (hereinafter referred to as "Table A") together with the European Communities (Single Member Private Limited Companies) Regulations, 1994 (“Single-Member Company Regulations”) shall apply to the Company. (b) Regulations 5, 8, 24, 40-46, 47, 51, 54, 55, 56, 75, 79, 84, 86, 91, and 92 to 100 Part I of Table A and Regulation 7 of Part II of Table A shall not apply. SHARE CAPITAL AND SHARES 2. The Share Capital of the Company is € divided into Ordinary shares of €1 each. 3. When any shares have been forfeited an entry shall forthwith be made in the Register of Members of the Company recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of an entry shall be made of the manner and date of the sale or disposal thereof. 4. No share shall be offered at a discount. 5. (a) The Directors of the Company are generally and unconditionally authorised to exercise all powers of the Company to allot relevant securities (within the meaning of Section 20 of the Companies (Amendment) Act, 1983), up to an amount equal to the authorised but as yet un-issued share capital of the Company on the date of incorporation of the Company. The authority hereby conferred shall expire five years from the date of incorporation of the Company, unless previously renewed, revoked or varied by the Company in general meeting, save that the Company may before such expiry date make an offer agreement which, might require relevant securities to be allotted after the authority has expired and the Directors may allot the relevant securities in pursuance of such offer or agreement as if the authority hereby conferred has not expired. (b) The pre-emption provisions of sub-sections (1), (7) and (8) of Section 23 of the Companies (Amendment) Act, 1983 shall not apply to any allotment by the Company of equity securities (within the meaning of the said Section 23).
  • 31.
    6. Subject to the provisions of Part XI of the Companies Act, 1990 the Company may: (a) Issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the holder, on such terms and in such manner as shall be provided by the Articles of Association of the Company provided always that the nominal value of the issued share capital which is not redeemable shall not at any time be less than one tenth of the nominal value of the total issued share capital of the Company. (b) Purchase its own shares. (c) Cancel any of its own shares following purchase. (d) Re-designate any of its own shares following purchase as treasury shares provided always that the nominal value of treasury shares held by the Company, may not at any one time, exceed ten per cent of the nominal value of the issued share capital of the Company. For so long as the Company holds shares as treasury shares: (i) The Company shall not exercise any voting rights in respect of those shares and any purported exercise of those rights shall be void. (ii) No dividend or other payment (including any payment in a winding up of the company) shall be payable to the company in respect of those shares. (e) Cancel or re-issue as shares of any class, any shares held by the Company as treasury shares. (f) Not make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits of the company or the proceeds of a fresh issue of shares. (g) Notice of redemption in writing shall be given in accordance with this sub-paragraph (g) to the holders of Ordinary Shares to be purchased or redeemed. Any notice of purchase or redemption shall specify the number of shares to be purchased or redeemed, the date fixed for purchase or redemption and the place at which the certificates for such shares are to be presented for purchase and upon such date each of the holders of the shares concerned shall be bound to deliver to the Company at such place the Certificates for the shares to be purchased or redeemed. If any certificate so delivered to the Company includes any shares not to be purchased or redeemed on that occasion fresh certificate for such shares shall forthwith be issued to the holder delivering such certificate to the Company. 7. When any shares have been forfeited an entry shall be made in the Register of Members of the Company recording the forfeiture and the terms and date thereof. ALTERATION OF CAPITAL 8. The Company may by Special Resolution: (a) increase its share capital by such sum to be divided into shares of such amount as the resolution may prescribe; (b) consolidate its shares of a larger amount than its existing shares; (c) sub-divide its shares into shares of a smaller amount than its existing shares; (d) cancel any shares which at the date of the passing of the resolution have not been
  • 32.
    taken or agreedto be taken by any person; or (e) reduce its share capital in any way, whether by purchase, redemption or otherwise. FINANCIAL ASSISTANCE 9. The Company may give any form of financial assistance which is permitted by the Companies Acts, 1963 to 2009 for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the Company or in the Company’s holding company and Regulation 10 of Part I of Table A will be modified accordingly. TRANSFER OF SHARES 10. The Directors may, in their absolute discretion and without assigning any reason therefore, decline to register any transfer of any share, whether or not it is a fully paid share; and Regulation 24 of Part I of Table A shall be modified accordingly. 11. The instrument of transfer of a fully paid up share need not be signed by or on behalf of the transferee and Regulation 22 of Part I of Table A will be modified accordingly. BORROWING POWERS 12. The Directors may raise or borrow for the purposes of the Company’s business such sum or sums of money as they think fit, and may secure the repayment of, or raise any such sum or sums as aforesaid by mortgage or charge upon the whole or any part of the property and assets of the Company, present and future, including its uncalled and un-issued capital, or by the issue at such price as they may think fit, of bonds or debentures, either charged upon the whole or any part of the property and assets of the Company, or not so charged, or in such other way as the Directors may think expedient. 13. A register of the holders of the debentures of the Company shall be kept at the registered offices of the Company, and shall be open to inspection of the registered holders of such debentures and of any member of the Company, or any other person subject to such restrictions as the Company in general meeting may from time to time impose. The Directors may close such Register for such period or periods as they may think fit, not exceeding in aggregate thirty days in each year. GENERAL MEETINGS 14. No business shall be transacted at a general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, two members present in person or by proxy shall be a quorum. 15. A general meeting may with the written consent of all the members and the Auditors be convened by less than fourteen days notice, and in such manner as the members may think fit, and Regulation 51 of Part I of Table A shall be modified accordingly. The annual general meeting may be held in the state or elsewhere subject to Section 140. 16. In Regulation 70 of Part I of Table A, the words “not less than 48 hours before the time for holding” and “not less than 48 hours before the time appointed for” will be deleted and there shall be substituted therefore the words “before the
  • 33.
    commencement of” onboth occasions. 17. In accordance with Section 160 of the Companies Act, 1963 relating to the removal of an auditor from office, exercisable by the Company in general meeting under the Companies Acts 1963 to 2009 or otherwise shall be exercisable by the members without the need to hold a general meeting of the Company. 18. Where the members makes a decision, which would be normally be taken by the Company in general meeting he/she must provide the Company with a written record of that decision. Such written record, together with any resolutions passed in accordance with Article 9, shall be retained by the Company in book or some other means suitable for the purpose. 19. Subject to Section 141 of the Act, a resolution in writing signed by all the members for the time being entitled to attend and vote on such resolution at a general meeting (by their duly authorised representative) shall be as valid and effective for all purposes as if the resolution had been passed at a general meeting of the Company duly convened and held, and if described as a Special Resolution shall be deemed to be a Special Resolution within the meaning of the Act. Any such resolution can consist of several signed documents, which together form a resolution. 20. Subject to Section 140 of the Act concerning annual general meetings, all other meetings (including extraordinary general and class meetings of the members of the company) may be conducted by the use of conference telephone or similar facility provided that the members of the Company and the Auditor have been notified of the convening of the meeting and the availability of the conference telephone or similar facility for the meeting can hear and contribute to the meeting and such participation in meeting shall constitute presence in person at the meeting and the members may be situated in any part of the world for any such meeting. DIRECTORS 21. Unless and until the Company in a general meeting shall otherwise determine, the number of Directors shall not be less than two. The first Directors shall be appointed in writing by the subscribers to the Memorandum of Association. 22. A Director shall not require a share qualification but nevertheless shall be entitled to receive notice of and to attend and speak at any general meeting and Regulation 136 of Part I of Table A shall be modified accordingly. 23. The quorum of Directors for transacting business shall, unless otherwise fixed by the Directors, be two. 24. (a) For the purpose of these Articles, the contemporaneous linking together by telephone or other means of communication of a number of Directors not less than the quorum shall be deemed to constitute a meeting of the Directors, and all the provisions in these Articles as to meetings of the Directors shall apply to such meetings. (b) Each of the Directors taking part in the meeting must be able to hear each of the other Directors taking part. (c) At the commencement of the meeting each Director must acknowledge his presence and that he accepts that the conversation shall be deemed to be a meeting of the
  • 34.
    Directors. (d) A Director may not cease to take part in the meeting by disconnecting his telephone or other means of communication unless he has previously obtained the express consent of the Chairman of the meeting, and a Director shall be conclusively presumed to have been present and to have formed part of the quorum at all times during the meeting unless he has previously obtained the express consent of the chairman of the meeting to leave the meeting as aforesaid. (e) A minute of the proceedings at such meeting by telephone or other means of communication shall be sufficient evidence of such proceedings and of observance of all necessary formalities if certified as a correct minute by the Chairman of the meeting. 25. A resolution in writing signed by all the Directors for the time being entitled to receive notice of a meeting of the Directors shall be valid as if it had been passed at a meeting of the Directors duly convened and held and may consist of several documents in the like form each signed by one or more Directors. 26. The Directors shall have the power at any time and from time to time appoint another person to be a Director of the Company, either to fill a casual vacancy or as an addition to the board, but so that the total number of Directors shall not at any time exceed the maximum number fixed as herein before mentioned. 27. Provided that he shall have declared the nature of his interest in accordance with Regulation 83 of Part I of Table A, a Director may vote in respect of any contract, appointment or arrangement in which he is interested, and he shall be counted in the quorum present at the meeting. SINGLE MEMBER COMPANY 28. (I) If at any time all the issued shares of the Company are registered in the name of the sole person (whether a natural person or a body corporate), it will be a single- member company within the meaning of the European (Single-Member Private Limited Companies) Regulations, 1994 (the Singe Member Company Regulations). If and so long as the Company is a single member company the following provisions shall apply notwithstanding anything to the contrary in these Articles or Table A: (a) Annual General Meetings The sole member may decide to dispense with the holding of annual general meetings. Such decision will be effective for the year in which it is made and subsequent years, but nevertheless the sole member or the auditors may require the holding of an annual general meeting in any such year in accordance with the procedure laid down in the Single Member Company Regulations. (b) Where a decision to dispense with the holding of an annual general meeting is in force, the accounts and the Directors' and Auditors report that would otherwise be laid before an annual general meeting shall be sent to the sole member as provided in the Single Member Company Regulations, and the provisions of the Companies Acts, 1963 with regard to the annual return and financial statements which apply by reference to the date of the annual general meeting will be construed as provided in the Single Member Company Regulations.
  • 35.
    (c) Quorum atGeneral Meetings The sole member, present in person or by proxy, is a sufficient quorum at a general meeting. (d) Resolutions of Shareholders All matters requiring a resolution of the Company in general meeting (except the removal of the auditors from office) may be validly dealt by a decision of the sole member. The sole member must provide the Company with a written record of any such decision or, if is dealt with by written resolution under Regulation 6 of Part II of Table A, with a copy of that resolution, and the decision or resolution shall be recorded and retained by the Company. (e) Contracts with Sole Member (i) Where the Company enters into a contract with the sole member which not in the ordinary course of business and which is not in writing and the sole member also represents the Company in the transaction (whether as a Director or otherwise), the Directors shall ensure that the terms of the contract are forthwith set out in a written recorded in the minutes of the next Directors' meeting. (ii) If and whenever the Company becomes a single-member company or ceases to be a single-member company, it shall notify the Registrar of Companies as provided in the single-member company regulations. DISQUALIFICATION OF DIRECTORS 29. The Office of a Director shall be vacated: (a) If he ceases to be a Director by virtue of Section 180/184 of the Act; or (b) If he becomes bankrupt or insolvent or compound with his creditors; or (c) If he becomes unsound of mind or found to be lunatic; or (d) If he is convicted of an indictable offence (other than an offence under the Road Traffic Act, 1961, or any Act amending the same) unless the Directors otherwise determine; or (e) If he absents himself from the meetings of the Directors for a period of six calendar months without special leave of absence from the other Directors; or (f) If he resigns his office by notice in writing to the Company; or (g) If he is disqualified or restricted pursuant to an Order made under the provisions of the Companies Act, 1990. INDEMNITY 30. In addition to the indemnity contained in Regulation 138 of Part I of Table A, the Company shall indemnify every Director, Secretary or other officer against all costs and expenses incurred or about the execution and discharge of the duties of his office. 31. A Director may hold any office of profit under the Company (other than that of the Auditor) in conjunction with the office of Director and may enter into contracts or arrangements or have dealings with the Company and shall not be disqualified from office thereby, nor shall he be liable to account to the Company for any profit arising
  • 36.
    out of suchcontract, arrangement or dealing to which he is a party, or in which he is interested by reason of his being at the same time a Director of the Company, provided that such Director discloses to the Board at or before the time when such contract, arrangement or dealing is determined upon his interest therein, or if such interest is subsequently acquired, provided that he on the first occasion possible discloses to the Board the fact that he has acquired such interest. But except in respect of any agreement or arrangement to give any indemnity or security to any Director who has undertaken or is about to undertake any liability on behalf of the Company, or of a resolution to allot any shares or debentures to a Director, no Director shall vote as a Director in regard to any contract, arrangement or dealing in which he is interested or upon any matter arising there out, and if he shall so vote his vote shall not be counted, nor shall he be reckoned in estimating a quorum when any such contract, arrangement or dealing is under consideration. MANAGING DIRECTOR 32. The Directors may from time to time entrust to and confer upon the Managing Director all or any of the powers of the Directors (excepting the power to make calls, forfeit shares, borrow money or issue debentures) that they think fit. But the exercise of all such powers by the Managing Director shall be subject to such regulations and restrictions as the Directors may from time to time impose and the said powers may at any time be withdrawn, revoked or varied. NOTICES 33. Where a notice is sent by post it shall be deemed to have been served at the expiration of twenty four hours after it was posted; and Regulation 133 of Part I of Table A shall be modified accordingly. 34. A member who has no registered address in the Republic of Ireland, Northern Ireland or Great Britain, and has not supplied to the Company an address within the Republic of Ireland, Northern Ireland or Great Britain for the giving of notices to him shall not be entitled to receive any notices from the Company. COMPANY SECRETARY 35. The first Company Secretary shall be appointed in writing by the Subscribers to the Memorandum of Association and shall be the person named in the statement delivered pursuant to Section 3 of the Companies (Amendment) Act, 1982.
  • 37.
    Names, Addresses andDescriptions of Subscribers Dated: Witness to the above signatures: Name: Address:
  • 38.
    Directors Their duties andpowers A quick guide
  • 40.
    Introduction We have producedthis information booklet to explain the role of company directors under the Companies Acts. What is a company director? Company directors control and direct a company in the interests of its owners (known as members). They also have particular responsibilities under the law and the company’s constitution. A company must have at least two directors. These act together on a board of directors. Who can be a company director? People do not need any particular qualifications or experience to be directors. Company directors will often not work for the company in question or own shares in it. To protect the public, some people cannot be directors at certain times. These include bankrupts, who are prohibited from being directors while their debts remain unpaid or until a court excuses them from paying those debts. People whom a court has found guilty of fraud or serious misconduct may also be disqualified from acting as directors for a certain period. If a person is found by a court to have acted dishonestly or irresponsibly in a company that failed to pay its debts, the court may restrict them. A restricted director can only act as a director in certain companies in which the members have invested a significant amount of money. Restrictions are normally for a period of five years. Directors Their duties and powers
  • 41.
    Are there differenttypes of director? There are five types of company director. • Executive directors are directors who are involved in managing the company. Examples include the company’s managing director or its sales director. • Non-executive directors are not involved in the company’s management. They may be knowledgeable and experienced people who are appointed to the board to give independent advice. Companies do not have to appoint non-executive directors. • Alternate directors are chosen by directors to act for them in their absence. • De facto directors perform the duties of a director even though they are not formally appointed and registered. They have the same duties as appointed directors. • Shadow directors are not formally appointed as directors but give instructions that are usually followed by the company’s directors. A shadow director has many of the legal responsibilities of an appointed director. Office of the Director of Corporate Enforcement
  • 42.
    What are theduties of directors? Directors are trustees or minders of the company’s assets and their duties reflect that responsible position. Executive and non-executive directors have the same duties. Directors do not have to do everything themselves. They may give appropriate tasks to company executives who will report back to the board. Common law duties of directors (the duties created by the courts) The common law duties require that: • directors must act in good faith and in the company’s interest and not use their powers for personal gain or for the benefit of others at the company’s expense - for example directors should pay the market value for company assets; • directors must not profit from being a director and must account for any profit secretly obtained – for example a director who is also a director of a second business cannot use any confidential information they receive as a director of the first company to benefit that second business; and • directors must act with due care, skill and diligence – for example, directors need to meet regularly to review the company’s finances and take action to correct any problems. Directors Their duties and powers
  • 43.
    Statutory duties ofdirectors (the duties created by legislation) On their appointment, directors must give the company their name, address, date of birth, nationality and occupation. They must also give details of any shares or debentures (written acknowledgements of a debt) in the company or in related companies that they own or in which they have an interest. They must also give details of any other companies of which they are a director. For as long as they are serving as a director, they should keep the company up to date on any changes to this information. They should also inform the company if they have any interest in a company contract or proposed contract. Directors must ensure that the company keeps proper books of account that record and explain the payments to or from the company or its customers and suppliers and accurately identify its assets and liabilities. Every year, directors must prepare financial statements that give ‘a true and fair view’ of the company’s affairs. These financial statements must be audited (unless the company can decide not to have an audit). Directors must also write a report for the members of the company. This report should include details of: • how the company is doing; • how its business has developed during the year; • any important events affecting the company since the end of the year; and • any likely developments in the business. Office of the Director of Corporate Enforcement
  • 44.
    Directors must arrangeto call the company’s annual general meeting (AGM) and circulate a draft agenda to the members in good time along with other relevant documents, including the financial statements, the directors’ report and any auditor’s report. Occasionally, directors will have to call an extraordinary general meeting (EGM) of the members to deal with special or urgent business. Directors must arrange to keep minutes of what is said and decided at general meetings and at meetings of the board and its sub-committees. They must ensure that the company keeps certain documents up to date, including the registers of members, directors and secretaries and the interests of the directors and secretaries in the company. Directors must ensure that the company promptly sends certain documents and information to the Companies Registration Office (www.cro.ie). These include, for example: • the company’s annual return and associated financial statements; • notice of a change of registered office, director, secretary or their details; • notice of the creation of a mortgage or charge on the company’s property in return for its receiving a loan; and • a memorandum of satisfaction of a charge (a statement that a loan has been repaid). Directors can be penalised if they or the company are found to have breached the Companies Acts. In cases of serious default, they can be made liable for the company’s debts. Directors Their duties and powers
  • 45.
    What are thepowers of directors? In general, directors may do anything that is legal and is allowed by the company’s constitution. However, the members have the responsibility to make some company decisions at a general meeting. These include the decision to appoint or reappoint the company’s auditor. What other issues should directors be aware of? Transactions between the company and its directors Some exceptions apply to the general rule that directors cannot use company assets for their own benefit. For example, a company may give loans to directors and people or organisations connected by family or business to the directors if the total loan value does not exceed 10% of the company’s ‘relevant assets’. A company may also engage in a property sale or purchase with a director or connected person in certain circumstances. Key conditions are that the directors must justify the merits of the proposed transaction to the members and that a majority of the members approve of it at a general meeting before the transaction can take place. Solvent liquidation If a company is wound up on the basis that it can pay all of its debts, the directors must make an accurate statement to this effect. Office of the Director of Corporate Enforcement
  • 46.
    Trading difficulties If acompany finds it difficult to pay its debts, the directors must favour the interests of the people to whom the company owes money (creditors). Reckless trading If directors help to create a company debt knowing that the company will not be able to pay the creditor, they may have to pay some or all of the company’s debts themselves if this is ordered by a court. Insolvent liquidation If a company does not have enough money to pay creditors and the company is later wound up, the directors must prepare a statement of its assets and liabilities and co-operate with the liquidator. Struck off insolvent companies If directors fail to arrange for the liquidation of a company that owes a large debt to one or more creditors, the High Court may disqualify them from acting as directors if the company is later struck off the Companies Register for failing to file its annual returns. Conclusion A more detailed information book on directors is available under Decision Notice D/2002/1 from www.odce.ie. Directors Their duties and powers
  • 47.
    Notes Office ofthe Director of Corporate Enforcement
  • 49.
    For further informationcontact: * Office of the Director of Corporate Enforcement 16 Parnell Square Dublin 1, Ireland ( 01 858 5800 Lo-call 1890 315 015 7 01 858 5801 @ info@odce.ie ¸ www.odce.ie
  • 51.
    For more informationon plain English go to www.simplyput.ie Transactions Involving Directors - A Quick Guide
  • 52.
    Transactions Involving Directors A Quick Guide Contents About this booklet ………………………………………………………2 Who do the rules apply to?………………………………………………2 Directors’ loans……………………………………………………………2 What are the general rules?……………………………………………2 Are there any exceptions?……………………………………………2 What might happen if more money is borrowed than is allowed?..4 Property transactions……………………………………………………4 What is the general rule?………………………………………………4 What is a property asset?……………………………………………5 Which property assets does the rule cover?………………………5 How do I work out when approval is needed?………………………5 What happens if the company’s members do not approve the transaction?……………………………………………………………6 Can members approve a transaction after it has taken place?…6 Where can I get more information?……………………………………6 Office of the Director of Corporate Enforcement
  • 53.
    About this booklet We have produced this booklet to give a summary of the strict rules for: • directors who borrow from their companies; and • directors who buy or sell property assets from or to their companies. Who do the rules apply to? The rules apply to company directors and people who are close to them, called ‘connected persons’. This includes parents, children, husbands, wives, civil partners, brothers and sisters. It also includes companies that the directors control. Directors’ loans What are the general rules? Directors and connected persons are not generally allowed to borrow money from the directors’ companies. Where a bank or other person gives a loan to a director or connected person, a company is also not allowed to give a guarantee that the company will repay the loan if the director or connected person fails to repay it. Also, a company is not allowed to give an asset of the company as security for such a loan as this asset could be sold if the loan was not repaid. The purpose of these general rules is to protect the company’s assets in the interests of the business and all its owners and creditors. Are there any exceptions? There are a number of exceptions to these rules. Exception 1 – Amount of the loan This exception says that the loans are legal if all the company loans taken out by all the directors and connected persons total less than one tenth of the company’s ‘relevant assets’. The following examples show how this rule works. 2 Transactions Involving Directors - A Quick Guide
  • 54.
    Example 1 In general,the company’s ‘relevant assets’ are the net assets on the company’s balance sheet at its last Annual General Meeting (AGM). If, for example, the stated value of a company’s ‘relevant assets’ is €500,000, then the total of all company loans to all directors and connected persons must be less than €50,000. Example 2 If, on the other hand, there has never been an AGM, the ‘relevant assets’ are the ‘called up share capital’ of the company. Called up share capital means the original cost of the shares of the company, and this is stated on the company’s balance sheet. This figure can be as low as €2. In such a situation, the maximum value of permitted company loans to all directors and connected persons is only 20 cent. Directors should bear in mind that where the value of a company’s ‘relevant assets’ falls and they know that the loans then breach the ‘one tenth’ rule, they must act within two months to correct the situation. This may mean repaying some loans. Exception 2 – Approved arrangements A company can enter into a guarantee or provide security in connection with a loan to a director or connected person if the arrangement is formally approved at a general meeting of the company’s owners by three quarters of those voting. There are a number of other detailed conditions which are explained in the ODCE information book called ‘A Guide to Transactions Involving Directors’. Exception 3 – Loans between companies in the same group Companies can lend money and provide guarantees and security to one another provided they are all controlled by the same company. There are rules that say exactly when a company is part of a group. Our more detailed information book called ‘A Guide to Transactions Involving Directors’ explains these rules. However, if you are not sure, you should talk to a solicitor. Office of the Director of Corporate Enforcement 3
  • 55.
    Exception 4 -Expenses The company can cover business expenses that the directors pay for. So, for example, the company can provide money or guarantee a director’s credit card as long as this is used to pay the business expenses of the company. Exception 5 - Lenders If a company (such as a bank) lends money as part of its business, it can lend to its directors as long as the loans are on the same terms as the company would offer to an ordinary person taking out the same loan. What might happen if more money is borrowed than is allowed? Borrowing more than is allowed is a criminal offence. Any director may face prosecution in the courts if they allow their company to provide such a loan. If a director or connected person borrows more than is allowed, the company can decide to cancel the transaction and look for the money back. The company can require repayment of the full amount where the transaction has suffered a loss. It can also demand repayment of the full amount and may also demand any profit earned by the director or connected person on the transaction. If the company cannot pay what it owes and is closed down (goes into liquidation), the court may look at why this has happened. If the directors have borrowed excessive amounts from the company, the court may say that as well as repaying the loans, they have to personally pay some or all of the money that the company itself owes. Property transations What is the general rule? If a director or connected person wants to buy a property asset from the company or sell a property asset to the company, the members (that is, the owners or shareholders) of the company must agree to this at a general meeting before the transaction takes place. 4 Transactions Involving Directors - A Quick Guide
  • 56.
    However this ruledoes not apply to property transfers within the same group of companies. What is a property asset? A property asset is any asset except cash. Examples include land, buildings, machinery, cars and so on. Which property assets does the rule cover? The rule applies to any property asset whose value is greater than: • €1,270; and • either €63,487 or one tenth of the value of the company’s ‘relevant assets’, whichever of these two is the smaller. The meaning of ‘relevant assets’ is explained on page 3 of this guide. How do I work out when approval is needed? This is quite complicated and depends on the value of the company’s ‘relevant assets’. The following examples may help. Example 1 Let’s say that a director’s daughter (a connected person) wants to buy computer equipment owned by the director’s company and valued at €1,100. In this example, the company’s ‘relevant assets’ are valued at €10,000, and one-tenth of this equals €1,000. Even though the equipment’s value of €1,100 is more than this, it is still less than €1,270 which is the minimum value for obtaining members’ approval. Accordingly, the transaction can proceed without needing that approval. Example 2 In this example, the company’s ‘relevant assets’ are valued at €200,000. One-tenth of this equals €20,000. A director wants to sell her car to the company for €40,000. As the value of the car (€40,000) exceeds both the minimum value of €1,270 and the smaller of the €20,000 and €63,487 figures according to the above rules (namely €20,000), the director will need the approval of the company’s members before this transaction takes place. Office of the Director of Corporate Enforcement 5
  • 57.
    Example 3 In this case, a director again wants to sell his car to the company for €40,000 where the company’s ‘relevant assets’ are valued at €800,000. One-tenth of this equals €80,000. Although the value of the car (€40,000) exceeds the minimum value of €1,270, it is less than €63,487, the smaller of the two options of €63,487 and €80,000 specified in the rules. Accordingly, this transaction does not need the approval of the company’s members. What happens if the company’s members do not approve the transaction? The company can cancel the transaction and look for either the asset or the money back. Also, if the director or connected person makes a profit from the transaction, they may be obliged to pay back the full amount and account for any profit. Similarly if the company makes a loss on the transaction, the director or connected person is liable for the full amount, including any loss suffered by the company. Can members approve a transaction after it has taken place? The members can agree to the transaction at a general meeting within a reasonable period of the transaction taking place. Where can I get more information? Our detailed information book, ‘A Guide to Transactions Involving Directors’, gives the complete law in this area. It is available from www. odce.ie. Print copies are also available. 6 Transactions Involving Directors - A Quick Guide
  • 58.
    Notes Office of theDirector of Corporate Enforcement
  • 59.
    Notes Transactions Involving Directors - A Quick Guide
  • 60.
    Notes Office of theDirector of Corporate Enforcement
  • 62.
    Restriction of Directors TheDirector of Corporate Enforcement AND Benedict McGowan AND Mary McGowan AND Keith McGowan. In the matter of Camlin Electric Limited and Tarmonbarry Hydroelectric Limited and in the matter of Section 160 of the Companies Act 1990. Camlin Electric Limited Company Number: 91186 Registered Office: Jamestown, Longford, Co. Longford. Tarmonbarry Hydroelectric Limited Company Number: 382815 Registered Office: Jamestown, Clondra, Co. Longford. Details of Respondents: Benedict McGowan Address: Jamestown, Clondra, Co. Longford Mary McGowan Address: Jamestown, Clondra, Co. Longford Keith McGowan Address: Jamestown, Clondra, Co. Longford Venue: High Court, Dublin. Judge: Justice Mary Finlay Geoghegan The Application: Under Section 160(2)(h) of the Companies Act 1990 (as amended by section 42(b) of the Company Law Enforcement Act 2001), the Director may seek the disqualification of the directors of a company, which has been involuntarily struck off the Register of Companies pursuant to Section 12 of the Companies (Amendment) Act 1982.
  • 63.
    Under Section 160(3A),directors may successfully defend such an application for disqualification by demonstrating to the High Court that the company had no liabilities at the time of involuntary strike-off or that any such liabilities were discharged before the date of the making of the disqualification application. Where it deems that a sanction is appropriate, the Court has discretion to either disqualify the director for such period as it deems fit or restrict him or her for a five year period. Outcome: On 19th December 2011, Mary McGowan, who was a director of the company known as Camlin Electric Limited and Keith McGowan, who was a director of the company known Tarmonbarry Hydroelectric Limited at the time that they were struck off the Companies Register, were each restricted for a mandatory period of 5 years from 19th December 2011 pursuant to Section 160(9A) of the Companies Act 1990. The consequence of the High Court restriction is that Mary McGowan and Keith McGowan are both prevented from being a company director or secretary or being involved in the formation or promotion of any company, unless it is adequately capitalised. In the case of a public limited company, the capital requirement is €317,435, and in the case of any other company, €63,487. In both cases, the allotted share capital must be fully paid up in cash.  
  • 64.
    Disqualification of Directors TheDirector of Corporate Enforcement AND Patrick Denagher (Senior) AND William Denagher. In the Matter of P W Denagher Enterprises Limited and In the Matter of Section 160 of the Companies Act 1990. P W Denagher Enterprises Limited Company Number: 414368 Registered Office: Allenwood South, Naas, Co. Kildare. Details of Respondents: Patrick Denagher (Senior) Address: Allenwood South, Naas, Co. Kildare. William Denagher Address: Allenwood, Naas, Co. Kildare Venue: High Court, Dublin. Judge: Mr. Justice Brian McGovern The Application: Under Section 160(2)(h) of the Companies Act 1990 (as amended by section 42(b) of the Company Law Enforcement Act 2001), the Director may seek the disqualification of the directors of a company, which has been involuntarily struck off the Register of Companies pursuant to Section 12 of the Companies (Amendment) Act 1982. Under Section 160(3A), directors may successfully defend such an application for disqualification by demonstrating to the High Court that the company had no liabilities at the time of involuntary strike-off or that any such liabilities were discharged before the date of the making of the disqualification application. Where it deems that a sanction is appropriate, the Court has discretion to either disqualify the director for such period as it deems fit or restrict him or her for a five year period.
  • 65.
    Outcome: On 20th February2012, Patrick Denagher (Senior) and William Denagher, who were directors of the company known as P W Denagher Enterprises Limited at the time it was struck off the Companies Register, were each made the subject of a disqualification order for a period of four years. Costs of €1,000 were awarded to the Director of Corporate Enforcement. The effect of this Order is that Patrick Denagher (Senior) and William Denagher are disqualified from being appointed or acting as auditor, director or other officer, receiver Liquidator or examiner or being in any way whether directly or indirectly concerned or taking part in the promotion, formation or management of any company or society registered under the Industrial Provident Societies Acts 1893 to 1978 for a period of four years effective from the 20th February 2012.