Director's Duties and Responsibilities

Author:Ms Paula Kelleher
Profession:Dillon Eustace
 
FREE EXCERPT

Originally Published In March 2008

Introduction

The duties owed by Directors to their company are many and

diverse. The overriding principle of Company Law is that a

Director's duties are owed in the first instance to the company

and not to the individual shareholders or employees. These duties

are derived from various sources including common law, case law,

legislation and the articles of association of the company

concerned. A brief summary is set out below.

It should be noted that no distinction is made in the Companies

Acts 1963- 2006 (the "Companies Acts") between Executive

and Non Executive Directors, in terms of appointment, removal or

duties and responsibilities. This is examined in more detail under

the heading Categories of Directors.

It is important that all directors understand the scope of their

role and responsibilities including their specific duties, length

of tenure (how long they can hold the appointment), and

restriction/disqualification provisions relating to Directors.

Finally, Directors should consider how to minimise the risks

involved during their tenure for example by having a letter of

appointment and ensuring the company provides Directors and

Officers insurance.

Summary of Director's Duties

Common law duties can be summarized into three

principles:

Directors must exercise their powers in good faith and in the

interests of the Company as a whole.

Directors are not allowed to make an undisclosed profit from

their position as Directors and must account for any profit which

they secretly derive from their position as a Director.

Directors are obliged to carry out their functions with due

care, skill and diligence.

Director's statutory duties are as follows:

Duties as a Company officer under the Companies Acts;

Duty to maintain proper books of account;

Duty to prepare annual accounts;

Duty to have an annual audit performed;

Duty to maintain certain registers and other documents;

Duty to file certain documents with the Registrar of

Companies;

Duty of disclosure of certain personal information;

Duty to convene general meetings of the Company;

Duties regarding transactions with the Company;

Duties of Directors of companies in liquidation and Directors

of insolvent companies.

In addition to the statutory duties imposed under the Companies

Acts, Directors should also be aware of the provisions of the Irish

Market Abuse (Directive 2003/6/EC) Regulations, 2005 which contain

new insider dealing provisions and the Irish Transparency

(Directive 2004/109/EC) Regulations 2007 which contain

provisions regarding (i) reporting to the issuer and the Irish

Stock Exchange any change in specified % levels of ownership and

(ii) increased reporting obligations on issuers in terms of

frequency and content of reports to be prepared by them.

Categories of Directors

Executive.

Non-Executive.

Nominee.

Alternate.

Shadow.

De Facto.

Executive Director

No reference is made in the Companies Acts to

"Executive" or "Non Executive" Directors and,

in fact, this distinction is one which has arisen...

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