Duties of Irish Company Directors | Companies Act, 2014
1 Apr 2018
President Michael D Higgins signed The Companies Act, 2014 into law at the end of December 2014. This short article focuses on the general and fiduciary duties of Irish company direc-tors as set out in Part 5, Chapter 2 of the Act. The Act came into operation on 1 June 2015.
General duties of Irish company directors
Sections 223-225 of the Act set out the general duties of Irish company directors. Under the Act, these general duties are:
◆To ensure that the company complies with The Companies Act, 2014.
◆On appointment as a director, to make a statement: “I acknowledge that, as a director, I have legal duties and obligations imposed by the Companies Act, other statutes and at common law.”.
◆To act in the best interests of the company and to respect the interests of members, shareholders and employees.
In addition, certain companies must include a Directors Statement of Compliance in their an-nual directors’ report. (To check if this applies to your company, see section 225 (7) of the Act.)
Fiduciary duties of Irish company directors
As well as their general duties and obligations, Irish company directors have fiduciary duties. A fiduciary duty is a legal duty to act in the best interests of another party. Fiduciary duties ensure that directors avoid conflicts of interest and work to serve the interests of the company and its members, shareholders and employees. The fiduciary duties set out in section 228 of the Act oblige directors to:
◆Act in good faith
◆Act honestly and responsibly
◆Act within their powers
◆Use company property only as permitted by the company’s constitution or in the best interests of the company
◆Exercise independent judgment unless otherwise permitted (see section 228 (e) )
◆Avoid conflicts of interest
◆Exercise the care, skill and diligence which would be exercised in the same circum-stances by a reasonable person
◆Have regard to the interests of employees and members
Where a director of a company acts in breach of his or her duty, penalties apply. It is im-portant, therefore, for all directors to familiarise themselves with their legal duties and obliga-tions. For more information and/or to discuss your specific situation please contact a member of our team.