As a Director of an Irish company, you need to be aware of your fiduciary duties. This means you have legal obligations to act in the best interest of the company. Therefore, it’s a huge commitment to become a Director and it’s not a role that should be offered without considering what it actually means to be a Director.
The duties of a Director can depend on your title. For example, you could be the Managing Director, CEO, Chief Financial Officer, De-facto Director etc.
The main responsibilities of Directors
- To ensure that all accounting records of the company are maintained.
- To ensure the Annual Returns are filed on time.
- To ensure that your duties are focused towards the success of your company.
Types of Company Directors
There are two types of Directors under the Companies Act 2014: an Executive Director and a non-executive Director.
A non-executive Director is usually hired by a company because such an individual is expected to possess a specific skill set and experience. You are obliged to monitor and challenge the performance of the management of the company.
An executive Director will have a far more intimate relationship with the management of the company.
If you are a nominee Director, you are required to maintain the expectation of your appointing person, as long as they are in line with the company.
What is a nominee service?
A nominee Director has the same responsibilities as any other Director in the company. They still need to act in the best interest of the company and the person who nominated them.
This service might attract Startups who need to fulfil the criteria of having an EEA-resident Director in order to incorporate a company in Ireland. But before you decide to appoint a nominee Director, you should be aware of what you are asking them to do:
- They will be the face of your company. The nominee Director may have to attend face-to-face meetings with banks to open a business account. They are still obliged to fulfil all duties and responsibilities of a company Director and may be personally liable in certain cases like any other company Director. They will sign their name on all company paperwork.
- Ensure proper management. All Directors need to make sure that the company is registered properly with the relevant bodies – i.e. Companies Registration Office and Revenue. Tax registration and/or registering for licences with government organisations could fall on their shoulders. This is a very important task and could leave you with headaches.
- Provide anonymity to appointing person. In certain cases, a nominee Director is hired to provide anonymity to the person actually pulling the strings. Although this will hide the appointing persons details – this also means that your company is owned by someone else in the eyes of the Companies Registration Office and the public.
What you need to know before you become a Director
Get familiar with reporting
You should know how to read financial reports. It’s important that you know what state the company is in. A good accountant will help you if you don’t know how to read financial statements. You should also have a strategic plan for the company, budgets and a copy of the company’s board manual.
Be aware of your legal obligations
You’ll need to consider what is the company’s risk policy and corporate governance practices. Be aware of any outstanding or ongoing legal matter pertaining to the company. You may need to review the company’s Directors’ & Officers’ (D&O) insurance policy. If you don’t have one, you should consult an insurance broker.
If you want to be a Director of an Irish Limited Company, but you’re resident outside of the EEA, you also need to consider that there is different conditions to be this type of non-EEA resident Director.
Establish good practices
The Director of a company should establish a guidebook on board policies and board dynamics. For example, the duration of the term of office and the policy in relation to remuneration and the reappointment of the Directors.
Ensure proper management
All Directors need to make sure that the company is registered properly with the relevant bodies – i.e. Companies Registration Office and Revenue. Tax registration and/or registering for licences with government organisations could fall on their shoulders. This is a very important task and could leave you with headaches.
Are there any disadvantages of being a Company Director?
The cons of being a company Director really amount to how you personally feel about the many liabilities associated with the title. These liabilities can add pressure that an ordinary employee does not have. Think about your own leadership, management, interpersonal, and overall person characteristics – is this something you can handle?
If so, great! We’re here to help you. We offer transparent fees which help you set up a company in Ireland. Accountant Online are here to help you when you’re ready.
What liabilities does a Director face?
- If you fail to ensure that the company’s financial records maintained this may be considered as a category three offence (up to six months imprisonment and/or a Class A fine, up to €5,000) (Section 286, Companies Act,2014).
- You mustn’t take any loan from the company unless the loan is less than 10% of the company’s assets. (Section 240 Companies Act 2014).
- Your position as a company Director is not guaranteed. A Director may be easily removed by an ordinary resolution by the board of Directors.
- You may be held personally liable for the debts of a company where the company is unlimited, or where the corporate veil is lifted. (Corporate veil is a legal concept that separates the actions of an organisation to the actions of the Directors and the shareholders and protects them from liability).
What’s good about being a Company Director?
As you know, becoming a Director is a personal decision. If you think you’re ready, despite the liabilities mentioned above, we are delighted you’ve decided to take on this role! It’s a long but exciting and very rewarding role to step into.
If you still need convincing… we’ve outlined some of the reasons our clients love being a Director of their own company.
Getting a say in how the company is run
As a Director, you can put lots of value into the company. In most cases, you can freely voice your opinion and have a hand in discussing how the company will operate. You can have a Director of Sales, Director of Operations, Director of Finance or more in your company. Your Constitution will usually state how much input you have, but you can be sure that you have a voice within the company.
You can deduct your pension contributions from company profits as tax deductions. You are also entitled to a small benefit of up to €500 in value which is tax-free. This is available each year under the small benefits exemption scheme, just like any other employee of the company. As a Director, you may get to decide who else in your company gets one!
Protection of personal assets
A big reason our clients decide to set up a Limited Company is to have protection against their personal assets being seized. If a company has fallen into debt and facing legal action, your personal finances and assets are safe. A Limited Company is a separate legal entity and can be sued just like a person.
You can establish a great working environment
If you have strong values and beliefs when it comes to employing staff or corporate responsibility, this is your opportunity to put it into action. If you’re the Director of your own company, you can implement good policies and practices.
Being a company Director can be a prestigious one. It may give you access to senior partners in your industry and beyond.
Before you make your decision...
Before you take on the role of being a company Director, ask yourself “Am I Ready?”. The process to set up a Limited Company can be an exciting and it’s easy to get caught up in the Startup mentality. Why not seek advice from your friends and family about your personal ability? If you need support from a legal or financial point of view, our team of experts are here to help you.
You won’t learn everything about becoming a Director through reading this guide and you may consider just taking the leap. We’re here to support you.
As you can see, it can seem like there are many more responsibilities and liabilities involved in the role of a company Director rather than benefits. Before accepting the position, you must be confident, well informed about your legal obligations and the financial situation of the company. You should have the appropriate skills and knowledge to execute your duties effectively as a company Director in order to work towards the success of your company.