How to become a Director of an Irish Limited Company?
Directors are usually appointed to Irish companies because they are in charge of the management of the company. Sometimes, they are the founder of the company and want to set up a business themselves.
You can form a company yourself and appoint yourself as a Company Director, or maybe a company hires you to be the Director because you have excellent skills that they need.
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.
If you are thinking about setting up a Limited Company in Ireland, talk to our Client Services Team. We are always happy to talk you through the services we offer to help make this journey as smooth as possible.
Types of Company Directors
There are five types of Directors outlined by the Office of the Director of Corporate Enforcement (ODCE). All these types of Directors have the same legal duties under the Companies Act 2014.
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.
An alternate Director is an individual who is appointed to attend board meetings on behalf of the Directors to act for them in their absence.
De facto Directors
This type of Director performs the duties of a Director even though they are not formally appointed by the company. They take on the role themselves.
These Directors are also not formally appointed as Directors but give instructions that are usually followed by the company’s Directors.
Who can become a Company Director?
- Anyone over the age of 18
- Not currently declared bankrupt
- Not disqualified from acting as a Director by a court
- Not a restricted person (a person who has failed to satisfy a court that they acted honestly and responsibily in relation to an insolvent company)
- If you are currently resident in a non-EEA country, you can set up a company by purchasing a Section 137 bond.
What is a nominee Director 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.
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.
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.
Things to note about nominee Directors
- 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.
- Nominee Directors are subject to the same rules. 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.
- It can 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 does a Company Director do?
Read financial reports and reports
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.
Ensures legal obligations are adhered to
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.
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.
Benefits of being a Company Director
Becoming a Director is a personal decision. If you think you’re ready, 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.
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. You also have experience and knowledge that new entrepreneurs may not have. Consider mentoring or joining a network to help individuals like you!
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!
Salary and pension planning
As a Company Director, you usually get to decide how you pay yourself. This can be a salary, dividend or you don't have to pay yourself at all. There are different tax rules with each way of taking money out of the company. Contact us if you want to learn more about how to pay yourself.
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 form a company in Ireland. Accountant Online are here to help you when you’re ready.
What risks are involved with being a Director?
- 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 to do next?
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 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 is here to help you.
You might also be interested in reading about the costs involved with setting up a Limited Company.
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.
Before becoming a Director, 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.