The new Companies Act 2014 aims to radically overhaul, modernise and streamline company law in Ireland and is set to be commenced on 1 June 2015. This blog will look at some of the changes the new Act will entail in relation to company officers.
While directors’ duties will remain much the same under the new Act, the major change is that these duties, previously established in case law rulings over many years, will for the first time be codified into eight fiduciary duties set out in Part 5, Section 228 of the new Act.
These duties are as follows:
1) To act in good faith in the interests of the company;
2) To act honestly and responsibly;
3) To act in accordance with the company’s constitution;
4) To not use the company’s property, information or opportunities for the director’s own, or anyone else’s, benefit;
5) To not agree to restrict the director’s power to exercise an independent judgement;
6) To avoid any conflict between the director’s duties to the company and the director’s other (including personal) interests;
7) To exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person with the same knowledge and experience; and
8) To have regard to the interests of its employees and of its members.
Appointment Of the Company Secretary
In addition to the duties listed above, under the Act, directors of private companies now have a duty to ensure that the person appointed as secretary has the skills or resources necessary to discharge his or her statutory and other duties. The duties of the secretary will be those delegated to them by the board of directors.
One Director Companies
Up to now, all companies under Irish law had to have a minimum of two directors. Under the Companies Act 2014, Companies Limited by Shares (the new model company type for private companies) will be allowed to have a single director, however this director cannot also be the company secretary. The two-director requirement will remain in force for all other company types.
Exemption On Disclosure Of Shareholdings
A new rule on what constitutes a disclosable interest in a company should substantially reduce disclosure obligations on directors and secretaries. While company officers are still under an obligation to disclose certain interests in shares or debentures in the company and in associated companies (any such interests include shares held by connected persons such as immediate family members), there is a new exemption on disclosure for any shares held amounting to less than 1% of the nominal value of the company’s issued share capital.
Directors’ Compliance Statement
The directors of public limited companies and certain large private limited companies (the threshold for private companies being a balance sheet total of €12,500,000 and a turnover of €25,000,000) will have an obligation to include a compliance statement with company law and tax law in their annual directors’ report, acknowledging that they are responsible for ensuring the company’s compliance with its legal obligations.