Key Post: Should I accept invitation to become a director?

Recently I have been invited to become a director of a small limited company (<10) that I am employed by.

I have read through this forum, and the BASIS and CRO information about the responsibilities of being a director but what I'm looking for is some information on becoming a director to an established company.

What documents should the company provide me with, or should I request from them? Should I seek independent advice on the financial/legal affairs of the company or accept the advice of the company accountant/solicitor? What pertinent questions should I put to the board of directors? What benefits/options (if any) are the company obliged to provide me with?

These questions may seem naive but I have never had to deal with this level of corporate/company affairs before. I would really appreciate some feedback on this topic.

Regards,
TCC

Apologies if earlier subject heading was misleading in any way.

Re: Issues relating to invitation to become company director

Hi Celt

Before becoming a director, you should be happy that the company is financially sound. You can check this out by reading the company's statutory accounts - they are the accounts as audited by the auditor. You should feel free to sit down with the auditor and have them explained to you.

There is prestige associated with being a director, but no real concrete advantage. Your terms and conditions are not changed in any way.

Brendan

Re: Issues relating to invitation to become company director

Unless you are getting a shareholding as a Director I personally would pass on this.

Particularly as Ireland's latest bureaucrat - Director of Corporate Enforcement - plan to introduce significant obligations for Directors where either the Balance Sheet total is over €7m ( I think) and Turnover is over €15m.. you as a Director will be signing off a ream of obligations.

The legal boys tell me that the idea is you will get your orse sued then if you actually signed stuff off when you did not have a clue what you were signing.

Re: Issues relating to invitation to become company director

The legal boys tell me that the idea is you will get your orse sued then if you actually signed stuff off when you did not have a clue what you were signing.

Is it not a good idea to have legislation aimed at concentrating the minds of directors in terms of doing their jobs properly rather than rubber stamping things and then, potentially, disclaiming all responsibility/understanding?

Re: Issues relating to invitation to become company director

Isn't there an issue with becoming a proprietary director (owning more than 15% of the company I think)? As far as I know, you will lose your PRSI benefits - i.e. no dole in the event of unemployment, pay full rate on glasses/eye tests, dental care etc. (on the upside you will also pay less PRSI).

I'm not sure of the above, but if anyone can clarify, I would appreciate it!

Re: Issues relating to invitation to become company director

PRSI contribution class S applies to self employed, company directors among others and provides less comprehensive benefits than employee PRSI (e.g. class A etc.). See here for more details.

Re: Issues relating to invitation to become company director

A proprietary director pays 5% employees prsi on all their income.

An ordinary employee pays 6% up around €45k, and only 2% on the balance.

But from the employers' point of view, there is no employer's prsi on the proprietary director's salary, which is a saving of 10.75%.

If you can be a proprietary director, you should be.

Brendan

Re: Issues relating to invitation to become company director

Could someone clarify the definition of proprietary director. I have seen two definitions of it. The revenue office define it as someone who holds >15% of the shares whilst various financial institutions define it as someone who holds >5% of the shares.

Or is it the case that both are correct depending on what is being discussed, ie. tax or pensions ?

Thanks for the input so far.

Regards,
TCC

Re: Issues relating to invitation to become company director

The particular significance of 15% from a Revenue perspective, is that this is the 'floor' for self directed trusts. Company can make payments to this on behalf of 'proprietary' directors.

The 5% may have other significance for different tax purposes.

Becoming a director

Hi Cryptic Celt
I think the answers you've already received are great and in particular the reference to the financial state of the company you have been invited to join.

Beware of your responsibilities - my other half was invited to join a company as a director which turned into a nightmare! His partner, who held 70% of the shares and was the Managing Director withheld financial information, borrowed from the Company, made his wife Company Secretary and had her sign off various documents, made regular payments to family members who were not involved in the company and spent money on ill-advised schemes - all without my other half's knowledge.

We only discovered what he was doing by accessing the cro.ie website and downloading all the documents. The company had an annual turnover of 4.5million and at the end of the year, through this partner's various dealings, there was nothing left!

Make sure you know 'who you're getting into bed with' before you make any moves!