# Directors Responsibilities



## johnpaul (14 Aug 2009)

Hello,

A friend of mine asked me and 3 others to become directors in his private limited company in which he is the 100% shareholder. We had a meeting with his accountant who is well established and regarded. The accountant talked us through what was required of directors and said that the accounts were all in order. We signed as directors. My friend asked would I be the second signatory on the accounts for the previous year (when I was not a director). I agreed and signed in the office, without ever looking at the accounts. 

Since signing I have become nervous in case I have opened myself up to a potential liability. The Director of Corporate Enforcement states that          "directors are obliged to carry out their functions with due care and diligence". 

My questions are
Is it my function to view the accounts and ensure they are correct or is it my function to ensure the accountant who prepares them is qualified to do so? Is there anything further I should do now to ensure that I am fulfilling my duties? Should I ask now to see a copy of the accounts to see if they look correct? 

Any guidance would be appreciated. 

P.S. I have no reason to think that my friend has done anything dishonest.


----------



## mathepac (14 Aug 2009)

johnpaul said:


> ... Is it my function to view the accounts and ensure they are correct  ...


Yes. The accounts need to be presented / discussed / reviewed by the directors at the AGM.


johnpaul said:


> ...  is it my function to ensure the accountant who prepares them is qualified to do so?  ...


Yes - the appointment of accountants / auditors to the firm needs discussion at the AGM


johnpaul said:


> ... Is there anything further I should do now to ensure that I am fulfilling my duties?  ...


Yes - update yourself on the contents of the memorandum & articles of association of the firm and update yourself on the duties and responsibilities of a director.


johnpaul said:


> ...  Should I ask now to see a copy of the accounts to see if they look correct? ...


Yes, but they have already been filed.

BTW, where did the other director go? AFAIK, the minimum requirement for a private limited company is one shareholder and two directors. Why did last years directors not sign off on last years accounts?

You do realise that in the event of anything being wrong, you may be liable to prosecution? Saying "I didn't know" is not a defence.


----------



## Latrade (14 Aug 2009)

[broken link removed]

A good guidance note on that page on responsibilities of Directors:

[broken link removed]

There are links to other legislation also, such as Health and Safety (Section 80 of the Safety, Health and Welfare at Work Act 2005) which would have some fairly serious implication in the event of a prosecution for an indictable offence. It isn't just finance law, but business law in general where there could be personal liability.


----------



## onq (14 Aug 2009)

johnpaul said:


> Hello,
> 
> A friend of mine asked me and 3 others to become directors in his private limited company in which he is the 100% shareholder. We had a meeting with his accountant who is well established and regarded. The accountant talked us through what was required of directors and said that the accounts were all in order. We signed as directors. My friend asked would I be the second signatory on the accounts for the previous year (when I was not a director). I agreed and signed in the office, without ever looking at the accounts.
> 
> ...



I echo the comments from Mathepac and Latrade and note the following, subject to being corrected - I am not a legal expert, but I was a director of a company for a short while and the ODCE website is your friend:

Directors should be familiar with the law affecting their company in any jurisdiction in which the company carries on its business.
This implies more than a laypersons knowledge of the law but some Directors I have met behave as if this is all that is required.
A company can be formed with a minimum of two Directors. In certain circumstances, single director companies are permitted.
Companies can be limited by share capital in which case your liability as a shareholder is limited to the amount you have invested.
Companies can be limited by guarantee in which case your liability as a Member is limited to the amount you have undertaken to pay should the company be wound up and its liabilities found to exceed its assets.
Directors liability in terms of fraudulent or improper trading practices is not limited by the company being "limited".
The fill rigour of the law may fall on them if they have broken the law and redress may be sought under criminal or civil law.
Negligence however can arise where you fail to carry out your duties and allow the original director to operate without any oversight from you.
You and your fellow directors may have acted impropertly or without care, but I think your attitude and diligence will redress any impropriety by you.
If you have not already tried to do so, I think you should make a point of reviewing the company's accounts for the year in which you were not a director.

Hope this helps.

ONQ.


----------



## Bill Struth (14 Aug 2009)

onq said:


> In certain circumstances, single director companies are permitted.


 Hi onq,

What would the circumstances be?


----------



## johnpaul (14 Aug 2009)

Thank you for the replies. It appears to me that I and the other directors have been negligent. I feel that this was naivety on me part but I can see that is not any excuse. 

In relation to this statement by ONQ

"You and your fellow directors may have acted impropertly or without care, but I think your attitude and diligence will redress any impropriety by you."

What do ye think I should do now (other than viewing the accounts) to reduce any liability for myself and the other directors. 

I presume I have the right to get a copy of the accounts I have signed?

In relation to the question by Mathepac " where did the other directors go", I believe the 100% shareholder (who is a director) had a falling out with the previous other directors and they resigned but still work for the company.


----------



## mathepac (14 Aug 2009)

johnpaul said:


> ... I presume I have the right to get a copy of the accounts I have signed?...


I don't want to sound like a smart-alec but you have an obligation to see and understand them.


johnpaul said:


> ...  I believe the 100% shareholder (who is a director) had a falling out with the previous other directors and they resigned but still work for the company.


I think it may be incumbent upon you to establish the reason(s) for :


the falling out
their failure to sign off the accounts as at the end of their tenure.


----------



## johnpaul (14 Aug 2009)

Thanks Mathepac,

Don't worry I know I am in Directorship 101 class here!!

I'll ask just two more basic q's.

1) What would happen to the accountant if it turned out that something untoward was going on and he signed off on the accounts knowing that the proper procedures had not being followed.

2) If I resigned my position as director now that I feel that things might not be done by the book how would that affect my exposure to possible liability.


----------



## onq (14 Aug 2009)

johnpaul said:


> Thank you for the replies. It appears to me that I and the other directors have been negligent. I feel that this was naivety on me part but I can see that is not any excuse.
> 
> In relation to this statement by ONQ
> 
> ...



<snip>

I think you should do continue to do what you're doing now - learning about the law as it affects Directors and what a good Director should do.
Read all the explanatory downloads about Company Law from the ODCE website - they are a good basis for understanding your responsibilities - and don't stop at the section on Directorships.
There are sections on shareholders, the types of limited company, the role of the Company Secretary - six or eight in all IIRC.
You must have a working knowleged of all aspects of the company and the law as it relates to its.

Read the legislation too;-
Companies Act 1990 as amended
Safety Health and Welfare at Work Acts as amended.
In fact finding out what legislation affects you is very important.

If you have any concerns or are looking for advice on general or specific items don't hesitate to contact the ODCE for advice, even without naming names.
They have a helpful pro-active attitude towards directors, expecially newly appointed directors, and you should explain your position to them clearly.
Assuming you are continuing in your role, ensure that the B10 form has been returned to the conpanies office to register your directorship.
Until that time, you are not officially registered as a director with the Companies Registration Office, although your duties and claimed competence may entitle you to be regarded as a Shadow Director.
And of course, if you discover there is something rotten in the State of Denmark, you know where to report it.

ONQ.


----------



## onq (14 Aug 2009)

Bill Struth said:


> Hi onq,
> 
> What would the circumstances be?



If you register the company in the UK the Companies Act 2006 permits a natural person to be a single director company. This measure became law in October 2008.

In Ireland the term is Single Member Company:
[broken link removed]

HTH

ONQ.


----------



## johnpaul (14 Aug 2009)

Thanks for the advice ONQ, I will take it


----------



## MandaC (15 Aug 2009)

onq said:


> If you register the company in the UK the Companies Act 2006 permits a natural person to be a single director company. This measure became law in October 2008.
> 
> In Ireland the term is Single Member Company:
> [broken link removed]
> ...



I think there is some confusion here between members (shareholders) and Directors.  

Single Member Company refers to the number of Members (Shareholders) and not Directors.  Single Member Company has 1 (100%) shareholder and not 1 Director.

There is often a lot of confusion around this, with people insisting there is only one Director required.

Check the link below under single member companies.

[broken link removed]

As far as I am aware there still needs to be 2 Directors and a Sec. in a single member company.

Has the law changed recently?  Onq, do you have a link to the ODCE where it says there can be companies with one Director?  Like Bill Struth, I would like to to check these circumstances out!


----------



## onq (17 Aug 2009)

To MandaC and Billl Sturth

To be honest guys, I may be getting a bit confused myself!

Its been a while since I looked at all of this [a year or more ago] but I seem to recall reading about single director companies.
It was in the context of the company having only one member alright anmd I note the advice page you referred to says:
"Single Member companies continue to require two directors."
So I may be incorrect in Irish Law.
I will have a look again and revert and I will either put up or shut up. 

ONQ.


----------



## onq (17 Aug 2009)

Okay I am shutting up.

Its in the Companies Consolidation and Reform Bill, which I read about it under I think yet another title ["the new Companies Act 2009" IIRC].
I had the impression it was to be in sooner rather than later, i.e. it would be in by now.
Its now looking like it'll be "later" fi.e. 2010, for the Act so I stand corrected.

However in that new act there is a provision for a single director company.
As a sole trader professional in the building industry I was interested in this option.
The new company won't be a Sole Tradership, a there is a need for a separate Company Secretary.

Some links:

[broken link removed]
http://www.orourkereid.com/newsletters/0907.htm
[broken link removed]

Hats off to those who spotted my gaff, and apologies for any confusion arising.

ONQ.


----------



## csirl (17 Aug 2009)

If you agree to be a Director of a company, you take your responsibilities seriously. You should make yourself familiar with the major aspects of the business, particularly its income and expenditure and attend as many Board meeting as possible. You should be involved in all major decisions.

It's a bad idea to sign up as a "silent" Director to do a friend a favour. Even people with the best intentions can end up in a mess if the business turns south.


----------



## MandaC (17 Aug 2009)

Knew I did not missed something....to be honest, I would not like to be left waiting for that new companies bill, so dont get excited at the thought of the single director company just yet.  We were waiting on it the year before last and then last year......and so on.


----------



## johny (10 Dec 2009)

hi guys,

i hope im posting in the correct forum but here goes, im a director of a company in ireland , registered in cork. cutting a long story short my sister is acting as a non shareholding director of the company., ive gone to the united states for a year to get back on my feet and now the county council and revenue are issusing demand notices to the company but addressed to her., ive explained throughly in writing mine and her position within the comapny before i left, ive reassured my sister the face that she has no liability as not only is it the companies liability but even if it were a directors liability she;s not even a shareholder. 

she accepts my explanation, but as we all know, im  use to these letter and demand notices are water off off a ducks back to me but i can understand her panic. 

im just looking to make sure that although the letters may arrive they cant really expect a sherrif to posses anything of hers as once they search they'll realise she owns nothing in the company? 

once ive enough money saved ive every intention of coming home in 6 months and formally taking care of the situation but just want to make sure she'll be ok until i get home??

anyonees thoughts would be appreeciated.

 Johny.


----------



## mathepac (10 Dec 2009)

Revenue and the Council evidently know that you are out of the country so they are serving notices / demands on the director they know is in the country.

Legal responsibility for the operation of the company rests with the directors. If Revenue and the Council see no activity in relation to satisfying the debts they claim they are owed, they may take it to court and refer the matter to the Revenue sheriff for collection.

Your sister is in a very precarious and vulnerable position IMHO. You need to take action urgently as her property and even her liberty may be at risk if matters are not resolved.

There was a man on the radio yesterday who was jailed for non-payment of a dog-licence and a related fine and costs.


----------



## Sconhome (10 Dec 2009)

johny said:


> my sister is acting as a non shareholding director of the company.,



She is still a director with equal responsibilities under law. It just means she is entitled to no dividend payable to shareholders, should there be a profit.

She is the one left holding the baby in this case.


----------

