The new Companies Act means business

There are up to 500,000 company directorships that will be affected by the provisions of the new Companies Act 2014 when it comes into force in June. The Act doesn’t pull its punches either, specifying fines of up to €500,000 fine and or imprisonment for not more than 10 years depending on the gravity of the case.

As ICSA members will know this a big, and very welcome Act with nearly 1,500 sections of new rules and regulations. It’s aimed at updating some very old legislation, giving greater clarity to company law and hopefully giving extra teeth to ensuring we see good corporate governance.

Severe consequences for directors who don’t take duties seriously

There are severe consequences for directors who have not taken their duties seriously and have not carried out their duties to the best of their ability, which may result in them being found personally liable and subject to civil or criminal sanctions according to the new codified directors’ duties under the Act. As our vision at the ICSA is for all organisations to earn and maintain the trust of their stakeholders through good governance we welcome measures that help enforce the highest level of compliance.

What the Act says

• Directors who are found to be in breach of their duties will be liable to account for any gains made and must indemnify companies for losses resulting from any breaches of duties.
• The Act combines the duties and responsibilities of directors in one unified code for clarity and transparency.
• Importantly, and something that is worth highlighting, the new regime will apply to all directors including de facto directors and shadow directors.

What you have to do

to act in good faith, in what the director considers to be the best interests of the company

• to act honestly and responsibly in relation to the company’s affairs
• to act in accordance with the company’s constitution and to exercise powers only for lawful purposes
• not to use company property for their own or others’ personal gain unless approved by the company’s members or agreed to in the company’s constitution
• not to fetter discretion unless permitted by the company’s constitution or entered into in the company’s interests
• to avoid conflicts of interest
• to exercise care, skill and diligence
• to have regard to the interests of the company’s members.