Director FAQs

There is no specific qualification required to be a director, although those who hold directorships will often have significant management experience. There are a number of instances whereby a person can be prevented from becoming a director at certain times. These include:

• bankrupts (who are prohibited from being directors while their debts remain unpaid or until a court excuses them from paying those debts);
• those found guilty of serious misconduct; and
• those disqualified from being a director by the courts.

A person under the age of 18 cannot be a director.

A body corporate (such as a company) may not itself be a director.

Directors of financial services regulated entities are subject to the fitness and probity requirements of the Central Bank of Ireland.

A director is subject to a large number and wide range of obligations from many areas of law, depending on the activities of the company. These can include data protection law, employment law, health and safety law, regulatory requirements and so forth.

Company law is only one source. However, for its part companies legislation imposes many specific obligations on a director, such as ensuring that the company complies with the Companies Act and ensuring that the company’s auditors have all relevant audit information. The Companies Act also imposes important “fiduciary” obligations on every director, such as to act honestly, responsibly, in good faith and in the interests of the company, to exercise care, skill and diligence and to avoid conflicts of interest.

Under companies legislation, there is no distinction between an executive and a non-executive director. The non-executive director’s role can be seen to balance that of the executive director.

Executive directors have an intimate knowledge of the company and generally provide an entrepreneurial spur, whereas the non-executive director is generally expected to have a wider perspective of the business community at large and often has more to say about prudent control.
 

One of the best and most transparent ways to get appointed to a board as a non-executive director is to register with a specialist recruitment provider. Often a company that is interested in appointing a non-executive director will source potential candidates through a search agency, such as the IoD’s Boardroom Centre.

Non-executive directors will be recommended to a company based on skill, suitability and expertise; however the final decision regarding appointment rests with the client company.

Generally remuneration varies and depends largely on how much time a non-executive director is expected to give to their duties, including any special functions undertaken, such as sitting on sub-committees of the board. Remuneration should therefore adequately match the responsibilities of
the role.

With regard to the treatment of fees,non-executive directors and non-resident directors of an Irish incorporated company are within the charge to income tax and the Universal Social Charge (USC). A company must deduct income tax at source under the PAYE system and deduct the USC at source under the USC scheme. In rare circumstances, the fees paid to a nonresident may be relieved from a charge to income tax and the USC under a relevant director satisfies the Revenue Commissioners that relief under the relevant double taxation agreement is appropriate.

In determining the amounts and form of remuneration, the board should have regard to any applicable legal requirements and in particular the rules around variable compensation, including bonuses.

It is generally recommended that non-executive directors are re-elected every three years and, in order to maintain independence, it is recommended that a non-executive should not serve on a board for longer than three terms of three years. Certain types of companies call for annual re-election.

The chairperson’s primary role is to ensure that the board is effective in its tasks of setting and implementing the company’s direction and strategy.

The effective chairperson will also uphold integrity and probity, promote effective relationships and open communication, initiate change and planning succession, promote the highest standards of corporate governance, ensure clear structure and implementation of board decisions and most importantly, provide coherent leadership.

The duties of the company secretary can be wide-ranging. Typically, the company secretary is responsible for maintaining the company’s statutory registers or books, filing annual returns to the Companies Registration Office, arranging meetings of the directors and shareholders, informing the Companies Registration Office of any significant changes in the company’s structure and ensuring the security of the company’s legal documents.

Yes. It is the directors’ responsibility to prepare financial statements for each financial year, consisting of a balance sheet, a profit and loss account and related notes. A statement acknowledging the directors’ responsibility for keeping proper accounting records and preparing financial statements is usually included in the annual report.

As a director, you must disclose to the board the nature of any direct or indirect interest that you, or a person connected with you, may have in any contract or proposed contract with the company.

No. Directors, not managers, are required in law to apply skill and care in exercising their duty to the company and are subject to fiduciary duties. A very wide range of statutes impose duties on directors, under which managers are generally not held responsible.

However, a manager too may be liable under legislation if the company commits a criminal wrong and the manager has contributed to that wrongdoing, and a manager is likely to owe contractual duties of care, skill etc to the company, as the manager’s employer.

Clearly, conflict within a board can present difficulties. If it is necessary to remove a director the easiest way to do so is normally to suggest the director resign in consideration for a severance package.

However, if this is not possible then the director may be removed by a statutory procedure. (See Chapter 15 of The Directors' Handbook:  Procedure for removing directors).

The legal duties of a director when a company is in financial trouble differ from those when a company is solvent. In insolvency-related cases the following applies:

• directors should consider the interests of creditors above those of shareholders;
• directors should separate their own personal interest from the company’s interests; their duty is to act in the interests of the company;
• directors should take steps to avoid loss to creditors;
• directors should not enter into transactions at an undervalue or make preferences.

The Institute of Directors is the premier information source for directors in Ireland.

Directors can access a wide range of information about their duties and responsibilities through training, events, resources and publications.

The loD also offers Ireland’s most prestigious director qualification – Chartered Director - which combines learning and actual professional experience, with a syllabus focused on all-round knowledge and skills. Find out more about the Chartered Director Programme.