Directors’ Duties in the Republic of Ireland

>> Liabilities and Penalties in the Republic of Ireland

Exercise your responsibilities carefully as the penalties for failure to do so can be severe. A variety of sanctions against directors for offences are provided for under the Companies Act or other defaults committed under the legislation.

Under the Companies Act.

The categories of offence and associated penalties are as follows:

  • category 1 – conviction on indictment can result in a term of imprisonment of up to ten years and/or a EUR500,000 fine while a summary prosecution for a category 1 offence will result in a Class A fine and/or a term of imprisonment of up to twelve months
  • category 2 – conviction on indictment can result in a term of imprisonment of up to five years and/or a EUR50,000 fine while a summary prosecution for a category 2 offence will result in a Class A fine and/or a term of imprisonment of up to twelve months
  • category 3 – summary offence only attracting a term on up to six months imprisonment and/ or a Class A fine
  • category 4 – summary offence only punishable by a Class A fine

A Class A fine is that within the meaning of the Fines Act 2010 and is a fine not exceeding EUR5,000.

In addition to sanctions arising by virtue of specific breaches of the Companies Act, a director who cannot demonstrate that he has acted honestly and responsibly may face administrative sanctions either in the form of proceedings for a declaration of restriction or, if his actions warrant it, an order for disqualification. Furthermore, a defaulting director may face unlimited personal liability and/or damages where he has acted in breach of his duties as a director or has failed to comply with the requirements of the Companies Acts or common law.

The consequences of a breach of duty are that the company may sue for damages, seek an indemnity for losses or seek an account for profits. In addition, the Act places on a statutory basis the requirement for director to indemnify and account in relation to the breach of certain duties. This applies to all of the fiduciary duties codified in the legislation except to the duty to act honestly and responsibly and to have regard to the interests of members. A breach of any of the fiduciary duties will not invalidate any contract or transaction or its enforceability, other than by the director in breach.

In addition to fines and penalties for criminal offences, there are also provisions for other sanctions under the Companies Act, such as disqualification.

Limitation of liability

In relation to directors’ indemnities, it remains the law that a provision will be void where it purports to exempt an officer of a company from, or indemnify an officer against, any liability in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company.

An exemption applies whereby a company may enter into a binding contract to indemnify an officer against any liability incurred in defending proceedings in which judgment is given in the officer’s favour. The Act contains a new provision stating that, where a company migrates to Ireland from another jurisdiction, which permitted such indemnities for directors, the Act will not operate to invalidate any such indemnities in respect of any negligence, default, breach of duty or breach of trust occurring before the re-domiciliation of that company.

Delegation of authorities

The Directors may delegate their authority to any of their number or to employees or other persons but the Board of Directors retains responsibility and supervision.

Directors and officers (“D&O”) insurance

Directors may obtain D&O insurance to cover  any losses and liabilities as a result of their position as directors.


Latest version updated 6th April 2018

Country Breakdown

4.773

Million

Population

Euro

Currency

$ 294.1

Billion

GDP

70,273

km2