Directors’ Proceedings

Overview

The powers of the board of directors are set out in the default Companies Act provisions/ articles of association.  The default provisions/  articles vest the powers of the company in the board of directors, other than those specifically reserved to the shareholders. The directors can exercise their powers in accordance with the constitution/ memorandum and articles of association and the law of the State.

The directors act by decisions made at board meetings. The default provisions/ standard articles provide that a resolution signed by all directors is as valid as a resolution of a meeting of the board of directors.

Generally, a director may convene a meeting. Directors are entitled to attend meetings.  Directors are entitled to reasonable notice of meetings. The directors need not necessarily accommodate a director who resides abroad.

In order for a meeting to be valid, there must be a quorum. The constitution may specify the quorum. The default quorum is two, other than in the case of a single director company.

Directors may meet for the purpose of convening a general meeting, notwithstanding the absence of a quorum. Directors can meet notwithstanding a vacancy.

Minutes must be kept of the business of the meeting. The same broad principles apply, as apply to shareholders’ meetings.

Outsiders may act on the basis of resolutions and decisions of the board of directors if they appear to be in order. They are not obliged to examine and satisfy themselves in relation to the internal workings of the company.


Board’s Power to Manage I

The Companies Act, 2014 restates the provisions formerly commonly contained in company articles of association, regarding the powers of the directors. The general rules and provisions regarding directors’ meetings and meetings of committees of directors under the pre-existing legislation were preserved.  The provisions regarding the passing of resolutions, written resolutions, remote meetings and alternate directors are re-enacted.

The previous regulation 80 of Table A of the standard Articles of Associations is now comprised in the Companies Act 2014 as the default position, in accordance with its general scheme. Each of the following provisions regarding the proceedings of directors may be varied by the constitution.

Subject to any regulations to the contrary, it is provided that the business of a company shall be managed by its directors. They may exercise all the powers of the company which are not by the Act or by the constitution, required to be exercised in general meeting, by the shareholders.This is subject to the regulations contained in the constitution and the provisions of the Act.


Board’s Power to Manage II

The powers of the directors are subject to such directions, not being inconsistent with the foregoing, as the company in general meeting may by special resolution give. No direction given by the company in general meeting is to invalidate any prior act of the directors, which would have been valid if the direction has not been given. The direction may be given by written resolution of the company. A 75 percent majority is therefore required.

The Act confirms the power of the directors to exercise all powers of the company to borrow money and to mortgage and charge the undertaking, property or capital of the company unless the constitution otherwise provides. The restriction on borrowing by the directors in the standard articles of association under the earlier legislation, which was commonly, but not invariably removed, does not apply.

The directors may delegate any of their powers to such person or persons as they think fit, including one or more committees.  Any committee exercising power so delegated shall comply with any regulations that may be imposed by the directors.


Managing Director

The directors may appoint any one or more of themselves to the office of managing director or similar title, for such period and on such terms as to remuneration or otherwise as they think fit.  This appointment is subject to the terms of any agreement entered with the appointee, in the particular case.

The managing director of a company shall receive such remuneration whether by way of salary, commission or participation in the profits or partly in one way and partly in another, as the directors may determine. The directors may confer upon a managing director, any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit.

In conferring any such powers, the directors may specify that the conferral is to operate either so that the powers concerned may be exercised concurrently by them and the managing director; or to the exclusion of their own such powers.

The directors may revoke or amend the terms of appointment. The appointment ceases when the appointee ceases to be a director. However, an appointee whose appointment is revoked may have a right to damages for breach of contract.


Convening a Meeting

Directors of a company may meet together for the dispatch of the company’s business. They may adjourn their meetings from time to time and otherwise regulate their meetings as they think fit. Generally, they have considerable flexibility in relation to their proceedings.

A director may, and the secretary on the requisition of a director shall summon a meeting at any time.  All directors are entitled to reasonable notice of any meeting of the directors. The period of notice is not fixed under the default provisions.

If the directors so resolve, it shall not be necessary to give notice of the meeting of directors to any director being resident in the State, who is absent for the time being from the State.

The quorum for the transaction of business of directors may be fixed by the director.  If not fixed, it is to be two. In the case of a single director, the “quorum” is one.

The continuing directors may act, notwithstanding any vacancy in their number.  If their number is reduced below the minimum number fixed by the Act as the quorum, the continuing directors may act for the purpose of increasing the number of directors or summoning a general meeting, but for no other purpose.


Proceedings at Meetings I

The directors may elect a chairperson of their meetings and determine the period for which he is to hold office.  If no chairperson is elected or if at a meeting, the chairperson is not present within 15 minutes after the time appointed for holding the meeting, the directors present, may choose one of their members to be the chairperson of the meeting.

Questions arising at a meeting shall be decided by a majority of votes.  Where there is equality of votes, the chairperson has a second or casting vote.

The directors may establish one or more committees.  They may elect a chairperson of the committee.  If the chairperson is not present at a committee meeting, the members of the committee present at the meeting may choose a chairperson for the meeting.


Proceedings at Meetings II

Questions arising at any meeting of a committee shall be determined by a majority of votes of the committee members present. Where there is an equality of votes, the chairperson has a casting vote.

A resolution in writing signed by the directors of a company or by members of a committee of the directors entitled to receive notice of the meeting of the directors or the committee is as valid as if it had been passed by the directors or committee concerned duly convened and held. A written resolution may consist of several documents in like form, each signed by one or more of the directors.  It shall take effect from the time it is signed by the last director. There is no provision for a chairman in the case of equality of votes, to have a second or casting vote in the case of a written resolution.

Where one or more directors (not being a majority of them) would not by reason of the Act, the constitution or a rule of law be permitted to vote on a resolution if passed at a meeting of the directors duly convened, then the resolution shall be valid if signed by those of directors who would have been permitted to vote, if the resolution had itself been passed at a meeting of directors. The resolution shall state the name of each director who did not sign it and the basis upon which he did not sign it.


Conference Meeting

A meeting of directors or of a committee may consist of a conference between some or all of them (or the members of a committee) who are not in one place.  Each of them must be able to speak either directly or by means of telephonic video or other electronic communication to the other and be heard by each of the others.

The director or member of a committee taking part in the conference is deemed to be present in person at the meeting and be entitled to vote and counted in a quorum accordingly.

The meeting is deemed to take place where the largest group participating is assembled.  Where there is no such group, it is deemed to take place where the chairperson is located. If neither of these circumstances applies, it is deemed to be at such location as the meeting itself decides


Voting Notwithstanding Interest

Subject to the Act, a director may vote in respect of any contract, appointment or arrangement in which he is interested, and he shall be counted in the quorum present.

Directors may exercise the voting powers conferred by shares of any other company held or owned by the company, in such manner as they think fit.  In particular, they may exercise the voting power in resolutions appointing any of them as director of the other company and providing for remuneration and pension payments to the directors of such other company. A director may exercise such voting rights notwithstanding that he may be or about to become a director of the other company, and may have an interest in the exercise of such rights in that manner.

A director of a company may hold any other office or place of profit in the company in conjunction with his office of director, on such terms as to remuneration or otherwise as the directors of the company may determine.  No director or intending director shall be disqualified by his office from contracting with the company. The contract is not avoided by reason of the director holding that office or a fiduciary relationship which thereby exists.

A director of a company, notwithstanding his interest, may be counted in the quorum present at any meeting at which that director or other directors are appointed to hold any position or office of profit in or with the company, or in relation to the terms of such appointment.  He may vote on any such appointment or arrangement, other than on his own appointment or arrangement and its terms.


Alternate Director

Any director may appoint another director to be an alternate director. He may appoint another person to be an alternate director with the approval of a majority of the directors.  Only one person may stand appointed at a particular time, to be an alternate director for any given director.  Any appointment so made may be revoked at any time by the appointer or by a majority of the other directors or by the company in general meeting.

The appointed alternate, while he holds office shall be entitled

  • to notice of meetings of the directors;
  • to attend such meetings in place of the appointor, and
  • to vote.

He shall not be entitled to be remunerated, other than out of the remuneration of the appointor.

An appointment is effected by notice in writing given to the company. Revocation of such an appointment by the appointor shall be effected by notice in writing given by the appointor to the company.


Minutes

A company shall cause minutes to be entered in books kept for that purpose, of

  • all appointments of officers made by the directors;
  • the names of the director’s present at each meeting of directors and committees of directors; and of
  • resolutions and proceedings at each meeting of the directors and a committee of the directors.

Minutes shall be entered in the books as soon as may be after the appointment or the meeting concerned has been held.  Any such minute purporting to be signed by the chairperson of the meeting at which the proceedings took place, or by the chairperson of the next succeeding meeting, shall be evidence of the proceedings.

Where minutes have been recorded in accordance with the above provisions at any meeting of the directors or of a committee, then until the contrary is proved, the meeting shall be deemed to have been held and convened, the proceedings at the meeting shall be deemed to have taken place and all appointments of officers made by the directors in the meeting shall be deemed valid.

A company shall if required by the ODCE produce to it for inspection, the books and records required to be kept in accordance with the above provisions. The ODCE may make copies. Failure to comply is a category 4 offence by the company and by an officer in default.


Audit Committee I

Certain larger companies must have an audit committee. This includes larger private companies.

The board of directors of a large company shall establish a committee or decide not to establish it.  It must state in their report whether they have established it and if they have not established it, the reasons for not so doing in the director’s report.

It is not clear whether and in what circumstances the explanation will be sufficient to excuse the non-appointment of the audit committee.  There is no guidance as to what is or is not sufficient.

The audit committee of a large company must have at least one independent director who has competence in accounting or auditing.  This is likely to require that the person be a qualified accountant and a member of a body which is recognised for the provision of audit services.

A large company is one which in the most recent and immediately preceding financial year

  • had a balance sheet size in excess of €25,000,000 or such other amount as is prescribed;
  • had a turnover of €50 million or such other amount as may be prescribed.

A company which has one or more subsidiary undertakings is a large company, if the company and all those subsidiaries taken together, meet the above criteria in the most recent and immediately preceding financial year.


Composition of Committee I

The members of the audit committee shall include at least one independent director who is a non-executive director with the above-mentioned qualification. He must have the requisite degree of independence and qualifications to enable him to contribute effectively to the committee’s functions.

The independent director must at no time in the preceding three years, have been an employee of, or had a material business relationship with the large company, either directly or indirectly as partner, shareholder, director (other than as non-executive director) or senior employee of a body that had such relationship.

The responsibly of the audit committee includes

  • the monitoring of the financial reporting process;
  • the monitoring of the effectiveness of the large company’s systems of internal control, internal audit and risk management;
  • the monitoring of the statutory audit of the large company’s statutory financial statements; and
  • the review and monitoring of the independence of the statutory auditors and in particular the provision of additional services to the large company.

Composition of Committee II

If an audit committee is established, any proposal of the board of directors of the large company with respect to the appointment of statutory auditors to the company shall be based on a recommendation made to the board by the audit committee. The statutory auditors shall report to the audit committee of the large company on key matters arising from the statutory audit of the company, and, in particular, on material weaknesses in internal control in relation to the financial reporting process.

A non-executive director, for the above purposes, is a director who is not engaged in the daily management of the large company or body concerned, as the case may be.

Where a director of a large company fails to take all reasonable steps to comply with that above requirements, the director shall be guilty of a category 3 offence.


References and Sources

Primary References

 

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)   Ch.14  Courtney

Keane on Company Law 5th Ed. (2016) Ch.37  Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Palmer’s Company Law