Contracting and Holding Office
A director of a company is not disqualified by reason of his office, from contracting with the company in relation to his terms of employment, the terms on which he holds office, as a vendor, purchaser or otherwise. A contract by the company in relation to such matters, in which the director is interested, is not liable to be avoided nor is a director so contracting liable to account to the company for any profit realised by reason of holding an office or the fiduciary relation thereby established.
Unless the company’s constitution otherwise provides, a director may become a director or officer or be interested in another company as a shareholder, which is promoted by the company or in which the company has an interest as a shareholder or otherwise. No such director is accountable to the company for any remuneration or other benefits received by him or her as a director or officer of, or from his or her interest in, such other company unless the company otherwise directs.
Save to the extent that the company’s constitution provides otherwise, any director may act personally or by his firm in a professional capacity for the company of which he is a director. Any director, in such a case (or his firm), is entitled to remuneration for professional services as if he was not a director. This does allow him to act as the statutory auditor of a company of which he is a director.
Disclosure of Interests
The obligation on a director to disclose that he is interested in a contract or proposed contract with the company was restated in modified terms in the 2014 Act. A director who is indirectly or directly interested in a proposed contract must disclose his interest.
It is the duty of a director who is in any way, directly or indirectly interested in a proposed contract with the company, to disclose his interest at a meeting of the directors of the company.
The obligation does not apply to contracts made other than by the board of directors or made by a committee of the board of which he is not a member. This is without prejudice to his other statutory and fiduciary duties.
The declaration required in the case of a proposed contract must be made at the meeting of the directors at which the question of entering the contract is first considered.If the director is not at that date interested in the proposed contract, then the disclosure is to be made at the next meeting of the directors, after he becomes so interested.
The director may vote in relation to a contract, appointment or arrangement in which he is interested and be part of the quorum for such purposes. This includes any transaction or arrangement, whether or not constituting a contract.
A director may hold any other office of employment or place of profit with the company such as an employee or executive director on such terms as the directors determine. He may count in the quorum notwithstanding that he has an interest, at the meeting by which he is appointed to such office or appointment. He may not vote on such appointment under the default provisions.
The above requirements do not limit any rule of common law, equity of or statutory provision which may apply where a party with an interest enters a contract with the company.
Notice of Interest
A copy of the declaration and notice that he is interested in a contract or proposed contract which is given by the director is to be entered in a book kept by the company for this purpose, within three days of it being made. The book must be open for inspection without charge by any directors, secretary or a member of the company at the registered office.
It must be produced at every general meeting of the company and any meeting of the directors if any of the directors so requests in sufficient time to enable the book to be made available at the meeting.
The company shall, if required by the ODCE, produce to for inspection, the book kept for the above purpose. Facilities shall be afforded to allow the OCDE to take copies of the contents of the book as it may require.
Notice of Interest II
A general notice may be given to the directors of a company by a director, to the effect that he is a member of a specified company or firm and is to be regarded as interested in any contract which may be made with the company of firm. A director may give a general notice in the same way that he is to be regarded as interested in any contract later made with a specified person, who is connected to him.
The general notices are a sufficient declaration of interest. However, this notice must be given at a meeting of the directors or the director takes reasonable steps to secure that it is brought up and read at the next meeting of the directors after it is given.
Failure to comply is a breach of the director’s general duties. The company may sue for damages, for an account of profits and/ or seek an injunction. There is a defence where the director can show that he took all reasonable steps to secure compliance.
The director’s duty to have regard to the interests of shareholders does not imply a direct and specifically enforceable duty. Their interests are to be taken into account, in conducting the company’s affairs. Ultimately, the key duties are owed to the company.
The director may generally be released from his or her duties to the company in relation to the matter concerned, in accordance with the company’s constitution or by resolution of the shareholders in general meeting.
The Companies, Act 2014 provided for an exception to the general duty, by which the director may not fetter his independent judgment. If the director enters a transaction or engagement which he believes in good faith to be in the best interests of the company, he may fetter his discretion to that extent.
A director may have regard to the interests of a particular shareholder/ member where he has been appointed or nominated by that shareholder who has an entitlement to appoint or nominate him under the company’s constitution or shareholders’ agreement. Directors may have regard to the interests of the members who have appointed them. This right is subject to the overriding duty to have regard to the interests of the members as a whole.
Relief by Court
In any proceedings for negligence, default, breach of duty or breach of trust against a director or other officer of a company the court may grant relief from liability. The relief of the officer may be in whole or in part from his or her liability in respect of the wrong concerned. It may be granted on such terms as the court may think fit.
The court hearing the proceedings may grant relief provided it appears to the court that the officer concerned is or may be liable in respect of the negligence, default, breach of duty or breach of trust but that he or she has acted honestly and reasonably and that, having regard to all the circumstances of the case (including those connected with his or her appointment), he or she ought fairly to be excused for the wrong concerned.
If an officer of a company has reason to apprehend that any claim will or might be made against him or her in respect of any negligence, default, breach of duty or breach of trust he or she may make an application to the court. On such an application, the court has the same power to relieve the applicant as it would have had if proceedings against that person for the wrong concerned had been taken.
Under ordinary principles of agency, directors are entitled to be indemnified by the company in relation to liabilities properly incurred by them in managing the company.
The company may provide in its constitution or otherwise, indemnify directors, other than in relation to willful default or dishonestly. It may enter into a contract to indemnify an officer against liability incurred in defending proceedings, civil or criminal.
The legislation provides that the indemnity may apply, only where the director is exonerated by the court. An order must be made in the officer’s favour, he must be acquitted or he must be granted relief by the High Court. The court may grant relief to a director in relation to a breach of duty when he has acted honestly and ought reasonably to be excused.
Any provision purporting to exempt any officer of a company from; or purporting to indemnify such an officer against any liability which by virtue of any enactment or rule of law would otherwise attach to him or her in respect of any negligence, default, breach of duty or breach of trust of which he or she may be guilty in relation to the company is void, subject to the above exceptions. This applies whether the indemnity is contained in the constitution of a company or a contract with a company or otherwise. An “officer” includes a statutory auditor.
The company may purchase and maintain for any of its officers, insurance, subject to the above conditions. Notwithstanding any provision contained in any enactment, the constitution of a company or otherwise, a director may be counted in the quorum and may vote on any resolution to purchase or maintain any insurance under which the director might benefit.
- any business, trade or activity has been carried on by means of a company, or another body corporate, registered or formed under the laws of another country,
- the period for which that business, trade or activity was so carried on was not less than 12 months preceding the date concerned
- an indemnity provision of the kind above in relation to officers of the company or another body corporate was in being and valid under the laws of that country, and
- a private company limited by shares is formed and registered to carry on that business, trade or activity,
then the indemnity provision applies in respect of any negligence, default, breach of duty or breach of trust occurring before that private company limited by shares is formed and registered.
Any directors’ and officers’ insurance purchased or maintained by a company before 6 April 2004 is as valid and effective as it would have been if this section had been in operation when that insurance was purchased or maintained.
References and Sources
Companies Act 2014 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.16 Courtney
Keane on Company Law 5th Ed. (2016) Ch. 27 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
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
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