What makes a good Chairperson?

The answer can lie in the eye of the beholder! Some people think a good Chairperson is someone who is popular or, agrees with the majority or, is on “your” side.

The reality is often quite different. A good Chairperson has to have at least some of the following basic traits in order to succeed in the role.

• Takes time to listen and, just as importantly, makes time to ensure all Board members have an opportunity to be heard;
• Summarises debates into a few clear and concise sentences.
• Considers both sides to an argument or debate.
• Keeps to a clear Agenda and timetable.
• Does not bully or dominate.
• Engages with the Board, Management Team and staff.
• Ensure there are appropriate checks and balances in place, e.g. information provided to the Board, relevant Board committees (Audit & Risk, Finance, Corporate Governance, etc).
• Makes people feel their input is relevant and valued.
• Can manage shareholder interactions clearly and efficiently.

The Companies Act 2014 states that the duties of a Company Secretary are delegated to the position by the Directors.  

Basically, this means that the Directors must ensure the Company Secretary is capable of doing the job.  A standard test would be to consider:

1. has the individual acted for three of last five years as Company Secretary;

2. is the individual a member of a recognised body; or

3. appears capable of discharging the duties.

Directors must also ensure that the Company Secretary has the skills but, also resources necessary to discharge his/her duties as Company Secretary.

The duties of a Company Secretary can be fairly standard regardless of the size of the Company such as outlined below.

• Prepare, issue and file statutory forms in the Companies Registration Office.

• File changes on beneficial ownership with the Central Register of Beneficial Ownership.

• Maintain Statutory Registers – includes Registers of Directors, Allotments, Transfers, Members, Charges, etc.

• Attend and minute Meetings, and maintain Minute Books.

• Assist Directors to comply with their duties.

• Acting as named Company Secretary.

Just remember if the company only has one Director that sole Director may not also act as named Company Secretary.

Being asked to be a Director of a company can, at first glance, appear an honour. How good for our egos that someone sought us out personally to ask US to be a Director of a company but, there is always a but! 

A Director is required to act in the best interests of the Company, its Members and Employees. The challenge for any Director is proving that he/she has done so. Turning up for a Board Meeting with an eye on the clock in anticipation of the Director’s lunch should be a thing of the past.

Yes, it can be an honour to be asked to be a Director but, if we get it wrong then we potentially face consequences that will impact on our professional and personal life.   So, if you are asked to be a Director ensure you interview the Company just as much as it should be interviewing you.

The first question is to find out if there is an Induction Pack for incoming Directors as it should help to provide answers on basic queries to be considered before becoming a Director.

• Experience and make-up of existing Board and is there a Chairperson.

• How frequently are Board Meeting held and what type of Board Pack is sent out in advance of same.

• Are or should there be Committees in place, e.g. Audit, Risk, etc, and if so how are findings outlined and acted upon by the Board.

• What Policies are in place, e.g. Ethics & Compliance, Health & Safety, etc.

The second question is to ensure the Company operates with good governance which is actively reviewed.

• Ensure all filings in the Companies Registration Office and Central Register of Beneficial Ownership and Revenue Commissioners are made in a timely and current manner.

• Maintain proper books and records which include Statutory Registers and Financial records.

• Ensure compatibility across all documents governing the company, e.g. if there is a Shareholders Agreement or Funding Agreement with a State Body or Bank ensure there is no contradiction between the Agreement(s) and the Company’s Constitution.

• Bank mandates should be current.

• Have appropriate contracts in place, e.g. it is a statutory requirement that all employees have a contract of employment.

• What procedures are in place to ensure registration and/or renewal of IP and Licences.

Only when we understand the Company and how it operates can we then make an informed decision on an invitation to join a Board. It can take new Directors up to a year to feel he/she is part of the Board but, the duty of a Director starts from the moment he/she is appointed.

Honour or risk – you decide. Good luck!

The phrase “Fiduciary Duties of a Director” is used so often but I still meet some Directors who feel inhibited to ask just what does the phrase mean.  

Fiduciary Duties are set out in the Companies Act 2014 and are intended to help a Director comply with his/her duties as a Director.

• Duty to disclose any interest Director may have in contracts made by the company.

• Act in good faith in interests of the company.

• Act in accordance with the Company’s Constitution.  Although not stated in the Companies Act 2014 a Director would also have to act in accordance with Shareholder’s Agreement if applicable.

• Only act in accordance with the law.

• Do not use the company’s property, information or opportunities for his/her own benefit or that of anyone else without specific approval as set out in the Act.

• Cannot restrict a Director’s power to exercise his/her independent judgement without specific approval or permission as set out in the Act.

• Avoid conflict between the Director’s duties to the company and his/her own personal interests.

• Exercise care, skill and diligence. 

• Have regard for the interests of its employees in general and the interests of the members. 

Fiduciary Duties may sound onerous but, they are a key resource in helping us as Directors to focus on our duties and responsibilities to act in the best interests of the company, its members and employees. For me, Fiduciary Duties are just common sense and should help all Directors to manage an effective and progressive company.

Change of address – in our experience this is one of the most neglected areas of compliance. Directors and Company Secretaries are notoriously forgetful when it comes to notifying any change in address.

Location of statutory registers – failure to notify current location of statutory registers, in our experience, primarily occurs where the Company Secretary is an individual and is less likely to occur when the Company Secretary is a corporate body. Perhaps it is a case of out of sight, out of mind!

Appointing a Director – is there a checklist in place when appointing a Director? A common mistake is not checking the Company’s Constitution. A Constitution may contain a clause declaring the minimum and maximum number of directors in the company. The Company may also have a Shareholders Agreement in place which could also include a minimum/maximum number of Directors.   Companies with both a Constitution and Shareholders Agreement need to ensure the minimum/maximum number is the same in both documents.

All of the above can be managed by ensuring the relevant statutory registers are current, changes are filed in the Companies Registration Office and (if applicable) in the Central Register of Beneficial Ownership.

WATER and BANKS

Surely there are no two words more contentious in the Irish lexicon.

Irish Water is carrying out a review of over 500 water tariffs currently in place for business users.  Under Irish Water current proposals it is estimated that water bills will increase for 49% of business customers with decreases for the remaining 51%.  Changes to tariffs are likely to come into effect in Q4 2019. 

Businesses can use their latest water bill to fill out the Business Tariff Calculator at  https://www.water.ie/for-business/billing-explained/business-tariff-calculator.  This will indicate how your water bill will change under the new charges.

Now is the time to participate in the public consultation of these proposals with information available on https://www.cru.ie/document_group/establishing-irish-waters-non-domestic-tariff-framework

Banks

Companies seeking overdraft/loan facilities with banks have now become prey to a common practice amongst Banks which has come into being almost unnoticed.  It is now common for Banks to seek undated letters of resignations from Company Directors in order to take up the facility offer from the Bank.  Company shareholders/members appoint Directors to manage a company on their behalf.  It seems incredible that an outside institution can intrude into the management of a company by forcing companies to provide undated letters of resignation.  Is it any wonder so many companies are availing of the myriad of alternative funding solutions (crowd funding, venture capital, etc).  Anything but the banks!  How (or can) banks hope to re-engage with the business community whilst this sort of demand is deemed “standard practice”? 

Thinking of becoming a Director?

Think before you leap!

Who thinks about becoming a Director

Running your own business may leave you without any choice but, to become a Director. For some it is perceived as a gentle wind-down towards retirement. For others it is a way of giving something back perhaps by becoming a Director of a State Board. Everyone has their own individual reasons on why they may wish to become a Director but, ensuring each person has the ability to integrate the additional time commitments into their existing business or personal lifestyle is an essential first step.

What do you hope to achieve by becoming a Director?

Becoming a Director is no longer the sinecure it once was as Legislators (in Ireland and EU) aim to increase the personal liability of individual Directors, and companies themselves recognise the value of a good Board, and achieving sound corporate governance. Wanting to become a Director in the expectation of a relatively benign wind-down at retirement is a non-starter.

A prospective Director should question their motives, and abilities before going further.

• Are you willing to take on the onerous personal responsibilities, and obligations of a director?
• Do you have the relevant skill set, and if not, are you willing to upskill or train as required?
• Can you envisage yourself as an active member of a Board?
• Do you know anyone currently acting as a Director who could give you a portrayal of how they find the role in real life?

Why bother?

Acting as a Director will invariably include moments of frustration and irritation but, so does anything in life, including life! Learning about a company from the inside out, making a positive impact on the dynamics of a company, interacting with your peers, the satisfaction of working with a well-balanced Board, and enthusiastic Management Team can make it all worthwhile.

Get it right and you will feel a million dollars knowing you are making a real and positive difference to a company, and its future. How many of us get such an opportunity to have such a tangible effect in the business world today?

Are you up to take such a leap?

How often do Directors assess themselves?

Directors rightly expend huge efforts on reviewing company procedures, financials, HR, management, etc but, how many Directors spend time thinking about the individual Directors of the Board?

 It is trite but, true to say the more effective the Board the more effective the Company. 

 Individual Directors should consider how issues such as those outlined below may impact on them personally, and the Company professionally.  They should ensure there are checks in place to monitor and react should such issues be triggered for any person during their tenure as Director.

o   Longevity – have Directors been in place so long their thinking has become staid?  Are individuals continuing to add value in their personal capacity as Director?

o   Attendance – do individual Directors have a good attendance record at Board Meetings?  S.148 Companies Act 2014 states that the office of director shall be vacated where “the director is for more than 6 months absent, without the permission of the directors, from meetings of the directors held during that period”.

o   Number of directorships – a person may not be a director of more than 25 companies.  Directors of Groups should not panic, S.142 Companies Act 2014 outlines circumstances of how a Director of a number of companies within a Group may count such directorships as one. 

o   New Directors – are they checked out before appointment?  The Companies Act 2014 imposes various restrictions on individuals including individuals serving bankruptcy terms, disqualification or restriction.  What catches people out here is that such restrictions for the most part apply regardless of jurisdiction. 
 

Register of Disqualified / Restricted persons – average figures for disqualification are around 3,500 individuals with average figures for restriction around 940 individual Directors.  The Register of Disqualified and Restricted persons in Ireland can be accessed for free on the Companies Registration Office website

Finally, after many false starts, almosts, nearly and any minute now the reality of the Companies Act is about to hit.  In April every single Director in the Country will receive a booklet from the Companies Registration Office (CRO) notifying him or her of their individual responsibilties under the Act.  The booklets will be sent by email to those Directors the CRO have personal email addresses for, with the balance being sent by post to the home address last recorded in the CRO.  Ensure the CRO have your current details by contacting us at vgeraghty@komsec.ie

The past couple of months have already seen a noticeable increase in seminars, workshops, etc, surrounding the commencement of the Act which are only likely to increase further once the CRO start their media campaign in April.

KomSec will be in touch with all our clients to keep them aware of what is happening, what is relevant, what to do, and when to do it!   We will support each of our clients as they come to terms with the options and implementation elements of the Act.