Kevin gives the Top 10 Corporate Governance Sins, which most frequently lead offenders to his door. He tells us that there are no hidden surprises in Irish Company Law but the worse thing to do is ignore a problem.
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1Don’t keep accounts.
Accounting is the basic way of recording information about your company. Failure to keep accounts is one of the most prosecuted offences in company law. In addition, business people can’t know if their company is profitable and this could quickly lead to liquidation. The courts will take a much for severe approach and may find culprits personally liable.
2Borrow money from your company.
Entrepreneurs need a change of mind set when they set up a business. The money they have invested is no longer there’s. People in this situation should pay themselves a salary or could give themselves a dividend but this must be done through proper channels.
3Don’t file your financial statements on time
Penalties apply for late filing. Those who don’t file on time loose the right to claim an audit exemption. This is lost for two years. Repeatedly late offenders can be struck off the companies register.
4Relationship breakdown between directors
People disagree over strategies or approach – and that’s fine. Disagreements that lead to a breakdown in business relationships will prevent board meetings and AGMs taking place or financial statements being filed. Business people should discuss potential mediation channels in advance because otherwise the High Court is the only option. This is an expensive and highly public route.
5Don’t have meetings
Companies need direction in the short, medium and long term. Questions surrounding strategy, market, competitors and technology change should be discussed. The minutes of the meeting must be kept.
6Failure to keep minutes of meetings
It is a criminal offence to fail to keep meetings of AGMs, EGMs and directors meetings. If you don’t have minutes, you don’t have proof. Minutes serve as a defence in civil proceedings. Directors are expected to demonstrate that they did their best. They don’t needn’t show 20/20 hindsight.
7Get your company struck off the Companies Office Register
The Companies Office Register is maintained by the Companies Registration Office (CRO). In this situation, persons are no longer leading a Limited Liability Company. Instead, they are personally liable for everything they do – without limit. This change would affect litigation concerning insurance, employment or trade contracts or third Party litigation by a customer or creditor. Companies wishing to get back on the list have 12 Months to get re-registered. After 12 months, a trip to the High Court would be required.
8Don’t deal with financial difficulties.
During an insolvent liquation, the liquidator will present a report to the ODCE. Directors may face civil sanction for gross negligence. They may have to operate under restriction for a period, which is typically 5 years. This means they will have to provide a larger than normal level of share capital when taking directorship. Disqualification from involvement with any company – usually for a period of 5 years – is an additional penalty. In extreme cases, limited liability can be removed by the courts for reckless conduct. Those responsible are therefore made personally liable.
9No business plan
Businesses need direction. Business people need to be conscious of their strategy and that of their competition.
10Leave it to the Accountant
Last point. Businesses can leave their accounts to their accountant. They can also sue him/her once the ODCE is finished because when things go wrong, it is the company directors that will be prosecuted. Simple things make a big difference. Examples include; keeping a calendar, staying informed on legislative changes and ensuring board meetings cover corporate governance and compliance.
