It falls to company directors to ensure the proper running of a company. Thus, it follows that improper actions by directors can result in sanctions against directors themselves.
There aren’t many cases that come before the High Court on directors’ liability, but recent caselaw illustrates how serious the courts view improper conduct by directors.
Improper conduct can take many forms: disrespecting the interests of shareholders, disrespecting minority shareholders rights, conflicts of interests among board members where decisions could impact negatively on the company, not obeying a court order and more.
The Companies Act, 2014 – Exposure of Directors
The Act sets out the duties and obligations of directors. Failure to follow these can result in exposing directors to categories of penalties ranging from minor to major. There are four categories listed in the Act for sanctioning directors.
Category 1 offences can result in imprisonment for up to 10 years and/or a fine of up to €500,000 on conviction on indictment or on summary conviction imprisonment for not more than 12 months and/or a fine not exceeding €5,000.
Category 2 offences can result in imprisonment of up to 5 years and/or a fine of up to €50,000 on conviction on indictment or on summary conviction imprisonment for up to 12 months and/or a fine not exceeding €5,000.
Category 3 offences are summary offences only and can result in imprisonment of up to 6 months and/or a fine not exceeding €5,000.
Category 4 offences are summary offences only and can result in a fine not exceeding €5,000.
The courts take breaches by company directors very seriously and in some instances, convictions can result in an order of Attachment. This can be against an individual for contempt in refusing to carry out a court order and if they continue to be in contempt, they could be committed to prison.
Attachment, Sequestration of Assets
Attachment is an order to have a named individual arrested and brought before the court to answer the contempt, which has been alleged. Sequestration of Assets is where a sequestrator (court official) is appointed to take possession of all property and assets in the possession of a person judged to be in contempt of court.
Conclusion
The consequences are severe and rightly so for directors who abuse the law and put the company at risk. The company secretary has greater responsibilities under the 2014 Act and if he or she is in any doubt on how the company is being operated, early contact with the company solicitor is advised.
A.C. FORDE & CO. LLP
SOLICITORS