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Governance & Compliance Update: The Importance of Board Meetings – Your 3 Minute Guide

05 February 2020

Irish company law provides directors with general powers to manage their company, subject to any provision to the contrary in the company’s constitution. To exercise those powers, directors are expected to meet to conduct their business and to have wide discretion to regulate their meetings as they see fit. In this article we will look at why it is important to hold meetings of directors. 

To discharge duties

One of the key innovations of the Companies Act 2014 was to codify the fiduciary duties owed by directors to Irish companies. Additionally, the directors have other duties, such as to approve the financial statements of their company.

One of the best ways to ensure that directors can discharge their duties is to convene regular board meetings, which, as well as being the default method of making decisions, provide a forum for discussion of long-term objectives, commercial strategies and business transactions.

In circumstances where a company becomes insolvent, attendance at and participation in meetings will help to demonstrate that a director has acted honestly and responsibly in relation to the conduct of the affairs of the company. Directors who dissent from decisions of the majority can request that their objections are recorded in the minutes of the meeting.

It is important to ensure that there is a written record of the matters discussed and agreed at board meetings, not only because it is required by law, but also because minutes constitute evidence of the meeting’s proceedings.

To authorise certain transactions

Under the Act, directors have ostensible authority to bind their company to contracts. This means that a third party dealing with a director of a company on its behalf need not check that the director was specifically authorised to act on the company’s behalf.

This means that, even if a director enters into a contract on the company’s behalf without the knowledge or consent of the board, the contract will still likely be enforceable against the company. The board will remain collectively responsible for the company’s performance, but will not have had the chance to consider a factor affecting that performance.

It is therefore important that the limits on directors’ authority and the terms and approval of any large or significant contracts are discussed and resolved by the directors at a properly convened and minuted meeting to ensure that each director is aware of the activities of the company and of the other members of the board.

Evidence of management and control

A company that is tax resident in Ireland will usually need to demonstrate that it is managed and controlled in the jurisdiction.

Convening board meetings to discuss and approve matters of strategic importance are an important way to show how and where decisions are being made.

It is important to establish where the board meeting is taking place. The Act provides that the meeting is located where the largest group of those participating in the conference is assembled. If there is no such group, where the chairperson of the meeting then is; and failing either, such location as the meeting itself decides.

Unlike general meetings, directors may not appoint proxies to attend a board meeting in their place. However, with the approval of the majority of the board, any other person may be appointed as an alternate director to attend in his or her place.

Authorising the use of the company seal

A key feature of Irish company law is that the board must give the appropriate authority for the use of the company’s seal.

Any document which requires execution under seal (such as a lease, a mortgage or a share certificate) should be considered by the board at a meeting. In addition, the board must authorise the use of the company seal and the execution of the document generally.

Comment

Company directors are required to take decisions collectively and to keep a record of their proceedings.

It is good practice to hold regular, properly convened and minuted meetings to ensure that directors fulfil their duties to their companies and comply generally with company and tax law.


The content of this article is provided for information purposes only and does not constitute legal or other advice.

Discuss your governance and compliance queries now with Nicholas Metcalfe.


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