Requirement to register as a director.

54and56 · 07-08-2018 11:33AM #1

I've searched online and can't find a definitive answer so I hope someone here can clarify.

Is there a test or list of criteria which determine whether someone needs to be registered as a director of a Ltd company with CRO?

I know formally appointed executive directors have to be as do non executive directors where there is a formal board structure with decision making responsibilities and the non exec directors have a vote etc but I'm wondering where the line is drawn in relation to more informal non exec type arrangements or where a company designates an employee as "Sales Director" or "Director of Consulting" but that person doesn't in fact sit on a formal board or if they do their role is to contribute their respective expertise and experience but they do not have a vote?

Another example could be where someone with senior experience in an industry , possibly retired from full time work, takes on a fixed term contract as a non exec director to contribute their knowledge to a monthly board meeting but doesn't have a vote on how decisions are made and has no other role or input into the business. Their role is limited to providing the board with advice. Would such a person have to register with CRO as a director of that company?

Thanks in advance for reading.

randomrb · 07-08-2018 11:43AM

They have to register.

If they themselves or the company holds them out as being a director or they have the same powers and responsibilities of a director they will be seen as a "de facto director" if they are not registered and will be held to the same standard regardless.

Stanford · 07-08-2018 11:59AM

randomrb wrote: »

They have to register.

If they themselves or the company holds them out as being a director or they have the same powers and responsibilities of a director they will be seen as a "de facto director" if they are not registered and will be held to the same standard regardless.

Correct, despite the continued use of the term "non-executive director" there is no such thing in law, any Director carries the same responsibility irrespective of whether he/she has no executive powers,

54and56 · 07-08-2018 01:39PM

Stanford wrote: »

Correct, despite the continued use of the term "non-executive director" there is no such thing in law, any Director carries the same responsibility irrespective of whether he/she has no executive powers,

Thanks for confirming guys. So basically, if you have the word "director" associated with the role you perform for a company, whether you are an executive or non executive, employee or externally contracted adviser, you must register as a director.

If my understanding is correct then all staff in an organisation who have the term "Director" in their title e.g. Director of Plumbing, Regional Director, Consulting Director, Assistant Director etc etc must register as a Director with CRO? Does this mean that hundreds of staff in large consulting organisations such as PWC, EY or Accenture with the word "Director" in their title (i.e. fee earning consultants who are not involved in managing the business and never attend board meetings etc) have to register as Directors of the companies which employ them?

The reason I give the above example is that I can't find any guide published by CRO or Revenue etc which helps to define whether someone needs to register as a company director or not regardless of the fact that the term "Director" in their job title is used purely for marketing or billing purposes and not to denote or confer the sort of decision making responsibilities typically associated with being a company director.

Revenue give good guidance on whether you are defined as an employee or independent contractor regardless of how you are paid by a company and set out some clear tests such as the percentage of revenue you receive from the company, whether you are entitled to holiday pay etc etc. I think something similar setting out the criteria for registering as a director would be useful over and above what is included in the relevant legislation.

ohnonotgmail · 07-08-2018 01:52PM

Je_suis_Jean wrote: »

Thanks for confirming guys. So basically, if you have the word "director" associated with the role you perform for a company, whether you are an executive or non executive, employee or externally contracted adviser, you must register as a director.

You have that backwards. Your employment title is irrelevant. What is relevant are your responsibilities in the company. If you the responsibilities of a director then you are a director and should register. If your job title is director of waste management and your responsibilities are limited to emptying the bins at the end of the day then you are not a director and do not have to register.

54and56 · 07-08-2018 01:59PM

ohnonotgmail wrote: »

You have that backwards.

Which is why I need your help

ohnonotgmail wrote: »

Your employment title is irrelevant. What is relevant are your responsibilities in the company. If you the responsibilities of a director then you are a director and should register.

Got it. If it looks like a duck, walks like a duck and talks like a duck (but it's official title is "Seagull") it's a duck!!

ohnonotgmail wrote: »

If your job title is director of waste management and your responsibilities are limited to emptying the bins at the end of the day then you are not a director and do not have to register.

Makes total sense.

I guess the only remaining question I have is "What are the responsibilities of a director for the purposes of determining whether a person needs to register with CRO as a director?" Do CRO/Revenue give examples and if you tick 3 or more (or some similar test) you are in fact a director and need to register? How can I objectively measure whether someone should register as a director or not?

ohnonotgmail · 07-08-2018 02:01PM

Je_suis_Jean wrote: »

Which is why I need your help

Got it. If it looks like a duck, walks like a duck and talks like a duck (but it's official title is "Seagull") it's a duck!!

Makes total sense.

I guess the only remaining question I have is "What are the responsibilities of a director for the purposes of determining whether a person needs to register with CRO as a director?" Do CRO/Revenue give examples and if you tick 3 or more (or some similar test) you are in fact a director and need to register? How can I objectively measure whether someone should register as a director or not?

https://www.cro.ie/Post-Registration/Company/Duties-of-Directors-and-Secretaries

54and56 · 07-08-2018 03:07PM

ohnonotgmail wrote: »

https://www.cro.ie/Post-Registration/Company/Duties-of-Directors-and-Secretaries

Thanks ohnonotgmail, appreciate your input.

I'd read that document and whilst it does talk about the eight fiduciary duties of a director it does so in the context of the standards a director must adhere to such as acting in good faith, acting honestly and responsibly, avoiding conflicts of interest etc. It doesn't (appear to me anyway to) set out any sort of definition as to what functional responsibilities a person must have in order to be defined as a director. In fact that document also includes the following statement: "The Act can only realistically provide core duties of position and case law may determine other requirements/existing requirements" so perhaps I need to research some case law to find where the role of a director is defined in relation to functions, responsibilities or actions.

I did find this useful presentation by Arthur Cox on the topic which, to my reading anyway, clarifies that if you are formally or informally "directing the affairs of the company" you must register as a director.

And finally I found this guide from the ODCE which seems pretty comprehensive and confirms that if you are engaged as a non executive director, regardless of whether the role is purely advisory and you don't have any ability to vote or take decisions you are considered a director and must therefore register with CRO.

Interestingly if you are an external adviser who attends board meetings (but you are not appointed and do not have the term "non executive director" associated with your role) you do not have to register as a director of the company unless the directors of the company usually act on your directions or instructions in which case you are considered a shadow director and must therefore be registered with CRO as a director.

Thanks for helping me get a bit of a handle on this.

coylemj · 07-08-2018 03:29PM

I worked for a company where there was a level of seniority held by some people just below the MD which involved the word 'director' but the person was not a board member.

The same happens in some of the consulting companies in Ireland, the top tier people all have the title 'partner' and the people in the tier just below that have the title 'director'. For example, in KPMG the progression up the ladder is Manager, Associate Director, Director and then Partner.

So it's pretty commonplace to use 'director' where the person is not actually a director of the company i.e. a member of the board of directors.

Glass fused light · 07-08-2018 07:50PM

The first directors are appointed by the shareholders/promoter and would serve for an agreed term. A Director can be appointed by the board midterm but usually have to be confirmed at the next AGM and the documents should be filed with the CRO on appointment to the board. Effectively if you are invited to turn up for the whole of the meeting of the board and are involved and can influence the decision making process and the way the organisation is managed you could be classed as a board member and a shadow director. Other factors would support this eg They would have full access to all the information required to make an informed decision.

If you are senior management reporting to the board with the *job* title of "director of X" you may attend part of some of the meetings and provide or receive a restricted amount of information, but would not be able to influence the decisions which would impact areas *you manage and would have no input into areas* unrelated to your job specification. * you would implement the boards decisions at their direction*

An external advisor would also normally intentionally limit the areas they become involved with when dispensing advice, if the person is a professional it's likely that they will not want to be involved in a 'general' board meeting where 'housekeeping' tasks are the focus, but rather only become involved in relevant task orientated meetings and only seek access to limited information and provide two or more alternatives.

coylemj · 07-08-2018 08:25PM

Glass fused light wrote: »

If you are senior management reporting to the board with the title of "director of X" you may attend part of some of the meetings and provide or receive a restricted amount of information, but would not be able to influence the decisions which would impact areas unrelated to your job specification.

You're trying to make out that there is a position of quasi-director who is a sort of half-in, half-out (of the board) director. There isn't. The board can ask anyone from inside or outside the company to attend a board meeting and give reports or recommendations, they don't have to have 'director' in their job title.

If someone has 'director' in their job title or grade but they do not have the right to attend every meeting of the board, it means they are not a member of the board of directors.

It's like pregnancy, you either are a director or you are not. Loose usage of the term as I pointed out above is pretty commonplace. If you are not a member of the board of directors then use of the word 'director' in your job title or grade has no legal standing.

Glass fused light · 07-08-2018 09:23PM

coylemj wrote: »

You're trying to make out that there is a position of quasi-director who is a sort of half-in, half-out (of the board) director. There isn't. The board can ask anyone from inside or outside the company to attend a board meeting and give reports or recommendations, they don't have to have 'director' in their job title.

If someone has 'director' in their job title or grade but they do not have the right to attend every meeting of the board, it means they are not a member of the board of directors.

It's like pregnancy, you either are a director or you are not. Loose usage of the term as I pointed out above is pretty commonplace. If you are not a member of the board of directors then use of the word 'director' in your job title or grade has no legal standing.

Agreed it was poor wording and i have stuck in a bit of an edit. It was not my intent to suggest that a job title had any legal standing when it comes to the decision making and control of the organisation, if you report to the board the buck stops at the board.

Peregrinus · 08-08-2018 08:43AM

coylemj wrote: »

You're trying to make out that there is a position of quasi-director who is a sort of half-in, half-out (of the board) director. There isn't. The board can ask anyone from inside or outside the company to attend a board meeting and give reports or recommendations, they don't have to have 'director' in their job title.

If someone has 'director' in their job title or grade but they do not have the right to attend every meeting of the board, it means they are not a member of the board of directors.

It's not quite as simple as that, since there are companies that don't have regular board meetings, or where functions that might normally (i.e. in other companies) be handled by the board are handles through other mechanisms. So you could be doing things that might be expected to be board functions but, in fact, in this particular company are not; you may still be a director.

It's hard to get beyond the general statment that directors direct the affairs of the company. If you, alone or with others, direct the affairs of the company, and aren't responsible to superior employees or officers for how you do that, then you're a director.

coylemj · 08-08-2018 02:44PM

Peregrinus wrote: »

It's hard to get beyond the general statment that directors direct the affairs of the company. If you, alone or with others, direct the affairs of the company, and aren't responsible to superior employees or officers for how you do that, then you're a director.

What you're suggesting is that there is a concept of a de facto director, a position you gradually work your way into without any formal process of appointment

1. Who defines the point at which you cross the line from being an employee to becoming a director?

2. What if I fulfil the role you describe (effectively day to day manager with no superior person or body to report to) but I don't own shares in the company - do I still become a director?

3. Don't you have to be co-opted by the board or elected by the shareholders at an AGM to be a director of a company?

54and56 · 08-08-2018 03:21PM

coylemj wrote: »

What you're suggesting is that there is a concept of a de facto director, a position you gradually work your way into without any formal process of appointment

1. Who defines the point at which you cross the line from being an employee to becoming a director?

AFAIK it is up to you to be aware of the role you are performing. If you are "directing the affairs of the company" or what you are doing could be interpreted as directing the affairs of the company you re likely to be acting as a director.

It's up to each of us to be aware of the law which is kind of why I started this thread as I had some doubts about a particular situation myself!!!

coylemj wrote: »

2. What if I fulfil the role you describe (effectively day to day manager with no superior person or body to report to) but I don't own shares in the company - do I still become a director?

Owning shares in a business has no impact on whether you are a director or not.

coylemj wrote: »

3. Don't you have to be co-opted by the board or elected by the shareholders at an AGM to be a director of a company?

No. You can be a shadow or de facto director without formal appointment by the shareholders.

I also found this presentation on the topic by Arthur Cox - http://www.arthurcox.com/wp-content/uploads/2014/01/Dec-2014-Part-5.pdf

Marcusm · 08-08-2018 04:12PM

coylemj wrote: »

What you're suggesting is that there is a concept of a de facto director, a position you gradually work your way into without any formal process of appointment

1. Who defines the point at which you cross the line from being an employee to becoming a director?

2. What if I fulfil the role you describe (effectively day to day manager with no superior person or body to report to) but I don't own shares in the company - do I still become a director?

3. Don't you have to be co-opted by the board or elected by the shareholders at an AGM to be a director of a company?

There was precisely that concept under the Companies Act 1990 called a “shadow Director” - a person in accordance with whose instructions the directors were accustomed to Act. This is now comprised in section 221 Companies Act 2014.

Peregrinus · 09-08-2018 01:56AM

coylemj wrote: »

What you're suggesting is that there is a concept of a de facto director, a position you gradually work your way into without any formal process of appointment

1. Who defines the point at which you cross the line from being an employee to becoming a director?

2. What if I fulfil the role you describe (effectively day to day manager with no superior person or body to report to) but I don't own shares in the company - do I still become a director?

3. Don't you have to be co-opted by the board or elected by the shareholders at an AGM to be a director of a company?

Look, it's not ideal, but we have to face reality. There are companies which are run very informally, without proper board meetings or appointments. And there are companies which go through the forms of corporate governance, but the real direction of the affairs of the company happens elsewhere. It's bad practice, but it happens.

And it would obviously be bad public policy to ignore this, and a have a corporate law regime under which, by running your company in this fashion, you could avoid the obligations and responsiblities that go with being a director. That would pretty much create an incentive for people to run their companies in an irregular and slapdash fashion, and why would we want to do that?

So, yeah, even if you are not formally appointed or clearly titled, if you are in fact directing the company's affairs, you're a director. And, yes, that does give rise to awkward questions like "at what point exactly do you cross the line?", that don't always lend themselves to clear answers.

But if you find that troublesome; the solution is in your own hands - run your company properly, with proper board meetings and proper appointments and a proper and documented allocation of management functions. If, whether delibarately or through carelessness, you muddy the waters of corporate governance, giving rise to confusion or lack of clarity, you can't really complain that your situation is unclear to you.

As for the question of shares - directors (formal or informal) have never had to own any shares at all in the company that they direct. Directors may or may not be shareholders as well.

Glass fused light · 09-08-2018 06:50AM

The concept of a shadow director is that directors are collectively responsible of the management and control of running the business. So when an individual takes on the functions of a director and acts with the power and authority the third parties who relied on this assertion are afforded the protection of being able to treat the interactions as if the individual was an actual director.

In reality it is only an issue when a conflict arises, eg a simple one would be where an employee is claiming unfair dismissal and was sacked by the domestic partner of the manager owner, they are not a documented employee or officer of the company but was given de facto control by their partner.

It also captures where there are linked companies but no shared directors (common ownership, a holding company structure etc) and a board of directors of one company don't actually have any independent control but act on behalf of and are managed by some or all of the other board.

Its mainly aimed at phoenix companies where the driving force of the business was a director in a failed mismanaged company, has been bared from becoming a director either officially or by reputation. And the person is fronting on the paperwork filed with the CRO eg where as shareholder, who had limited liability as a shareholder, they are in running the business with a paper director who has no active part or real control over what is happening in the business. Where mismanagement occurs the director can become personally liable for board decisions, so if there was no provision for a shadow director the shareholder 'director' would only 'loose' the 1eur initial shareholding leaving the offical director and creditors to carry the rest of the loss.

Requirement to register as a director.

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