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Convening regular board meetings ensures that company directors discharge their fiduciary duties, writes Nicholas Metcalfe (pictured) of Mason Hayes & Curran

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 have wide discretion to regulate their meetings as they see fit.

Discharging duties

One of the key innovations of the Companies Act 2014 was to codify the fiduciary duties owed by directors to Irish companies. 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. 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.

Authorising certain transactions

Under the Act, directors have ostensible authority to bind their company to contracts. A third party dealing with a director of a company on its behalf need not check that the director was specifically authorised to act in relation to that particular transaction. 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.

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. This ensures that each director is aware of the activities of the company and of the other members of the board.

In Association with

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 a board meeting is taking place. The Act provides that a 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 that 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.

• Nicholas Metcalfe is Corporate Governance & Compliance Partner in Mason Hayes & Curran.
Email: nmetcalfe@mhc.ie
www.mhc.ie