Currently the main sources of director's fiduciary duties are derived from common law relating to companies as created and developed by the courts. These common law duties include a duty to act in the best interests of the Company, not to abuse their powers and to act with due care and skill. In addition Directors must comply with statutory duties and obligations arising under the Companies Acts 1963-2013.
The Bill consolidates the duties and responsibilities of directors in in one unified code for clarity and transparency. The new regime will apply to all directors, including those that have been formally appointed, de facto directors (a common law concept now given legislative recognition in the Bill) and shadow directors. The fiduciary duties to be adhered to are the following:
- to act in good faith, in what the director considers to be the best interests of the company;
- to act honestly and responsibly in relation to the company's affairs;
- to act in accordance with the company's constitution and to exercise powers only for lawful purposes;
- not to use company property for their own or others' personal gain unless approved by the company's members or agreed to in the company's constitution;
- not to fetter discretion unless permitted by the company's constitution or entered into in the company's interests;
- to avoid conflicts of interest;
- to exercise care, skill and diligence; and
- to have regard to the interests of the company's members.
Directors who are found to be in breach of their duties will be liable to account for any gains accrued and must indemnify companies for losses resulting from any breaches of duties. A court may grant relief from liability where it is satisfied that a director acted honestly and reasonably at all times.
Secretaries are also dealt with in the Bill but they are not subject to the same duties as directors, reflecting the fact that their duties are those that have been delegated by the board of directors.
The codification of directors' duties in one place will greatly assist directors in identifying what is required of them. The Bill is intended to make it easier and cheaper to operate a company in Ireland. Practical changes such as this are an example of that aim being put into practice.