How to become a director of an Irish Limited Company

Directors are usually appointed to companies because they are in charge of the company’s management. Sometimes, they are the company’s founder and want to set up a business.

You can form a company yourself and appoint yourself as a company director or a company can hire you to be the director because you have the excellent skills that they need.

As a Director of an Irish company, you need to be aware of your fiduciary duties. This means you have legal obligations to act in the best interest of the company. 

If you are considering setting up a Limited Company in Ireland, talk to our Client Services Team. We are always happy to talk you through the services we offer to help make this journey as smooth as possible.

Types of company directors

The Office of the Director of Corporate Enforcement (ODCE) identifies five types of directors. All these directors have the same legal duties under the Companies Act 2014.

Non-executive director

  • A company usually hires a non-executive director because such an individual is expected to possess a specific skill set and experience. You are obliged to monitor and challenge the performance of the company’s management.

Executive director

  • An executive director will have a far more intimate relationship with the company’s management.

Alternate director

  • An alternate director is an individual who is appointed to attend board meetings on behalf of the Directors to act for them in their absence.

De facto directors

  • This type of director performs the duties of a director even though the company does not formally appoint them. They take on the role themselves.

Shadow directors

  • These directors are not formally appointed but give instructions that the company’s directors usually follow.

Who can become a company director?

  • Anyone over the age of 18
  • Not currently declared bankrupt
  • Not disqualified from acting as a director by a court
  • Not a restricted person (a person who has failed to satisfy a court that they acted honestly and responsibly in relation to an insolvent company)
  • If you reside in a non-EEA country, you can set up a company by purchasing a Section 137 bond.

What is a nominee director service?

A nominee director has the same responsibilities as any other director in the company. They still need to act in the best interest of the company and the person who nominated them.
If you are a nominee director, you must maintain the expectation of your appointing person as long as they align with the company.

This service might attract Startups who need to fulfil the criteria of having an EEA-resident director to incorporate a company in Ireland. But before you decide to appoint a nominee director, you should be aware of what you are asking them to do.

Should you use a nominee director service?

  • They will be the face of your company. The nominee director may have to attend face-to-face meetings with banks to open a business account. They are still obliged to fulfil all duties and responsibilities of a company director and may be personally liable in some instances like any other company director. They will sign their name on all company paperwork.
  • Nominee directors are subject to the same rules as directors.
  • It can provide anonymity to the appointing person. Sometimes, a company hires a nominee director to give anonymity to the person pulling the strings. Although this will hide the appointing persons’ details – this also means that your company is owned by someone else in the eyes of the Companies Registration Office and the public.

What does a company director do?

Read financial reports and reports

  • You should know how to read financial reports. You must know what state the company is in. A good accountant will help you if you need to learn how to read financial statements. It would be best if you also had a strategic plan for the company, budgets and a copy of the company’s board manual.

Ensures legal obligations are adhered to

  • You must consider the company’s risk policy and corporate governance practices. Be aware of any outstanding or ongoing legal matters about the company. You may need to review the company’s Directors’ & Officers’ (D&O) insurance policy. If you don’t have one, you should consult an insurance broker.

Establish good practices

  • The director of a company should establish a guidebook on board policies and dynamics. For example, the duration of the term of office and the policy about remuneration and the reappointment of the directors.

Ensure proper management

  • All Directors must ensure that the company is registered correctly with the relevant bodies – i.e. Companies Registration Office and Revenue. Tax registration and registering for licences with government organisations could fall on their shoulders. This is an essential task and could leave you with headaches if done incorrectly.

Benefits of being a company director

Becoming a Director is a personal decision. If you’re ready, we are delighted you’ve decided to take on this role! It’s a long but exciting and enriching role to step into.

If you still need convincing, we’ve outlined why our clients love being a director of their own company.

Getting a say in how the company is run

  • As a director, you can put lots of value into the company. In most cases, you can freely voice your opinion and have a hand in discussing how the company will operate. You can have a Director of Sales, Director of Operations, Director of Finance or more in your company. Your Constitution will usually state how much input you have, but you can be sure that you have a voice within the company.

Protection of personal assets

  • A big reason our clients decide to set up a Limited Company is to have protection against their personal assets being seized. If a company has fallen into debt and faces legal action, your finances and assets are safe. A Limited Company is a separate legal entity and can be sued like a person.

You can establish a great working environment

  • If you have solid values and beliefs regarding employing staff or corporate responsibility, this is your opportunity to put them into action. If you’re the director of your own company, you can implement good policies and practices.

Great networking

  • Being a company Director can be a prestigious one. It may give you access to senior partners in your industry and beyond. You also have experience and knowledge that new entrepreneurs may have yet to gain. Consider mentoring or joining a network to help individuals like you!

Tax-free benefits

  • You can deduct your pension contributions from company profits as tax deductions. You are also entitled to a small benefit of up to €1,000 in value, which is tax-free. This is available yearly under the small benefits exemption scheme, just like any other company employee. As a director, you may decide who else in your company gets one!

Salary and pension planning

  • As a company director, you usually decide how you pay yourself. This can be a salary, dividend, or you don’t have to pay yourself at all. There are different tax rules with each way of taking money out of the company. Contact us if you want to learn more about how to pay yourself.

Disadvantages of being a company director

The cons of being a company director can depend on how you feel about the many responsibilities of the title. These responsibilities can add pressure that an ordinary employee does not have. Think about your own leadership, management, interpersonal, and overall personal characteristics – is this something you can handle?

What risks are involved with being a director?

  1. Failure to ensure the company’s financial records are filed with Revenue can be a category three offence (up to six months imprisonment and a Class A fine, up to €5,000) (Section 286, Companies Act,2014).
  2. You mustn’t take any loan from the company unless the loan is less than 10% of the company’s assets. (Section 240 Companies Act 2014).
  3. Your position as a company director is not guaranteed. An ordinary resolution by the Board of Directors may easily remove a director.
  4. You may be held personally liable for the debts of a company where the company is unlimited or where the corporate veil is lifted. (Corporate veil is a legal concept that separates the actions of an organisation from the activities of the directors and the shareholders and protects them from liability).

What to do next?

Before you take on the role of a company director, ask yourself, “Am I Ready?”.

The process to set up a Limited Company can be exciting, and it’s easy to get caught up in the Startup mentality. Why not seek advice from your friends and family about your ability? If you need support from a legal or financial point of view, our team of experts is here to help you.

You might also be interested in this guide if you wonder how much it costs to set up a limited company in Ireland.

Before becoming a director, you must be confident and well-informed about your legal obligations and the financial situation of the company. You should have the appropriate skills and knowledge to execute your duties effectively as a director to work towards the success of your company.