The position of a director in Ireland comes with enormous responsibility and a set of regulations which company directors must adhere to. To become a company director, individuals must be over 18 years old, solvent, have no relevant convictions, and be mentally capable.
It seems pretty easy to become a company director in Ireland. However, it takes a lot more to BE one. Especially if this is your first directorship. For years in business as a company formation agent, we gathered a couple of unobvious mistakes that company directors make. You may not be doing them on purpose but neither CRO nor the Revenue will make allowances for your lack of expertise. So let’s see what mistakes you, as a director, can make and how they may threaten you and your company.
Use Your Company’s Finances as Your Own
Some directors struggle to realise that their company is a separate legal entity. As a result, they blur the line between their finances and the company’s money, using it for personal purposes. This common mistake that directors make leaves accountants in a tizzy. Simply put, you cannot withdraw money from the company for personal use e.g, to purchase vehicles, phone, vacations etc. That amounts to misappropriation or unapproved loans to directors, which is illegal.
Failing to Implement Anti-Money Laundering (AML) Measures
Certain companies operating in industries such as legal, finance, and property, particularly those operating under licenses, must take steps to prevent money laundering and terrorist financing.
The MRLO of the company is responsible for the organisation and fulfilment of the risk assessment process, this role can be held by a responsible person or a director (CEO). Your company should conduct a CDD (Customer Due Diligence) and report any suspicious transactions to relevant authorities. Otherwise, regulatory bodies (such as the Central Bank of Ireland, the Department of Justice, Designated Accountancy Bodies, and other authorities in Ireland and globally) may suspend or cancel your company’s license. This would result in the company no longer being eligible to offer its services.
Not Filing Annual Returns & Financial Statements
Companies in Ireland are required to file annual returns with the Companies Registration Office. Your duty as a company director is to guarantee timely submission of annual reports and ensure annual reports contain such information as registration number, registered office address, authorised and issued share capital, members, their shareholding and any share transfers in the preceding year, directors and their details and the company secretary.
In case of late filing or non-filing, your company may face penalties such as late filing fees, loss of audit exemption, and involuntary strike-off. A company director may get prosecuted and get disqualified from acting as a company director.
Ignoring Tax Obligations
Directors must ensure that the company pays all the taxes it is accountable for, including Corporation Tax, VAT, and PAYE. When a company is in arrears in meeting its tax payments, the Revenue Commissioners can hold the directors personally responsible.
Directors will be left with a financial cost of unpaid company taxes, so having compliance as a priority and well-prepared financial records is advisable.
Continue Acting as a Director While Disqualified
The Companies Act 2014 states that directors may be prosecuted for breaching and be punished by being disqualified. Disqualification means a situation when a person is prohibited from taking on the roles of director, officer, statutory auditor, or from being involved in any way with a company’s formation, promotion, or management. This includes both direct and indirect participation.Directors may be disqualified based on bankruptcy, misconduct, or by court order.
Acting as a director while disqualified puts you at risk of being brought before criminal proceedings, which can result in fines or prison.
Conclusion
To avoid costly mistakes and stay compliant as a company director in Ireland, you must be aware of the common pitfalls, such as neglecting company duties, failing to manage conflicts of interest, and not maintaining accurate records.
If you need help with company formation and ensuring compliance of your Irish Ltd, get in touch with Chern & Co. Our team offers expert guidance and support to help you navigate company governance with confidence.
