Non-Executive Directors in Ireland

Under Irish law, Non-Executive Directors hold a crucial position in corporate governance. According to the Company Act 2014, the role of non-executive directors is defined by their duties and responsibilities concerning the company. Here are the key aspects to consider:

1. Role and Responsibilities

Non-executive directors play a strategic role in managing the company without engaging in its day-to-day operations. Their primary tasks include:

• Providing independent advice and guidance to executive directors.

• Monitoring and supervising the actions of the executive management.

• Participating in strategic planning and key decision-making.

• Assessing risks and ensuring compliance with laws and corporate ethics.

They must act in the best interests of the company and its shareholders.

2. Duties and Legal Requirements

The duties of non-executive directors are regulated by Parts 4 and 5 of the Company Act 2014 and include:

• Duty to act honestly and in good faith: They must make decisions in the interest of the company and avoid conflicts of interest.

• Duty to exercise due care and competence: Their actions must meet professional standards.

• Duty to avoid conflicts of interest: Non-executive directors must not misuse their position or use information obtained during their duties for personal gain.

• Maintaining confidentiality: They are obligated to keep company information confidential.

3. Liability for Violations

In case of a breach of duties, non-executive directors may bear legal responsibility. The Company Act 2014 outlines several types of liability:

• Civil liability: For damages caused to the company due to negligence or wrongful actions.

• Criminal liability: For fraud, misleading practices, or other illegal acts.

• Liability for company debts: If the company becomes insolvent due to the wrongful actions of a director.

4. Selection and Appointment

According to the Company Act 2014, non-executive directors are appointed based on a decision made at the company’s general shareholders’ meeting. The appointment must comply with the company’s articles of association. Such directors are often appointed for a limited term with the possibility of renewal.

5. Corporate Governance and Committees

Non-executive directors frequently serve on various board committees, such as:

• Audit Committee: Monitors financial reporting and auditing.

• Remuneration Committee: Determines compensation policies for executive directors.

• Risk Management Committee: Evaluates and manages corporate risks.

6. Accountability and Reporting

Non-executive directors are accountable to shareholders and must ensure transparency in the board’s activities. The law requires them to provide objective and unbiased recommendations based on factual information.

7. Skills and Experience

The Company Act 2014 states that non-executive directors should possess adequate knowledge and experience in the company’s field of activity to perform their duties effectively. This also includes regular training and professional development.

8. Remuneration

The remuneration of non-executive directors is typically fixed and stipulated in the contract. It is not linked to the company’s financial results, allowing them to maintain objectivity and independence.

9. Removal from Office

A non-executive director can be removed based on a decision by shareholders at the general meeting. Reasons for removal may include ineffective performance of duties, conflicts of interest, or failure to comply with corporate standards.

Key Takeaways:

The Company Act 2014 in Ireland strictly regulates the activities of non-executive directors, emphasizing the importance of their independence, responsibility, and accountability. This law aims to ensure transparent and effective corporate governance that protects the interests of shareholders and the business itself.