Ten most common corporate governance sins

And how to avoid them

Kevin PrendergastHead of Advocacy and Assessment, ODCE.

Company law isn’t rocket science

There are no hidden surprises

Most matters can be addressed simply

The worst thing you can do is ignore an issue

Corporate Governance Sins

1. Don’t keep accounts Breach of the law Most prosecuted offence for directors No idea if making a profit or loss as a business It leads to insolvency, a separate offence Could lead to personal liability in insolvency

Corporate Governance Sins

2. Borrow money from your company This is a criminal offence Your auditor has to report it Easier to prosecute since 2009 Can be resolved without money having to be

paid

Corporate Governance Sins

3. Don’t file your financial statements on time Fees and penalties Loss of audit exemption for two years Risk of strike-off

Corporate Governance Sins

4. Fight with your fellow directors Board meetings may not take place AGM’s may not take place Financial statements may not be signed or filed Must be resolved in High Court, public and

expensive

Corporate Governance Sins

5. Don’t have meetings No opportunity to take strategic look at

the business No opportunity to raise issues No record of key decisions taken by the

company No minutes!

Corporate Governance Sins

6. Don’t keep minutes Criminal offence No official record of decisions No proof if legal disputes between directors No defence if facing civil proceedings

Corporate Governance Sins

7. Get struck off the register Lose limited liability Question mark over legality of contracts May be committing an offence 12 months to get re-registered with CRO Thereafter wait for a High Court hearing

Corporate Governance Sins

8. Don’t deal with financial difficulties If put into liquidation, liquidator will

review at least last 12 months of trading Directors may face restriction or even

disqualification proceedings Directors may be made personally liable

for some or all of the debts

Corporate Governance Sins

9. Don’t have a strategy and business plan Business will lack direction Management and staff will have no guide

to their work No awareness of or plan for opportunities

and threats

Corporate Governance Sins

10. Leave it to the accountant The legal obligations rest with directors Accountants cannot face company law criminal

actions Your accountant can advise

What can you do?

Put systems in place to ensure basic responsibilities are complied with

Ensure board meetings cover corporate governance /compliance matters

Keep informed of new developments

Thank You

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