Ten most common corporate governance sins And how to avoid them CIMA Dublin & District Branch Kevin Prendergast Corporate Compliance Manager, 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 –If 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

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 accountants do? Put systems in place to ensure basic responsibilities are complied with Check agenda items for meeting to ensure they include corporate governance /compliance matters Keep directors informed of new developments

Systems for filing requirements Annually (on ARD) –Financial statements –Audit report unless exempt –B1 Annual return When necessary –Change in directors/registered office –Change in Memo and Articles –Register of a charge against company

Current position on Irish Corporate Governance At all levels of business, corporate governance is a key topic For quoted companies, the Corporate Governance Code has expanded requirements of Chairmen and Audit Committees

Current position on Irish Corporate Governance The public sector has its own Code issued by the Department of Finance The not for profit sector is developing its own three tier code A code for SME’s is also available

Current position on Irish Corporate Governance Internationally –OECD Code on Corporate Governance At EU Level –Recent directives on corporate governance disclosures for quoted companies –Proposals on wider corporate governance Directives

Current position on Irish Corporate Governance Nationally –The Companies Bill will have major changes for ordinary private companies Single director companies Decisions by signature rather than meeting Reduced formal structures for corporate governance –This may not always be for the best

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