Corporate Governance in a
Hospital Environment
Presentation to
Dublin Hospital CEO’s
Kevin Prendergast
Corporate Compliance Manager, ODCE.
Presentation Overview
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Introduction to ODCE
Company Law and Directors’ Duties
Board of Directors/Hospital Board
Corporate Governance, Best Practice
Sources of Information
Company Law Enforcement Act
(2001)
 Functions of the Director
 to enforce the Companies Acts, including by the
prosecution of offences by way of summary
proceedings,
 to encourage compliance with the Companies Acts,
 to investigate instances of suspected offences under the
Companies Acts,
Company Law Enforcement Act
(2001)
 Functions of the Director cont’d
 at his or her discretion, to refer cases to the Director of
Public Prosecutions where the Director of Corporate
Enforcement has reasonable grounds for believing that
an indictable offence under the Companies Acts has
been committed,
 to exercise, insofar as the Director feels it necessary or
appropriate, a supervisory role over the activity of
liquidators and receivers in the discharge of their
functions under the Companies Acts,
Overview of the ODCE
• Independent
• 37 staff
• Divided into 5 Units:
– Compliance
– Assessment
– Insolvency
- Enforcement
- Corporate Services
Consequences of Non-Compliance
Prosecutions
• In general, maximum penalties under the Companies Acts
are:
– €1,900 and/or 12 months imprisonment on summary conviction,
and;
– €12,700 and/or 5 years imprisonment on conviction on indictment
(any offence for which the maximum sentence is 5 years or more is
an arrestable offence).
Consequences of Non-Compliance
• Significantly higher penalties are available for certain
offences e.g.
– fraudulent trading: €63,500 and/or 7 years, and;
– market abuse: €10million and/or 10 years.
• Can also be held personally liable for debts/costs
Restriction
Part VII (Section 150) Companies Act, 1990
Director of an insolvent company
Not able to prove that acted honestly and responsibly
Reverse Burden of proof
Company need not be in liquidation (Section 251 Companies
Act, 1990
Applies to Shadow Directors (section 27 Companies Act,
1990)
Must have minimum capitalisation of Company (€63,487)
Disqualification
Meaning of Disqualification
during the period of five years from the date of conviction or such
other period as the court, on the application of the prosecutor and
having regard to all the circumstances of the case, may order—
– (a) he shall not be appointed or act as an auditor, director or other
officer, receiver, liquidator or examiner or be in any way,
whether directly or indirectly, concerned or take part in the
promotion, formation or management of any company or any
society registered under the Industrial and Provident Societies
Acts, 1893 to 1978;
– (b) he shall be deemed, for the purposes of this Act, to be subject
to a disqualification order for that period.
Company Law and Directors’
Duties
• Company is a separate legal entity
– Can sue and be sued in its own name
– Holds assets and incurs liabilities separate from
its members/shareholders
– Confers limited liability on
members/shareholders
Company Law and Directors’
Duties
• Company is managed on behalf of members
by the Board of Directors
• Duty to company
• Board has collective responsibility for all
actions (and omissions) by the company
• All directors are officers of the company
and are subject to Company Law duties
Company Law and Directors’
Duties
• “Types of Directors”
– Non-executive directors
– Shadow directors
– De facto directors
Company Law and Directors’
Duties
• What Duties?
– Maintenance of Books and Records
• Company registers
• Companies Registration Office
– Accounts and Audit
• Proper books of account
• Sign off of accounts
• Accounts audited
Company Law and Directors’
Duties
– Board Meetings
• No specific legal requirement, but good practice
– AGM’s/ EGM’s
– Annual Returns
• Submitted on time
• False information
Company Law and Directors’
Duties
• Special Rules on Transactions with
Directors
– Loans to Directors
– Significant Transactions with Directors (or
related parties)
– Loan guarantees
– Credit transactions
Company Law and Directors’
Duties
• Fiduciary Duties
– Act in good faith and in company’s interest
– Be open and transparent
– Act with due care, skill and diligence
• Duties owed to company, members,
creditors, employees.
Board of Directors and Hospital
Board
• Company Law does not recognise boards,
committees, etc.
• Only directors have the powers under
Companies Acts
• Members/Shareholders/Subcribers have
ultimate power in general meeting to hire
and fire Board
Board of Directors and Hospital
Board
• Specific rules contained in Memo and
Articles of Association
– Composition of Board
– Appointment/retirement
• Board members must be approved by
members at AGM.
Board of Directors and Hospital
Board
• Hospital Board should be aligned with
Board of Directors under Company Law
• Representatives of hospital management are
executive directors
• Independent representatives are nonexecutive directors
Board of Directors and Hospital
Board
• As a member of the Board you are an
officer of the company
• All company law duties apply to you
personally
• You are potentially exposed to punishment
under Company Law
Corporate Governance
• Term of Office of Directors
– Standard Articles require re-election every three
years
– May be amended to require annual reappointment
– Cannot take from members the right to remove
directors
Corporate Governance
• Regularity of board meetings
– No specific company law requirement
– Best practice says “sufficient”
– In general 2-6 times a year, depending on
degree of involvement in day-to-day operations
– Failure to maintain control over company
affairs is a primary cause of company failure
Corporate Governance
• Composition of Board
– Again, no guidance under Company Law
– Majority should be non-executive, including
Chairman
– At least one director should have solid financial
expertise (Finance Director/CFO)
Corporate Governance
A Code for the Voluntary and
Community Sector, UK, June 2005
• Set strategic goals of the organisation
• Review of financial and other internal
controls to ensure risks are addressed
• Daily operation delegated to management
• Ensure roles are clear, and that appropriate
skills and where necessary training is
provided
Corporate Governance
• Board should review its own operations
• Strategy for its own renewal
• Delegation must be properly documented,
with sufficient powers but with clear limits
• Highest ethical standards, no conflicts
• Open, accountable, and communicative
www.governancehub.org.uk
Sources of Information
• ODCE Information books
– 7 booklets, covering powers and
responsibilities, of companies, directors,
secretaries, members, creditors, auditors,
liquidators, receivers and examiners
Sources of Information
• Other guidance from our website
www.odce.ie
– Combined Code on Corporate Governance
– Turnbull guide on implementation of Code
– Guide for Community and Voluntary sector
(UK)
More Common Breaches
• On the basis of information coming to ODCE attention, the
following are some of the more common breaches:
– failure to file returns with the CRO
• 1989 reports to ODCE
– transactions with directors - breaches of directors’ loans provisions
• 342 reports to ODCE
– failure by directors to hold AGMs and/or EGMs
• 28 reports to ODCE
– failure to keep proper books of account
• 64 reports to ODCE & 29 convictions
What to do?
• Advice to Directors
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Ask questions
Don’t assume anything
Know your powers, and responsibilities
Discuss issues don’t avoid them
Seek professional advice
Consult your company secretary/auditors/legal advisors
Possibility of insurance
Thank You