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
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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
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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
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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
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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
Question & Answers
Thank You
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