Friday, June 19, 2015
The Companies Act 2014 (“the 2014 Act”) became law on 1 June 2015. The Act consolidates Irish company law; it adds updates too. One of these additions is the duties of directors set out in Part 5.
The Act lists fiduciary and general duties. It makes clear that these duties are not exhaustive and that they are additional to duties in other legislation. (Section 227)
Since advice on directors’ duties under health and safety legislation is a popular request, it seems timely now as the legislative basis for those duties expands, to reflect and remind oneself of directors’ responsibilities pursuant to the Safety Health and Welfare at Work Act 2005 (“the 2005 Act”), while noting the new duties set out in the 2014 Act.
General Health and Safety Duties of a Company
To consider the breaches of duty for which a director can be personally responsible, let’s remind ourselves briefly of those duties which attach to all Employers.
The 2005 Act and the Regulations thereunder contain a general obligation at Section 8(1) that: “every employer shall ensure, so far as reasonably practicable, the safety, health and welfare of his or her employees.” Section 8 (together with the rest of the Act and its family of Regulations) proceeds to break down those duties to cover the entire gauntlet of duties ranging from equipment, place of work, product and supply to procedures in dealing with employees, emergencies and everything else in between.
The obligations extend to all employees and members of the public. Bearing in mind this breadth of responsibilities, we turn to Section 80, and how breach of duties by the employer company can lead to personal responsibility of directors
Health and Safety Legislation and Directors
Personal responsibility is detailed in Section 80(1) of the 2005 Act. This provides that:
“(1) Where the offence under any of the relevant statutory provisions has been committed by an undertaking and the doing of the Acts that constituted the offence has been authorised, or consented to by, or is attributable to connivance or neglect on the part of, a person, being a director manager or other similar officer of the undertaking, or a person who purports to act in any such capacity, that person as well as the undertaking shall be guilty of an offence and shall be liable to be proceeded against and punished as if he or she were guilty of the first mentioned offence.”
The Companies Act 2014
In the 2014 Act, we see an expansion of the legislative duties placed upon directors in Part 5. There is little new in these 2014 Act duties which are really a legislative reference to duties which have long existed at common law but this is the first time these fiduciary duties of directors have been set out in a statute. (Directors are now responsible for complying with the Companies Acts (previously this was the responsibility of the company secretary) and there is a new duty on directors of all private companies to ensure the company secretary has skills and resources to discharge duties and to maintain the company’s statutory non-financial records.) Prior to this, they existed at only common law, alluded to in prior judgments of the courts. In placing the duties into formal legislation in this manner, the judiciary are likely to place more frequent reliance upon these common law duties.
One potential disadvantage of codifying common law of course is the potential limitation of providing a comprehensive list of these duties via legislation. The 2014 Act does, however, establish that the list of fiduciary duties is by no means an exhaustive one and interpretation is left to the judiciary, so this is a positive development and gives an element of certainty and transparency to considerations of these duties as a basis for convictions.
The Act also includes a number of general duties for directors.
Under the Act, directors’ fiduciary duties as codified should make it easier to determine what is expected of a director.
These fiduciary duties listed in the 2014 Act cover
Bearing in mind the expanded duties, what can a director do to protect oneself?
Safety Statements and Risk Assessments – Section 19 of the 2005 Act legislates for risk assessments and Section 20 for Safety Statements based upon these risk assessments. Ensuring this legislation is implemented is the most basic way in which a director protects oneself.
Setting Standards – Be clear on the standards to expect. There should be leadership in relation to health and safety. In all decisions which the board takes, health and safety should be considered. – If there is a construction project to be undertaken, pass a board resolution providing for the project to be undertaken by a team that is competent with adequate resources.
Responsibility for health and safety can be delegated to one particular director and then further delegated to managers in the organisation, but each director must accept their responsibility and recognise that their role entails a level of collective and individual responsibility.
Monitoring – ensure updates are provided, specifically compliance updates regarding complaints or investigations.
The board should ensure periodic audits of how health and safety take place and that the impact of any changes in work procedure are accounted for. An awareness of the legal requirements and any change therein is also integral to such a monitoring process.
There is always a tension between a need for strict application to support deterrence, and a desire not to convict people who are not apparently “guilty” of wrongdoing. Placing duties on directors is a legislative method of trying to enforce delivery of standards. The Companies Act 2014 is timely reminder of these duties.
Because of judicial discretion, specifically acknowledged in the 2014 Act, it is still not possible to compile a definitive list of steps to be taken which will guarantee against prosecution and/or conviction of directors, but the 2014 codification is very welcome in helping to consolidate same. It will be interesting to watch the case law unfold.