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Obligations for a new limited company in Ireland
By: Damien
28 Sep, 2022
After setting up a new limited company in Ireland the directors have certain obligations that they must fulfil to ensure the business is run legally. This article explains those obligations.
There are many advantages to setting up a business in Ireland as a limited company. For instance, it limits the liabilities that the directors are subject to if the business fails – which isn’t the case for sole traders – and it provides certain tax incentives for the directors and shareholders. But when a limited company has been formed in Ireland, the company has certain obligations that it needs to fulfil.
While you may be busy running the business and building up its customer base, you shouldn’t neglect the obligations that it has: if you do it could land you in legal trouble later that could harm the business in terms of fines and reputational damage.
One of the most important obligations is to file an annual return to the Revenue. As the name suggests, this has to be done on a yearly basis. If the annual return isn’t submitted on time, it can result in a hefty fine.
The first annual return is due six months after the business was incorporated – although it is not required to submit accounts with this. Thereafter, an annual return must be submitted every year, along with an abridged version of the company’s accounts to the Registrar of Companies.
Another obligation for limited companies in Ireland is to hold an annual general meeting (AGM). This is where the company directors and shareholders come together and is often a chance for the directors to present their annual report to shareholders, who can then question directors on the business’ performance and future direction.
A first AGM must be held within 18 months of the business being incorporated, and then annually thereafter. These meetings should occur in Ireland, whether at the company’s premises or elsewhere. Minutes of every meeting – including key points discussed, decisions made and the reasons for them and any actions taken – must be recorded and stored for other directors and shareholders to view.
It is possible to do away with the requirement of holding an AGM by signing a resolution to that effect. But most businesses do hold one every year.
Directors of limited companies also have certain legal obligations, which were set out in the Companies Act 2014. The Act stipulates that directors must act in the interest of their business alone and no other parties – and this includes shareholders. Even if the company has a sole director, they must put the considerations of the business ahead of their own interests. While this is subjective to a point, it encompasses what the director thinks is in the company’s best interest.
Other obligations include:
• A duty to act honestly and responsibly when conducting the affairs of the business • Avoiding conflicts of interest – where a director’s personal interests’ conflict with their duty to the company • Maintaining the confidentiality of any information they are party to in their role as a director • Performing their duties with skill and care – this means adhering to standards that may be expected of someone with their knowledge and experience • Not using the business property, information or opportunities for their own or anyone else’s benefit.
If a director breaches any of those obligations – other than having to act honestly and responsibly – the Companies Act stipulates that the person has to account to the business for any gains they have made through it or indemnify the company for any loss or damage resulting from the breach.
Another obligation for proprietary directors is to file a Form 11, which is a directors’ tax return. The first time this self-assessed form must be submitted is before October 31 in the year following the formation of the limited company. So, if the business was established in June 2022, the first Form 11 will need to be filed on or before October 31, 2023.
This form must be submitted even if the only income the director has is through PAYE or if the business is inactive. If the deadline for submission is must, there can be penalties and fines imposed, which can affect cash flow.
Directors also have an obligation to maintain various statutory registers relating to the business.
This includes a register of members, which shows who owns shares in the business and includes the name and address of each member, along with details of ownership. This is a public document and must be updated within 28 days of a new member agreeing to join or leaving the business.
Another important document is the register of directors. This includes details such as the name, address, nationality and business occupation of each director, along with any other directorships they have held in the past five years. Again, this is a document that the general public can access. It must be updated within a fortnight of any change of director.
Other registers include secretaries, disclosures of interests, beneficial ownership and more.
All registers must be kept in Ireland – usually at the business’ registered office. If the address where the registers are kept is changed, or is anywhere other than the registered office, the CRO must be informed.
Other obligations for directors
There are various other obligations directors have to their business. This includes ensuring that the company secretary has the skills required to successfully carry out the role. A limited company must have a secretary, who can be one of the directors, but in the case of businesses with a sole director, they cannot be the secretary too – in those cases an outside secretary can be appointed and there are plenty of advisers who provide such services.
Directors also must disclose any interests they have in any contracts signed by the business. They also have an obligation to consider the interests of its staff and any other members of the business.
Finally, directors must confirm they are aware of their obligations by signing a declaration to that effect and ensure that the business and its directors comply with all of the provisions set out in the Companies Act.
As this article shows, there are many obligations that directors of limited companies have to deal with following the incorporation of their business. While some are straightforward, others are more complicated and can potentially trip up some entrepreneurs, especially those who haven’t run a business before.
At Malone & Co, our financial advisers have in-depth knowledge of directors’ obligations and can advise entrepreneurs on how to ensure that these are complied with at all times, which means you can focus more on running your business.
Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of raising funding, including the risks involved, as well as anything from setting up a company and ensuring it is as tax efficient as possible to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.
There are many advantages to setting up a business in Ireland as a limited company. For instance, it limits the liabilities that the directors are subject to if the business fails – which isn’t the case for sole traders – and it provides certain tax incentives for the directors and shareholders. But when a limited company has been formed in Ireland, the company has certain obligations that it needs to fulfil.
While you may be busy running the business and building up its customer base, you shouldn’t neglect the obligations that it has: if you do it could land you in legal trouble later that could harm the business in terms of fines and reputational damage.
Annual returns
One of the most important obligations is to file an annual return to the Revenue. As the name suggests, this has to be done on a yearly basis. If the annual return isn’t submitted on time, it can result in a hefty fine.
The first annual return is due six months after the business was incorporated – although it is not required to submit accounts with this. Thereafter, an annual return must be submitted every year, along with an abridged version of the company’s accounts to the Registrar of Companies.
Annual general meetings
Another obligation for limited companies in Ireland is to hold an annual general meeting (AGM). This is where the company directors and shareholders come together and is often a chance for the directors to present their annual report to shareholders, who can then question directors on the business’ performance and future direction.
A first AGM must be held within 18 months of the business being incorporated, and then annually thereafter. These meetings should occur in Ireland, whether at the company’s premises or elsewhere. Minutes of every meeting – including key points discussed, decisions made and the reasons for them and any actions taken – must be recorded and stored for other directors and shareholders to view.
It is possible to do away with the requirement of holding an AGM by signing a resolution to that effect. But most businesses do hold one every year.
Directors’ obligations
Directors of limited companies also have certain legal obligations, which were set out in the Companies Act 2014. The Act stipulates that directors must act in the interest of their business alone and no other parties – and this includes shareholders. Even if the company has a sole director, they must put the considerations of the business ahead of their own interests. While this is subjective to a point, it encompasses what the director thinks is in the company’s best interest.
Other obligations include:
• A duty to act honestly and responsibly when conducting the affairs of the business • Avoiding conflicts of interest – where a director’s personal interests’ conflict with their duty to the company • Maintaining the confidentiality of any information they are party to in their role as a director • Performing their duties with skill and care – this means adhering to standards that may be expected of someone with their knowledge and experience • Not using the business property, information or opportunities for their own or anyone else’s benefit.
If a director breaches any of those obligations – other than having to act honestly and responsibly – the Companies Act stipulates that the person has to account to the business for any gains they have made through it or indemnify the company for any loss or damage resulting from the breach.
Tax returns
Another obligation for proprietary directors is to file a Form 11, which is a directors’ tax return. The first time this self-assessed form must be submitted is before October 31 in the year following the formation of the limited company. So, if the business was established in June 2022, the first Form 11 will need to be filed on or before October 31, 2023.
This form must be submitted even if the only income the director has is through PAYE or if the business is inactive. If the deadline for submission is must, there can be penalties and fines imposed, which can affect cash flow.
Maintaining statutory registers
Directors also have an obligation to maintain various statutory registers relating to the business.
This includes a register of members, which shows who owns shares in the business and includes the name and address of each member, along with details of ownership. This is a public document and must be updated within 28 days of a new member agreeing to join or leaving the business.
Another important document is the register of directors. This includes details such as the name, address, nationality and business occupation of each director, along with any other directorships they have held in the past five years. Again, this is a document that the general public can access. It must be updated within a fortnight of any change of director.
Other registers include secretaries, disclosures of interests, beneficial ownership and more.
All registers must be kept in Ireland – usually at the business’ registered office. If the address where the registers are kept is changed, or is anywhere other than the registered office, the CRO must be informed.
Other obligations for directors
There are various other obligations directors have to their business. This includes ensuring that the company secretary has the skills required to successfully carry out the role. A limited company must have a secretary, who can be one of the directors, but in the case of businesses with a sole director, they cannot be the secretary too – in those cases an outside secretary can be appointed and there are plenty of advisers who provide such services.
Directors also must disclose any interests they have in any contracts signed by the business. They also have an obligation to consider the interests of its staff and any other members of the business.
Finally, directors must confirm they are aware of their obligations by signing a declaration to that effect and ensure that the business and its directors comply with all of the provisions set out in the Companies Act.
Get advice
As this article shows, there are many obligations that directors of limited companies have to deal with following the incorporation of their business. While some are straightforward, others are more complicated and can potentially trip up some entrepreneurs, especially those who haven’t run a business before.
At Malone & Co, our financial advisers have in-depth knowledge of directors’ obligations and can advise entrepreneurs on how to ensure that these are complied with at all times, which means you can focus more on running your business.
Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of raising funding, including the risks involved, as well as anything from setting up a company and ensuring it is as tax efficient as possible to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.
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