As part of a series of articles providing insights on the management and corporate governance of Irish-incorporated companies and, in particular Irish subsidiaries of international companies, Pat English (Partner, Head of International Business) and Grainne Boyle (Senior Associate, International Business) provide an overview of the key issues to bear in mind and some practical tips when considering who can represent an Irish company with a particular focus on any proposed delegations of authority by the board of directors. Navigating this issue in a commercially pragmatic manner has become more important than ever, in particular in the COVID-19 virtual environment in which businesses are now operating, where companies have an absolute need to operate efficiently while at the same time protecting the business from the risk of the chain of authority being breached.
1. Introduction
1.1 It is often not practical for the board of directors to approve each document and action proposed to be taken on behalf of the company. In that context, in order to facilitate the operation of the day-to-day business of the company, delegations of authority can be put in place in favour of named individuals and/or committees to execute certain documentation, and/or take certain actions, on behalf of the company.
1.2 Although they are not bound to give continuous attention to a company's affairs and cannot necessarily be held responsible for errors of judgement, it is important to note that the directors continue to have an overriding duty to supervise all actions taken pursuant to any delegations.
2. Board Authority
2.1 Irish law creates a statutory default in favour of powers of management being vested in a company's directors, subject to:1
- a company's constitution (to ensure the root of the company's powers rests with its shareholders);
- powers requiring approval at a general meeting of a company;
- the provisions of the Companies Act 2014 (the "Act"); and
- any resolutions or provisions made by a company at a general meeting.
2.2 The vast majority of boards of Irish companies are "unitary" (ie, one tier boards). A unitary board can be comprised of both executive and non-executive directors. The board is responsible for both the running of the business and ensuring compliance with strategies, policies and law.
2.3 One important point to note is that typically, it is the board collectively, and not the individual directors (save in the case of a sole director company), who have the authority to act on behalf of a company. The board may delegate authority to an individual director in the same way as the board may delegate authority to other individuals.
TIP
The fact that individual directors of Irish companies do not typically have individual authority to act on behalf of the company should be flagged to the appropriate teams within the business (for example, the commercial contracts team). This can avoid issues later where documents inevitably require execution urgently and there is a need to evidence their signature authority.
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Footnote
1. Please note that, for the purposes of this article, we have assumed that no additional limitations or restrictions are imposed (eg, regulatory, banking or other contractually agreed covenants etc).
Originally published 21/05/2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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