Becoming a director of a limited by guarantee company

[Lyndan]

Hey All,

Anyone have any experience of becoming a director on a limited by guarantee company?

Our management company is supposedly limited by guarantee and I heard that meant you are not liable personally for any finacial issues with the company - all members of the company are (residents),

Any advise?

Cheers

 

[simplyjoe]

Re: Becoming a director on a limited by guarantee company

Hey All,

Anyone have any experience of becoming a director on a limited by guarantee company?

Our management company is supposedly limited by guarantee and I heard that meant you are not liable personally for any finacial issues with the company - all members of the company are (residents),

Any advise?

Cheers

The directors manage the company. If they act negligently or without due care then directors can be held personally liabile for company debts. Also if the company fails in its filing obligations - tax and CRO - directors can be held liabile for indictable offences. They can also be removed as directors and be restricted from holding future directorships. This can have severe consequenses for individuals. Thread carefully and ensure all matters are properly attended to - insurance, filing, tax, etc

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

The directors manage the company. If they act negligently or without due care then directors can be held personally liabile for company debts. Also if the company fails in its filing obligations - tax and CRO - directors can be held liabile for indictable offences. They can also be removed as directors and be restricted from holding future directorships. This can have severe consequenses for individuals. Thread carefully and ensure all matters are properly attended to - insurance, filing, tax, etc

Surely there are different provisions for these management companies?
In my experience most of them are a complete shambles...why would anyone want to be involved if it was going to jeopardise their own career/business?

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

Surely there are different provisions for these management companies?

The provisions for management companies are in fact heavier for "limited by guarantee" companies than for other companies - for example "limited by guarantee" companies cannot avail of audit exemption.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

why would anyone want to be involved if it was going to jeopardise their own career/business?

Very good point. People should refuse point blank to remain, or accept appointment, as director of any guarantee company until and unless the law in this area is reformed.

 

[ClubMan]

Re: Becoming a director on a limited by guarantee company

The NCA booklets available here have some relevant reading on this topic.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Very good point. People should refuse point blank to remain, or accept appointment, as director of any guarantee company until and unless the law in this area is reformed.

It's a massive problem...we are approaching the handover stage in our complex and the company is literally a mess. How could anyone serve as a director? There are some people living in cloud cuckoo land regarding these companies. I met the builder recently and he had an idea for a resident (i.e. me) not to be a director but to help out. When I mentioned shadow directorships he looked at me like I was crazy!
The few management companies I'm involved with are all a shambles, generally insolvent and flouting regulations left right and centre.
I'd worry about people diving in to get involved with them.

 

[ClubMan]

Re: Becoming a director on a limited by guarantee company

The few management companies I'm involved with are all a shambles, generally insolvent and flouting regulations left right and centre.
I'd worry about people diving in to get involved with them.

I guess we're lucky in that ours seems to be well run or does anybody else have any relative positive experiences? I would still be reluctant to actually get involved in directorship matters for the reasons mentioned earlier...

 

[Graham_07]

Re: Becoming a director on a limited by guarantee company

Very good point. People should refuse point blank to remain, or accept appointment, as director of any guarantee company until and unless the law in this area is reformed.

Why should the law be reformed? The law is there to protect the interests of parties dealing with companies, whether limited by shares or by guarantee. If one is to become a director one must be aware of and accept the responsibilities which go with such appointments. The Office of the Director of Corporate Enforcement www.odce.ie has some good booklets on directors responsibilities , well worth reading by anyone considering directorships.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Why should the law be reformed? The law is there to protect the interests of parties dealing with companies, whether limited by shares or by guarantee. If one is to become a director one must be aware of and accept the responsibilities which go with such appointments. The Office of the Director of Corporate Enforcement www.odce.ie has some good booklets on directors responsibilities , well worth reading by anyone considering directorships.

I agree...landscapers, painters, cleaners and whoever else supplies goods or services to the company need to be protected. However, there has to be a better way to legislate for these property management companies. That might involve coming down far heavier on builders who abuse them...I don't know? Or allowing residents serve as a type of non-executive director without all of the inherent responsibilties?
The sooner this sector is reformed and heavily regulated the better. I'm convinced many of us are sitting on timebombs...it is genuinely disheartening as a compliant individual to see how the building/property sectors work and how much of a mess this sector is.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

Why should the law be reformed?

1. The vast majority (if not all) of directorships in guarantee companies are held by volunteers who have absolutely no financial interest in the company or the underlying charity/club/association.

2. The whole company law enforcement regime in this country was designed to prevent company directors from enriching themselves by illegally using companies for personal gain, eg "the Phoenix syndrome". By its very nature it is impossible to use a guarantee company as a vehicle for wealth generation.

3. Because guarantee companies rely so heavily on volunteers, it is unrealistic to expect their directors to have the required levels of knowledge of company law etc.

4. It is an absolute scandal that small voluntary organisation have had to publicly fundraise in order to pay large CRO & auditors fees.

5. Something like 96% of Irish private companies are exempt from statutory audits as their turnover is less than €7.5m. Yet a guarantee company such as a sports club has to undergo such an audit even if their turnover in the year as as low as €100. This doesn't make sense.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Great post...you have summed up the arguments perfectly.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

The law is there to protect the interests of parties dealing with companies, whether limited by shares or by guarantee.

If only...

I know people who have contacted the ODCE to report companies who have breached company law and diddled people in the process. The ODCE have told them that their role does not extend to dealing with complaints from the public about individual companies. They will process statutory reports from Revenue, auditors or certain State agencies but not complaints or queries from the public.

 

[Graham_07]

Re: Becoming a director on a limited by guarantee company

1
3. Because guarantee companies rely so heavily on volunteers, it is unrealistic to expect their directors to have the required levels of knowledge of company law etc.

In my experience there are many directors of "with profit" companies who have little or no knowledge of company law also. Unfortunately the Companies Acts requres all directors to have appropriate knowledge of some 43 years od companies legislation which I agree is rediculous.

 

[Graham_07]

Re: Becoming a director on a limited by guarantee company

4. It is an absolute scandal that small voluntary organisation have had to publicly fundraise in order to pay large CRO & auditors fees.

5. Something like 96% of Irish private companies are exempt from statutory audits as their turnover is less than €7.5m. Yet a guarantee company such as a sports club has to undergo such an audit even if their turnover in the year as as low as €100. This doesn't make sense.

Large CRO fees ? €40 per annual return if filed on time. Its only if companies run late that the CRO fees start to stack up.

Audit fees - yes definitely rediculous. Many audit forms do charitable guarantee companies for very low or no fees given the nature of the cause, however they (the auditor) is still faced with the same responsibilities they would have for a full fee audit. This area needs reform.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

Large CRO fees ? €40 per annual return if filed on time. Its only if companies run late that the CRO fees start to stack up.

And...? I think its rather obvious that many guarantee companies have been forced to pay large amounts to the CRO in late filing fees. As such I don't really understand your point.

 

[Graham_07]

Re: Becoming a director on a limited by guarantee company

Large CRO fees ? €40 per annual return if filed on time. Its only if companies run late that the CRO fees start to stack up.

And...? I think its rather obvious that many guarantee companies have been forced to pay large amounts to the CRO in late filing fees. As such I don't really understand your point.

Why is it "obvious" that many guarantee companies have been forced to pay late fees ? One is only forced to pay late fees if one is late in filing. If the company is compliant then annual compliance cost is €40 to the CRO, no more. My point is that a company is only forced to pay late fees if they are late in filing. The separate issue is WHY are they late filing? Is it back to the directors not understanding their responsibilities?

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

The separate issue is WHY are they late filing? Is it back to the directors not understanding their responsibilities?

I did say...

Because guarantee companies rely so heavily on volunteers, it is unrealistic to expect their directors to have the required levels of knowledge of company law etc.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

I stand over my assertion that many guarantee companies have been forced to pay late filing fees. My belief that this point is rather "obvious" is based on a number of grounds, including extensive media coverage of the problems facing apartment owners and apartment management companies, and also the fact that the CRO have issued at least one public statement reiterating their policy of charging late filing fees to guarantee companies except in a narrow range of circumstances.

Dont forget the earlier comments from other posters in this thread.

It's a massive problem...we are approaching the handover stage in our complex and the company is literally a mess.

I guess we're lucky in that ours seems to be well run or does anybody else have any relative positive experiences?

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Why is it "obvious" that many guarantee companies have been forced to pay late fees ? One is only forced to pay late fees if one is late in filing. If the company is compliant then annual compliance cost is €40 to the CRO, no more. My point is that a company is only forced to pay late fees if they are late in filing. The separate issue is WHY are they late filing? Is it back to the directors not understanding their responsibilities?

You're way off the mark here.
Our management company has been forced to pay approximately €3,000 in fines to Companies Office since its incorporation. This money has come from company funds...i.e. money I and the other residents have put into the company by way of management fees. We are arguing that the directors (in this case the builders) should pay these fees but it's a tough fight. I would like to be a director of this company but cannot and will not accept the liabilities that go with a standard directorship. So what do we do? Keep the status quo and continue to be ripped off? And I use the term ripped off knowing meaning what I say. Or become a director of a shambolic company to look after my and other residents' interests and jeopardise my own career?
These companies are a special case...and normal rules cannot apply.