Ten most common corporate

governance sins

And how to avoid them

Kevin Prendergast
Head of Advocacy and Assessment, 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
 Breach of the law
 Most prosecuted offence for directors
 No idea if making a profit or loss as a business
 It leads to insolvency, a separate offence
 Could lead to personal liability in insolvency
Corporate Governance Sins
2. Borrow money from your company
 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
 No minutes!
Corporate Governance Sins

6. Don’t keep minutes

 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
 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 you do?
 Put systems in place to ensure basic
responsibilities are complied with
 Ensure board meetings cover corporate
governance /compliance matters
 Keep informed of new developments
 Thank You

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