Under the Companies Act 1963, a director must declare the nature of any interest, whether direct or indirect, in any contract or proposed contract with the company of which he or she is a director.

To comply with this obligation, a director must disclose his or her interest at the meeting of the board at which the contract is first discussed or at the first meeting held after the director first becomes interested. A director must also take reasonable steps to ensure that a copy of his or her disclosure is entered, within 3 days of the making of the disclosure, into a book of directors’ interests which the company must maintain. The requirement to make the disclosure in writing has tended to be overlooked. Directors have made such disclosures orally, with their interests being noted in the relevant board minutes but not in a book of directors’ interests. However, this is now likely to come under increased scrutiny as the Office of the Director of Corporate Enforcement now has the power to examine the book of directors’ interests. Shareholders are also permitted access to the book of directors’ interests and it must also be available for inspection at general meetings.

Instead of disclosing an interest in a contract or proposed contract at every board meeting, the legislation permits the giving of a general notice of a director’s interest in a company or a connection with a specified person, stating that they are to be regarded as interested in any proposed contract with that company or person.

Failure to comply with this obligation can result in criminal penalties. Any director, company, or officer of the company who fails to comply may be found guilty of an offence and liable to a fine of up to €1,904.61. The legislation is silent with regard to civil consequences. However, under ordinary principles of law, the contract that has been entered into may be voidable at the instance of the company.

This article has been authored by Ruairi Bourke.