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Pit Falls to becoming a Company Director

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  • 25-02-2016 5:06pm
    #1
    briancbyrne
    Registered Users Posts: 7 ✭


    hi
    I hope in the near future to be invited to become a company director by the MD of the business where I work as a reward for performance and long loyalty to date.
    The MD has indicated that I will be given a small amount of equity in the business as part of the appointment.

    As per the title of the post, are there any warnings or pitfalls which members might be able to advise me in entering into such a situation.

    Thanks in advance.


Comments

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    #2
    jimmii
    Registered Users Posts: 14,810 ✭✭✭✭jimmii


    Banks often ask for directors guarantees on loans so if it's a business that depends on credit then you might have to be liable for that. Other than that it's just the additional responsibility for the company and perhaps jealousy at your promotion. As a director you have obligations with regards to the running of the company so you might want to just have a look at things make sure everything has been done right.


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    #3
    gargargar
    Registered Users Posts: 249 ✭✭gargargar


    Being honest it is rarely worth taking a directorship in this case. Will you get a directors fee/payment? If not it is just a ego thing. You will have no real power but will be on the hook if anything happens to the company i.e. liquidation. You will be taking on legal responsibilities but probably the MD will still run the company how he/she wants.

    Take the shares by all means, however even these can be worthless unless there is likely to a sale or regular dividends. Maybe just ask for a pay rise?


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    #4
    pedroeibar1
    Closed Accounts Posts: 5,108 ✭✭✭pedroeibar1


    I agree with much of the above - the title is an ego thing, but in a sales role it does carry some weight when dealing with big clients (that can work both ways!). What your input level would/could be in a family co is questionable.

    The downside is now much increased since the new Companies Act so I would favour a properly structured stock option agreement over a board appointment. Done correctly it can also be very tax effective.
    Have a read of this to get an idea of what is involved in being a co. director.

    There are several good educational programmes out there for potential directors - IMI and Smurfit are pathways to the Chartered Director qualification (expensive!) and the Law Soc. has a good diploma on Corporate Law and Governance - they take a few non-lawyers each time round.


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