By Seamus Parfrey

 LOANS TO DIRECTORS

Under the Companies Act 2014 loans, quasi-loans or other arrangements, such as entering into a transaction as a creditor on behalf of the director of the company or of its holding company, or providing guarantees or any other security in connection with a loan, quasi-loan or credit transaction, are prohibited to directors or parties connected to directors except under the following circumstances:

1. The value of the arrangement is less than 10% of the company's relevant net assets as determined by its latest statutory financial statements as laid before its AGM. Where the company's net assets decrease and the loan comes to represent more than 10% of the company's net assets, then the company and the director must take reasonable steps to reduce the balances outstanding such that they are less than 10%. This must be done within two months of the director becoming aware or ought reasonably to have become aware of the position
2. The arrangement is a reimbursement of the director's expenses which are properly incurred in the discharge of his duties as an officer of the company
3. The arrangement is where the company enters into the transaction in the ordinary course of business and the value of the transaction is not greater nor the terms better than that which the company would offer to an ordinary person taking out the same loan
4. The arrangement is with a group company (holding company, subsidiary or sister company)
5. The relevant Summary Approval Procedure (SAP) is followed with regard to permitting a company to enter into a loan, quasi-loan or a credit transaction or to enter into a guarantee or provide security in connection with a loan, quasi-loan or a credit transaction to a director or persons who are connected to the director. 

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By Noel Murphy

Under the Companies Act 2014 four Offence Categories have been established with associated penalties for each category.

Category 1 offences can result in imprisonment for up to 10 years and/or a fine of up to €500,000 on conviction on indictment or on summary conviction imprisonment for not more than 12 months and/or a fine not exceeding €5,000.

Category 2 offences can result in imprisonment of up to 5 years and/or a fine of up to €50,000 on conviction on indictment or on summary conviction imprisonment for up to 12 months and/or a fine not exceeding €5,000.

Category 3 offences are summary offences only and can result in imprisonment of up to 6 months and/or a fine not exceeding €5,000.

Category 4 offences are summary offences only and can result in a fine not exceeding €5,000.

Examples of category offences applicable are as follows:

Category 1

• Failure to draw up a Directors compliance policy statement on relevant obligations
• Committing certain offences relating to accounting records
• Knowingly trading fraudulently.

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