This article is for Irish business owners, startup founders, and anyone setting up or running a private limited company who needs to understand the legal distinction between directors and shareholders.
If you're confused about what powers directors actually have, what decisions need shareholder approval, or whether you can be both director and shareholder in your own company, this guide covers the key differences in roles, the eight statutory duties directors must follow, and what happens when these responsibilities are breached.
Key Takeaways
• Directors owe eight statutory duties to the company alone, not to individual shareholders, regardless of shareholding status. • Shareholders can remove any director by ordinary resolution with special notice, even if directors oppose the decision. • Directors face personal liability for reckless trading if the company incurs debts with no reasonable grounds for repayment. • There is no automatic right to dividends; directors must recommend payment from distributable profits requiring shareholder approval. • Directors must declare any conflict of interest at the first board discussion and cannot vote on matters where conflicts exist.
Laura Ryan is a practising Barrister at the Bar of Ireland. She graduated from the Honourable Society of King’s Inns in 2024, having previously qualified and practised as a Chartered Accountant in a big four accounting firm.
Can the same person be both a director and a shareholder in an Irish company?
Yes, one person can hold both positions simultaneously, and this is extremely common in small Irish businesses and startups. However, your duties as a director remain legally separate from your rights as a shareholder, meaning you wear two distinct hats with different responsibilities in each capacity.
What's the main difference between directors and shareholders?
Directors exercise management power and control the day-to-day operations of the company, while shareholders exercise ownership rights and control fundamental company decisions through voting at general meetings. Shareholders cannot direct how directors run the company on a daily basis, though they can convene meetings to remove directors or amend the constitution.
Can directors make all company decisions on their own?
No, directors cannot make certain major decisions without shareholder approval. They cannot change the company constitution, authorize major structural changes like mergers or voluntary liquidation, or issue shares exceeding constitutional limits without shareholder authorization.
Do I automatically receive dividends as a shareholder?
No, there is no automatic right to dividends under Irish company law. Directors must recommend dividend payments from distributable profits, and this recommendation must be approved by ordinary resolution of the shareholders at a general meeting.
What happens if a director breaches their fiduciary duties?
Directors found breaching their duties are liable to account to the company for any gain made and must indemnify the company for losses. They may face personal liability under both criminal and civil law, and can be restricted or disqualified from serving on company boards, though courts have discretion to grant relief if directors acted honestly and reasonably.
Can shareholders remove a director they disagree with?
Yes, the Companies Act grants majority shareholders the right to remove a director by ordinary resolution with special notice under Section 146. Directors cannot prevent their removal even if they disagree with the shareholder decision, though the removed director has the right to make representations before the vote.
Am I personally liable for company debts as a shareholder?
No, shareholders are only liable for the price they paid for their shares, and this limited liability protects you from company debts beyond your investment. However, if you hold partially paid shares, you may be required to pay the remaining balance when called.
When do directors face personal liability for company debts?
Directors become personally liable for company debts in cases of fraudulent or reckless trading, particularly if the company incurs debts when there are no reasonable grounds for believing they can be repaid. They may also be liable if knowingly operating without proper corporate structure or if their breach of fiduciary duties causes company losses.
What's the difference between ordinary and preference shares?
Preference shareholders may have a right to receive fixed dividend payments before ordinary shareholders and often have guaranteed dividend payments but limited growth potential. Ordinary shareholders are typically residual equity holders with unlimited upside potential and full voting rights, though they only receive dividends after preference shareholders are paid.
