This week, we’re looking at the ‘who’s who’ of section 28, to find out if a person’s role within a charity or organisation could place them in the crosshairs of the section 28 trigger.
In our most recent essay, Part 6 of our current review of Section 28 – Liability for Offences by Bodies Corporate – National Vetting Bureau (Children and Vulnerable Persons) Acts 2012 – 2016 – we looked at the idea that a person’s willful neglect can be the third of the 3 branches of ‘intention’, in deciding whether or not the member of the senior management team falls foul of the section 28 liability triggering provision (whether it’s due to deliberate neglect or reckless failure to do something properly).
If you haven’t already checked them out, you can access the other parts of this series on section 28 liability here: Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6.
This week, we’re exploring the categories of persons covered by section 28, namely any person who in relation to the organisation is:
- A director
- A manager
- A secretary
- Any other officer, or
- Any person purporting to act as such
SECTION 28 - A RECAP
(Remember, for those looking for a quick recap, that section 28 of the Irish vetting legislation creates personal criminal liabilities on charities and clubs’ senior management (directors, officers, managers, or persons purporting to act as such) where it’s found that a criminal offence has been committed not by them, but rather by the body corporate (i.e. the charity / club), in circumstances where it can be proven that the offence was committed either with the senior management personnel’s personal consent, connivance, or willful neglect).
A few essays back, we created this Handy Guide to Section 28, for anyone involved in an organization with volunteers, where they hold the position of director, manager, secretary, or another officer position. If you haven’t done so already, you might want to check it out now.
YOUR HANDY GUIDE TO DIRECTORS' & OFFICERS' POTENTIAL PERSONAL CRIMINAL LIABILITIES UNDER SECTION 28 OF THE VETTING LAW
Anyone in senior management in a club, charity or organisation with a volunteer workforce, should ensure that they are properly acquainted with the potential personal criminal liabilities created by section 28. Click the big red button to download your handy guide as a PDF.
ROLLING WITH IT
Section 28 is a statutory obligation placed on certain categories of people in an organisation: directors, managers, the secretary, any other officer, or a person purporting to act as such.
On the one hand this is a relatively simple idea.
Namely: self-check the role you carry out in your organisation, against the ‘official’ roles that a company is required to fill; see if it turns out that you’re already fulfilling an official company role; and, if you are, make sure you’re up to speed on the statutory obligations that can flow out of the legislation from holding that post.
On the other hand, as in life, things can sometimes be more complicated than they first seem.
COMPANY LAW - PERSONALITY TEST
Wikipedia has a very useful definition of company law:
Companies occupy a special place in civil law, because they have a legal personality separate from those who invest their capital and labour to run the business. The general rules of contract, tort and unjust enrichment operate in the first place against the company as a distinct entity.
This differs fundamentally from other forms of business association. A sole trader acquires rights and duties as normal under the general law of obligations. If people carry on business together with a view to profit, they are deemed to have formed a partnership under the Partnership Act 1890 section 1.
Like a sole trader, partners will be liable on any contract or tort obligation jointly and severally in shares equal to their monetary contribution, or according to their culpability.
WHAT IS A DIRECTOR?
It’s helpful in understanding who a director is in an organisation to review the following:
A director is a real, living, breathing human being.
This in contrast to a company or charity, which while it’s technically a ‘legal person’, is in fact an artificial construct, which therefore means it must carry out its jobs though real people: its directors.
A director (in the UK at least), must:
and this, from the Institute of Directors in Ireland:
The Role of Directors and the Board in Charity and Not-For-Profit Organisations
The key purpose of a board of directors is to ensure an organisation’s prosperity by collectively directing the organisation’s affairs while meeting the appropriate interests of its shareholders and other relevant stakeholders, and complying with all necessary legislation and regulation. High standards of governance, transparency and accountability are expected of all organisations, with charity and not-for-profit organisations being no exception.
Even though a board may serve on a voluntary basis, the directors, officers or trustees of charitable and not-for-profit organisations are obliged to make themselves aware of the organisation’s obligations and to ensure that it operates effectively and efficiently and that they behave with integrity. Legislation does not distinguish between those directors who are volunteers and those who are remunerated, with the same duties and responsibilities applying in terms of compliance with corporate governance requirements and legislation, such as the Companies Act 2014 and Charities Act 2009.
A key aim of the Charities Regulatory Authority (CRA), which was established in October 2014, is to increase public trust and confidence in the management and administration of charitable trusts and charitable organisations, and to promote compliance by charity trustees with their duties in the control and management of organisations.
Boards of charitable and not-for-profit organisations also have a role to play in contributing to the wider re-building of trust in Ireland’s not-for-profit sector by employing and practicing the highest standards of corporate governance, relevant to the size of their organisation. Good governance practices will not only increase transparency by informing the public and funders about how the organisation is being run, but will also contribute to managing risks to the organisation, achieving goals and optimising the use of all resources.
WHAT IS A MANAGER?
This is, potentially, the most complex area of all. In theory, a manager is someone who holds a ‘management’ position within the organisation.
In reality, it can be harder to shed light on this area, when the facts on the ground are considered. For example, in a traditional charity, it’s usually clear where senior management starts and stops.
However, what about the managers at the level immediately beneath senior management? Regional managers? Departmental managers? It’s difficult to avoid the potential conclusion that they’d also be considered as ‘managers’ under the vetting legislation.
WHAT IS A SECRETARY?
A company secretary is an official company law position, and is not to be confused with the clerical role of working as a secretary in a company.
As such, a company secretary wears two main hats: (1) administrative (ensuring various documents are filed at the right time); (2) corporate governance (encouraging the company to adopt and implement best practice processes and procedures).
Deloitte have a very useful analysis of the role of the secretary in Irish company law:
Statutory responsibilities
The Companies Act 2014, which was signed on 23 December 2014 and is expected to be commenced on 1 June 2015, retains the requirement for a company secretary unlike the UK legislation which eliminated this requirement for private companies in 2006. The retention of this requirement demonstrates the importance of the role of the company secretary in the eyes of the legislature and in fact the proposals go a step further by placing the responsibility on the Board of directors to ensure that the secretary has the requisite knowledge and experience to discharge the functions of secretary of the company and to maintain the records as required by the Bill. Furthermore, the company secretary will be required to sign a declaration acknowledging the existence of the secretary’s duties on appointment.
If one were to examine the role and duties of the company secretary as currently outlined in Irish legislation it would appear to be quite restrictive and mainly administrative in nature. Principally, the company secretary ensures the company complies with company law, maintains certain statutory registers and makes the necessary filings with the Registrar of Companies such as annual returns, financial statements and certain forms with respect to changes to share capital etc.
Corporate governance
In practice, the role of the company secretary has developed into much more than the basic statutory requirements outlined above. Most notably, the responsibility for developing and implementing processes to promote and sustain good corporate governance has fallen largely within the remit of the company secretary. This is recognised in both the UK Code of Corporate Governance (which has been adopted by the Irish Stock Exchange through the Irish Annex) and the FRC Guidance on Board Effectiveness. Both have served to focus companies on Board effectiveness and in turn how they can be assisted by the company secretary.
WHAT IS ‘ANY OTHER OFFICER’ / 'ANY PERSON PURPORTING TO ACT AS SUCH’?
Sometimes it’s a case of a calling a ‘spade’ a ‘spade’.
Say what?
Well, for different reasons, occasionally people can either mistakenly, or deliberately, be under the impression that they don’t hold a particular position; whereas in fact, they do. So, for example, someone who thinks that they’ve resigned/stepped back from a company board of directors, but who fails to notify appropriately the Companies Registration Officer, may still be deemed to be a director, even when they don’t consider themselves to be.
Alternately, you have can have people who don’t hold out the technical title that would bring them within the remit of Section 28, but who, by their actions and omissions, clearly communicate that they are in fact empowered by the company as if they were a director or officer.
You could do far worse than look at the 2007 definition supplied by the Association of Chartered Certified Accountants, as follows (in relation to UK companies law):
It means that, in determining whether any person is or has been a director or officer of a company, account must be taken not only of whether a person has been duly appointed and registered as a director in accordance with the prescribed procedures, but also of whether that person is or has been exercising the actual legal functions of a director and taking part as a full member in the process of making the sort of decisions that directors routinely make
The absence of an exact definition of the term may be considered by many to be unhelpful in the context of making the law accessible to non-specialists. On the other hand, the absence of an exhaustive definition serves the interests of flexibility: while most companies are commercial enterprises, they can also be charities or quasi-partnerships, in which case the companies concerned may feel it more in keeping with the nature of their operations for the persons who control them to be referred to principally as ‘trustees’ or ‘partners’.
The broad definition of the term ‘director’ ensures that persons who are commonly referred to in such terms will be directors for company law purposes and will be treated as directors by the law. Further, the deliberately wide definition also allows the law on directors’ duties to be applied to persons who, for one reason or another, do not formally register themselves as directors of their companies (yet still act as though they are directors).
Accordingly, whether or not a person is a director of a company as far as the law is concerned depends not so much on his or her title but on the role that he or she plays in relation to the company and, in particular, to its decision-making processes.
If a person has a job title which includes the title ‘director’ then this would suggest that the person concerned is in fact a director of the company. This need not, however, always be the case – the title ‘director’ is sometimes bestowed on an employee as a designation of purely internal significance (NB where an employee with a job title which includes the word ‘director’ presents him or herself as such to a third party, that other party may be entitled to infer that the person is in fact a director for legal purposes).
Conversely, if a person whose title does not include the word ‘director’ nevertheless actually participates in the central decision-making processes of a company, that person will be ‘occupying the position of director’ under section 250 and will therefore be a director under the law.
Remember here it’s the function, not so much the form that counts:
- Executive Director
- Non-Executive Director
- Managing Director
- Trustee
- Auditors
All of these roles would fall potentially under the definition of ‘any other officer / any person purporting to act as such’.
SUMMARY
Section 28 is directed the people in an organisation who have a combination of some form of executive and / or operational control of that organisation.
The label on the tin isn’t so relevant so much as the function carried out by that person.
For the puposes of section 28 of the Irish vetting legislation, a person who is found to be a director, manager, secretary, officer, or person purporting to act as such; potentially finds themselves in the crosshairs of section 28 liability, in the event their organisation commits a criminal offence, where that’s done with the consent, connivance or is attributable to the willful neglect of a person holding that senior management position.
YOUR HANDY GUIDE TO DIRECTORS' & OFFICERS' POTENTIAL PERSONAL CRIMINAL LIABILITIES UNDER SECTION 28 OF THE VETTING LAW
Anyone in senior management in a club, charity or organisation with a volunteer workforce, should ensure that they are properly acquainted with the potential personal criminal liabilities created by section 28. Click the big red button to download your handy guide as a PDF.
A few essays back, we created this Handy Guide to Section 28, for anyone involved in an organization with volunteers, where they hold the position of director, manager, secretary, or another officer position. If you haven’t done so already, check it out now.
This essay is for general information and guidance purposes only and, just to be clear, does not constitute legal or other professional advice.
You should always seek your own specific legal advice, from a firm of solicitors, on the application of the law in a situation.
Whilst we used reasonable endeavours to ensure the accuracy of this content, we do not accept any liability for any omissions or errors; or for any action taken in reliance of the information in this essay.
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