Corporate Governance in a Hospital Environment Presentation to Dublin Hospital CEO’s

2. Corporate Governance in a Hospital Environment Presentation to Dublin Hospital CEO’s Kevin Prendergast Corporate Compliance Manager, ODCE.

3. Presentation Overview • Introduction to ODCE • Company Law and Directors’ Duties • Board of Directors/Hospital Board • Corporate Governance, Best Practice • Sources of Information

4. Company Law Enforcement Act (2001) • Functions of the Director • to enforce the Companies Acts, including by the prosecution of offences by way of summary proceedings, • to encourage compliance with the Companies Acts, • to investigate instances of suspected offences under the Companies Acts,

5. Company Law Enforcement Act (2001) • Functions of the Director cont’d • at his or her discretion, to refer cases to the Director of Public Prosecutions where the Director of Corporate Enforcement has reasonable grounds for believing that an indictable offence under the Companies Acts has been committed, • to exercise, insofar as the Director feels it necessary or appropriate, a supervisory role over the activity of liquidators and receivers in the discharge of their functions under the Companies Acts,

6. Overview of the ODCE • Independent • 37 staff • Divided into 5 Units: • Compliance - Enforcement • Assessment - Corporate Services • Insolvency

7. Consequences of Non-Compliance Prosecutions • In general, maximum penalties under the Companies Acts are: • €1,900 and/or 12 months imprisonment on summary conviction, and; • €12,700 and/or 5 years imprisonment on conviction on indictment (any offence for which the maximum sentence is 5 years or more is an arrestable offence).

8. Consequences of Non-Compliance • Significantly higher penalties are available for certain offences e.g. • fraudulent trading: €63,500 and/or 7 years, and; • market abuse: €10million and/or 10 years. • Can also be held personally liable for debts/costs

9. Restriction Part VII (Section 150) Companies Act, 1990 Director of an insolvent company Not able to prove that acted honestly and responsibly Reverse Burden of proof Company need not be in liquidation (Section 251 Companies Act, 1990 Applies to Shadow Directors (section 27 Companies Act, 1990) Must have minimum capitalisation of Company (€63,487)

10. Disqualification Meaning of Disqualification during the period of five years from the date of conviction or such other period as the court, on the application of the prosecutor and having regard to all the circumstances of the case, may order— • (a) he shall not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way, whether directly or indirectly, concerned or take part in the promotion, formation or management of any company or any society registered under the Industrial and Provident Societies Acts, 1893 to 1978; • (b) he shall be deemed, for the purposes of this Act, to be subject to a disqualification order for that period.

11. Company Law and Directors’ Duties • Company is a separate legal entity • Can sue and be sued in its own name • Holds assets and incurs liabilities separate from its members/shareholders • Confers limited liability on members/shareholders

12. Company Law and Directors’ Duties • Company is managed on behalf of members by the Board of Directors • Duty to company • Board has collective responsibility for all actions (and omissions) by the company • All directors are officers of the company and are subject to Company Law duties

13. Company Law and Directors’ Duties • “Types of Directors” • Non-executive directors • Shadow directors • De facto directors

14. Company Law and Directors’ Duties • What Duties? • Maintenance of Books and Records • Company registers • Companies Registration Office • Accounts and Audit • Proper books of account • Sign off of accounts • Accounts audited

15. Company Law and Directors’ Duties • Board Meetings • No specific legal requirement, but good practice • AGM’s/ EGM’s • Annual Returns • Submitted on time • False information

16. Company Law and Directors’ Duties • Special Rules on Transactions with Directors • Loans to Directors • Significant Transactions with Directors (or related parties) • Loan guarantees • Credit transactions

17. Company Law and Directors’ Duties • Fiduciary Duties • Act in good faith and in company’s interest • Be open and transparent • Act with due care, skill and diligence • Duties owed to company, members, creditors, employees.

18. Board of Directors and Hospital Board • Company Law does not recognise boards, committees, etc. • Only directors have the powers under Companies Acts • Members/Shareholders/Subcribers have ultimate power in general meeting to hire and fire Board

19. Board of Directors and Hospital Board • Specific rules contained in Memo and Articles of Association • Composition of Board • Appointment/retirement • Board members must be approved by members at AGM.

20. Board of Directors and Hospital Board • Hospital Board should be aligned with Board of Directors under Company Law • Representatives of hospital management are executive directors • Independent representatives are non-executive directors

21. Board of Directors and Hospital Board • As a member of the Board you are an officer of the company • All company law duties apply to you personally • You are potentially exposed to punishment under Company Law

22. Corporate Governance • Term of Office of Directors • Standard Articles require re-election every three years • May be amended to require annual re-appointment • Cannot take from members the right to remove directors

23. Corporate Governance • Regularity of board meetings • No specific company law requirement • Best practice says “sufficient” • In general 2-6 times a year, depending on degree of involvement in day-to-day operations • Failure to maintain control over company affairs is a primary cause of company failure

24. Corporate Governance • Composition of Board • Again, no guidance under Company Law • Majority should be non-executive, including Chairman • At least one director should have solid financial expertise (Finance Director/CFO)

25. Corporate Governance A Code for the Voluntary and Community Sector, UK, June 2005 • Set strategic goals of the organisation • Review of financial and other internal controls to ensure risks are addressed • Daily operation delegated to management • Ensure roles are clear, and that appropriate skills and where necessary training is provided

26. Corporate Governance • Board should review its own operations • Strategy for its own renewal • Delegation must be properly documented, with sufficient powers but with clear limits • Highest ethical standards, no conflicts • Open, accountable, and communicative www.governancehub.org.uk

27. Sources of Information • ODCE Information books • 7 booklets, covering powers and responsibilities, of companies, directors, secretaries, members, creditors, auditors, liquidators, receivers and examiners

28. Sources of Information • Other guidance from our website www.odce.ie • Combined Code on Corporate Governance • Turnbull guide on implementation of Code • Guide for Community and Voluntary sector (UK)

29. More Common Breaches • On the basis of information coming to ODCE attention, the following are some of the more common breaches: • failure to file returns with the CRO • 1989 reports to ODCE • transactions with directors - breaches of directors’ loans provisions • 342 reports to ODCE • failure by directors to hold AGMs and/or EGMs • 28 reports to ODCE • failure to keep proper books of account • 64 reports to ODCE & 29 convictions

30. What to do? • Advice to Directors • Ask questions • Don’t assume anything • Know your powers, and responsibilities • Discuss issues don’t avoid them • Seek professional advice • Consult your company secretary/auditors/legal advisors • Possibility of insurance

31. Thank You