Ireland: Customised Director Training Programme

Last Updated: 24 January 2013
Article by Mary Canning
Most Read Contributor in Ireland, September 2019

With the recent introduction of the IFIA Corporate Governance Code for Collective Investment Schemes and Management Companies (the "Code"), there is an increased focus on the role and on performance of directors on fund/management company boards. While the Code is voluntary, it has been adopted by most Central Bank authorised funds and management companies. Good governance requires that the performance of a board of directors be evaluated on an on-going basis and this is reflected in the Code which expects that the overall performance of the board and that of individual directors be reviewed annually and a formal review of the Board and the Chair be carried out and documented at least once every three years.

To assist in compliance with the Code, a board should ensure that directors are aware of the relevant policies and procedures that apply to their fund and can avail of adequate and sufficient training to enable them to discharge their duties.

In advising clients in relation to complying with the Code and its various requirements, Dillon Eustace has identified a number of key areas in which boards might consider formal training in relation to their commitments under the Code and, more generally good corporate governance for their Board.

Dillon Eustace can tailor a training programme to suit the needs of your board and deliver it in a confidential interactive setting in which directors will have an opportunity to raise issues that are of concern to them. These training sessions can be arranged to tie in with your quarterly board meetings here in our office or can be delivered at any other convenient location. Some of the topics in which Dillon Eustace can provide training include:

Understanding the Board's Role

In considering whether to adopt the Code, directors have been forced to look much more closely at the role of the board and the role that directors play on the board. It is important for directors to understand their duties and responsibilities, both at common law and those imposed by statute and regulation in the context of the fund/management company they act for. Directors should also have a clear understanding of the provisions of the Code which have been adopted and which will need to be considered on an annual basis before the end of each accounting period for the fund/management company.

Creating and Maintaining an Effective Board

The Code focuses closely on the make-up of a fund/management company board in terms of

  • its size,
  • the balance of skills,
  • director independence,
  • executive/non-executive roles,
  • time commitments of individual directors,
  • the creation and make up of committees, and
  • the appointment and role of the permanent chair.

Boards have an on-going duty to assess continued adherence to the Central Bank Fitness and Probity Standards. A board level conflicts of interest policy must be adopted and understood and implemented.

A board must also decide on a method of evaluating itself and its individual members, what action should be taken following such an evaluation and what rules are in place regarding replacement, rotation or retirement of directors.

Operating an Effective Board

The Code requires that the board meets as often as is necessary to fulfill its responsibilities effectively and prudently, reflective of the nature, scale and complexity of the particular fund/management company. In any event, for certain categories of funds, the board is required to meet at least quarterly. In some cases, it may be appropriate to meet more frequently than that. In this context, directors will need to be satisfied that the board convenes sufficiently frequently. It is also important that key matters are dealt with at meetings and discussed in sufficient detail as to ensure that issues are given adequate consideration. "Key strategic decisions" and matters reserved to the Board must be identified. The roles of the Chairman and Company Secretary are important in this context. Directors need to be satisfied that they are circulated with the right information in advance of board meetings and that the agenda of meetings covers the matters which they determine require consideration.

Directors also need to understand the importance of attendance at meetings and of contributing appropriately to discussions drawing on the balance of skills on the board. Minutes of meetings are very important and must reflect the decisions that have been made.

A board must understand the regulatory framework and the structure in which it operates. In the context of funds/management companies, this involves having a good understanding of the product, the target investor base, distribution mechanisms and the role and obligations of each of the delegated service providers to the fund/management company. It also requires an understanding of the nature of the agreements which have been entered into with these parties and an understanding of the regulatory status and obligations of such parties.

Monitoring Risk

Risk is a fundamental part of the business of funds and management companies. It cannot be eliminated but must be managed by the board.

In order to monitor the risks to which a fund/management company is exposed, a board must understand the types of risks which a fund faces and have a good understanding of the role and obligations of each of the delegated service providers to the fund/management company. Directors need to ensure that their service providers have a risk aware culture and will need to have an understanding of the practices and procedures that service providers use to manage the risks that their fund faces.

Boards should understand the relationship between internal control, internal audit and risk management and have procedures in place to supervise their delegate service providers and review their performance against relevant benchmarks. Directors need to know what reports to look for from their delegates and to know what detail such reports should contain, such as report on adherence to policies, objectives and restrictions and valuation policy.

Training will be led and coordinated by Mary Canning. Mary is a partner in the Regulatory and Compliance Department with many years' experience in the funds industry. She has also served as a non-executive director on the boards of many funds and fund management companies. She has an in-depth knowledge of the operations of funds and of the challenges that are faced by directors and will draw on her own professional experience to provide sessions which are both practical and informative. Whether you require a brief introduction to the duties of directors or a more tailored training session on the monitoring of risk, Dillon Eustace can offer a programme that will suit the needs of your board.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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