Comment Paul KeaneWho would want to be a director these days? Dealing with the competition of rival firms and the increasing demands of customers is challenge enough. But in addition, the director must bear the enormous burden of form-filling and red tape required by the regime of compliance, which has become so heavy in the past 10-15 years.

With ever-increasing levels of paper-pushing from the regulator landing on the desks of Irish directors, it is hardly surprising that the hue and cry from directors is of the impossible burden of compliance.

As a practitioner of business law, I know that compliance advice does not quicken the pulse of clients, but compliance has its role and is a vital cog in the wheel of proper management and direction of any organisation.

It imposes a certain rigour on directors in relation to the management of the affairs of the companies in which they are involved. While Ireland has experienced an unprecedented boom in recent years, there has been no shortage of tough trading conditions across a variety of sectors and established companies continue to go to the wall.

In such instances, the rigour imposed by compliance is a vital safety net. Although no director or entrepreneur sets out to fail, with every business venture - new or established - there are risks. Directors' survival instincts will drive them to keep the doors open for as long as possible, but there are times when, due to uncontrollable or unpredictable factors, a company must close its doors and cease to trade.

When that happens, many people will have questions - creditors, Revenue, regulators, the courts and fellow directors and shareholders.

Without a strong compliance record, a director may be unable to answer those questions. More importantly, an inability to answer questions relating to the proper and responsible management of the company may leave the director open to accusations of mismanagement, reckless trading, breach of duty, or even fraud.

Faced with such accusations, the loss of a business can be further compounded by the loss of reputation, and even freedom.

The only means of protection, and only source of proof that the director acted honestly and responsibly, will be found in the many layers of compliance. As well as the aspiration to trade at a profit, the director has a responsibility to ensure that the company is playing by the rules of the game by complying with the law of the land.

To protect themselves, directors must insist on frequent and informative board meetings, where an up- to-date picture of the financial health of the company is presented. The directors must ensure that proper books of account are kept and that the appropriate filings to the Companies' Registration Office (CRO) are made.

Where the viability of the company is in question, particular care must be taken and appropriate legal and financial advice obtained.

Where the future of the company is dependent on receipt of future financing, the likelihood and accessibility of that finance must be reviewed at board level, with alternative business plans prepared and at the ready.

Creditors too, both secured and unsecured, should, where possible, be kept up-to-date on the trading position and financial health of the company.

A healthy relationship built on regular contact with creditors can result in support from those creditors to ensure the continued operation of the company at times of extreme pressure due to outside circumstances.

Failure to follow some of these basic steps may leave a director open to restriction or disqualification. Neither sanction is a pleasant one, but there are key differences.

If restricted, a director can continue, but only in a state akin to corporate leprosy. Accordingly, the restricted director is publicly declared to be restricted and there is a public register maintained of restricted persons.

Other companies with which a restricted director is involved must have a specified level of paid-up share capital, and breach of the conditions of restriction can lead to a criminal prosecution. The director must toll the bell of corporate leprosy by disclosing their restriction to any other company to which they are appointed.

Companies in which they might participate, in turn, become legally contaminated by the presence of a restricted director on their board, with the result that certain facilities under company law are not available to such a company.

Disqualifications were very rare. However, the Director of Corporate Enforcement has made it clear his intention to apply for an increasing number of disqualification orders in future. A disqualification means that a disqualified person must not in any way be involved as an officer of the company in the management of the company.

Of course, in both cases, directors have the right to defend themselves. Maintaining such a defence can be difficult, time-consuming and expensive.

However, the burden to prove one's honesty and responsibility lies with the director. The burden can only be discharged by providing evidence as to the director's compliance record in relation to the management of the company.

So next time the red haze of compliance begins to cloud your head, think of the alternative and the value of your reputation.

Paul Keane is managing partner of law firm Reddy Charlton McKnight.