What type of company is typically used in group structures?
In Angola, the most common type of company used in group structures is the private company limited by shares. This guide therefore focuses on the management of private limited companies.
What is a "director"?
There is no complete definition of the term "director" in Angolan law. Basically, the law regards someone who manages the affairs of a company on behalf of its shareholders as a director.
What are the different types of director?
Directors validly appointed as such, through a shareholders' resolution, may be executive or non-executive.
The executive directors are responsible for the management of the affairs of the company.
The non-executive directors are responsible for the general supervision of the performance of executive directors’ duties.
Who can be a director?
A director must be at least 18 years old. In the event of a legal person being appointed as a director, it must appoint an individual to exercise the office in their own name. The legal person must share liability with the person appointed by it.
Foreign directors must hold a work visa, ordinary visa or residency card.
Minimum / maximum number of directors
Under Angolan law there is no maximum number of directors. The company’s articles of association may, however, specify a greater minimum number and/or specify a maximum.
The management of private limited companies is carried out by a board of directors, composed of an odd number of members.
It may be agreed in the articles of association that the management shall be exercised by one single director when:
- The number of shareholders is only two (which can only happen in cases where the State, public companies or entities legally equivalent to the State hold the majority of the share capital).
- The share capital does not exceed an amount equivalent, in national currency, to USD50,000.00.
How are directors appointed?
Directors must be appointed by the company's shareholders (via a shareholders' general meeting or by unanimous written resolution).
A resolution appointing a director must be filed at the company’s registry office.
Directors must be appointed for the period fixed in company’s bylaws, which must not exceed four calendar years with re-appointment being permitted.
How are directors removed?
Any member of the board of directors may be dismissed (either with cause, or without cause) at any time by means of a resolution approved by the company's shareholders (via a shareholders' general meeting or by unanimous written resolution).
A director may also resign at any time through the issuance of a resignation letter addressed to the Chairman of the board of directors, or in case of the resignation of the Chairman, to the company’s audit board or audit committee.
The resignation or the resolution on director’s dismissal must be filed at the commercial registry.
Typical management structure
Typically, the management of private limited companies is carried out by a board of directors and supervision by a supervisory board, made up of an odd number of members, elected by shareholders at a general meeting.
One of the directors is appointed as Chairman of the board of directors.
How are decisions made by directors?
The manner in which directors can make decisions is set out in the company's bylaws. In private companies limited by shares, the bylaws typically provide directors with flexibility to determine between themselves how decisions are made – whether by physical meeting, telematic means (provided that the company ensures the authenticity of declarations and the security of communications, registering the content of all interventions) or an unanimous written resolution.
Directors must meet at least once a month, unless otherwise provided in company’s bylaws.
The validity of the resolutions of the board of directors depends on the presence of the majority of its members.
In relation to the minimum quorum, the board of directors must not approve resolutions without the absolute majority of votes of the directors present.
Authority and powers
The board of directors has exclusive and full powers to represent the company.
The powers of representation of the board of directors are performed jointly by the directors.
Acts performed by the directors, on behalf of the company and in the use of the powers conferred upon them by law, shall bind the company before third parties, irrespective of any limitations that may be established by the articles of association or by decisions of shareholders, whether published or not.
Directors shall bind the company if, by affixing their signature, they indicate that intention.
Subject to Angolan law restrictions, and unless otherwise provided in the bylaws, the board of directors may delegate powers to one or more directors to deal with certain managing matters. However, the board retains overall responsibility for the company's operations and management.
The board of directors can also appoint attorneys to perform certain acts or categories of acts, without the need for an express contractual clause.
What are the key general duties of directors?
The key duties of a director are set out in the Angola Companies Law, pursuant to which the director:
- Must observe a duty of care towards the company, demonstrate capability, technical competence and an understanding of the company's business considered appropriate for the role, and execute its tasks with the diligence of a careful and earnest manager.
- Must observe a duty of loyalty towards the interests of the company, serving the long term collective interests of the shareholders and taking into consideration the interests of other stakeholders such as employees, clients and creditors by ensuring the sustainability of the company. As a specific realization of this duty, the directors must not pursue or develop, directly or indirectly, other activities in direct competition with the company, unless duly authorized by the general meeting of shareholders.
- Must carry out any acts deemed necessary or appropriate to achieve the corporate purpose in line with the resolutions adopted by the shareholders, the bylaws and the applicable law.
- Are responsible for drafting merger and spin-off plans, in addition to other documents required or appropriate for the full legal and economic transparency of the transaction, as well as preparing a report in case of change of the company's legal form (i.e. a change to a different type of company).
- Are responsible for performing and executing all managing acts not specifically reserved by law or bylaws to the general meeting of shareholders.
- Are responsible for, following a shareholders resolution (except an unlawful resolution or resolutions that are not compliant with the company's by-laws), taking all necessary measures to execute such resolution, as promptly as possible (namely resolutions making any amendments to the company’s bylaws).
In addition, if agreed by the shareholders and set out in the company’s bylaws, the directors must also decide on and implement:
- The acquisition, disposal and encumbrance of real estate of the company.
- The disposal, encumbrance and lease of the business establishment of the company.
- The subscription or acquisition of other companies' shares or the disposal and/or encumbrance of these shares.
- The establishment of subsidiaries, agencies, branches or other local forms of representation of the company.
In general, the directors are bound to manage a company in a professional and diligent way, which includes compliance with all legal, statutory and contractual requirements.
What are directors' other key obligations?
The directors are responsible for preparing the annual reports and accounts and other financial statements required by law in respect of each financial year, and must submit them to the general meeting of shareholders and supervisory board, within three months from the end of each financial year, or within five months for companies that submit consolidated accounts or that use the equity method.
The directors are also responsible of preparing and submitting a proposal for the allocation of profits and/or handling of losses to the shareholders, in respect of each financial year.
Transactions with the company
Whenever there is a conflict of interest between the company and a director, the director shall advise the Chairman of the board of directors and abstain from voting on the resolution concerning that conflict.
The company may only grant loans or credit to directors, make payments on their account, guarantee obligations that they have contracted or make advances to them on account of the respective remuneration, up to the limit of the monthly amount thereof.
Contracts signed between the company and its directors, directly or through another person, shall be null and void except if they have been previously authorised by means of a decision of the board of directors, in which the director concerned may not participate, and if they have obtained the favourable opinion of the supervisory board.
Breach of general duties
Directors are severally liable towards the company for the damages caused to the company as a result of their actions or omissions that are not compliant with their legal statutory or contractual obligations, unless they prove that their actions/omissions were not caused with intentional or negligent misconduct.
The directors may also be subject to criminal liability.
A lawsuit against the directors may be brought by:
- The company – in this case a shareholder’s resolution to bring the lawsuit must be approved by the majority of the shareholders, and the lawsuit must be sought within six months from the date of such resolution.
- In the absence of a lawsuit sought by the company, one or more shareholders who jointly own, at least, 10% of the share capital may bring a liability suit against the directors to claim reparation for damages caused to the company.
A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property, accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.
Liabilities on insolvency
If during the course of its management the company goes bankrupt, the directors may incur in liability if the bankruptcy is declared fraudulent or culpable. The crime of fraudulent or culpable bankruptcy is punishable with a penalty of two to eight years' imprisonment.
Other key risks
Personal liability for directors may, in certain circumstances, arise under Angolan legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.
A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company. A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).
How can directors be protected from liability?
The board of directors or the shareholders' general meeting may declare null and void or annul defective resolutions, at the request of any director, shareholder with the right to vote or of the supervisory board, made within one year of becoming aware of the defect that serves as its basis.
The general meeting of shareholders may ratify any resolution or substitute an invalid resolution if it does not concern a matter that falls within the exclusive competence of the board of directors.
Directors shall not execute or allow to be executed resolutions of the board of directors that are null and void.
Directors' and officers' (D&O) insurance is also available. It typically provides both cover for individual directors against claims made against them in their capacity as director, including defence costs (which applies when indemnification by the company is not available), and company reimbursement when it has indemnified its directors (subject to an excess/retention). Policy exclusions typically include claims in respect of a director's fraud, dishonesty, wilful default or criminal behaviour.
What practical steps can directors take to avoid liability?
- Keep informed about the affairs of the company, particularly its financial position, and compliance obligations. Directors should have access to up to date financial information, prepare thoroughly for and regularly attend board meetings and familiarise themselves with key legislation affecting the business.
- Make full disclosures to the board and shareholders if they have outside positions or interests which may give rise to a conflict of interest and/or if they have a personal interest in any proposed or existing transaction or arrangement with the company.
- Keep records and take advice – directors should ensure that full written records of board proceedings are made reflecting the reasoning behind key decisions. This should include any alternative courses of action considered. Minutes should also record any disagreement amongst the board and the reasons for that. In addition, directors should ensure that returns and accounts and filed promptly and take professional advice for decisions based on areas outside their personal expertise, for example from legal professionals and accountants.
- Be aware of, and comply with, any group-wide governance policies. These may cover areas such as health and safety, ethics, bribery/anti-corruption, and human rights. Compliance with them is designed to help directors (and employees) fulfil their duties and obligations and minimise the risk of liability.
- Act, not only with diligence, but also with loyalty, keeping in mind that they must act always in the interest of the company, taking into account the long-term interests of the shareholders and considering the interests of other subjects relevant to the sustainability of the company, such as its workers, customers and creditors.
- Also in a group situation, directors should keep in mind that thet must act in the best interest of their group company. Whilst group interests and that company's interests are usually aligned, this may not always be the case (e.g. when their group company's solvency is adversely impacted). It is important to keep communication and reporting lines as open and clear as possible between parent and subsidiary companies when issues may arise and seek appropriate advice.