Duties and obligations of directors

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.

Last modified 1 Mar 2021

Under Australian law, directors are subject to statutory duties (under a range of statutes) as well as general law duties.  There is significant overlap between these duties.

The Act sets out some of the key statutory duties of a director.  These include:

  • Act with a reasonable degree of care and diligence.  There is an ongoing obligation to maintain a basic understanding of the company’s activities, size, distribution of functions and its financial position.
  • Act in good faith, in the interests of the company and for a proper purpose. In corporate groups, the interests of the company extend to both the interests of shareholders as well as the interests of other stakeholders. This requires a balance. Further, additional consideration must be given to nominee directors in joint ventures. The relationship of wholly-owned subsidiary and corporate group is discussed below.
  • Misuse of position.  Not improperly use their position to gain advantage for themselves or another person or cause detriment to the company.
  • Misuse of information.  Not improperly use information to gain advantage for themselves or another person or cause detriment to the company (this duty continues after the director leaves office).
  • Disclose to fellow directors any material personal interest in matters relating to the affairs of the company.  Depending on the type of company and the requirements set out in its constitution (if the company has one), a director may not be permitted to be present when a matter in which they have a material personal interest is discussed, or vote on the matter.
  • Insolvent trading.  Directors have a duty to prevent insolvent trading by their company, and can be held personally liable for the company's debts if they allow the company to trade while it is insolvent or its insolvency would have been objectively suspected.  Insolvency occurs when a company is unable to pay its debts as and when they fall due. Insolvent trading occurs when a company incurs a debt whilst insolvent or becomes insolvent by incurring the debt.

Many other statutes also impose duties on directors, including laws relating to workplace health and safety, environmental protection and competition.

In addition, directors have both equitable and common law duties, including:

  • Act in good faith and in the best interests of the company.  Good faith has both subjective and objective elements, in that a director must genuinely believe they are acting in the company’s best interests and must also act in a way that an honest and reasonable director would.
  • Exercise powers for a proper purpose.  In determining what is a proper purpose, the purpose motivating the exercise of power must accord with the objective purpose for which the power was granted.
  • Not fetter their own future discretion.  A director must exercise active discretions and not improperly limit their decision-making authority (but this does not prevent delegation by directors).
  • Avoid conflicts of interest and duty.  If a director must choose between favouring their own interests and the interests of the company, the director must usually choose the latter.  A director should avoid actual and perceived conflicts.

Last modified 8 Feb 2021

The key duties of a director are set out in the Act on Limited Liability Companies (the Act):

  • The managing directors owe a duty to the company to exercise the care of a prudent business person in their management of the company.
  • A managing director is deemed to act with the diligence of a prudent business person if, in making a business decision, the director is not guided by extraneous interests and it can be assumed, on the basis of adequate information, that he is acting in the best interests of the company.
  • The managing directors must ensure that an accounting system and an internal control system are maintained which meet the requirements of the enterprise.
  • Copies of the annual financial statements, including the management report, and of the consolidated financial statements, including the group management report, must be sent to each shareholder without delay after their preparation.
  • In the interests of the company, the directors are required to convene shareholders' meetings whenever they deem it appropriate.

Last modified 8 Feb 2021

There is no exhaustive list laid down in law of the key duties of directors. The law merely states that the management organ of a company has, through its director(s), the (residual) power to perform all acts necessary or useful for the realisation of the object of the company, except those for which the general shareholders’ meeting is authorised by law. In fact, directors are responsible for both the strategy as well as the overall monitoring of the organisation.

The management duties can in general be described as follows:

  • Duty of care and duty of loyalty. The directors have a general duty of care, meaning that they must be diligent in the performance of their tasks and (actively) participate in board meetings. They are required to manage the company's business and affairs to the best of their ability and in the best interest of the company. They also have a duty of loyalty towards the company which encompasses both a duty of confidentiality and a duty not to compete with the company.
  • Decision making with respect to the general strategy of the company and acting as a reasonable, prudent and diligent person. Directors have to act within the company's interest and exercise their powers for the purposes for which they were given and not for any collateral purpose.
  • Financial duties. As part of its financial duties, the management organ is in charge of the drafting of the annual accounts and the management report.
  • Operational duties. As part of its operational duties, the management organ enters into agreements with third parties, grants special powers to special proxy holders and supervises them.
  • Convening of and reporting to the general shareholders’ meeting. The management organ convenes the general shareholders’ meeting at least once a year and replies to questions of the shareholders at the general shareholders' meeting. The management organ is obliged to convene a general shareholders' meeting if the shareholders who represent one tenth of the company's shares/share capital request a general shareholder's meeting.

Last modified 8 Feb 2021

The key duties of a director are set out in the Companies Act. These are duties:

  • To act in good faith and the best interest of the company. It shall be the duty of the director to exercise their powers in accordance with the  Act and with the limits and subject to the conditions and restriction established by the company’s constitution where applicable.
  • Not to agree to the company incurring any obligations unless he/she believes at the time, on reasonable grounds that the company will be able to perform the obligations when it is required to do so.
  • To obtain the authorisation of a general meeting before doing any act or entering into any transaction for which authorisation or consent of a general meeting is required by the Act or by the company’s constitution.
  • To act with reasonable care, skill and diligence. To exercise the degree of care, diligence and skill that a prudent person would exercise in comparable circumstances.  
  • Not to use any assets of the company for any illegal purpose and not to do, or knowingly allow to be done, anything by which the company’s assets may be damaged or lost (otherwise than in the ordinary course of carrying on its business).
  • To avoid conflicts of interest. A director has an obligation to the company not to compete or become a director or officer of a competing company, unless it is approved by the company with the knowledge of all the facts.
  • To attend meetings of the directors of the company with reasonable regularity, unless prevented from doing so by illness or other reasonable excuse.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Last modified 1 Mar 2021

Directors must exercise their functions in accordance with their fiduciary duties. Their main duties are:

  • Duty to be informed (and the right to request certain information).
  • Duty of care. Directors are obliged to use, in the exercise of their functions, the care and diligence that people ordinarily employ in their own businesses. This corresponds to the ordinary standard of care (culpa leve) defined by Chilean civil law.

The duty of care obliges every director to regularly follow and decide about management issues (requesting all the information needed for this purpose, with the collaboration or assistance from management), to actively participate in the board and any committees, to attend  meetings, to request board meetings, to request that certain matters be reviewed by the board and to oppose illegal acts, among others.

  • Duty of loyalty. This includes:
    • Duty of confidentiality.
    • Duty to respect the business opportunity of the company.

The director must be loyal to the company in the exercise of his/her functions and cannot compete with it or damage it with his or her actions.

Last modified 5 Apr 2021

A director is in charge of the company’s day-to-day business. The company's business management must be distinguished from the company's representation. While the representation of the company is carried out in relation to third parties, business management is directed inside the company and involves the management of the company, including decisions on business plans. In our view, business management does not include deciding on the long-term strategic plans of the company, as this decision must be taken by the General Meeting.

A director must ensure that the prescribed records and accounts are duly and properly kept and that a register of members is administered and, upon request, must inform the members about any company-related matters.

A director must file any changes to the articles of association to the Commercial Register.

A director must call upon the general meeting to convene at least once a year.

Last modified 8 Feb 2021

The board of directors is entrusted with the ultimate responsibility of the company as they have both the supervisory function of the executive board and the overall strategic responsibility of the company.

In general, the board of directors must at all times act with due care and diligence and in the best interests of the company.

Last modified 8 Feb 2021

The key duties of a director are set out in the Companies Act 2006 (the Act).  These are duties to:

  • Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
  • Act with reasonable care, skill and diligence. Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the statutory standard required of them.
  • Exercise independent judgement. However, a director may rely on other people (eg through proper delegation or by seeking advice) provided they judge that it is reasonable to do so.  A director may not usually limit their discretion.
  • Treat the shareholders equally. The board or the managing director (or the general meeting) shall not make decisions or take other measures that are conducive to conferring an undue benefit to a shareholder or another person at the expense of the company or another shareholder.
  • Act within the company's articles of association and exercise their powers for the purposes for which they were given and not for any collateral purpose.
  • Disqualify from handling a matter with personal interest. A director shall be disqualified from handling a contract, transaction or litigation between the director and the company or the company and a third party, if the director is to derive a significant benefit in the matter and that benefit may be contrary to the interests of the company. Even if disqualified the director should declare relevant information about the matter to the company.

In addition, directors have duties, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company and not accept benefits from third parties to promote their interests in the company.

Last modified 8 Feb 2021

A director must exercise the powers conferred upon him/her (in the bylaws and the decision having appointed him/her, as well as -as regards the President- pursuant to law) and act in the best interests of the SAS.

There is no specific statement of duties of a director under French law, except for the general duty of confidentiality.

In certain cases however, French courts have stated that directors should conduct the company’s business with due and reasonable care (gestion en bon père de famille).

In addition, certain restrictions exist so as to ensure that directors ensure that their duties towards the company do not conflict with their personal interests.

Last modified 8 Feb 2021

Organisational duties

  • Duty to convene and prepare a Shareholders’ Meeting in the following circumstances:
    • The annual ordinary shareholders' meeting.
    • If a business decision falls within the competence of the shareholders’ meeting due to specific provisions in the articles of association (so called approval catalogue).
    • Extraordinary shareholders' meeting, if this is necessary in the interest of the company, in particular if the annual (or any interim) balance sheet shows that one half or more of the share capital has been lost.
  •  Disclosure Obligation, Shareholders’ Directives
    • Obligation to provide each shareholder upon request with information about matters concerning the company and to allow them to inspect the books and documents of the company.
    • Obligation to comply with shareholders' instructions based on valid shareholders' resolutions.
  • Responsibility for compliance with application and filing requirements towards the commercial register.

Duty of loyalty

The managing director has a duty of loyalty towards the company and a duty to exercise the diligence of a prudent business person. This duty arises from the extensive competences of the managing director and their access to the share capital of the company. In particular, the managing director is obliged:

  • Not to disclose any business secrets or other confidential information about the company.
  • Not to compete with the company.
  • To return any personal advantages deriving from executed agreements to the company.

Other duties

  • Preservation of the share capital.
  • Accounting duties.
  • Tax and social contributions.
  • Obligations during crisis/insolvency.

Last modified 8 Feb 2021

As a general rule, directors of a company are subject to fiduciary duties imposed by common law as well as statutory duties imposed by various statutes (principally the Companies Ordinance (CO)).

Under the CO, a director has a duty to exercise reasonable care, skill and diligence. The CO provides that a director must take such actions as would be taken by a reasonably diligent person, having both:

  • the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and
  • the general knowledge, skill and experience of that particular director.

In addition, the CO requires a director to take all reasonable steps to ensure that proper books of account are kept so as to give a true and fair view of the state of affairs of the company.

Under the common law, the directors have a range of fiduciary duties. These include:

  • Duty to act in good faith for the benefit of the company as a whole. A director has to act at all times in good faith and in what they consider as being in the best interests of the company assessed by reference to the interests of its present and future shareholders having regard to both their short and long-term interests. In cases where the interests of the present shareholders and those of the corporate entity differ, the interests of the corporate entity would generally prevail. This fiduciary duty is owed to the company alone, and not to any individual shareholder or even the majority shareholder of the company, or to its parent company or any other company within a group of which the director’s company is a member.
  • Duty to use powers for a proper purpose for the benefit of shareholders of the company as a whole. The purpose of the exercise of the directors’ powers ought to be for the benefit of the company and not for any collateral purpose.
  • Duty not to delegate powers except with proper authorisation and duty to exercise independent judgment. The company’s articles of association may allow its directors to delegate their powers by setting up local boards or committees for managing the affairs of the company. However, it should be borne in mind that the exercise of the power of delegation will not absolve a director from the duty to supervise and discharge of the delegated functions – the directors remain responsible notwithstanding the delegation.
  • Duty to avoid conflicts between personal interests and the interests of the company. In the event that the interests of a director and that of the company conflict with each other, the latter will always prevail. Whenever possible a director should disclose any personal interest to the Board either at a directors’ meeting; by notice in writing and sent to the other directors or by general notice given at a directors’ meeting or in writing sent to the company.
  • Duty not to enter into transactions in which the directors have an interest. A director is generally prohibited under common law from contracting directly or indirectly with the company except in compliance with the requirements of the law, for example, the approval of the shareholders following full disclosure.
  • Duty not to gain advantage from use of position as a director. A director must not use their position as director for attaining direct or indirect gain/advantage for himself or others or cause detriment to the company.
  • Duty not to make unauthorized use of the company’s property or information. A director is prohibited from using the company’s information or property or exploiting opportunities to benefit themselves at the expense of the company and its shareholders.

Besides the above mentioned common law duties, the directors also owe an equitable duty of confidentiality to the company.

Last modified 8 Feb 2021

  • To make all decisions related to the governance / strategic management of the company that are outside the powers of the general meeting.
  • In performing their role, directors must always act in the interest of the company, and in line with the articles of association and the resolutions of the general meeting.
  • The directors must keep the shareholders informed in relation to the company and provide access to shareholders to the company’s documents, records and registers (subject to confidentiality obligations).

Last modified 8 Feb 2021

The key duties of a director are set out in the Companies Act 2006 (the Act).  These are duties to:

  • Act in good faith in what the director considers to be the interests of the company.  Directors must act in the way that they consider, in good faith, would be most likely to be in the interests of the company, having regard (amongst other matters) to the interests of the company's employees and shareholders.
  • Act honestly and responsibly in relation to the conduct of the affairs of the company.  This duty is consistent with the requirement for directors to declare their interests in any company transactions and to require shareholder approval for certain transactions which involve a director.
  • Act in accordance with the company's constitution and exercise their powers for the purposes allowed by law. 
  • Not use the company’s property, information or opportunities for his or her own or anyone else’s benefit unless this is expressly permitted by the company’s constitution or the use has been approved by a resolution of the company in general meeting.
  • Not agree to restrict the director’s power to exercise an independent judgment unless:
    • this is expressly permitted by the company’s constitution
    • the director considers in good faith for that agreement to be in the interest of the company or
    • shareholders have approved that agreement. 

A director may not usually limit their discretion, however in certain circumstances they can do so.

  • Avoid conflicts of interest.  Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been authorised by the company’s constitution or by a members’ resolution (provided conflicted directors take no part in this decision).
  • Exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both:
    • the knowledge and experience that may reasonably be expected of a person in the same position as the director and
    • the knowledge and experience which the director has. 

Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the statutory standard required of them.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.

Last modified 8 Feb 2021

As a general principle, the Italian Civil Code provides that the directors must comply with the duties provided by law and by the by-laws with the diligence required by the nature of the office held as well as in consideration of the specific competence of each director. The directors are jointly and severally liable towards the managed company for damages arising from the breach of their duties, except for those competences which have been delegated to the executive committee or which have been otherwise delegated to one or more directors.

The Italian Civil Code further provides that “in any event […] all directors are jointly liable if, despite being aware of facts prejudicial to the managed company, they have not done whatever is in their power to avoid the occurrence of such facts or, otherwise, to exclude or limit the prejudicial consequences of such facts.”

General duties binding each director are, for instance:

  • Duty to act in order to pursue the company’s purpose.
  • Duty to set out an organizational, administrative and accounting structure adequate given the nature and size of the company and functional to the timely detection of a business crisis. Directors also have the duty to act promptly to adopt one of the preventative restructuring frameworks for the overcoming of a business crisis, and to ensure the viability of the company.
  • Duty of care. Directors must act with the diligence required by the nature of their office, taking into account their specific skills.
  • Duty to inform the other directors. Executives must report to the board, at least once every six months, on the general management performance and on the most relevant operations.
  • Duty to act advisedly. Directors may ask executives to report about the company’s management.
  • Duty to monitor the executive directors. Directors may be held jointly liable if they fail to take the necessary measures to prevent damage to the company (if they are aware about facts that may adversely affect the company) . Non-executive directors must supervise and be informed about company’s business; on the basis of information received by executives, they asses the adequacy of the organizational structure of the company, they examine industrial, strategic and financial plans and they assess the general management performance .
  • Duty to inform the other directors and statutory auditors, of any existing conflict of interest in a specific company transaction. If the director is a managing director he must refrain from the transaction and apply the board with regard to the transaction .

The extent of these duties and responsibilities and the standard of care required for each director depend on the director's office and specific expertise.

Last modified 8 Feb 2021

The key general duties of directors are as follows:

  • Duty of care. Directors assume a fiduciary duty of care in managing the company. The fiduciary duty of care in managing includes (without limitation) making decisions regarding business operation with the care of a good manager; and complying with all laws applicable to the company’s operation.

Under the Japanese court precedents, whether the director breaches the fiduciary duty of care is determined based on whether the process of making the decision or the decision itself was extremely unreasonable or not (so-called "business judgement rule"). Even if a certain decision results in losses of the company, as long as the directors conduct sufficient examination and discussion before making the decision and the decision is reasonable, the directors generally would not be liable for the losses of the company. 

  • Duty of loyalty. Directors are required to perform their duty so as to benefit the company and must not cause any disadvantage to the company by prioritising a benefit to himself/herself or to a third party.
  • Duty of supervision. Directors are required to supervise the performance of duties of the representative director(s) or other directors. The directors are obliged to review and monitor any matters related to the company’s management even if those are not matters for which the director is responsible; provided, however, under the court precedents, in the case where the directors delegate/allocate responsibility of management among directors, a director generally shall not be responsible for the matters for which the director is not responsible unless the director is aware of any suspicion of breach of duties relating to such matters.

Last modified 8 Feb 2021

The key duties of a director under Kenyan law are borrowed from the English common law. Duties of directors have been codified in the Companies Act (Part IX , Division 3). They are as follows:

  • Act in accordance with the articles and only exercise powers for the purposes for which they are conferred. Directors should exercise the powers conferred upon them by law or by shareholders strictly for the benefit of the company in which they are a director and not for any other purposes.
  • Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions, (2) the interests of the company's employees, (3) the need to foster the company's business relationships with customers, suppliers and others, (4) the impact of the company's operations on the community and the environment, (5) the desire to maintain a reputation for high standards of business conduct, and (6) the need to act fairly between members.
  • Exercise independent judgment. However, a director may rely on other people (eg through proper delegation or by seeking independent professional advice) provided that they consider it to be reasonable to do so. A director should not limit their discretion, unless properly authorized to do so through the articles, or by acting in accordance with an agreement entered into by the company.
  • Exercise the same care, skill and diligence that would be exercisable by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions performed by the director in relation to the company and the general knowledge, skill and experience that the director has.
  • Avoid conflict of interest situations especially in matters relating to the exploitation of any property, information or opportunity.
  • Not to accept a benefit from a third party if the benefit is attributable to the fact that the person is a director of the company, or to any act or omission of the person as a director.
  • Declare the nature and extent of his interest in a proposed or existing transaction or arrangement to the other directors. Such declaration must be made before the company enters into the transaction or arrangement concerned. This duty does not, however, apply if the director is not aware of the interest or the transaction or arrangement to which the interest relates. A director is however assumed to be aware of matters of which the director ought reasonably to be aware.

Last modified 16 Jun 2021

The key general duties of the managers are to manage the affairs of the company and take any action they consider necessary or useful to realise its corporate purpose, unless that action is reserved to the general meeting of shareholders by law (e.g. approval of the annual accounts). The board is thus a company’s main decision making body, and is responsible for determining the guidelines for its management and business development.

The managers represent the company, and must exercise their duties with as much care, diligence and skill as would be displayed by a reasonable person in the same circumstances. Greater expertise, such as would be displayed by a reasonably competent member of the same profession may be expected from a manager who is a member of a specific profession, e.g. a lawyer or accountant. Although Luxembourg law, unlike common law jurisdictions, contains no such concept as the "fiduciary duty" of managers, the managers must also act with loyalty, honesty and in good faith, for the company's exclusive benefit. Hence they must participate in board meetings and manage the company actively.

The company must act for its own benefit (spécialité légale) and in its own corporate interest (intérêt social). In that context, managers are responsible for determining whether a particular action falls within the boundaries of the corporate interest, a decision which is made on a case by case basis and in the light of all prevailing circumstances.

Last modified 8 Feb 2021

In general terms, directors are responsible for the management activities of the company, binding the company, pursuant to the terms established for each type of company, and representing the company in or out of court. They act in accordance with the law and the company's articles of association, being subordinated to the decisions of shareholders and the interventions of the fiscal board or sole auditor only in the cases where the law or company' articles of association so require. The company’s directors must act with the diligence of a responsible and coordinated manager, in the interest of the company, taking into account the shareholders and employees’ interests.

Last modified 19 Aug 2021

The basic principle under Dutch law is that the board is collectively responsible for the day-to-day management of the company. Its duties also include making plans for the future and determining the strategy and policies of the company. The board has a central role with respect to preparing, determining and executing the policies of the company.

The key duties of a director are set out in the DCC:

  • The task of the board is to serve the corporate interest of the company, meaning the interests of the company and the enterprises affiliated with it, i.e. the interests of all stakeholders of the company. When the board acts contrary to the corporate interest, the relevant director(s) can be held liable.
  • The company and the persons who by virtue of law and the articles of associations are concerned with its organisation must conduct themselves in relation to each other in accordance with the requirements of reasonableness and fairness. The board should act reasonably and fairly in relation to other persons who are concerned with the company and its organisation. The company must furthermore treat its shareholders equally. A resolution of the board may be voidable if it is contrary to the principles of reasonableness and fairness.
  • The duty of each director towards the company is to properly perform the individual tasks allocated to them. When a director breaches their duty of proper performance, they may be held personally liable.

Last modified 8 Feb 2021

A director stands in a fiduciary relationship towards a company and must observe the following duties:

  • Good faith: Directors must observe good faith in any transaction in relation to the company, and discharge their duties honestly.
  • Best interest of the company: Directors must act in the way that they believe to be the best interest of the company, so as to further its business and promote its objectives. In doing so, the directors must have regard to the impact of the company's operations on the environment in the community it operates, the interest of the company’s employees and the interest of its shareholders.
  • Care and skill: Each directors must exercise a degree of care, diligence and skill which a reasonably prudent director would exercise in comparable circumstances. Directors must meet the minimum standard of skill and care expected of someone in their position, and they must also bring to bear their particular skills and experience. Therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
  • No collateral purpose: Directors must exercise their power for the specific purpose it was given and not for any collateral purpose. They must not restrict their discretion to vote in any particular way.
  • No conflict of interest: Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests and their duty the company.
  • No secret profit: Directors must not make any secret profit or achieve any unnecessary benefit, and must declare the nature and extent any interest in proposed transactions or arrangements with the company before the secret profits are made.
  • Misuse of corporate information: Directors must not to misuse the company's information.
  • Gifts: Directors must not accept bribes, a gifts, or commissions from any person in respect of any transaction involving their company in order to introduce their company to deal with such a person.

Last modified 1 Mar 2021

There are three key duties of the board of directors:  

  • Management of the company. The board of directors must ensure the proper organisation of the business of the company. The board of directors must draw up plans and budgets for the company’s business. The board of directors may also lay down guidelines for the business. The board of directors must keep itself informed of the company’s financial position and is obliged to ensure that its activities, accounts and capital management are subject to adequate control.
  • Supervisory responsibility. The board of directors must supervise the day-to-day management and the company’s business in general.
  • Duty to act in the event of capital deficiency of insolvency. If the equity is presumed to be less than adequate in terms of the risk and scope of the company’s business, the board of directors shall forthwith deal with the matter. The board of directors must within a reasonable time call a general meeting and report to it on the company’s financial position and propose remedying measures. If the board of directors does not find measures to ensure adequate equity, it must propose the dissolution of the company.

Last modified 16 Jun 2021

Directors must perform their role with the diligence of a prudent businessperson and a loyal representative.

The board of directors should provide shareholders and stakeholders with sufficient, reliable and timely information, as determined by law, regarding the legal, economic and financial situation of the company.

Last modified 26 Jul 2021

The key duties of management board members are set out in the Polish Commercial Companies Code, however, they are also spread throughout the entire Polish legal system.

These are duties to:

  • Carry out the company's affairs and represent the company in relation to third parties. This means that any activity that is not attributed to another body of the company belongs to the management board and is the responsibility of its members.
  • Apply diligence resulting from the professional nature of management board members’ activities. Management board members should fulfil their duties with diligence resulting from the professional nature of their activities. This includes, in particular, the knowledge of organisational and financial processes, but also of the law in force including the legal consequences arising from statutory law with regard to business activity, as well as human resources management.
  • Fulfil yearly reporting obligations. This covers preparing and signing (with qualified electronic signatures) the company’s yearly financial statements and management board’s reports on the company’s activities and submitting them to the National Court Register within the prescribed time limits each year.
  • Convene ordinary and extraordinary shareholders' meetings. An ordinary meeting of shareholders should be held within six months of the end of each financial year. If the balance sheet drawn up by the management board shows a loss exceeding the sum of supplementary and reserve capitals and a half of the share capital, the management board members are obliged to immediately convene the shareholders' meeting in order to adopt a resolution concerning the company's further existence. Furthermore, a shareholders’ meeting should be convened at the request of a shareholder(s) representing at least one tenth of the share capital. Nevertheless, the shareholders’ meeting should be convened in all instances where the management board deems it appropriate.
  • Keep a share register. The management board members are jointly obliged to prepare and maintain such a book. The members are also obliged to update this book.
  • Refrain from engaging in competitive business or participate in competitive entities as a partner in a civil law partnership or a partnership, or as a member of the authorities of a company, or any other competitive legal entity . However, the shareholders may give a relevant consent which allows a board member to carry out the competitive activities.
  • Avoid conflicts of interest. In the event of a conflict of interests between the company and a management board member, his/her spouse, relatives and second degree next of kin and persons with whom the management board member has a personal relationship, the member should disclose the conflict of interests and refrain from participating in the settlement of such issues and may request that this fact be recorded in the minutes of the management board meeting.

In addition, management board members have duties under various legal acts of statutory law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Last modified 8 Feb 2021

The key duties of a director are set out in the Portuguese Companies Code, 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 to 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.

Last modified 8 Feb 2021

Directors' rights, duties and liabilities are governed by the civil law provisions regarding the mandate agreement  and by the special rules set out under the Company Law.

Directors' rights (e.g. the right to manage the company and the right to represent the company towards third parties) set out by the Company Law are designed in a quite broad manner in order to allow a flexible management of the company.

According to the Company Law, the directors represent the company towards third parties and may undertake all actions required to carry out the company's business. Directors are empowered to make any necessary decisions in relation to the company’s activity, within the limits set out by the Company Law, shareholders' resolutions and the AoA of the company.

Directors have several duties related to the internal management of the company, such as the duty to convene and attend the shareholders' meetings, the duty to draft the annual report accompanying the annual financial statements of the company and business plan, the duty to keep the company's registries.

  • Convening and attending the shareholders' meeting. The directors are obliged to convene the GMS at least once a year or as many times as necessary.
  • The annual report. The annual report should comprise an accurate presentation of the business performance and financial position of the company, together with a summary or the main risks and uncertainties faced by the company. In addition, explanations and details on the figures within the annual financial statements should also be included.
  • Keeping the company's registries. The obligation of the directors to maintain and update the shareholders' register is compulsory. Such shareholders' register should reflect:
    • The shareholding history of the company, including the identification details of the former and existing shareholders and their participations in the share capital, if any.
    • All the transfers of shares that have occurred in the company, if the case.
    • Any other changes that have occurred in relation to the shares of the company (e.g. any pledges over the shares, share capital increases etc).

Last modified 8 Feb 2021

The Director and BoD members must act in the interests of the company, reasonably and in good faith, which includes, among other things, the duty to inform the company of their interest in a transaction.

Last modified 8 Feb 2021

The Act provides that a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

The key duties of a director are set out in the Act and under common law.  These are duties to:

  • Act in good faith in the best interest of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to:
    • The long term consequences of decisions.
    • The interests of the company's employees.
    • The need to foster the company's business relationships with customers, suppliers and others.
    • The impact of the company's operations on the community and the environment.
    • The desire to maintain a reputation for high standards of business conduct
    • The need to act fairly between members.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing the conflicts against one another.

Companies which are "large" for accounting purposes are required to include a statement in their annual financial report describing how, during the relevant financial year, the directors have had regard to these factors when performing their duty to promote the success of the company.

  • Act with reasonable care, skill and diligence. Directors must meet the minimum standard of skill and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the subjective standard of duty of care, skill and diligence is imposed on the director.
  • Exercise independent judgement. However, a director may rely on other people (e.g. through proper delegation or by seeking advice) provided they judge that it is reasonable to do so and it does not fetter the director’s discretion pursuant to an agreement entered into by the company or is done in a way that is authorised by the company's constitution.
  • Act within the company's constitution and exercise their powers for the purposes for which they were given and not for any collateral purpose.
  • Act honestly and avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board, by shareholders or in the company's constitution.
  • Not accept benefits from third parties, without prior shareholder approval. This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest.  This allows for reasonable levels of corporate hospitality from third parties.
  • Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into.  Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.
  • Not to make improper use of information obtained by virtue of office to gain advantage personally or to cause detriment to the company and not to make improper use of unpublished price-sensitive information to gain personal benefit.
  • Maintain duty of confidentiality. A director must not disclose information of a confidential nature concerning the company (which could include information about its business, future plans, research and development and other commercially sensitive information) to anyone else, unless he or she has been authorised by the company to do so.  For example, where a director is appointed by a shareholder he or she must not, without the authority of the company, disclose to that shareholder any confidential information relating to the company which has been gained by him as a director.  In this situation, the board should agree in advance what categories of information a director can pass to a shareholder, for example, through a shareholders' agreement.

Last modified 8 Feb 2021

A director, alternate director, prescribed officer and member of a committee or board must:

  • Perform all powers and functions:
    • in good faith and for a proper purpose, which entails acting within the company’s capacity at all times and using powers only for the purpose which they have been assigned
    • in the best interests of the company whilst considering the interests of the stakeholders of the company and
    • with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions in relation to the company as those carried out by that director and having the general knowledge, skill and experience of that director.
  • Exercise an independent and unfettered discretion and judgement, and in particular where the opinion of an outside expert is relied upon, such director must still apply his/her mind and exercise his/her own independent judgment.
  • Avoid any conflicts of interest.

Last modified 19 Apr 2021

The main duties of directors are the following:

  • A duty of care (deber de diligencia). Directors must perform their duties with the diligence of an "orderly businessman" (ordenado empresario) and comply with the various duties imposed by applicable law, by company's bylaws and by other internal rules of conduct of the company with this level of diligence. The duty of care includes:
    • the duty to exercise the office effectively
    • the duty of vigilance or supervision
    • the duty to be informed and
    • the protection of business discretion.
  • A duty of loyalty (deber de lealtad). This duty requires the directors to exercise their functions at all times in the interest of the company. This duty of loyalty obliges the director to act in good faith and be guided by what is most favourable to the company. It includes, among others, not to exercise their powers for purposes other than those provided, to keep the confidentiality of the received information or to refrain from participating in decisions in which the director has a direct or indirect conflict of interest.

Last modified 8 Feb 2021

The board of directors is responsible for the organisation of the company and management of the company's affairs. The management of the company's affairs includes all matters where the shareholders' meeting does not have the exclusive right to make decisions.

The key general duties consist of:

  • The duty to ensure the organisation of the company and management of the company's affairs. The board of directors shall ensure that the company's organisation is structured in such a manner that the company's accounts, asset management, and finances in general are monitored in a satisfactory way.
  • The duty to regularly assess the company's financial position. The board of directors shall regularly assess the company's financial position and, if the company is the parent of a group, the group's financial position. The board of directors is also responsible for ensuring that the company's taxes and fees to the relevant authorities are paid. A failure by the company to pay taxes may entail personal liability for the board of directors.
  • The duty to act in the event of capital deficiency or insolvency. The board of directors shall immediately prepare and cause the company's auditor to examine a balance sheet for liquidation purposes where:
    • there is reason to assume that the company's equity is less than half of its registered share capital; or
    • in conjunction with execution, it has been found that the company lacks assets capable of being subject to a warrant of execution.

Where the balance sheet for liquidation purposes shows that the company's equity is less than half of its registered share capital, the board of directors shall, as soon as possible, undertake a number of actions including convening a shareholders' meeting which shall consider whether the company shall enter into liquidation (initial meeting for liquidation purposes). The balance sheet for liquidation purposes and an auditor's report on such balance sheet shall be presented at the shareholders' meeting.

  • The duty to act in good faith to promote the success of the company for the benefit of its shareholders as a whole.  When discharging this duty, directors must have regard to a number of factors including (amongst other things) the long term consequences of their decisions; the interests of the company's employees; the need to foster the company's business relationships with customers, suppliers and others; the impact of the company's operations on the community and the environment; and the desire to maintain a reputation for high standards of business conduct.

Last modified 8 Feb 2021

The key duties of a director are set out in the CA.  These are duties to:

  • Act in good faith and in the best interest of the company. Directors are required to act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, directors should have regard (amongst other matters) to:
    • The likely consequences of any decision in the long term.
    • The interests of the company’s employees.
    • The need to foster the company’s business relationships with suppliers, customers and others.
    • The impact on the company’s operations on the community and the environment.
    • The desirability of the company maintaining a reputation for high standards of business conduct.
    • The need to act fairly as between shareholders of the company.

Where it is established the company is to be sold to a third party (or its value realised for the benefit of the shareholders generally in some other way) for example, the directors should seek to maximise shareholder value.

For normal commercial companies, success for these purposes is generally interpreted as a long-term increase in value and what constitutes such success is a matter for the directors' good faith judgment.

  • Act within the powers conferred by the company’s memorandum and articles of association. Directors must act in accordance with the company’s constitution (including the articles of association) and only exercise powers for the purposes for which they are conferred (e.g. it may be that a director is given specific authority for a specific set of circumstances which doesn’t align with the articles of association).
  • Exercise care, skill and diligence. Directors must exercise reasonable care, skill and diligence in the exercise of their functions. This means they must exercise the degree of care, skill and diligence that would be exercised by a reasonably diligent person with both:
    • the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the relevant director in relation to the company (the objective element) and
    • the special knowledge, skill and experience that the director actually has (the subjective element).

This dual test means that all directors are subject to an objective minimum standard and a more demanding, subjective test based on the director's own skills and experience (for example, accounting or legal knowledge if the director has an accountancy or legal qualification).

Non-executive directors can look to others to perform particular tasks, but they retain residual responsibilities for supervision and control which cannot be delegated and have a collective responsibility to manage the company. It will therefore be essential for all non-executive directors to ensure that they are properly informed about the company's affairs, both when they take up their appointment, and for the duration of their appointment.

Although non-executive directors may to a significant degree rely on information and explanations provided by the executive directors and senior management, they should not do so blindly and without question. For example, non-executive directors are expected to satisfy themselves, by requesting appropriate information and explanation from management, that actions proposed by the executive directors will promote the success of the company.

  • Not make a secret profit.
  • Have regard to interest of employees. Directors have a duty to have regard to the interests of employees, to exercise powers for proper purpose. This duty is enforceable in the same was as any other fiduciary duty owed to a company by its directors.
  • Avoid conflicts of interest.  Directors are under a positive obligation to avoid any situations in which they have (or could have) a direct or indirect interest, which either conflicts, or could potentially conflict, with the interests of the company. In addition, directors have a duty to declare the nature and extent of any direct or indirect interests in a proposed transaction or arrangement with the company to the board and such conflicts or interests will need to be authorised by shareholders or the board.
  • Make disclosure. Directors have a duty to give notice to the company:
    • Of such matters relating to themselves as may be necessary for the purposes of directors shareholding, salaries, pension, compensations for loss of office etc. and particulars of loans made to officers.
    • Where he or any connected person is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company to declare the nature of that interest at a meeting of the directors of the company.

In the case of a proposed contract, the declaration shall be at the meeting of the directors at which the question of entering into the contract is first taken into consideration, or if the director was not at the date of that meeting interested in the proposed contract, at the next meeting of the directors held after he became interested. In the case where the director becomes interested in a contract after it is made, the said declaration shall be made at the first meeting of the directors held after the director becomes so interested.

Last modified 1 Mar 2021

Onshore UAE

The duties of a director in an LLC include:

  • General company obligations, such as the preparation and filing of accounts.
  • Acting in a way which is compatible with the LLC's objectives.
  • Exercising a degree of care in the discharge of management responsibilities.
  • Acting within the powers granted.
  • Disclosing any conflicts of interest.
  • Complying with the statutory restrictions relating to loan arrangements.

Dubai International Financial Centre

The key duties of a director are set out in the DIFC Companies Law. These are duties to:

  • Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions; (2) the interests of the company's employees; (3) the need to foster the company's business relationships with customers, suppliers and others; (4) the impact of the company's operations on the community and the environment; (5) the desire to maintain a reputation for high standards of business conduct; and (6) the need to act fairly between shareholders.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.

  • Act with reasonable care, skill and diligence. Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
  • Exercise independent judgement. However, a director may rely on other people (e.g. through proper delegation or by seeking advice) provided they judge that it is reasonable to do so. A director may not usually limit their discretion, however in certain circumstances they can do so by acting in accordance with an agreement entered into by the company or in a way authorised by the company's articles of association.
  • Act within the company's articles of association and exercise their powers for the purposes for which they were given and not for any collateral purpose. 
  • Avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director). This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board  (provided conflicted directors take no part in this decision) or by shareholders or in the company's articles of association.
  • Not accept benefits from third parties, without prior shareholder approval. This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest. 
  • Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into. Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.

Last modified 8 Feb 2021

The key duties of a director are set out in the Companies Act 2006 (the Act).  These are duties to:

  • Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions; (2) the interests of the company's employees; (3) the need to foster the company's business relationships with customers, suppliers and others; (4) the impact of the company's operations on the community and the environment; (5) the desire to maintain a reputation for high standards of business conduct; and (6) the need to act fairly between members.

    There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.

    Companies which are "large" for accounting purposes are required to include a statement in their annual financial report describing how, during the relevant financial year, the directors have had regard to these factors when performing their duty to promote the success of the company.
  • Act with reasonable care, skill and diligence. Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
  • Exercise independent judgement. However, a director may rely on other people (eg through proper delegation or by seeking advice) provided they judge that it is reasonable to do so.  A director may not usually limit their discretion, however in certain circumstances they can do so by acting in accordance with an agreement entered into by the company or in a way authorised by the company's constitution.
  • Act within the company's constitution and exercise their powers for the purposes for which they were given and not for any collateral purpose.
  • Avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board  (provided conflicted directors take no part in this decision), by shareholders or in the company's constitution.
  • Not accept benefits from third parties, without prior shareholder approval.  This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest.  This allows for reasonable levels of corporate hospitality from third parties.
  • Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into.  Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Last modified 8 Feb 2021

Directors have the duties of care and loyalty to the corporations that they oversee.  The duty of care is the duty to act with the level of care that an ordinary, prudent person would exercise under the same circumstances. In addition to becoming informed about decisions, the duty of care focuses on refraining from engaging in reckless conduct, intentional misconduct or gross negligence. The duty of loyalty is the duty to act in the best interests of the company. It includes disclosure obligations, oversight obligations and a duty to not take actions that are harmful to the company or its stockholders for the benefit of directors or management. The duty of loyalty includes a duty of good faith, which requires directors to take actions performed with an honest belief that such actions are in the best interests of the company.

Last modified 8 Feb 2021

Directors owe fiduciary duties to the company, including a duty to promote the success of the company for the benefit of its shareholders.

The executive body is is accountable to the general meeting of shareholders and the supervisory board of the company (if established) and shall organize the implementation of their decisions.

According to the LLC Law, the directors have the following duties:

  • Convene a general meeting. The executive body may convene a general meeting on its own initiative or at the request of the shareholder or the supervisory board (if established). The executive body must convene a general meeting if the value of the company's net assets has decreased by more than 50% in comparison to the previous year.
  • Disclose their affiliates and conflicts of interest. The director(s) must provide a list of their affiliates at the time of the director’s election/appointment and timely report if the list changes. The LLC Law also sets out the obligation to report on conflicts of interest.
  • Monitor timely payment of contributions to the charter capital by the shareholders. The director(s) must notify the shareholders of their failure to make timely contribution and set an additional deadline for repayment of the debt. In case of non-payment of the debt within the additional term, the director(s) must convene a general meeting.
  • Notify the creditors on reduction of the charter capital. If the general meeting has decided to reduce the amount of the charter capital, the director(s) must notify each creditor in writing of such decision.

Last modified 8 Feb 2021

The key duties of a director are set out in the COBE, as follows:

  • To act in good faith. A director stands in a fiduciary relationship with their company which requires them to act in good faith always for the benefit of the company. This is especially so since the director is in a position of trust and confidence with the business entities and thus the law exacts the highest degree of integrity from those who control it.
  • Duty of care and business judgment rule. Every manager of a private business corporation and every director or officer of a company has a duty to perform as such in good faith, in the best interests of the registered business entity, and with the care, skill, and attention that a diligent businessperson would exercise in the same circumstances.
  • Duty of loyalty. A manager or controlling member of a private business corporation and a director, officer or controlling member of a company has a duty to act with loyalty to that registered business entity and, in the case of a company, towards any subsidiary of that company.
  • Duty to disclose a conflict of interest. Where a director has a personal financial interest in respect of a matter to be considered at a meeting of the board of the company or a meeting of the members of the private business corporation, or knows that an associate has a personal financial interest in the matter, the person must disclose this to the board.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Last modified 19 Apr 2021

Angola

Angola

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.

Last modified 1 Mar 2021

Angola

Angola

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.

Last modified 1 Mar 2021

Angola

Angola

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.

Last modified 1 Mar 2021

Angola

Angola

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.

Last modified 1 Mar 2021

Angola

Angola

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.

Delegation

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.

Last modified 1 Mar 2021

Angola

Angola

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.

Last modified 1 Mar 2021

Angola

Angola

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).

Last modified 1 Mar 2021

Angola

Angola

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?

Directors should:

  • 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.

Last modified 1 Mar 2021