Liabilities of directors

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.

Last modified 1 Mar 2021

Directors ordinarily owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, ordinarily only the company can bring an action for breach of duty against a director.

However, shareholders and certain other persons are able to bring an action for breach of duty on behalf of the company in certain circumstances (a statutory derivative action).  Broadly, a shareholder must first obtain the court's permission to proceed with a statutory derivative action and the court will take into account a number of factors when deciding whether to grant this permission.  This includes whether it is probable that the company itself will not bring the proceedings or properly take responsibility for them, whether the applicant is acting in good faith and whether it is in the best interests of the company that leave is granted (among other factors).

A company may seek a range of remedies against a director for breach of duty including damages or compensation, grant of an injunction, an order that property held by the director be held on trust for the company, entitlement for profits made by the director in breach of duty, and rescission of a contract entered into by a director improperly.

ASIC may also bring proceedings against a director alleging breach of certain statutory duties.  Under the Act, a director who is found to have breached their duties can be guilty of a criminal offence (resulting in fines or imprisonment), be ordered to pay a pecuniary penalty, be ordered to compensate the company or others for any loss or damage they have sustained due to the director's conduct, and be prohibited from managing companies for a specified period.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

Directors who violate their duties shall be jointly and severally liable to the company for the resulting damage. In particular, they shall be liable for compensation if:

  • Company assets are distributed in breach of the provisions of the Act or of the articles of association, in particular if capital contributions or additional contributions are returned in whole or in part to shareholders, interest or shares in profits are paid out, or own shares in the company are acquired, pledged or withdrawn.
  • Payments are made after the time at which they were obliged to request the opening of the insolvency proceedings.

Shareholders are able to bring an action for breach of duty on behalf of the company in certain circumstances.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

As a general principle, directors are not personally liable for actions taken by them during the performance of their mandate. Actions taken will be imputed to the company. In certain cases however, a director can be held responsible for acts taken during the performance of his mandate both towards the company and towards third parties.

Generally speaking, directors may be held liable, towards the company and/or third parties, for: management faults (if their acts go beyond the margin of appreciation in which normal, prudent and careful directors, in the same circumstances, could reasonably have deviating views);  breach of law or breach of the articles of association; and under the general extra-contractual regime or for infringements of criminal law or special laws.

As a general rule, fault, damage and a causal link between fault and damage must be established if the legal proceedings are to be successful.

If the legal person has several directors, a distinction is made whether the governing body constitutes a collegiate body or not:

  • If the management organ acts as a collegiate body, the members are jointly and severally liable for the faults committed by the collegiate body.
  • If the management organ does not act as a collegiate body, then each director is only liable insofar as he can be blamed for fault. However, if the error consists in the violation of a provision of company law or the articles of association, the members of the management organ are jointly and severally liable for all damage resulting from this fault.

However, a director shall be relieved of liability if he did not take part in the fault committed and he has reported the alleged fault to all the other members of the management organ. This denunciation and the discussions to which it gives rise shall be recorded in the minutes.

The liability regime affects not only the members of the management organ, but also the persons entrusted with the daily management, as well as the de facto directors, understood as those who have held the power to effectively manage the legal person. Finally, the permanent representative of a legal entity appointed as director - necessarily a natural person - shall be jointly and severally liable with that legal person, as if he/she had exercised this mandate personally.

Last modified 8 Feb 2021

The director’s primary duty is to act in the best interest of the company.  Therefore, any act which is deemed not to have been done in the best interest of the company would be conceived as a breach of duty. Generally, only the company can bring an action for breach of duty against a director.

However, shareholders or any other entitled person or director of the company may by way of a court application bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.

The application shall:

  • Be in the name and on behalf of the company or any subsidiary.
  • Intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discounting the proceedings on behalf of the company or subsidiary, as the case may be.

Remedies for the breach include damages or compensation, restoration of property, accounting for profit made in breach of duty, an interdict to prevent breach and rescission of a contract.

Last modified 1 Mar 2021

If a director breaches the Corporations Act, its Rules or the company's bylaws causing damage to others, they must compensate the damages caused, in addition to any other civil, administrative or criminal sanction.

Directors will be jointly and severally liable (with other directors and/or the company) for damages caused due to any guilty and fraudulent actions.

Any stipulation of the bylaws and any agreement of the shareholders' meeting that releases or limits the directors' responsibility will be null.

The approval by the shareholders' meeting of the annual report and balance sheet presented by the board of directors or of any other account or general information, does not release the directors from their responsibility for certain acts or businesses; nor does the specific approval of these exempt them from that responsibility, when they have been carried out or executed with slight negligence, gross negligence or fraud.

To protect themselves from liability for an act or agreement, directors must oppose that act or agreement and this opposition must be recorded in the minutes of the relevant directors’ meeting and made known to shareholders in the next ordinary shareholders' meeting.

Any shareholder or shareholders, owning more than 5% of the corporation's capital, or any director or directors may claim any damages caused to the company on its behalf.

In addition, the Corporations Act presumes the liability of directors and they will be jointly and severally liable in certain cases.

Finally, the Corporations Act provides that in case of breach of the Corporations Act, its Rules and other provisions, the company's managers and legal representatives will be personally liable unless they didn't concur with the decision or they opposed it.

Last modified 5 Apr 2021

Any director who has violated the duty of due managerial care must return to the business corporation any benefit obtained in connection with such behaviour. Where such return of the benefit is impossible, the obliged person shall pay an equivalent amount to the business corporation in cash.

Every shareholder is entitled to claim, on behalf of the company, compensation or damage against a director or the fulfilment of his or her obligation, and is entitled to represent the company in the following proceedings. The same rights apply to the subsequent enforcement of the ruling on the matter.

Last modified 8 Feb 2021

Members of the board of directors may be held liable to pay damages to the company, the shareholder(s) or a third party if the directors in the performance of their duties intentionally or negligently caused damage to any of them.  

The decision to bring an action against one or more of the directors is determined by the shareholder(s) by simple majority. However, shareholder(s) that hold(s) at least 10% of the total share capital may bring an action against a director on behalf of the company if the shareholder(s) has/have opposed either the resolution to grant protection against liability or the resolution to waive the right to commence legal proceedings.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and generally not directly to the parent or other group companies or individual shareholders. The shareholders have no right to make direct claims towards directors for damage caused to the company which causes a reduction in the value of their shares. Violation of certain specific rules (for example if a shareholder is not given redemption right as provided in the articles of association) could cause damage directly to shareholders and for that shareholders would have direct claim against directors.

In insolvency proceedings, creditors may through the bankruptcy estate be able to make claims against directors. Individual creditors may have also direct claims against directors for violations of law or articles of association intended to protect creditors.

Shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, claiming shareholders must either own at least 10 per cent of all shares of the company or the court should consider that not giving the right to make such a claim would violate equal treatment of the shareholders.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

Directors may incur civil liability if they breach company laws and regulations, the company’s bylaws or their duty of care in management, to the extent that damage is caused directly to the person bringing the action before the court.

A shareholder may sue a director for compensation for any prejudice it has personally suffered because of the action of a director, provided that the prejudice suffered is different from the prejudice suffered by the company. If several shareholders have suffered directly and individually from a prejudice resulting from the same facts or action, they may initiate a collective action and instruct one or more of them to act on their behalf.

Shareholders may sue a director on the company’s behalf in order to obtain a compensation for the prejudice suffered by the company (ut singuli action).

With respect to third parties, directors may only be held liable if their misconduct is contrary to the normal exercise of their corporate functions and is personally attributable to them (Faute séparable des fonctions).

The remedies against a director for breach of duty include: damages, imprisonment and/or fines.

There may be additional sanctions such as prohibition from exercising a public, social, commercial, banking and/or industrial activity, permanently or temporarily.

Last modified 8 Feb 2021

In general, managing directors owe their duties to the company itself. Therefore, in case if any breaches, only the company is entitled to bring an action for breach of duty against a managing director.

Different from other jurisdictions, under certain circumstances, (minority) shareholders may not bring derivative claims of the company against a managing director.

In general, third contractual parties may not personally sue a managing director for a breach of their duties. This is only possible in cases of the legal institute of “immorality” (Sittenwidrigkeit).

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether there is a serious question to be tried, whether the shareholder is acting in good faith and the issue is prima facie in the interests of the company, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

For damages caused by the directors in the performance of his duties:

  • Vis-à-vis their own company. As a general rule, the directors have unlimited liability towards their company for damages caused by the breach of their duties; commencement of an action against the directors for breach of their duties falls within the power of the general meeting; however, if the general meeting decides not to pursue such action, shareholders with at least 5% of the votes (or 1% in the case of public companies) have the right to litigate against the director on behalf of the company (derivative suit).
  • Vis-à-vis third parties. As a general rule, it is the company who will be liable towards third parties for the actions of their directors (i.e. such third parties can sue the company, not the individual directors); however, if the director causes damages deliberately to third parties, the director will be liable jointly with the company vis-à-vis the third party.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.  Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

The extent of directors’ duties and responsibilities and the standard of care required for each director depend on the director's office and their specific expertise. In certain circumstances, directors are jointly liable to the company for damages that result from a failure to fulfil their duties or for failing to take the necessary measures to prevent damage to the company (if they are aware about facts that may adversely affect the company) .

Civil liability may be incurred by directors towards:

  • The company for damages caused by a failure of one or more directors to perform the specific duties and obligations under applicable law and the by-laws with regard to the management of the company. If the board of directors has delegated specific functions to certain directors, then only those directors will be liable for the delegated functions. However, the board of directors will also be held liable if a court finds that the board of directors has breached its duty of supervision and control.
  • The company’s creditors if directors have breached the specific rules regarding the preservation of the corporate assets.
  • Individual shareholders or third parties for damages directly caused by directors' fraudulent or negligent action.

An action for damages can be filed by the company or by the shareholders (only if they own one fifth of the stock capital or another share, in any case not exceeding one third, set forth in the by-laws and if they can show that the damage was caused by actions exclusively attributable to the director.). The contractual nature of the liability means that the plaintiff has the burden to prove the breach of the duty of diligence, the damages and the causal nexus.

The action for liability towards the director can be exercised by the company only after a resolution of the shareholders’ meeting.

The law provides a general duty of supervision over the management, which persists even if competence is delegated to the executive committee or to one or more directors. The breach of this duty entails a joint liability of all the members of the Board of Directors, unless one of them proves that the conduct of the other directors did not allow the supervision to be performed.

Such joint liability is owed to the company only and therefore not to creditors and third parties.

The liability of the director must be also connected with the violation of the general duty of diligence in making management choices, therefore, the good business conduct of the director is sufficient to exclude the default, notwithstanding the result of the choice made.

In relation to criminal liability, as well as the general rules that apply to all, specific rules of criminal corporate law apply to directors. They mainly concern the following:

  • accounting documents
  • shareholders' contribution
  • distribution of profits and reserves
  • corporate assets.

Last modified 8 Feb 2021

Liabilities to the company and shareholder’s derivative lawsuit

Under the Companies Act, if a director breaches its duties, the director shall be liable to the company for damages arising from the breach.

Even if a director has engaged in a transaction with the company which has been approved by the board of directors (or a majority of directors), the director who engages in the transaction with the company, the director who engages in the transaction on behalf of the company and the other directors approving the resolution will still be liable jointly and severally if the company sustains any loss as a result of that transaction. In order to avoid falling under the latter, a director needs to record his opposition in the minutes of the board of directors or it is assumed that the director has approved the resolution.

If the company does not seek to recover loss arising from a transaction with a director, shareholders who have held stock continuously for at least six months (which may be shortened by the articles of incorporation of a non-public company) may request the company bring a claim against the director to recover the loss. If the company does not bring the claim within 60 days of the shareholder request, the shareholders may bring a derivative claim against the director.

Liability to third parties

In addition to the liability owed to the company, if third parties are damaged by a director’s gross negligence or if a director acts in bad faith in the course of performance of his director duties, such director will be liable to third parties.

Even though the third parties are not "directly" damaged by the directors, they can likely make a claim against the directors under the Companies Act. Specifically, if the company breaches a contract by withholding payment, the counter party to that contract may bring an indemnity claim against a director who acted in bad faith or with gross negligence.  

Last modified 8 Feb 2021

Directors owe their duties to the company in which they are a director and not to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 16 Jun 2021

Managers are liable to the company for their performance of their mandate, and hence for any shortcomings in the performance of their duties. It is generally accepted that this ground for liability may only be invoked by the company, or by a creditor if the company fails to act. The complainant must establish the manager’s fault, the loss suffered and a causal link between the manager’s fault and the loss.

It should be noted that in addition to this liability regime, Luxembourg company law states that a company’s manager may be held jointly and severally liable to the company and third parties for all losses from a breach of the Luxembourg company law or the articles of association. Again, the plaintiff must establish the manager’s fault, the loss and a causal link between the managers’ fault and the loss.

Lastly, the general principles of tort provided by articles 1382 and 1383 of the Luxembourg Civil Code are also applicable to a company’s managers. According to these articles, they are individually and personally liable to the company and third parties for any breach of the general duty of care or a provision imposing a specific obligation of a non-contractual nature. Either the company or third parties may bring legal proceedings in tort against a manager. An individual shareholder may also bring proceedings if he has incurred a personal prejudice different from that suffered by the company owing to an act or omission by a manager; in this case the shareholder is viewed as a third party.

Last modified 8 Feb 2021

Directors are severally liable towards the company for the damage caused to the company as a result of those actions or omissions that are not compliant with their legal, statutory or contractual obligations, unless they prove that the director acted without fault, or that  the act or omission is based on a deliberation taken by the shareholders, even if it is voidable, with the exceptions provided by law, (other than when the director intentionally executes a deliberation approved with the intention to obtain an undue advantage to the detriment of the company).

The directors are liable towards the creditors of the company when, by neglecting a legal provision or a provision in the articles of association which is mainly or exclusively aimed at their protection, the net assets of the company become insufficient for the satisfaction of their claims.

If the annual accounts and the report of the directors are not presented to the shareholders/quotaholders within three months after the end of the respective accounting period, then any shareholder/quotaholder may ask the court to set a period not exceeding sixty days, for its presentation. If not observed, then the court may determine the cessation of the functions of one or more directors and order a judicial review of the company, and appoint a trustee in charge of the preparation of the annual accounts and the report.

The Mozambican Commercial Code considers any clause that excludes or limits the liability of directors to be null and void.

If the company’s unlawful act is also qualified as a crime under the Penal Code or other relevant legislation, in addition to the civil liability mentioned above, the directors may also be held liable for such criminal acts.

A director providing false information regarding the company’s financial situation can be imprisoned or prohibited from carrying out similar activities or from owning or managing a company.

A claim against the directors may be brought by the company and the company’s shareholders. Creditors of the company may also bring a claim against the directors when, by neglecting a legal or statutory provision mainly or exclusively aimed at their protection, the net assets of the company become insufficient for the satisfaction of the creditors' claims. Also, any third party that has suffered any damage caused directly by the exercise of the directors functions may bring a claim against them.

Last modified 19 Aug 2021

As a starting point, directors are not liable for acts performed in their capacity as directors on behalf of the company. However, there are specific principles under Dutch law pursuant to which a director could be held personally liable. A distinction should be made between internal and external liability:

  • Internal liability is liability towards the company and is based on the relationship between the director(s) on the one hand and the company on the other hand. Generally, a director can only be held liable internally for improper performance of duties in the event of serious negligence (ernstig verwijt). Whether serious negligence can be established should be assessed on the basis of all particular circumstances.
  • External liability is liability of the director(s) and policy makers  towards third parties, such as creditors of the company or the Dutch tax authorities. A director is generally at fault when they have procured the performance of a legal act on behalf of the legal entity in circumstances where they knew, or reasonably should have known, that the legal entity concerned would not be able to meet its obligations. The liability can also be based on an omission.

Under Dutch law, it is not possible for shareholders to bring an action for breach of duty on behalf of the company (a derivative action).

Note that in the event that the managing director is a Dutch legal entity, the person who is managing director of the legal entity director shall also be jointly and severally liable in accordance with the DCC if the legal entity director is successfully held liable.

Last modified 8 Feb 2021

Generally, only the company can bring an action to enforce a director’s duty or remedy its breach, as directors owe their duties to the company itself and not directly the company’s shareholders or creditors. 

However, shareholders are permitted to sue directors for breach of duty on behalf of the company by way of a derivative action, under certain circumstances.  In order to do so, court approval to proceed with a derivative action must be sought by the shareholders.

A range of remedies in favour of the company are available against a director for breach of duty including suing for negligent performance, damages, recovery of misapplied property, accounting for profit made in breach of duty, restitution, injunction to prevent breach and rescission of a contract.

Last modified 1 Mar 2021

The company, a shareholder or others may hold the general manager and/or a member of the board of directors personally and jointly liable for any damage which they, in the capacity mentioned, have intentionally or negligently caused such party.

Members of the board of directors or general manager who intentionally or negligently infringe any provision issued in or pursuant to the Norwegian Private Limited Liability Act may be punished by fines or in aggravating circumstances by imprisonment for up to one year. Complicity will be similarly punished.

Last modified 16 Jun 2021

Directors shall be liable, jointly and severally, to the company, shareholders and third parties for damages caused by agreements or acts contrary to the law or the bylaws or caused by those made intentionally, with abuse of authority or gross negligence.

The directors are also jointly and severally liable along with the directors that have preceded them for irregularities they have committed if, being aware of them, they had not denounced them in writing to the general meeting.

Likewise, the board is responsible for the compliance with resolutions of the general shareholders meeting, unless the board provides otherwise for specific cases.

Last modified 26 Jul 2021

Each of the management board members may be liable to the company if he/she causes damage to the company by an act or omission which is unlawful or which is contrary to the company’s articles of association.

Furthermore, management board members who are responsible for the distribution of dividend in a way which is contrary to the law or the articles of association may be liable jointly and severally with the recipient (shareholder) and required to reimburse it to the company.

In the abovementioned instances, the company may bring an action for a breach of duty against such management board members.

As an exception, where the management board member provided, intentionally or negligently, false information in the statement on the contributions made to pay for any newly created shares (in the event of a capital share increase), such member may be liable towards the company's creditors jointly and severally with the company for a period of three years following the registration of the share capital increase. Such liability is caped to the increased amount.

Based on general rules, a company may seek a range of remedies against a management board member for a breach of duty including damages, recovery of misapplied property, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

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.

Director’s liability may be excluded in specific cases provided by law.

The directors may 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, 5% of the share capital (or 2% in the case of a company with shares admitted to trading on a regulated market) 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.

Last modified 8 Feb 2021

Under Romanian law, the failure of directors to fulfil their duties may trigger both civil or criminal liability.

Civil liability

The directors' civil liability may be held both towards the company and its shareholders and towards third parties.

Civil liability towards the company and its shareholders

Directors are liable for breach of their duties under the Company Law, the AoA and the shareholders' resolutions, such as breaches resulting from the transfer of powers to other persons without being permitted to do so and acts exceeding the limits on the powers granted to the directors by way of the AoA/shareholders' resolutions; etc.

As a general rule, each director is to be held civilly liable only for the damages that director has personally caused to the company or to the shareholders. By way of exception, the Company Law expressly provides for certain situations where directors are to be held jointly liable, including:

  • The existence and accuracy of payments made by the shareholders.
  • The true existence of the paid dividends.
  • The existence of the registries required by law and their accurate keeping.
  • The correct fulfilment of the resolutions of the GMS.
  • Strict compliance with the obligations prescribed by the law and the AoA.

If the directors exceed their powers when acting in relation with third parties and provided that the agreement concluded as such could be considered binding and valid with regards to the company, the company is entitled to claim compensation from the respective directors for the damages incurred as a result of such act.

Civil liability towards third parties

In the event that third parties were aware or, given the circumstances, should have been aware that the directors were acting without proper corporate authority, or if the directors exceeded the powers conferred to them by the law, and the agreement concluded as such could not be considered binding and valid with regards to the company, third parties would be entitled to claim damages from the directors as if they acted in their own name.

Criminal liability

The Company Law provides for a number of criminal offences applicable to directors. However, if the actions of such directors may qualify as more serious offences than those provided in the Company Law, the provisions of the Romanian Criminal Code become applicable. Moreover, directors may be held liable for offences under other special laws.

The director committing a criminal offence provided by the Company Law can be imprisoned (for a minimum of one month and a maximum of five years) or may be ordered to pay a fine. The amount of the penalty differs for each type of criminal offence. The criminal offences regulated under the Company Law refer mainly to breaches of the directors' duties, such as:

  • Providing misleading information to the shareholders/the public in relation to the financial status, economic or legal standing of the company.
  • In certain cases, benefiting from loans or guarantees in granted by the company.
  • Collecting or paying dividends, in any form, out of fictitious profits or which could not have been distributed, in the absence of a financial statement or contrary to the results thereof.
  • Violating the provisions of the Company Law which state that at least 5% of the company’s profits must be set aside each year for the purpose of establishing a reserve fund until such fund reaches a minimum of 20% of the share capital.
  • Failure to convene the GMS in the cases provided by the law etc.

Last modified 8 Feb 2021

A company and its participants, acting in the interests of the company, are entitled to claim damages (both direct losses and lost profit) caused to the company by the unreasonable or bad faith conduct of their Director or BoD members (if their behaviour does not constitute a criminal offence, in which case statutory provisions of criminal law apply) (for more information see Liabilities on insolvency).

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith and whether it appears to be in the best interest of the company for the permission to be granted. Notwithstanding, a shareholder (who is acting on the company’s behalf with the court’s permission) will not benefit directly and personally from a derivative action as any damages or remedies awarded will be payable to the company.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, the South African Companies Act does make provision for civil claims to be instituted by third parties against directors (and others) in respect of breaches of the Act if that third party (including a shareholder) is able to prove it suffered a loss due to the breach.  Recent case law suggests the courts will recognise the rights of creditors and other third parties to bring such claims, but will not recognise shareholder rights to do so. 

Generally directors are liable to the company for any losses, damages or costs sustained by the company as a direct or indirect consequence of the director having breached their duties and obligations.

Last modified 19 Apr 2021

Directors shall be liable to the company, shareholders and creditors, for the damage caused by their acts or omissions against the law or the company’s bylaws or for those incurred in breach of their duties, provided that there is fraud or negligence. Guilt shall be presumed, unless proven otherwise, when the act is contrary to the law or the company’s bylaws.

All the members of the management body that execute the damaging act or adopt the damaging resolution are, in principle (the opposite can be proved), jointly and severally liable.

The director shall be exonerated from his/her liability to the company and shareholders when the act causing the damage has been adopted, authorised or ratified by the general shareholders meeting. In addition, the liability of the directors also extends to the de facto directors. To this end, a person who actually performs the functions of a director in the business without a title, with a title that is null or extinguished, or with another title, as well as a person under whose instructions the directors of the company act, is considered a de facto director.

There are two main legal actions against directors:

  • Corporate liability claim (acción social de responsabilidad). This action is taken by the company, or alternatively by the shareholders, and on a subsidiary basis by creditors, in the absence of a corporate claim by the company or by its shareholders, to compensate the damages incurred by the company.
  • Individual liability claim (acción individual de responsabilidad). This action allows the shareholders and third parties to take legal action for acts carried out by directors that directly harm their interests.

Last modified 8 Feb 2021

If directors neglect any of their duties, they are personally and jointly liable to the company for the damages caused by the neglect.

A director may also be liable towards shareholders and third parties in case of breaches of the Swedish Companies Act, the company's articles of association or the Swedish Annual Reports Act, for damages caused due to negligence or intent.

Shareholders are able to bring an action for breach of duty either on behalf of the company or in their own name in certain circumstances. Broadly, it requires that the majority or a minority comprising owners of at least one-tenth of all shares in the company has supported a general meeting resolution intending to bring an action for damages or has voted against a resolution on discharge from liability.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, in some circumstances it is also possible for shareholders to bring an action in the name of the company, known as a “derivative claim” by obtaining the court’s permission.

The right for a shareholder to bring a claim on behalf of a company applies in respect of any actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. It is important to note that the right belongs to any shareholder, irrespective of the number of shares held by that shareholder and whether the action complained of occurred before or after he became a shareholder.

Claims may be brought against former directors as well as current directors. In this context, it should be emphasised that this is not a right for shareholders to recover damages directly against directors - it is a right to pursue an action on behalf of the company where the company has suffered or may suffer from a director’s negligence or breach. Consequently, any financial benefit from the litigation would go to the company, not directly to the shareholders conducting the claim.

The risk of litigation is substantially reduced, however, by the hurdles built into the derivative claims procedure to prevent inappropriate litigation. Permission must be given by the court for claims to proceed, and the way in which the court’s discretion in this area is exercised is therefore important. A key feature of the procedure is the ability of the court to take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

Remedies against a director for breach of duty include damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 1 Mar 2021

Onshore UAE

In certain circumstances directors may face liabilities where they have acted unlawfully, including:

  • Disclosing corporate secrets.
  • Participating in a competing business.
  • Fraud and embezzlement, misuse of power, violation of the UAE Companies Law or the company's memorandum and gross error/mismanagement.
  • Any act carried out in the course of his/her duties which causes harm to another person.
  • Exceeding authority.
  • Unlawful competition.
  • Issuing a cheque with insufficient funds.
  • Certain violations prescribed under the law (such as, the Federal Environmental Law, the Federal Labour Law, etc.).
  • Certain acts in the event of a company's bankruptcy, such as engaging in transactions defrauding creditors.

Depending on the nature of the unlawful act, action can be taken against a director for breach of legislation (including the UAE Companies Law, Civil Code, Penal Code, Commercial Code or Bankruptcy Law) or breach of the LLC's memorandum of association.

Dubai International Financial Centre

Pursuant to the DIFC Companies Law, a breach by a director of any one or more of the duties set out in the Law shall constitute a contravention by that director of the relevant duty. On this basis, the company may bring action against the director.

Where it is apparent to the DIFC Registrar of Companies that a director should not hold office, they may apply to the DIFC Courts for an order against that director. This consideration is based on whether the director has breached any of the duties prescribed in the Law or the Registrar of Companies has otherwise determined, based on the given circumstances, that a director is unfit to be involved in the management of a company.

Remedies may be sought against the director by filing a claim with the DIFC Courts. These may include remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.  Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Last modified 8 Feb 2021

Generally, a company (directly) or its stockholders (derivatively, on behalf of the company) may bring an action against a director for breach of fiduciary duty. The court has broad powers to grant remedies for a breach of fiduciary duty, which can include requiring the rescission of a transaction or the payment of monetary damages.

Last modified 8 Feb 2021

The director(s) are jointly and severally liable to the company for damages caused to the company for their wrongful acts, including but not limited to violation of the procedure for approval of interested-party transactions, significant transactions (i.e. such transactions entering into which requires prior approval of the general meeting of other company’s bodies), or omissions.

Any shareholder who owns ten or more percent of the company’s shares can bring an action on behalf of a company (derivative suit) for damages caused by the director(s) to such company. According to Ukrainian court practice, for the director(s) of the company to be held liable four conditions of the civil liability shall be simultaneously satisfied, i.e., illegality, causality, fault and damages. In practice, the availability of all such conditions is difficult to prove, therefore the number of successful derivative suits in Ukraine is limited.

Additionally, director(s) without consent of the general meeting or the supervisory board of the company are not allowed to:

  • Act as the private entrepreneurs in the sphere of the company’s business activity.
  • Be the shareholders of specific types of other companies which exercise same business activity as the company.
  • Be the members of the executive bodies or supervisory boards of other companies engaged in the same business activity as the company.

Last modified 8 Feb 2021

A member of a company (a shareholder) may bring a legal action against the directors or managers of a company. The shareholder must establish that:

  • The managers or directors, or the member, of the entity are deadlocked, whether because of even division in their number or another reason, and irreparable injury to the company is likely to be caused to the business or the business can no longer be conducted to the members’ advantage due to that deadlock. 
  • The managers, directors, or any other persons in control of the entity have acted illegally, fraudulently, or oppressively toward the petitioning member.
  • A shareholder may bring a claim of personal damages against a director or manager who fails to exercise the duty of care and duty of loyalty as enshrined in the COBE. The damages to be claimed may be for harm caused to the member by the conduct of the manager or director.

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