Liabilities of directors

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

Directors can face personal liability under a range of statutes.  Some statutory regimes apply at State and Territory level and so may not be uniform around Australia, which can heighten the risks for directors of companies operating in more than one State or Territory.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Austrian 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 upon request of the majority of shareholders. Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for all (and not only individual) directors.

Last modified 8 Feb 2021

There are a number of specific liabilities to take into account as a director, such as:

  • Liability for the incorrect application of the liquidity test in a private limited liability company. If it is established that the directors knew, or ought to have known, given the circumstances, that the company would no longer be able to pay its debts over a period of at least 12 months as of the date of distribution of the dividend, then they are jointly liable vis-à-vis the company and third parties for all damages that follow from it.
  • Liability for not complying with the conflict of interest procedure (see Transactions with the company).
  • Liability for not complying with the alarm bell procedure (see What are the key general duties of directors?). If the general shareholders’ meeting has not been convened, then any third party damages will be considered to follow from the lack of convocation.
  • Tax liabilities. A joint liability of directors applies in case of the non-payment of professional withholding tax and VAT, and, in case of the bankruptcy of the company, for the outstanding social security contributions (which is frequently called upon in an insolvency context).
  • Tort liability. Third parties can bring a claim against a director for damages resulting from a tort committed by such director. Typical cases involve creditors, employees, etc (e.g. failure to enter into an insurance, false appearance of solvability and proceeding with a manifest deficit activity). Limitations however apply on the combination of claims under contract and other tort.
  • In certain cases, criminal liability may arise (e.g. non-compliance with legal obligations relating to the annual accounts, forgery, misappropriation of company funds and goods, money laundering, etc.).

Last modified 8 Feb 2021

A director may also be disqualified by the court from acting as a director if he or she being a director of a company was wholly or substantially responsible for the company:

  • Being wound up because of its inability to pay its debts as and when they become due.
  • Ceasing to carry on business because of its inability to pay its debts as and when they become due.
  • Entering into a scheme of compromise or arrangement with its creditors.
  • Failure by the director to fulfil his constitutional and statutory duties.

Last modified 1 Mar 2021

Directors must not prevent or obstruct investigations which aim to establish their own responsibility, or the responsibility of any managers, executives etc.

Last modified 5 Apr 2021

Although the company will be liable for any breach, a director is also personally liable for ensuring the company complies with all of the following requirements:

  • Ensuring that there is no violation of contractual obligations.  Such violation constitutes an objective liability, i.e. no negligent or intentional conduct is required.  All obligations resulting from the Business Corporations Act have to be met.
  • Ensuring that the company pays its taxes and advances in time and submits the respective tax declarations.
  • Ensuring that the company makes payments in time, especially those regarding the company's employees' social security insurance, health insurance and contribution to the State Employment Policy.
  • A director might be found personally liable for crimes defined by the Penal Code, especially economic crimes committed by him during the performance of his or her duties.
  • Ensuring that all administrative law requirements are met fully and in a timely manner, especially those concerning business licences or other titles for executing business and environmental law requirements etc.
  • Ensuring that the requirements of the Labour Code and any secondary legislation regarding employees' conditions are met.
  • Ensuring that the company meets all the liability requirements specified in the Civil Code as " special liability" cases.

Last modified 8 Feb 2021

A director may under certain circumstances be disqualified to participate in the management of a company by the bankruptcy court and thus will not be able to participate in the management of a company without assuming personal and unlimited liability. Further, in certain cases criminal liability may arise for directors.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Finnish 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 formation or management of a company or from acquiring controlling interest in an operating company.  A disqualification order can be made for conviction for criminal offences relating to the running of a company or persistent breaches of statutory obligations.

Failure to comply with certain company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

  • A director may be held personally liable for taxes and relating penalties due by the company if the director has breached tax obligations of the company.
  • Directors can be held criminally liable when:
    • They have committed a crime or participated in the commission of a crime.
    • They have committed a criminal offence within the company related to its activity, even if they did not participate directly in the commission of this offence (e.g. under employment law, tax law, environmental law, health and safety regulations, etc.).
  • Failure to comply with a company’s obligation to file a declaration of beneficial owner (bénéficiaire effectif) with the Trade and Companies Registry may lead to liability for the corporate officer, the consequences of which are imprisonment and a fine, as well as additional penalties (such as being prohibited from acting as manager).

Last modified 8 Feb 2021

In case of non-compliance with the filing of financial statements, the managing directors of a GmbH are subject to administrative fines.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Hong Kong legislation including that relating to, 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 (eg conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

The Bankruptcy Act imposes several obligations on the directors of companies under insolvent liquidation or bankruptcy procedures (aiming at the orderly and transparent management of such distress situations, particularly the handover of the management and documentation of the insolvent company to the liquidator). Failure to observe these obligations may give rise to penalties imposed personally on the directors.

The direct, personal exposure of the directors to fines or liability may also arise in several other specific cases under applicable laws, including tax- and environmental laws.

Criminal liability of the directors may also be relevant in extreme cases (embezzlement, fraud, serious breach of financial reporting obligations etc.). 

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Irish 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 restricted or 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).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Italian legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

Last modified 8 Feb 2021

Company administration obligations

Under general legislation in Japan, if the company fails to comply with regulatory obligations, it is possible that the (representative) director is also subject to punishment, administrative fine, etc together with the company. 

Criminal liabilities - misappropriation

If a director, through his or her own action or that of a third party, deliberately causes damage to the company, breaches his or her fiduciary duty and causes a financial loss to the company, such director can be punished by up to 10 years' imprisonment or a penal fine of not more than JPY10 million, or both.

Last modified 8 Feb 2021

Director liability is personal and unlimited generally. Some statutes such as those relating to environmental and health and safety, employment, consumer protection, tax and bribery/anti-corruption have express liability provisions for directors.

Most statutes provide that where a body corporate is found to have committed a criminal offence, every director is personally liable for such offence unless they can prove that they were not aware or could not have been aware that the offence was being committed.

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.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 16 Jun 2021

Managers may be subject to all the provisions of the Luxembourg Criminal Code concerning misdemeanours or felonies. Those most relevant for managers include fraud and embezzlement. The Luxembourg company law qualifies in particular as criminal offences the failure by managers to fulfil some of their specific duties, such as:

  • Failure to:
    • Submit the annual accounts and the management report (and the auditor's report and the consolidated accounts, if applicable) to the general meeting of the shareholders within six months after the closing of the relevant financial year and
    • File them with the Luxembourg Trade and Companies Register for publication.
  • Failure to convene, the annual ordinary general meeting within three weeks of being requested to do so.
  • Failure to publish changes in the shareholdings of the company.
  • The opening of a public subscription for shares or bonds.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Mozambican 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 (or by the Central Bank in case of companies supervised by this institution) from acting as a director or from taking part in the 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 and keep the company’s books, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Last modified 19 Aug 2021

Tax debts, social security and pension premiums

Each individual director is responsible for adequate notification to the Dutch tax authorities, social security authorities and pension funds when the company is no longer able to pay certain taxes (including wage tax and VAT), social security and/or pension premiums. Notification must be made forthwith when it appears that the company is or will no longer be able to fulfil its payment obligations, and in any event within 14 days after the date on which the sums were due.

If the notification is not sent in time or not sent at all, the individual directors are jointly and severally liable based on the assumption that the non-payment is caused by mismanagement. An individual director who is able to prove that they are not responsible for the late notification will not be liable, however, such exculpation is subject to a high threshold.

Misleading accounts

If the (annual) accounts published by the company contain a misleading presentation of the financial situation of the company, the directors can be held jointly and severally liable towards third parties for damages suffered as a result.

Last modified 8 Feb 2021

A director may be held personally liable for taxes and relating penalties that are due by the company, if the director has breached tax obligations of the company.

A director may be held criminally responsible if:

  • The director committed a crime or participated in the commission.
  • If they committed a criminal offence within the company related to its activities, even if the director was not directly involved in the commission of the crime (e.g. under the Labour laws, Economic and Financial Crimes Commission Act, Money Laundering (Prohibition) Act, Investment and Securities Act).

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, or being found liable for fraudulent or wrongful trading).

Last modified 1 Mar 2021

Personal liability for directors may, in certain circumstances, arise under Norwegian legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

Last modified 16 Jun 2021

Given that the directors are the administrators of the company, they are personally, jointly and severally liable (without limit) for contracts and, in general, for all legal acts performed if the company becomes irregular.

The liabilities comprise the fulfillment of the respective obligation, together with, if applicable, compensation for damages and losses caused by acts or omissions that directly damage the interests of the company, partners or third parties. The foregoing is in addition to any criminal liability of the liable parties.

Also, within the scope of anti-trust law, the directors of the company may be held liable if they have participated in the planning or execution of anticompetitive conduct.

In the tax field, the directors may be liable if they exercise the administration or have decision-making capacity in the disposition of necessary resources of the company to pay taxes, or if the duties of their position include the control of the accounting or finances of the company.

In the criminal area, the director of a company may be sanctioned with a penalty of up to four years if they are involved in bribery through which a favour is obtained in the acquisition or contracting of goods and services or, in general, through which a favour is obtained in the course of commercial relations.

Last modified 26 Jul 2021

Personal liability for directors may, in certain circumstances, arise under Polish legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

Special rules of liability are set out in Polish tax law. Responsibility for the company’s tax arrears is jointly and severally borne by members of the company’s management board with their entire property, if enforcement proceedings against the company’s property appear to be entirely or partly ineffective, and if a member of the management board fails to fulfil certain obligations specifically set out in the Polish Tax Ordinance.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual management board members.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Portuguese 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 8 Feb 2021

Consideration should also be given to the fact that shared/common directors could, in certain circumstances, be considered as evidence in support of piercing the corporate veil.

The directors’ liability may also be triggered if regulations within various sectors are breached such as competition legislation, anti-corruption legislation, tax-related legislation etc.

Last modified 8 Feb 2021

The Director and BoD members may be held criminally liable, for example for economic crimes.

The Director may be disqualified for committing an administrative offence (e.g. for repeatedly violating labour and/or tax law provisions, for allowing fraudulent or premeditated bankruptcy, etc). A disqualified person may not hold the position of Director or be a BoD member.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under legislation including those relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

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). Please also refer to Who can be a director? for examples of relevant statutory breaches that would trigger disqualification.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under South African legislation including that relating to environmental and health and safety, anti-trust and bribery/anti-corruption.  In certain cases, criminal liability may arise.

Directors may also be declared deliquent or under probation if, amongst other things, they have breached their duties or certain obligations under the South African Companies Act. An order of deliquency or probation prevents a person acting as a director of a company (or places restrictions on their ability to do so) and a court may also order that compensation is payable to persons adversely affected by the director's conduct. 

Last modified 19 Apr 2021

An important issue is the possible liability for company’s debts (responsabilidad por deudas sociales): directors are jointly and severally liable for obligations arising after the occurrence of a cause for dissolution, when they have not called the general shareholders meeting within two months to adopt the dissolution or, where appropriate, when they do not apply for the judicial dissolution or the declaration of insolvency.

Personal liability for directors may, in certain circumstances, arise under Spanish legislation including liability relating to civil, employment, tax, corporate and environmental matters. In certain cases, criminal liability may arise.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Swedish legislation including that relating to environmental and health and safety, tax and bribery/anti-corruption. In certain cases, criminal liability may arise.

If a director or managing director has been declared bankrupt, has had a guardian appointed under the relevant legislation, or has been banned from trading, the Swedish Companies Registration Office must remove the representative from the Companies Register.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under various Tanzanian legislation including those relating to the winding up, delinquent trading, fraudulent trading, wrongful trading, environmental and health and safety, employment, consumer protection, tax, competition, and bribery/anti-corruption.  In certain cases, such liability can be criminal liability may arise.

Last modified 1 Mar 2021

Onshore UAE

In some circumstances, directors who engage in any of the following activities could face criminal liability and up to two years imprisonment:

  • Did not maintain commercial books sufficient to reveal the company's financial position or assets.
  • Refrained from providing the data required by the bankruptcy trustee or the court, or intentionally provided incorrect data.
  • Disposed of the company's assets after becoming cashflow-insolvent with the intent of depriving the creditors of those assets.
  • Paid the debt of a creditor, while cashflow-insolvent, to the detriment of the other creditors or treated a creditor preferentially to other creditors, even if such acts were conducted with the intent of achieving a preventive composition or restructuring procedure.
  • Disposed of company assets at a value less than their market price, or acted in a manner detrimental to the interest of the creditors with the intent to obtain funds in order to avoid or delay cashflow-insolvency, the adjudication of bankruptcy or the termination of a preventive composition or restructuring procedure.
  • Spent disproportionate or excessive sums in gambling or speculative activities outside the company's usual business.
  • Entered into disproportionate undertakings in favour of a third party without having regard to the financial status of the company at the time such acts were decided.

The UAE bankruptcy laws provide defences for directors/managers not involved in the crime or who vote against resolutions approving such acts.

Dubai International Financial Centre

A director may also be disqualified by the court from acting as a director. A disqualification order can be made for a variety of reasons (eg 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).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under UK 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).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Last modified 8 Feb 2021

A key risk is a derivative action by a company’s stockholders for breach of fiduciary duties, which commonly happens in connection with M&A activity, securities offerings, data breaches, or other significant transactions or events.  In addition, directors may be held personally criminally or civilly liable for misconduct by the company or its employees, including violations of securities laws, environmental laws or the Foreign Corrupt Practices Act.  Additionally, directors may be held jointly and severally liable for unlawful share purchases or redemptions or dividends. Under “bad actor” laws, directors who have committed fraud or other crimes may be barred from serving as a director of a company offering or selling securities in the future.

Last modified 8 Feb 2021

The director may be held liable for violations under tax, labour, environmental, consumer protection, anti-money laundering, anticorruption legislation and any other laws which regulate the company’s activity in a specific field. Such violations may constitute, for example, non-submission of tax declarations, financial reports, non-payment of the tax duties, salary to employees, non-compliance with the labour safety requirements, etc. Criminal, administrative, disciplinary, civil liability may be imposed upon director for such violations.

Last modified 8 Feb 2021

Personal liability for directors may, in certain circumstances, arise under Zimbabwean legislation.

The courts have been prepared to lift the corporate veil in situations under the alter ego doctrine. This involves situations where the individuals or individuals behind the corporation use the business as a mere mask for personal dealings.

The courts have specific guiding principles which are to be looked for in such situations such as absence of corporate formalities, inadequate capital, degree of separate property, financial interest of the individual, degree of control and any personal factor of the individual involved. The courts evaluation involves a balancing of considerations being the principle of separate personality against rising considerations or facts favouring piercing of the corporate veil.

If the courts enquiry dictates, the individual may be forced to pay the corporations' creditors from their personal funds.

Directors who act in a manner which is ultra vires, or which contravenes the COBE, may be liable to damages. There is also possible civil and criminal liability. If there is a contract in place, directors may also be held liable for breach of contract and any repercussions which may result from that breach.

The board is responsible for compliance with all of the above. Where the board fails to comply with the applicable laws, including non-binding rules and codes and standards, and if this causes any prejudice to the company, the directors can be held liable for any damages arises from such board's failure and can be held criminally liable where an offence has been committed.

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