The Commercial Code does not provide for a specific definition of a director.
Basically, a director is someone appointed by the shareholders to manage the company on their behalf.
There is no complete definition of the term "director" in Australian company law. Basically, the law regards someone who manages the affairs of a company on behalf of its shareholders as a director (whether they are called a director or not).
A director (or also managing director; in German Geschäftsführer) is the individual who manages the business of the GmbH. A director is responsible both for the business of the company as such as well as for all administrative duties, e.g. preparation of financial statements, filings with the companies register, tax filings, etc.).
Shareholders are free to decide whether a director shall be allowed to represent the company alone or together with another director (or more directors or together with a Prokurist; see What are the different types of director?).
Generally speaking, a director:
- Is responsible for the overall direction, supervision and management of the company.
- Has the authority, power and discretion to manage and control the business and affairs of the company and to make decisions regarding those matters and to perform acts or activities customary or incidental to the management of the company.
- May establish one or more committees and determine the scope of authority of such committees.
- To the extent applicable, must ensure that the business of the company operates in accordance with its constitution/bylaws.
- Must make all decisions which are not part of the day-to-day management of the company.
- Directs and supervises aspects of the company and its affairs whether commercial, administrative, financial or otherwise.
- Represents the company before, and liaises with, governmental, judicial, administrative and other authorities; arbitration bodies; and all individuals, committees, establishments and other bodies of any kind whatsoever.
- Appoints, engages, removes and replaces managerial staff and other employees, agents, consultants and advisers of the company and determines and approves payment of their salaries, and other remuneration, fees and benefits.
A director is a (member of a) corporate organ of the company. As such, a director is basically regarded as someone who manages (either individually or together with others, depending on the company type and board structure) the affairs of the company on behalf of its shareholder(s).
The term director in Botswana is defined in the Companies Act (Cap 42:01) (the Act), as amended from time to time. According to the Act, a director is "a person occupying the position of director or alternate director of the company by whatever name called".
The term director can also be applied to the following persons in accordance with the Act:
- A person in accordance with whose direction or instruction the board of the company may be required or is accustomed to act.
- A person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board.
- A person in accordance with whose directions or instructions a person occupying the position of director or alternate director of the company may be required or is accustomed to act.
A person cannot be appointed as a director of a company unless that person has consented in writing to be a director and has certified that they are not disqualified from being appointed or holding office as a director of a company.
A director is a person appointed by the shareholders in a shareholders´ meeting to be a member of the board of directors. Directors must accept their appointment, expressly or tacitly.
The board of directors is in charge of managing the company and represents it judicially and extra-judicially, to fulfil its corporate purpose. The board is invested with all the managing and disposal authorities that are not otherwise established, by the law or the bylaws, as authorities of the shareholders’ meeting.
Directors’ functions are collectively exercised in duly constituted directors meetings. Therefore, individual acts of directors do not constitute an act of the board, nor of the company and they are not binding on the company unless the board, acting as such, has delegated some specific functions to the individual director.
There is no specific definition of the term "director" in Czech company law. Basically, the law defines a director by setting out the criteria for how directors can be appointed and what their duties are. It can therefore generally be said that a director describes someone who is a "statutory body" of a company, manages the affairs of a company on behalf of its shareholders as a director and is registered as such in the Commercial Register.
There is no codified definition as such of the term “director” in the Danish Companies Act. However, a director is a natural person who takes and implements decisions on behalf of the company.
The term “director” typically refers to a member of the board of directors in a company that has chosen a two-tier governance structure which is further described in Minimum/maximum number of directors. Thus, this guide also deals with the duties of a board of directors.
"Directors" usually refers to the members of the board of directors and, if appointed, the managing director (CEO). The managing director is optional unless otherwise stipulated in the articles of association.
French law (article L. 227-6 of the French Commercial Code) only requires the appointment of a “President” (physical or legal person) who/which will represent the SAS towards third parties.
The President has the broadest powers to act on behalf of the SAS within the limits of the corporate purpose (subject, as the case may be, to internal limitations which may be provided for in the bylaws, but which are not enforceable against third parties).
French law however provides that the President may be assisted by one or several “General Managers” and/or “Delegated General Managers”, who/which may have the same powers than the President, depending on the bylaws of the SAS.
In addition, the bylaws may also create collegiate bodies alongside the President, with complete freedom to determine their names (board of directors or supervisory board, management committee, executive committee, etc.), as well as their respective functions and the rules applicable to decision-making (simple majority, qualified majority, unanimity).
The bylaws of the SAS freely determine the conditions of appointment and dismissal of the directors, but also their number, the duration of their mandate, their method of remuneration and their powers.
The President, any General Manager, any Delegated General Manager as well as any other manager to be appointed pursuant to the bylaws of the company may be referred to as “directors” or “managers” for the purposes of the liability regime applying to managers of an SAS.
For a GmbH, the correct term is “managing director” (Geschäftsführer). A managing director must be a natural person. A managing director manages the affairs of the company and represents it towards third parties.
The general rule is that in case of more than one managing director, the managing directors represent the company jointly. However, the articles of association may stipulate or allow that a managing director has sole power of representation or that, for example, two managing directors represent the company jointly or that one managing director does so jointly with a registered proxy holder (Prokurist).
The Companies Act, 2019 (Act 992) defines a director as a person, by whatever name called, who is appointed to direct and administer the business of a company.
The definition of a “director” under Hong Kong law is influenced by the common law jurisprudence. Basically, the law regards any person who manages the affairs of a company on behalf of its shareholders as a director (whether they are called a director or not).
Under Hungarian law in kfts. and zrts., the strategic management of the company is carried out by either one or more individual "executive officers” (vezető tisztségviselő), or by a body consisting of “executive officers” (board of directors). For the purpose of this guide we will use the term “director” for the executive officers.
The directors must be registered in the Hungarian companies register and such record must be kept up to date. Accordingly, the identity of the directors of any kfts and zrts is available to the public at any time.
A PT has a two-tiered board system, namely the Board of Directors (BOD) and the Board of Commissioners (BOC). A director is an individual member of the BOD and is appointed by the shareholders.
The BOD is responsible for the day-to-day activities of a PT. Whereas, the BOC acts as the advisory/supervisory body to the BOD.
There is no complete definition of the term "director" in Irish company law. Basically, the law regards someone who manages the affairs of a company on behalf of its shareholders as a director (whether they are called a director or not).
There is no specific definition of the term "director" in OHADA company law. Overall, anyone who manages the affairs of a company on behalf of its shareholders is regarded as a director regardless of their official title.
There is no complete definition of the term “director” in Italian company Law. The director(s) of a limited company (società di capitali) are those person(s) entrusted with the management powers and functions. It is not necessary for a director to be a shareholder.
There is no clear definition of a “director” in Japanese company law. In general, a director is someone who is appointed by the shareholders of a KK in general meeting and whose main roles are making decisions on the operations of the company and supervising the operations engaged in by other directors.
Section 2 of the Companies Act, 2015 (the Companies Act) defines a director as any person occupying the position of a director in a company by whatever name called. It also includes any person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of the company are accustomed to act (such persons are generally known as shadow directors).
The law describes the behaviour of persons who would be considered to be directors, their powers, duties and responsibilities.
The Luxembourg law of 10 August 1915 on commercial companies, as amended (the “LSC”) governing, inter alia, SARLs does not clearly define the term “director” (referred to as “manager” for SARLs). A “director” is a person in charge of the management of the affairs of a company on behalf of its shareholders.
The term “manager” will be used in this guide as this is the most appropriate term to refer to the members of the management body of a SARL.
The Companies Act 2001 (Companies Act) defines a “director” as a person occupying the position of director in a company by whatever name called. It includes an alternate director but does not include a receiver.
It also includes:
- Any person in accordance with whose directions or instructions a person may be required or is accustomed to act.
- A person in accordance with whose directions or instructions the Board of the company may be required or is accustomed to act.
- A person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the Board.
- A person to whom a power or duty of the Board has been directly delegated by the Board with that person's consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the Board.
A director is an individual that may be appointed by the shareholders/partners’ meeting (and exceptionally, by the board of directors in the case of S.A.B.s) and whose position is of a personal nature, is temporary and is revocable. Directors may be compensated or not, as so determined by the shareholders or the partners annually.
The personal nature of the role of a director precludes the position from being held through representatives. It is important to make a distinction between two different types of directors of a S.A.B. Such entities must, by law, appoint independent directors, and such independent directors must comprise at least 25% of the membership of the board of directors.
The function of all types of directors is to supervise the day-to-day management of the company, to achieve the goals set by the board of directors or the shareholders/partners (as applicable).
In particular, in the case of S.A.B.s, the main functions of their directors are to set up the company's main strategic priorities and to oversee the management of the company carried out by the Chief Executive Officer. The Chief Executive Officer of a S.A.B. (unlike S.A.s whose stock is not publicly traded) is for legal purposes considered as a corporate body itself (for further information, see Authority and powers).
There is no proper definition of the term “director” in law. However, a director has the broadest powers to act on behalf of the company in all circumstances. The director has the exclusive power to represent the company with respect to third parties.
Although the New CCom does not provide a clear definition of the term “director”, it is possible to infer from it that a “director” is a person that is duly appointed to administrate, manage and direct the business of the company and is responsible for (i) the managing of the affairs of the company on behalf of the shareholders; and (ii) representing and binding the company, taking into account the powers established under the relevant law and the company´s articles of association.
The Companies Act 28 of 2004 (Companies Act) does not contain a comprehensive definition of “director”, but defines a director as “includ[ing] any person occupying the position of director or alternate director of a company, by whatever name that person may be designated". While the Companies Act does not purport to define the status and nature of a “director”, it is clear that it is intended to apply to all directors who are formally appointed as directors as well as de facto directors who are not formally appointed. In addition, the Act will regard certain persons as directors even though they may be designated by a different name.
The status and nature of a director is determined with reference to the duties of a company director, which is governed by the Act and common law. A person de facto exercising the duties of a director will be considered a director under the Act.
Basically, the law regards as a director someone who is charged with the management of the company, subject to any restrictions under the articles of association.
Directors (other than a "deemed director") must be a natural person, and are generally elected or appointed by the company's shareholders. The Act provides that the meaning of the term 'director' can also include any person:
- occupying the position of director of a company by whatever name called
- in accordance with whose directions or instructions a director or the board of a company may be required or accustomed to act
- who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which would fall to be exercised by the board
- to whom a power or duty of the board has been directly delegated by the board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board, and
- in accordance with whose directions or instructions a director (whether appointed or not) may be required or is accustomed to act in respect of their duties and powers as a director.
Any of these persons (other than those specified in the first bullet point) who have not been validly appointed or elected as a director of a company will be considered a “deemed director”, and will owe many of the same duties and may face many of the same liabilities as a validly appointed or elected director. “Deemed directors” can be non-individuals, including another company if that company has a certain amount of influence over the decision making of the company's directors. In general, however, New Zealand company law does not differentiate between different types of directors – all directors are subject to the same duties.
A director is any person appointed by the company to direct and manage the business of the company. A person who has not been formally appointed as a director will also be regarded as a director under the law, if they are a person on whose directions and instructions the directors of the company are accustomed to act, except where such person is merely acting in a professional capacity.
There is no complete definition of "director" under the Norwegian Private Limited Liability Companies Act. However, reference to a director is typically to a member of the company's board of directors, which is responsible for the organisation of a company and management of the company's affairs.
Further, the general manager of a private limited liability company may be referred to as the "managing director".
A director is an individual appointed by the shareholders' meeting to be part of the board of directors of the company, a collective body in charge of its management.
An appointed director must perform the position with the diligence of a prudent business person and a loyal representative. They are obliged to maintain confidentiality regarding the affairs of the company and the company information they have access to, even after the termination of their role.
There is no complete definition of the term "director" in Polish company law. Basically, the law regards the management board which represents the company and manages its affairs (the management board consists of members) as a body equivalent to the board of directors.
Pursuant to the Portuguese law, there is no legal definition of the term “director”. Basically, the law regards someone who manages the affairs of a company on behalf of its shareholders as a director.
There is no complete definition of the term "director" in the Qatar Companies Law. The law essentially regards someone who manages the affairs of a company on behalf of its shareholders as a director. In most cases, the terms "director" and "manager" are used interchangeably.
Romanian law does not provide for an express definition of the term “director” (in Romanian administrator), but it addresses the eligibility criteria to be observed by the person to be appointed as director, as well as the duties, liabilities and the organization/functioning requirements of the various board of directors/management structures. In a nutshell, the director manages the affairs of the company and represents the company towards third parties.
There is no complete definition of the term "director" in KSA company law. The law essentially regards someone who manages the affairs of a company on behalf of its shareholders as a director. In most cases, the terms "director" and "manager" are used interchangeably.
Under the provisions of the Company Act (which forms part of the law of the Organisation for the Harmonisation of Business Law in Africa (Ohada)), the director is an individual who is responsible for the management of the company. The director can be a shareholder of the company. It is important to specify that in Senegal only an individual can be a director of a LLC.
Section 4 of the Companies Act 1967 of Singapore (Act) provides that “director” includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors or the majority of the directors of a corporation are accustomed to act and an alternate or substitute director.
Broadly, the law therefore potentially regards someone who manages the affairs of a company on behalf of its shareholders as a director (whether they are called a director or not). Accordingly, it is the position that the individual holds and the role that the individual plays in managing the company that are important in determining whether they are a director of the company.
There is no specific definition of the term "director" in Slovak commercial law. Basically, the law defines a director (in Slovak: konateľ) by setting out the criteria for their role, for example how directors can be appointed and what their duties are. In general, a director (one or more) is a statutory body of a limited liability company, acting on its behalf (if there is more than one director, each of them is authorised to act on behalf of the company independently, unless the Articles of Association stipulate otherwise). Directors are registered in the Commercial Register.
The role of the director consists of, for example:
- Representation of the company externally in relation to state institutions, courts or other (third) parties.
- Conclusion of contracts on behalf of the company, conducting transactions, etc.
A director is a member of the board of a company, including an alternate director and any person occupying the position of a director by whatever name designated. The business and affairs of the company must be managed by (or under the direction of) the board.
South African company law also makes provision for "prescribed officers", which are persons who are not specifically appointed as directors but which exercise (or regularly participate to a material degree in the exercise) of general executive control over and management of all or a significant portion of the business or activities of a company. Prescribed officers are subject to the same fiduciary duties as directors.
At common law, persons who outwardly purport to act as a director, and which are tacitly permitted to do so by the company, will also be deemed to have the authority of a director to bind the company in certain instances.
Company directors are natural persons or legal entities (in the latter case represented by a natural person) who are in charge of managing and representing the company. They are responsible for making business decisions and overseeing the affairs of a company.
There is no complete definition of the term "director" under Swedish company law. However, a director can be a member of a company's board of directors who is responsible for the organisation of a company and management of the company's affairs and/or managing director of the company.
There is no complete definition of the term "director" in Tanzania company law. A director is someone elected or appointed to manage a company's business and affairs in accordance with the Companies Act Cap 212 (the CA).
Directors may include employees, some of whom are officers in management positions in the company.
It should be noted that there is no exact and general definition of the term "director" in Tunisian company law.
Under the law, a director means any person in charge of representing the company towards third parties and who enjoys multiple powers. In Tunisian legislation, a director is referred to as a "manager".
The manager must always exercise their powers in the interest of the company and within the framework of its corporate purpose.
A director means any person occupying the position of a director by whatever name called, so it may be any person either appointed as such (de jure director) or that who is not appointed but acts as one (de facto director), and includes a shadow director.
Onshore UAE
There is no complete definition of the term "director" in UAE company law. The law essentially regards someone who manages the affairs of a company on behalf of its shareholders as a director. In most cases, the terms "director" and "manager" are used interchangeably.
Dubai International Financial Centre
The DIFC Companies Law does not provide a complete definition of the term "director". However, a director is considered to be someone who manages the affairs of a company on behalf of its shareholders (whether they are called a director or not). If a person acts in this way they should be formally registered with the DIFC as a director.
There is no complete definition of the term "director" in UK company law. Basically, the law regards someone who manages the affairs of a company on behalf of its shareholders as a director (whether they are called a director or not).
The oversight of a corporation is undertaken by its board of directors. A director is a member of the board of directors, which is generally responsible for managing or directing the management of the business and affairs of the corporation. A director (also called a “board member”) is distinct from the company’s stockholders, or owners, and distinct from the company’s executive officers or management. A stockholder, executive officer or other member of management can serve as a director if elected by the stockholders.
The Companies Act No. 10 of 2017 (Companies Act) defines a director as a person appointed as a member of the board of directors and includes an alternate director, by whatever name designated.
The Companies Act defines board of directors as persons appointed or nominated as either:
- directors of the company whose number is not less than the required quorum acting together as a board or,
- if the company has one director, that director acting alone.
An alternate director is a person who is not a director appointed by a director with the approval of the board of directors and subject to any restrictions in the articles of association.
There is no complete definition of the term "director" in Zimbabwean company law. However, the definition of a “director’’ in terms of the Companies and Other Business Entities Act (the COBE or the Act) includes:
- Any person occupying the position of director.
- An alternate director as defined in the COBE.
- A person who is a member of a committee of a board of a company, or of the audit committee of a company, irrespective of whether or not the person is also a member of the company’s board.
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.
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.
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.
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 Chair of the board of directors, or in case of the resignation of the Chair, 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.
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 Chair 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.
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 Chair 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.
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).
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.
Angola
Luis Filipe Carvalho
Managing Partner
DLA Piper Africa, Angola, ADCA
T: +244 926 612 525[email protected]