Types of 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

Directors validly appointed as such are known as de jure directors and may be executive (usually employees, with an operational/executive role) or non-executive (usually not employees) - and may also be appointed to represent a particular shareholder (a nominee director). In addition, a de facto director is a person who acts as though they are a director but is not validly appointed as such and a "shadow director" is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. Also, an “alternate” director is a person who is appointed by a director to act in that director’s place. In general, however, Australian company law does not differentiate between different types of director – all directors are subject to the same duties.

Last modified 8 Feb 2021

Austrian company law does not differentiate between different types of director – all directors are subject to the same duties.

However, in addition to a director, proxy holders may be appointed (in German Prokurist). A Prokurist may also represent the company and may sign agreements, however, this power is limited to typical transactions for a company. The power of representation of a Prokurist may also be restricted to e.g. a specific branch office.

Last modified 8 Feb 2021

In general, Belgian company law does not differentiate between different types of directors – all directors are subject to the same duties. It should be noted that, under Belgian law, a director cannot be bound with the company through an employment agreement for the execution of his director duties. In joint venture structures, a director may also be appointed upon the explicit proposal of a particular shareholder. In addition, a de facto director is a person who acts as though they are a director, but is not validly appointed as such; such de facto directors may also be subject to directors’ liability. Finally, for listed companies, a regime for independent directors is provided.

Under Belgian law, it is also possible to entrust someone (either a director or a non-director) with the daily management of the company (see also below). If a director of the company is charged with such daily management, he or she will commonly be named a managing director (gedelegeerd bestuurder/administrateur délégué).

Also, some articles of association provide that the managing director is the director who can externally represent the company individually in all matters (including those that go beyond the daily management).

Last modified 8 Feb 2021

Executive directors, non-executive directors and alternate directors.

Employee or lender representatives are not required to be appointed to company boards

Last modified 1 Mar 2021

There are the following types of directors:

  • Principal. A director elected by the shareholders, who has the right (and the obligation) to attend the board's meetings and to vote on the matters discussed in them.
  • Alternate. By-laws may establish alternate directors. If they do, each principal director shall have an alternate. Alternates are also appointed by shareholders.
  • Substitute. A person temporarily appointed as director of a corporation by its board, if there is a vacancy of a director and his/her alternate. This appointment is temporary, until the renovation of the whole board at the next ordinary shareholders’ meeting.

Principal and alternates jointly apply for their positions as directors and are appointed in the same and unique election process. The votes for the principal will also benefit his/her alternate.

Alternates replace principals permanently in case of vacancy or temporarily in case of absence. If the vacancy of a director and his/her alternate occurs, the whole board has to be renewed at the next ordinary shareholders' meeting. In the meantime, the board may appoint a substitute. However, if the vacancy prevent the board from meeting due to lack of quorum, the board must appoint a substitute.

Alternates may always attend the board's meeting with right to speak, but they only will be able to vote when his/her principal is absent.

As general rule, alternates are subject to the same rules as principals.

A substitute director does not have an alternate.

Certain listed corporations must also appoint at least one independent director and constitute a directors' committee. The independent director(s) must be members of this committee. Directors must satisfy a number of criteria in order to be considered independent. Although independent directors are also appointed by shareholders, some special rules apply to their nomination process and also to vacancies of independent directors.

Last modified 5 Apr 2021

There is only one type of director in an s.r.o. under Czech law.

However, for the sake of completeness, please note, that a fairly similar position to a director may be assumed by a proxy, who may be authorised by an s.r.o. to carry out juridical acts associated with the operation of a business enterprise or its branch, including those which otherwise require a special power of attorney. A proxy’s scope of power is however limited compared to a director.

Last modified 8 Feb 2021

There is only one type of director under the Danish Companies Act, which is an individual who has been appointed as a director (usually) by the shareholder(s) at the general meeting and is registered as such with the Danish Business Authority.

Employees have a statutory right to appoint and elect employee representatives to the board of directors provided that the company in question has maintained an average of no less than 35 employees during a period of three consecutive years. The number of employee representatives correspond to half of the number of members elected by the shareholder(s), however, no less than two members. The employee representatives account for at least two and may equal up to half of the number of the board members elected by the shareholders. An employee representative has the same rights and obligations as other members of the board of directors, i.e. in relation to confidentiality, conflict of interests, remuneration, etc.

Last modified 8 Feb 2021

Finnish law does not distinguish between executive and non-executive directors - all members of the board are subject to the same duties. The members of the board may be employed by the company.

The members of the board generally have duties relating to general and strategic matters. If appointed, a managing director has duties relating to day-to-day issues of the company. If not appointed, the members of the board will have duties also regarding the day-to-day issues of the company.

In addition, a de facto director is a person who acts as a director but is not validly appointed as such.

Last modified 8 Feb 2021

Directors validly appointed as such are known as de jure directors. In addition, a de facto director is a person who acts as though they are a director but is not validly appointed as such and a "shadow director" is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. In general, however, French law does not differentiate between different types of director – all directors are subject to the same liabilities.

Restrictions apply if directors are employees of the SAS. No gender balance requirements or obligations to appoint directors representing employees apply to the management of an SAS.

Last modified 8 Feb 2021

There are no different types of director.

Last modified 8 Feb 2021

Directors validly appointed as such are known as de jure directors and may be executive (usually employees, with an operational/executive role) or non-executive (usually not employees) - and may also be appointed to represent a particular shareholder (a nominee director). In addition, a de facto director is a person who acts as though they are a director but is not validly appointed as such and a "shadow director" is a person in accordance with whose directions or instructions the directors, or a majority of the directors, of a company are accustomed to act. Notwithstanding the terms "de facto director" and "shadow director" which derive from customary corporate usage, Hong Kong company law does not distinguish between different types of directors and directors are all subject to the same duties and obligations.

Last modified 8 Feb 2021

In general, Hungarian law has a single class of directors – they being responsible for the strategic management of their company. The only distinction in this regard is that in the case of public companies limited by shares (i.e. listed companies) with a unitary board of directors (i.e. having no separate supervisory board), the Civil Code requires that the majority of the directors must be independent. The definition of independence is set out in the Civil Code – in this regard directors can therefore be independent or non-independent. Further, sectoral rules may also require that the board of directors includes "inside" directors, i.e. directors who are executive employees of the company – this applies e.g. to banks.

For completeness, two additional types of corporate officers are mentioned who are sometimes referred to as some form of “director” but who are in fact not directors:

  • Company secretaries (cégvezető): these officers are appointed by the general meeting to assist the directors. Company secretaries are always employees of their company who must comply with the directors’ instructions.
  • Supervisory directors: this term is sometimes used for members of the supervisory board – under Hungarian law the supervisory board is usually a monitoring body (similar to the widely used audit committees) and it usually does not have a strategic/operative management function; referring to the supervisory board members as “directors” is, therefore, misleading.

Last modified 8 Feb 2021

Directors validly appointed as such are known as de jure directors and may be executive (usually employees, with an operational/executive role) or non-executive (usually not employees) - and may also be appointed to represent a particular shareholder (a nominee director).  In addition, a de facto director is a person who acts as though they are a director but is not validly appointed as such and a "shadow director" is a person in accordance with whose directions or instructions the directors of a company are accustomed to act.  In general, however, Irish company law does not differentiate between different types of director – all directors are subject to the same duties.

Last modified 8 Feb 2021

Directors are regarded as de jure directors if they are validly appointed as such, and may be executive and non-executive. In addition, according to the Italian Civil Code, the title of director may be extended to someone who is not formally invested of the title but that carries out managing activities typical of directors in a continuative and non-occasional manner. These are regarded as de facto directors. Managing powers may be legitimately exercised only by de jure directors but liability for managing activities may be extended to de facto directors. 

Executive directors are those directors to which the board has delegated part of its functions. They perform managing functions, while non-executive directors carry out supervising activity on executives. In particular, executive directors make sure that the organizational, administrative and accounting structure is adequate in light of the nature and size of the company and they report to non-executives and auditors in relation to the general management performance and the most relevant operations . Non-executives directors assess, on the basis of the information received by executives, the adequacy of the organizational, administrative and accounting structure of the company, they examine the strategical, industrial and financial plans of the company and they assess the general performance of management as reported to them by executives.

A SpA's bylaws can require that a director comply with specific requirements of integrity, experience and independence but this is not mandatory. Similar requirements may exist under self- regulatory codes issued by professional associations, or by the companies who manage regulated markets.

Last modified 8 Feb 2021

From among the directors, a representative director (daihyo-torishimari-yaku) can be appointed.   A representative director is a director with the most senior position in a company who is entitled to enter into business and legal contracts on behalf of the company. A KK may have more than one representative director if needed.

In addition, a board of directors may have outside directors (shagai-torishimari-yaku).  There are certain restrictions applying to an outside director.  For example, an outside director cannot be an executive director, officer or employee of the company, its subsidiary or its parent company.

Last modified 8 Feb 2021

Directors are either executive or non-executive.

Executive directors (usually senior employees, with an operational/executive role e.g. chief executive officer/managing director, finance director, etc) are responsible for the day to day running of the business. These directors are normally appointed to the Board by virtue of their positions as employees of the company and their directorship ordinarily ceases when the employment relationship is terminated unless shareholders choose to retain them as non-executive directors.

Executive directors must be appointed directors of the company in accordance with the governance instruments of the company. They should be distinguished from senior managers whose titles are ‘director’ for example Human Resources Director or Information Technology Director but who are not directors within the meaning of the Companies Act.

On the other hand, non-executive directors are not employees of the company. Non-executive directors only attend Board meetings and make decisions at that level or as members of committees of the Board.

Non-executive directors who have no shareholding in, or other relationship with, the company are referred to as independent directors.

It is also fairly standard for articles of association of a private company and, where a company has a shareholders’ agreement, such agreement, to allow a director (subject to any necessary safeguards) to appoint an alternate director. Such alternate director would, in the absence of the appointing director, exercise the powers and carry out the responsibilities of the appointing director. Alternate directors in law have the same responsibility as substantive directors.

Kenya’s company law does not differentiate between the different types of directors – all directors are subject to the same duties and obligations. Sectoral rules such as those governing financial institutions however refer to the various categories particularly in providing guidance on the construction of effective boards.

There is no legal obligation to appoint representatives of lenders or employees to the Board. In practice, a small number of companies have the head of human resources appointed to the Board as a director. Appointment of representatives of lenders to the Board is not a common practice.

Last modified 16 Jun 2021

Managers validly appointed as such are known as de jure managers and are in a contractual relationship with the company.

In addition, a de facto manager is a manager who has not been appointed as such by the shareholders but who in fact manages the company. Such managers are not in a contractual relationship with the company.

The daily management of the company may be delegated to one or more persons, the day-to-day manager(s) (délégué(s) à la gestion journalière), who may or may not be a shareholder or a manager.

Last modified 8 Feb 2021

Under the Mozambican Commercial Code there are no different types of directors, for either share companies or for quota companies. However, it is common to have companies that include executive and non-executive directors in its board of directors, as defined by its articles of association and/or indicated by the company’s general assembly. However, under the law, all directors have the same duties.

Note also that, unless otherwise provided for in the company’s articles of association, the daily management of the company may be entrusted to one or more general managers appointed by the board of directors, who report to that board and are appointed from the directors appointed by the company’s general assembly.

The law also determines that, regardless of explicit authorisation in the company’s articles of association, upon authorisation of the general assembly or the board of directors, if any, managers can be appointed to run some branches of business that fall within its activity, assistants can be appointed to represent it in certain acts or contracts and, by notarial deed, attorneys can be appointed to perform certain acts or categories of acts.

Last modified 19 Aug 2021

There are two types of directors: executive directors (uitvoerende bestuurders) and non-executive directors (niet-uitvoerende bestuurders). This is explained further under Typical management structure.

In addition, Dutch law also recognises an informal director, so-called "policy makers" (feitelijk beleidsbepalers). Such policy makers may be held liable as if they were directors.

Last modified 8 Feb 2021

All directors are subject to the same legal duties and responsibilities. However, Nigerian law recognises an "independent director" as a director who (or whose relatives) during the two years preceding his/her appointment:

  • Was not an employee.
  • Did not own more than 30% of the shares in the company.
  • Did not give to or receive payments from the company of more than NGN20,000.
  • Did not own at least a 30% shareholding in a company that gave or received such payments - nor was he/she a partner, director or officer of such a company.
  • Was not an auditor of the company.

Directors may also appoint a director to the position of Chairman with the responsibility of presiding over board and shareholder meetings. Unless the articles of association state otherwise, the Chairman will have a casting vote in the case of equality of votes.

Apart from these distinctions, Nigerian company law does not differentiate between different types of director. However, directors may be executive (usually employees who have an executive role) or non-executive (usually not employees). They may also be appointed to represent a particular shareholder (a nominee director).

Last modified 1 Mar 2021

There are two types of director:

  • A board of directors whose members usually are appointed by a shareholders' meeting and must be registered with the Norwegian Register of Business Enterprises.
  • A managing director (general manager) who may be appointed by the board of directors and, if so, must be registered with the Norwegian Register of Business Enterprises. For a private limited company, it is not mandatory to have a managing director.

If the number of employees in a company exceed 30 employees, and the company has not established a corporate assembly, employees have the right to be represented in the board of directors, and choose their representatives themselves. In companies with more than 200 employees the company is required to have employee representatives, provided that it has been agreed that the company shall not have a corporate assembly.

Last modified 16 Jun 2021

The company’s bylaws may provide for the possibility of having three different types of directors to comprise the board of directors: principal, substitute and altern.

Substitute directors are those appointed to replace any principal director in the event of absence or vacancy.

Altern directors are those appointed to replace a specific principal director in the event of absence or vacancy.

The board of directors must designate among its principal directors the Chairman (Presidente) of the board of directors. According to law, unless expressly stated differently in the company’s bylaws, the Chairman of the board will have a casting vote in the event of a tie in a board vote.

It is not mandatory by law to appoint employees’ or lenders’ representatives as directors of a company.

Last modified 26 Jul 2021

Polish company law does not differentiate between different types of management board members – all members are subject to the same duties. However, the shareholders may appoint the chairman/president of the management board from among the board members. If this is the case, the company’s articles of association may provide that, in the case of a voting deadlock at management board meetings, the president of the management board will have the casting vote. Furthermore, the articles of association may confer special powers upon the president of the management board in respect of managing the work of the management board.

The management board member may be an employee or a civil law contractor of a company, but he/she may perform this function based on separate agreement(s) to be concluded between such member and the company itself.

Last modified 8 Feb 2021

Although not expressly provided in the Portuguese Companies Code, Portuguese doctrine classifies a company’s directors in the following types: de jure directors, de facto directors, and shadow directors.

Directors validly appointed as such, through shareholders resolution, are known as de jure directors and 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.

A de facto director is a person who performs, directly or indirectly and autonomously the duties of a de jure director but is not validly appointed as such.

A shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. 

Last modified 8 Feb 2021

In the case of LLCs:

Romanian law does not distinguish between different types of directors. More exactly, under Company Law No. 31/1990 (Company Law), the director is the statutory body having management and representation duties.

In the case of JSCs:

Romanian JSCs can be managed either under a one-tier management system, or a two-tier management system.

The one-tier system is the most common. In such system, the sole director/board of directors ensures the general management of the Company, either directly or by way of delegating certain of its powers to the managing directors. The board of directors has both an executive and supervisory function. While the delegation of the company's management to managers is generally optional, in the case of JSCs whose annual financial statements are subject to legal auditing obligations, the delegation is mandatory. If management duties are delegated, such duties pertain to the managers.

As opposed to the one-tier management system, in the two-tier management system, the two functions, executive and supervising, belong to different bodies. The executive board (in Romanian directorat) is the executive body of the company. The executive board performs its duties under the control of the supervisory board (in Romanian consiliul de supraveghere). 

To sum up, in the case of JSCs:

  • With a one-tier system – in the absence of management duties being delegated, such duties pertain to the sole director / board of directors. Otherwise (if management duties are delegated by the board of directors), such duties pertain to the managers.
  • With a two-tier system – the sole manager / executive board has management duties (as opposed to the supervisory board which only appoints the sole manager / executive board and supervises their activity).

Last modified 8 Feb 2021

Russian legislation does not envisage different types of directors.

Members of the BoD participate in board meetings, have the right to request information, assert claims, etc, but are usually not involved in the day-to-day management of the company and ‑ unlike the Directors, multiple or sole ‑ do not have the right to enter into contracts on behalf of the company or hire employees, etc.

The BoD is not an executive body but supervises the Director(s). In particular, certain powers of the Director may be restricted so that the Director's actions require the prior approval of the BoD. For instance, before entering into a particular contract, the Director may be required to obtain the prior approval of the BoD. Importantly, although the BoD may have the competence to approve a particular transaction, the Director or Directors are the ones who may enter into the transaction on behalf of the company.

Corporate governance structures with one Director and a BoD are ‑ unlike the multiple Directors structures ‑ common in Russia. The competence of the BoD (that restricts the authority of the Director) must be reflected in the charter.

All decisions of the BoD are made collectively; if decisions need to be made unanimously or by a (qualified) majority it must be determined in the company's corporate documents. Collective decision making may be more difficult to arrange (absence of quorum, non-availability of a member of the BoD, etc) than the signature of another Director.

Russian law provides for certain authorities that cannot be assigned to the BoD and remain with the company’s shareholders/participants (fundamental matters, such as, for example, the reorganisation / liquidation of a company), however, all remaining matters of significance related to the day-to-day management of the company (as a general rule, being within the competence of a Director) can be assigned to the BoD (for example, approval of certain transactions that exceed a certain amount, etc).

Members of the supervisory board may be Russian or foreign citizens. Unless such foreign members have a contract with the company (which is not generally required), they do not need to obtain a work permit in Russia.

Last modified 8 Feb 2021

Some Singapore companies categorise their directors under the following categories (non-exhaustive):

  • Executive and non-executive directors.
  • Local directors.
  • Associate directors.
  • Managing director(s).
  • Alternate directors.

It is important to note, however, that the Act does not differentiate between the types of directors and all directors are subject to the same level of duties.

Last modified 8 Feb 2021

In general South African company law does not differentiate between different types of director and all directors are subject to the same duties.

Certain companies are required by companies legislation to appoint an audit committee of the board.  A director who is an employee of the company, or who does not meet certain independence standards (i.e. is not an independent, non-executive director) may not serve on a statutory audit committee.

The distinction between executive directors (persons also employed by the company to oversee the day to day operations of the company) and independent or non-independent non-executive directors (directors which are not employed by the company other than in their capacity as members of the board of directors) is important in terms of applying the principles of good corporate governance set out in the King IV Report on Corporate Governance for South Africa 2016 (King Code).  Although not codified in statute, the King Code's principles are required to be implemented by all listed companies in South Africa and are applicable to private companies on a voluntary basis.

Directors, or the applicable shareholders, may nominate "alternate directors", which alternate directors are appointed in the same manner as directors and carry the same duties as directors, but which only participate in board meetings in the absence of a specific director.

A company's memorandum of incorporation may make provision for a person to hold the office of director by virtue of their office, title of designation (e.g. CEO or MD), in which case such a person will be an ex officio director.

Last modified 19 Apr 2021

Directors are appointed by the shareholders and a company may have the following types of directors:

  • Sole director. The sole director is the sole representative of the company and therefore acts individually.
  • Multiple directors. Either joint and several directors, each one of them can act separately and the actions carried out by one of the joint and several directors will bind the company, or joint directors, who must necessarily act jointly.
  • Board of directors. The board of directors shall not have less than three and no more than 12 members. The bylaws may establish the extract or a minimum and maximum number of members for the board of directors. In the latter case the shareholders shall determine the exact number. In addition, the board must appoint a chairman and a secretary. If the company has a board of directors, individual directors do not have authority to bind the company unless powers are delegated to them. The board may delegate some of their functions to a managing director/CEO (consejero delegado) or an executive committee (comité ejecutivo). Please note that a board of directors is mandatory for joint-stock companies (sociedad anónima or S.A.) when there are more than two directors and for public listed companies (sociedad cotizada).

In all cases, powers of attorney can be granted by the management body of the company in favour of other persons (subject to some restrictions).

Directors may be shareholders of the company (consejero dominical) or not (consejero indepediente).

Finally, company’s directors may be de jure, as they are validly appointed through the procedures provided for by law and the company’s bylaws, or de facto, by exercising its functions in spite of not have been formally appointed. Nevertheless, all of them are subject to the same duties.

Last modified 8 Feb 2021

There are two types of directors: a board of directors whose members usually are appointed by a shareholders' meeting and are duly registered with the Swedish Companies Registration Office, and a managing director who must be appointed by the board of directors and be duly registered with the Swedish Companies Registration Office. For a private limited company, it is not mandatory to have a managing director.

According to the Swedish law regarding board representation for private employees, the trade union with which the company has concluded a collective bargaining agreement (if required to do so) has the right to appoint employee representatives as members of the company's board of directors (two employee representatives may be appointed, as well as one deputy for each such representative). Employees in companies which are not bound by a collective agreement have no right to demand representation on the board. This regulation may not lead to the employee representatives exceeding the number of ordinary board members.

Last modified 8 Feb 2021

The CA only contains the term “director” - there are no different types of director and the CA only recognises validly appointed directors (not shadow directors). However, directors may be executive (usually employees, with an operational/executive role) or non-executive (usually not employees) - and may also be appointed to represent a particular shareholder (a nominee director). 

Further, please note that the CA does not on its face distinguish between executive and non-executive directors as regards the duties they owe to the company. However, the steps that they will be expected to take to discharge the duty to exercise reasonable care, skill and diligence will vary because of their different roles on the board.

Last modified 1 Mar 2021

Onshore UAE

The UAE Companies Law does not distinguish between types of directors. It is nevertheless possible to define, to an extent, different types of directors in the memorandum of association of an LLC. This may include a designation as a managing director, for instance. The particular nature of such a designation would be defined in the memorandum of association.

Regardless of whether a director is appointed, a manager must also be appointed for an LLC. A director and manager may be the same person holding both roles.

Dubai International Financial Centre

The DIFC does not distinguish between types of directors and the DIFC Companies Law similarly does not provide for a variation on the designation of a director. If a company wishes to internally assign a prefix to a director denoting a particular role, then this should be acceptable. A director registered with the DIFC will assume the same responsibility and authority regardless of their internal designation, unless the articles of association of the company are amended to reflect this (the DIFC must approve the articles of association).

Last modified 8 Feb 2021

Directors validly appointed as such are known as de jure directors and may be executive (usually employees, with an operational/executive role) or non-executive (usually not employees) - and may also be appointed to represent a particular shareholder (a nominee director).  In addition, a de facto director is a person who acts as though they are a director but is not validly appointed as such and a "shadow director" is a person in accordance with whose directions or instructions the directors of a company are accustomed to act.  In general, however, UK company law does not differentiate between different types of director – all directors are subject to the same duties.

Last modified 8 Feb 2021

There are two primary documents that control and set forth the powers of the company and its stockholders – the Certificate of Incorporation (or the charter) and the Bylaws (together, the “charter documents”). Unless otherwise provided in the company’s charter, there are not multiple types of directors under Delaware law: all directors are members of the board with the same voting power, duties and responsibilities. Some companies may appoint board committees to oversee distinct aspects of the business, such as an audit committee that oversees the company’s audits and financial affairs.  It is also common to appoint a “chairperson of the board” and/or “committee chair” who is a member of the board of directors responsible for presiding over board or committee meetings and may have certain other specific delegated duties or authority.

Last modified 8 Feb 2021

The LLC Law does not set forth any specific types of directors. It is up to the company’s shareholders to establish a corporate governance structure with directors of different types and authorities. If a collegiate executive body is established in the company, the head of such body is usually called a “general director”.

Last modified 8 Feb 2021

There are two types of directors in terms of Zimbabwean company law.

  • Executive directors- these are usually employees, with an operational/executive role in the company. They are appointed through a formal process.
  • Non-executive directors- these are appointed to represent a particular shareholder and to provide expertise in a certain sector.

However, Zimbabwean company law does not differentiate between different types of directors, as all directors are subject to the same duties under the COBE.

 

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