A Cross-Border Guide to Private M&A
Total Page：16
File Type：pdf, Size：1020Kb
Global Knowledge. A cross-border guide for group company directors May 2017 Purpose of this guide Contents This guide aims to help multinational groups by giving an introduction to the 01 Australia 3 role, powers, duties and liabilities of directors of subsidiary companies in 02 Belgium 8 different jurisdictions. 03 Brazil 13 04 France 18 Directors usually have wide powers to manage the affairs of their company 05 Germany 23 and act as its agent and a duty to do so with due care, skill and diligence. 06 Hong Kong 28 The interests of the company should also be put ahead of the director’s own 07 India 33 interests. As this guide illustrates, however, the exact nature and scope of these 08 Indonesia 38 duties varies from one legal jurisdiction to another. 09 Italy 43 Company directors are, of course, also subject to the company’s constitution 10 Japan 48 and to further laws and regulations, depending on the business of the company 11 Luxembourg 53 concerned. In particular, directors may need to be aware of rules relating to 12 The Netherlands 58 health and safety, the environment, bribery and anti-corruption and financial 13 People’s Republic of China (PRC) 63 and markets regulation. This guide focuses solely on the general laws to which 14 Poland 68 a director is subject by reason of becoming a director. 15 Portugal 73 16 Russia 78 For convenience, the information is given in relation to the type of non-listed 17 Singapore 83 corporate entity most commonly used within a group in each particular 18 South Africa 88 jurisdiction. Different rules will apply to other corporate entities and / or if the 19 Spain 93 company is listed. 20 Sweden 98 Information about Australia and Vietnam was contributed by Allens, 21 Thailand 103 Brazil by Lefosse Advogados, Indonesia by Widyawan & Partners and 22 United Arab Emirates 108 South Africa by Webber Wentzel. 23 United Kingdom 113 24 United States (Delaware) 118 25 Vietnam 123 01 Australia Greg Bosmans Allens Partner, Melbourne Tel: (+61) 3 9613 8602 [email protected] Kate Towey Allens Partner, Sydney Tel: (+61) 2 9230 5053 [email protected] Linklaters A cross-border guide for group company directors > Australia 4 What type of company? Management structure Board composition Appointment and removal In Australia, subsidiaries within a group are more Australian companies (with more than one A proprietary company must have at least one Directors are first appointed on incorporation likely to be proprietary companies limited by director) are managed by a board of directors. director who must ordinarily reside in Australia. and, thereafter, under a company’s constitution shares but may also be public companies limited A public company must have at least three or the replaceable rules (as applicable). The In practice, the board may consist of executive by shares. directors on its board, two of whom must replaceable rules (and usually the constitution) and non-executive directors. Executive directors ordinarily reside in Australia. In both cases, a provide for appointment by a majority vote of are employed by the company (or a related company’s constitution may provide for a higher the shareholders or a decision of the existing body corporate) and are in charge of managing minimum number. directors (which, at least under the replaceable its business. Non-executive directors generally rules, must be subsequently confirmed by fulfil a supervisory role and are not expected to All formally appointed directors must be natural majority shareholder vote). Unless required in be involved in the day-to-day management of persons (although a corporation may be a a constitution, there is no limit on the period of the company, although this does not absolve shadow director). Any person over the age of 18 office for directors of proprietary and unlisted them from the legal responsibilities and duties can be appointed as a director, unless he / she: public companies. The appointment of, as well applying to directors. Except to the extent > has not consented in writing to the as certain personal information about, directors delegated, management decisions must be appointment, (and any subsequent changes) must be taken by the board acting collectively, although notified to ASIC and this information is generally all directors are still personally responsible for > is disqualified by law from managing accessible to the public. their actions as directors. corporations (unless granted leave by the Australian Securities and Investments For proprietary companies, if the replaceable Under the law, persons not formally appointed Commission (“ASIC”) or by the court), or rules apply or a company’s constitution permits, as directors but who act in the position of a > is the current (or within the last two years) the shareholders can remove directors by director (de facto directors) will be treated as auditor of the company (other than a small a majority vote. For public companies, the directors. Similarly, persons in accordance with proprietary company). law allows shareholders (but not directors) whose instructions or wishes the directors are to remove directors by a majority vote. The accustomed to act (shadow directors) will also Employees do not have the right to be statutory procedure includes providing at least generally be treated as directors. De facto and represented on the board (unless a company’s two months’ notice to the company and a copy shadow directors are bound by the same civil constitution requires it). Directors are not of that notice to the director. The statutory liabilities and criminal sanctions applying to required to have specific qualifications to act procedure can be used despite anything in a validly appointed directors. as directors. There are no share ownership company’s constitution. However, although not requirements at law on directors, although a The company’s internal management may be settled at law, the constitution is also likely able company’s constitution may mandate those. governed by: provisions of the Corporations Act to provide for an alternative removal procedure. A director can also be a secretary of the 2001 (Cth) that apply to the company (known as Constitutions will generally also provide company (unless the constitution provides replaceable rules), the company’s constitution for circumstances in which a directorship otherwise). Also, it is possible to serve as a or a combination of both. Company constitutions automatically terminates (such as bankruptcy director of several companies in the same are not mandatory. or ill health). group, although directors must avoid conflicts of interest / duty. Linklaters A cross-border guide for group company directors > Australia (continued) 5 Powers General duties Who are the duties owed to? Dealings with company / conflicts Under the replaceable rules and generally Directors have the following fiduciary duties Directors owe their duties to the company and Directors have a fiduciary duty to avoid actual or under a company’s constitution, the directors under general law (which are largely reflected not to the company’s shareholders or, generally, potential conflicts between their own interests are given wide powers to manage the business in statute): to the group to which the company may belong. and those of the company, and between their of the company, thereby enabling the board to duty to the company and their duties to third > to act in good faith in the best interests of the It is important to bear this in mind, in particular, exercise all powers which are not, by law or in parties (for example, duties owed as directors of company and for a proper purpose, when a director is also a director of another the constitution, required to be exercised by the other companies). company within the group (although, under company in a general shareholders’ meeting. > to exercise a reasonable degree of care, skill and diligence, and Australian law, the constitution of a wholly- Under statute, a director must notify the other The directors must exercise their powers by owned subsidiary may provide for its directors to directors of any “material personal interests” > to avoid actual and potential conflicts of taking decisions collectively as a board, meaning act in the best interests of the holding company), they have in matters that relate to the company’s interest / duty. that where the law requires or allows directors to or has been appointed by a specific shareholder. affairs (this can be done by standing notice). do certain things, such as calling a shareholders’ Under statute, directors also must not Exemptions include where a contract is subject In a situation where a company is or may meeting or issuing shares, such action should improperly use their position, or information to shareholder approval, in relation to the become insolvent, its directors will owe duties usually be approved by the board rather than obtained because they are a director, to gain an director’s remuneration, where the interest to creditors. a sole director. Directors may, however, be advantage for themselves or someone else, or to relates to permitted insurance or indemnities, permitted to act individually where specific cause detriment to the company. or, for proprietary companies, where the other powers and responsibilities have been delegated directors are already aware. The general law duties require directors to to them by the board. For example, under the take reasonable steps to put themselves in a Public company directors with a material replaceable rules or a constitution, a director position to guide and monitor the management personal interest may not generally vote may be appointed to act as managing director of the company. In particular, they must have or be present while the relevant matter is of the company. a general understanding of the company’s considered at a board meeting unless permitted Unless a company’s constitution provides business, act in accordance with its constitution by the non-interested directors (subject to otherwise, the directors may delegate any or, where applicable, the replaceable rules and statutory requirements).