CMS Adonnino Ascoli & Cavasola Scamoni CMS Albiñana & Suárez de Lezo CMS Bureau Francis Lefebvre CMS Cameron McKenna LLP CMS DeBacker CMS Derks Star Busmann CMS von Erlach Henrici CMS Hasche Sigle CMS Reich-Rohrwig Hainz Duties and responsibilities of directors in Europe With increased consolidation of business across Europe, executives of multinational groups can find that they are required to become directors of companies in a variety of jurisdictions, often at short notice. The rules relating to directorships vary considerably from jurisdiction to jurisdiction. This guide is intended to provide an overview of the duties and responsibilities of directors across 13 jurisdictions in Europe, answering the most frequently asked questions for directors coming from another jurisdiction. In many jurisdictions, there are various forms of company available, and there are different rules for directors according to the type of company used. This guide focuses for each jurisdiction on the most common form of company, and on the rules which apply to executive/managing directors. CMS is the alliance of major independent European law firms providing clients with a full range of legal and tax services based on a thorough understanding of their business. Operating in 47 business centres around the world, CMS has over 575 partners, more than 2,000 legal and tax advisers and a total complement of over 3,800 staff. This guide is intended only to provide a general overview of the matters covered. It is based upon the law in each of the countries as at 1st September 2005. However, the information contained in this guide is not comprehensive and does not purport to be professional advice. For further information on rules for directors of private companies in Europe, contact any of the following or your usual contact at CMS. Austria Germany Russia Peter Huber Jan Schepke David Griston [email protected] [email protected] [email protected] Johannes Trenkwalder Ludwig Linder [email protected] [email protected] Spain Carlos Peña Belgium Hungary [email protected] Cedric Guyot Istvan Kovari [email protected] [email protected] Switzerland Jean-François Goffin Dr Max Albers [email protected] Italy [email protected] Pietro Cavasola Hans Wille Czech Republic [email protected] [email protected] Richard Baček [email protected] The Netherlands United Kingdom Helen Rodwell Paulus van den Bos Barney Hearnden [email protected] [email protected] [email protected] Richard Montijn Martin Mendelssohn France [email protected] [email protected] Jacques Isnard [email protected] Poland Anne Charveriat Dariusz Greszta [email protected] [email protected] Duties and responsibilities of directors in Europe – 2 Contents Austria 4 Belgium 8 Czech Republic 12 France 16 Germany 22 Hungary 26 Italy 30 The Netherlands 34 Poland 40 Russia 46 Spain 50 Switzerland 56 United Kingdom 60 For each of the jurisdictions we cover the following key question areas: eligibility requirements, method of appointment, method of removal, authority and representation, working rules of the board, contractual relationship with the company, conflicts of interest, duties of a director, liability, limitation of liability, immigration issues, taxation and social security. Duties and responsibilities of directors in Europe – 3 Austria Peter Huber, [email protected] Johannes Trenkwalder, [email protected] Austrian private limited companies A company may have one or more generally have one board, namely a managing directors. Usually the number management board (Geschäftsführung). of managing directors is determined by All directors of the Management Board the articles of association. are ‘managing’ directors. The company must effectively be An additional supervisory board managed from within Austria. Otherwise (Aufsichtsrat) is mandatory if: it might be regarded as liquidated and taxed on built-in gains. the stated capital exceeds d 70,000 and the number of shareholders exceeds 50; A supervisory board must consist of at least three directors. Additional members may the number of employees of the be appointed unless the number of mem- company exceeds 300; or bers is restricted by the articles. Usually the number of directors of the supervisory the company centrally manages or, by board is determined by the articles. means of a direct interest exceeding 50%, controls private or public limited Members of the supervisory board may companies, and the total number of not simultaneously be managing directors, employees of the controlling and of the or permanent substitutes for managing controlled companies exceeds 300. The directors, or employees. Also, an individual articles of association may provide for must not be member of the supervisory an optional supervisory board. The board of more than 10 (in certain cases 5 supervisory board has a controlling or 20) private or public limited companies. function, and thus its directors are non-managing. If the employees have established a works council (which requires a minimum number of five employees), the works Eligibility requirements council may nominate one additional member of the supervisory board for There are few restrictions on who can every two members of the supervisory become a director. In particular, a board elected by the shareholders. This guide focuses on the director is not required to be resident in rules relating to private limited Austria, and there is no nationality companies (Gesellschaft mit requirement. Method of appointment beschränkter Haftung, GmbH). It does not address the rules for Only a physical person with full legal Managing directors are appointed by other forms of company, such as capacity can be appointed as a director. shareholder resolution. Managing the public limited company A legal entity or a partnership may not be directors may also be appointed by a (Aktiengesellschaft, or AG). appointed. Special provisions apply to provision in the articles of association, However, rules for private and directors that are shareholders. if and as long as they are shareholders. public limited companies are The period of appointment is not limited similar in many cases. unless the articles provide otherwise. Duties and responsibilities of directors in Europe – 4 Notification of the appointment, signed Notification of the removal or resignation “The actions of managing by the managing director(s), together with of a director, signed by the new or directors properly representing certified evidence of the appointment as remaining managing director(s), must be the company… are valid and well as a certified sample signature of the filed with the Commercial Register. A binding regardless of whether managing director must be filed with the small fee is payable. prior approval by the shareholders Commercial Register. A small fee is or by the supervisory board payable. is required or not.” Authority and representation The directors of the supervisory board are appointed by shareholder resolution. The By law, the managing directors can Contractual relationship with period of appointment must not exceed represent the company only simultaneously. the company five years. Notification of the appointment, signed by the managing director(s), must The articles of association may provide for Appointment by the shareholder be filed with the Commercial Register. a different form of representation and resolution as a director does not of itself Again, a small fee is payable. usually provide that one or two managing constitute a contract with the company, directors or, if there is more than one or entitle a director to remuneration. A managing director, one managing director company’s articles will generally only enti- “Members of the supervisory together with a ‘Prokurist’ (agent with tle members of the supervisory board to board may not simultaneously be limited power to represent) may represent reimbursement of expenses. Supervisory managing directors, or permanent the company. board directors’ fees commensurate with substitutes for managing directors, their duties may be payable to the extent or employees.” The actions of managing directors specified in the articles of association or properly representing the company – i.e. approved by resolution of shareholders. exercising such powers as are conferred Method of removal by law or by the articles, as seen above – A managing director may also have a are valid and binding regardless of contractual relationship with the A director may be removed at any time by whether prior approval by the company, e.g. as an employee under a resolution of shareholders. shareholders or by the supervisory board service agreement or as an independent is required or not. contractor providing services under a A director may resign at any time by giving consultancy agreement. Termination of notice to the company. However, such A managing director has full authority to any such contract will not automatically resignation may constitute a breach of manage the company. However, such terminate the directorship. Termination of duty or a breach of contract. The authority may be restricted by the articles the directorship will not automatically ter- resignation has immediate effect in cases or by shareholder resolution. In many minate, but may constitute a breach of, where there are substantial grounds for it cases the articles will provide that certain the related contract. to do so, otherwise it is effective after 14 key managing acts will be subject to prior days following notification of the general approval by the shareholders or by the assembly or of each shareholder. Even if supervisory board. Conflicts of interest only one managing director was appointed, resignation is still possible. A director has In the case of a conflict of interest a direc- certain obligations to clarify to the Working rules of the board tor must refrain from any action that company any business activities carried out might be detrimental for the company.