Appointment of directors
Appointment of directors is a process of formal appointing to an office of director. The formal way is required due to some legal issues. Directors are appointed by the investors or owners - in small companies usually from themselves, in large often employed or promoted. The person appointed to the office of director has to be accepted by all eligible investors or owners, has to sign his/her consent to hold the office and cannot be disqualified for any reasons (e.g. some legislative restrictions). Appointment of directors happens usually during general meeting. [1]
Appointment of directors - methods
Typical methods fo appointment of directors are:
- by signatures to the memorandum,
- by company in general meeting,
- by board of directors,
- by third parties,
- by proportional representation,
- by central government.
Board of directors in joint-stock company
In the case of a joint-stock company, the appointment of a supervisory board is always obligatory. Moreover, such a company can not be registered without the appointed controlling authority. The council must also exist throughout the company's existence. If the company has been deprived of the supervisory board for more than three months, the members of the management board shall be held criminally liable under the Code of Commercial Companies.[2]
Composition of the supervisory board
The statute must specify the number of board members or at least the minimum or maximum number of members of the supervisory board and the entity authorized to determine its composition. The specific names and surnames of board members should be provided in the company's application to the registry court. The Commercial Companies Code requires that the council should consist of at least three members, and in public companies, at least 5 members, but it should be remembered that for specific types of joint-stock companies, specific provisions provide for higher numerical requirements.
Requirements to be met by a member of the supervisory board
A member of the council may only be a natural person with full legal capacity, not convicted by a valid court judgment for offenses against information protection, document reliability, property, trade, money and securities trading, and crimes specified in the Code of Commercial Companies (related to acting to the detriment of the company by its founders or members of the bodies, announcing false data, allowing unlawful voting at the general meeting or unauthorized voting). This ban is valid for 5 years from the validation of the sentence, minimum 3 years after the sentence, but within the first 3 months (if the offense was not committed intentionally) you can apply to the court to shorten or abolish it.
Appointment and dismissal of the supervisory board
Members of the supervisory board are appointed and dismissed by the general meeting of shareholders, although the statute may regulate this matter differently. It may, for example, provide for the selection of a council by state or local government bodies or any other entities (even other companies). It is only excluded that the statute establishes the principles of selecting a council that would be contrary to the law or the essence of this body.
Footnotes
| Appointment of directors — recommended articles |
| Share certificate — Shareholder register — Nominee shareholding — Mandatory disclosure — Shareholders Agreement — Confession Of Judgment — Authorized person — Special resolution — Adverse Action |
References
- Ferris S. P., Jagannathan M., Pritchard A. C. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. The Journal of finance, 58(3), p. 1087-1111.
- Roach L. (2016). Company Law OXFORD University Press p. 68.
- Saharay H. K. (2008). Company Law Universal Law Publishing Co. p. 279
Author: Klaudia Wróbel
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