Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Jesper specialises in corporate litigation and governance
jesper.nooij@russell.nl +31 20 301 55 55In this blog, we give a brief overview of the main bodies present in limited companies and the powers they have.
When a business is run from a private or public limited company (besloten venootschap (bv) or naamloze venootschap (nv)), it has at least a management board and one or more shareholders. For small(er) companies, this may be the same person; the so-called director-major shareholder (directeur-grootaandeelhouder; dga). The board is charged with managing the company, whereby it must act in the interests of the company and its affiliated enterprise. In addition, the board represents the company.
Some companies have both a board of directors and a management board. The distinction is that a board of directors consists of directors who are registered as statutory directors. In most cases, these directors are appointed by the general meeting of shareholders. In addition, these directors are ultimately responsible for the affairs of the company and, for example, if things do not go well with the company, they can be held personally liable for (any) directors’ liability. In contrast, a management board consists of nominal rather than statutory directors and is generally tasked with the day-to-day management within a company. In most cases, a board member is not registered under the articles of association.
The chief executive officer (CEO) is the person ultimately responsible within the company. However, this position need not coincide with the position of chairman of the board of directors, but can also be the head of the management board. This therefore means that a CEO does not necessarily have to be registered as a statutory director.
The chief financial officer (CFO) is ultimately responsible for the financial affairs of a company. The CFO can be either a statutory director or a nominal director.
Directors can agree among themselves on the division of tasks so that the board members can focus on their own task. However, all directors remain responsible for the entire management tasks and can therefore also be held liable for the whole.
In addition, it is advisable to draw up a management code that sets out, for example, how the statutory and nominal directors relate to each other, how decision-making should take place and which additional activities the statutory and titular directors have. By having and complying with good management regulations, the statutory and titular directors act in line with their legal obligations.
A company may also establish a supervisory board to supervise and advise the management board. In some cases, the supervisory board also appoints the board members. Setting up a supervisory board is not mandatory, unless the company is a statutory two-tier company. If a listed company chooses to establish a supervisory board, at least one-third of the board must consist of women and one-third of men. This quota applies to a first appointment. In case of reappointment within eight years, this quota does not apply in principle. An exception to this is possible in some situations. The mandatory quota also applies to non-executive directors if the company uses a one-tier board model.
If a company has both a board and a supervisory board, it means that the company operates a two-tier board model. It is also possible to introduce a monistic board model within a company, where there is one board, divided into executive and non-executive directors. In such a system, the executive directors deal with the day-to-day tasks of the company, while the non-executive directors supervise the executive directors. In this case, the chairman of the board should always be a non-executive director. Mainly international companies opt for a monistic board model.
A private or public limited company has shareholders who jointly own the company and jointly form the general meeting. The general meeting has important duties, such as adopting the financial statements, discharging the directors for the past year and appointing and dismissing directors and (some of the) supervisory directors. The appointment and dismissal of directors can also be delegated to another body. In its decisions, the general meeting should always consider the continued existence of the company.
Finally, a company may establish a works council (ondernemingsraad; OR). A works council can be established voluntarily, but is mandatory if a company employs at least 50 people. The works council has advisory rights for important financial, economic or organisational decisions. In addition, the works council has the right of consent if the management intends to take decisions regarding personnel arrangements. If special occasions occur within the company, such as the transfer of the company or a change in the location where the company carries out its activities, the works council must be given a timely opportunity to issue an opinion.
Do you have questions about (setting up) certain company bodies and how they should be implemented within your company? We will be happy to provide you with advice. You can also contact us for other questions about corporate law.
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