Tag: διοικητικό συμβούλιο ανωνύμων εταιρειών

In a series of our previous articles, we explored the responsibility of the members of the Board of Directors of an SA. Specifically, we looked int the internal (intra-company) liability of the members of the Board of Directors for their actions or omissions, which risk the company’s property (art. 102-108, law 4548/2018). Also, with the “external” responsibility of the directors of the SA for the direct damage to shareholders or third parties due to their (illegal and culpable) actions. In addition, with the liability of the aforementioned persons vis-à-vis corporate creditors due to causing or delaying the bankruptcy or from tax violations of the SA. In the present article we will examine the other responsibilities (civil, administrative, criminal) that may be borne by the administrators of the SA from custom-related violations of the SA and non-payment of insurance contributions. Also, from the potential disloyalty of the managers of the legal entity at the expense of the latter, as well as from the criminal provisions of the bankruptcy code. And all this in the light of the provisions for money laundering from criminal activities.

Liability From Non-Payment of Insurance Contributions

Joint and several liability of the administrators of the SA, with the latter, is established regarding the (non)payment of insurance contributions.

In particular, legal representatives, presidents, administrators, managing directors, authorized management and liquidators of legal persons and legal entities (as defined in art. 3 of Law 4174/2013) are personally, jointly and severally liable for the payment of insurance contributions, additional fees, surcharges and other charges owed by the legal persons and legal entities to the Social Security Institutions, regardless of the time of their certification. In this case, in order to establish its liability, the conditions for joint and several liability in fiscal offenses must also be met [see art. 31 Law 4321/2015, as amended by Law 4646/2019 (Article 66 of which was amended pursuant to Article 31 Law 4701/2020), and e-EFKA Circular 62/21].

Specifically, in order to establish the said liability of the above persons, the following conditions must be met cumulatively:

(a) The aforementioned persons must have had the above qualities during the time of operation of the legal entity or at the time of its dissolution or merger or during its liquidation.

(b) The debts became overdue during the term of office of the above persons (subject to the law regarding the time of reduction of the debts when any tax is imposed following an audit by a tax authority and the cases subject to settlement). If, therefore, a debt becomes overdue in the following year from the one to which it relates, then the person who exercises the administration of the SA when the debt became overdue is responsible. In other words, the person who was in charge of the SA at the time the disputed debt was incurred is not liable.

(c) The debts were not paid or attributed to the State due to the fault of the above persons-administrators (with the explicit clarification, however, that the burden of proof for the eventual non-existence of culpability is borne by the specific persons). In the event that the above persons are responsible (as discussed above), their culpability is also presumed. Unless these show a lack of culpability. The reformation of the institutional framework related to the issue aims at the assumption of responsibilities by persons who actually exercised management during the critical time of the creation of the tax debt. That is, by persons who had the ability to act in the name and on behalf of the legal entity and fulfill its obligations.

Furthermore, the provision of article 1 §1 and 2 of Law 86/1967 is still in force, which criminalizes – subject to conditions – the non-payment of employer contributions as well as the withholding and non-return of employee contributions. The relevant sanctions are also not insignificant (: a prison sentence of at least 3 months and a cumulative fine of at least 10,000 drachmas and a prison sentence of at least 6 months and a cumulative fine of at least 10,000 drachmas, respectively). At the same time, according to §7 para. a’ of the same article, as perpetrators for employers who are not natural persons, of the relevant offences, the following are considered with regard to national SAs: the presidents of the Board of Directors, the managing directors or authorized or co-acting advisors, the administrators, the general managers or directors and in general any person entrusted either directly by law or by private will or by court order to the administration or management thereof. If all the above persons are missing, the members of the boards of directors of these companies are considered as perpetrators, as long as they actually temporarily or permanently exercise one of the aforementioned duties.

Liability for Customs Violations

Liability of the administrators of the SA may be established (also) due to customs violations.

Specifically, based on the provisions of the Customs Code (law 2960/2001), a customs debt is the obligation of any natural or legal person vis-à-vis the Customs Authority to pay all duties, taxes, including value added tax (VAT), and the other rights of the State, which correspond to goods and burden them according to the relevant provisions.

For the payment of the customs debt, the following are personally and jointly and severally responsible for the payment of the customs debt: the presidents of the Board of Directors, the managing directors or authorized or advisors acting jointly, the administrators, the general managers or directors, and in general, any person authorized, either directly by the law, either by private will or by court order in their administration or management. If all the above persons are missing, the members of the boards of directors of these companies are considered to be perpetrators, if they actually temporarily or permanently exercise one of the aforementioned duties, as well as the SA liquidators, at the time of their dissolution or merger, regardless of the time of attestation of the debt (articles 29 and 153 of paragraph a of Law 2960/2001).

The same, aforementioned, persons are considered perpetrators or, as the case may be, accomplices of the offenses of smuggling and, as a result, are exposed to the relevant (not insignificant) criminal sanctions (: in its basic form, imprisonment of at least 6 months – art. 157).

Liability Under Criminal Provisions of the Bankruptcy Code

The Bankruptcy Code (law 4738/2020) includes a series of provisions (arts. 197-203 of the Bankruptcy Code) that provide for the criminal liability of managers, members of the administration and directors of legal entities to which any bankruptcy is referred, as long as these persons have fulfilled the prescribed in the said provisions unfair acts (art. 202 § 1 Bankruptcy Code). In particular, the persons in question may be held liable for the offences of: (a) bankruptcy (art. 197 Civil Code) and (b) favorable creditor treatment (art. 198 Civil Code).

Furthermore, as expressly defined, administrators, members of management and directors of legal entities are punished with the penalties of §1 of the article on bankruptcy (: prison sentence of at least 2 years and a monetary penalty – no. 197 of the Civil Code), and in the case of receive of advance payments, higher than those provided for in the decision of the competent corporate body or in the statute of the legal entity (art. 202 § 2 Bankruptcy Code).

Liability Under Criminal Code Provisions: The Crime of Infidelity

The management of an SA and its members may be liable (also) under the provisions of the Criminal Code for the crime of infidelity (art. 390 law 4619/2019) when they knowingly cause certain damage to the property of another, who have, by law or legal action, the custody or management.

Regarding administrative offenses against the property of a legal entity, this crime is committed by those who violate the rules of diligent management – of course also the members of the board of directors of the SA.

The persons in question are punished with imprisonment and if the damage caused is particularly great, with imprisonment of at least three months and a monetary penalty. In the distinguished form of the crime, if the damage caused exceeds a total of one hundred and twenty thousand euros, imprisonment for up to ten years and a fine are imposed.

Laundering of Proceeds of Criminal Activities

It is pointed out, finally, that the above crimes of smuggling and non-payment of debts to the State are included in the “basic crimes” for establishing responsibility in terms of money laundering (law 4816/2021). In other words: the crime of legalization of illegal proceeds is concurrent, cumulatively (also) with the aforementioned crimes. The threatened penalties for the crime of money laundering are not at all negligible (: in its basic form, the wrongful act is punishable by imprisonment for up to 8 years and a fine from 300 to one thousand 1,000 daily units – no. 6).

We have already established that the responsibilities of the members of the Board of Directors are extremely extensive. They derive from the provisions of the law on SAs and extend beyond it. The latter, in fact, seem more important. For obvious reasons, it seems that the provisions concerning the liability of the members of the Board of Directors and administrators of the SA for the non-payment of the latter’s insurance obligations seem to attract greater interest. The liability of the liable legal entity and its co-obligatory natural persons/managers is joint and several. Corresponding are the responsibilities of the administrators of the SA from violations of the Customs and Bankruptcy Code. But more important, for many reasons, are the relative criminal responsibilities of the managers-individuals involved. Of course, the responsibilities and penalties of the crime of infidelity. If we consider, in fact, that those responsible will be prosecuted, potentially (and cumulatively) for money laundering, we realize – in this case as well- that the relevant responsibilities are not at all simple. Neither negligible.-

Stavros Koumentakis
Managing Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 17th, 2023).

Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

In a series of our previous articles, we looked into the responsibility of the members of the Board of Directors of an SA. Specifically, we examined the internal (intra-company) liability of the members of the Board of Directors for their actions or omissions, which endanger the company’s property (art. 102-108, law 4548/2018). Also, with the “external” responsibility of the directors of the SA for the direct damage to shareholders or third parties due to their (illegal and culpable) action. In addition, the liability of the aforementioned persons towards corporate creditors due to causing or delaying the bankruptcy. In the present article we will look into the other responsibilities that may fall on the administrators of the SA from tax violations of the latter.

Liability for Fiscal Violations

Joint Liability of Managers of the SA

The administrators of the SA are, subject to conditions, personally and jointly liable for the tax debts and obligations of the SA.

Specifically, as expressly provided in article 50 Code of Fiscal Procedure (law 4987/2022), “Persons who are executive presidents, directors, general managers, administrators, managing directors, appointed to the administration and liquidators of legal persons and legal entities, as well as and the persons who in fact exercise the management or administration of a legal person or legal entity, are personally and jointly liable for the payment of income tax, withholding tax, any imputed tax, VAT. and ENFIA, owed by these legal persons and legal entities, regardless of the time of their certification, as well as for interest, fines, surcharges and any administrative monetary sanctions imposed on them… “.

In order, however, to establish the said responsibility of the specific persons, the following conditions must be met cumulatively:

(a) The aforementioned persons must have had the above qualities during the time of operation of the legal entity or at the time of its dissolution or merger or during its liquidation.

(b) The debts became overdue during the term of office of the above persons (subject to the law regarding the time of reduction of the debts when any tax is imposed following an audit by a tax authority and the cases subject to regulation). If, therefore, a debt becomes overdue in the following year from the one to which it relates, then the person who exercises the administration of the SA when the debt became overdue is responsible. In other words, the person who was in charge of the SA at the time the disputed debt was incurred is not liable.

(c) The debts were not paid or attributed to the State due to the fault of the above persons-administrators (with the explicit clarification, however, that the burden of proof for the eventual non-existence of culpability is borne by the specific persons).

This is, therefore, non-genuine or illegitimate objective liability. This means that in the event that the above persons are held responsible (as discussed above), their culpability is also presumed. Unless these show a lack of culpability.

Law 4987/2022, in continuation of Law 4646/2019, aims to correct the incorrect wording of the existing CFP regime. Based on the latter, it was usual for natural persons to be liable (also), who, although they participated in the management of the SA, did not, however, exercise management in reality.

In this specific context, the Explanatory Report n. 4646/2019 states that under the previous regime, the additional joint and several liability of those exercising administration to legal persons or entities for the tax debts of the latter was structured in such a way that it could be imposed on persons who they had no participation in the administration. In other words, obligations were born to the above persons, simply because they happened to be in charge at the time of dissolution or merger of the company.

Given the above, the reform of the institutional framework is aimed at the assumption of responsibilities by persons who actually exercised management during the critical time of generation of the tax debt. That is, by persons who had the ability to act in the name and on behalf of the legal entity and fulfill its obligations.

Criminal Liability of Directors of the SA

In order to prevent violations of the tax legislation by the liable legal entities, criminal sanctions are threatened against the managers (and) of the SA. The specific sanctions concern the offences: (a) tax evasion and (b) non-payment of confirmed debts to the State and the wider public sector.

(a) With respect to the crimes of tax evasion:

The crimes of tax evasion are standardized in article 66 KFD.

Specifically, the crime of tax evasion is committed by anyone who intentionally conceals taxable income in order to avoid paying income tax, ENFIA or special real estate tax. Also, anyone who does not pay VAT, PKE, insurance premium tax and withheld and imputed taxes, fees and contributions (having completed the above actions as, specifically, described in the law).

Based on the value of the violation, the crime takes either a misdemeanor or a felony form, leading to a different penalty (from at least two years in prison to imprisonment).

The crime of tax evasion is also committed by anyone who issues false or fictitious tax information, as well as anyone who accepts fictitious tax information or falsifies such information, regardless of whether or not they are evading tax payment.

Especially with regard to legal entities – and, in this case, SAs – the legislator determines the perpetrators (and accomplices) of the (above) crimes of tax evasion.

Specifically, it is provided that as perpetrators in the AU countries, if by any act or omission they contributed to the commission of the above offences, the following are considered:, as well as in general any person mandated either directly by law or by private will or by court decision in the administration or management or representation thereof. If all the above persons are missing, the members of the boards of directors of these companies are considered as perpetrators, as long as they actually temporarily or permanently exercise one of the duties mentioned above. » (see art. 67 §1 CFP).

Furthermore, it is provided that “the person who knowingly signs an inaccurate tax return as a proxy, as well as anyone who in any other way knowingly cooperates or offers direct assistance in the commission of these crimes, is punished as a direct accomplice ” (see art. 67 §3 CFP).

While, finally, as perpetrators or participants of the above crimes, it is expressly provided that they are also considered “…those who actually exercise the powers and responsibilities that correspond to the roles and positions named in the KDF.” (see art. 67 §4 KFD).

(b) Regarding the offense of non-payment of confirmed debts to the State and the wider public sector:

The offense of non-payment of debts is committed by anyone who does not pay the debts certified to the Tax Administration to the State, legal entities under public law, businesses and organizations of the wider public sector for a period of time longer than four months (art. 25 § 1 Law 1882/1990).

The commission of this offense is punishable by imprisonment. Its amount depends, also in this case, on the value of the debt.

And with regard to the specific offence, the legislator expressly determines the persons against whom the relevant penalties are imposed in the cases of the nationals of the Republic. Specifically, as provided for “…the prescribed penalties…are imposed, in order: for domestic limited liability companies, to the presidents of the Board of Directors, to the managing directors or authorized or co-acting advisors or managers or general managers or directors thereof or to any person authorized or directly by the law either by private will or by judicial decision in the administration or management thereof, cumulatively or not.”.

It is further provided that in the event that all the above persons are absent, the penalties are imposed against the members of the Board of Directors of these companies, as long as they actually exercise, temporarily or permanently, one of the above duties (art. 25 § 2 par. a) Law 1882/1990).

For the above persons, the criminal prosecution is carried out for the debts to the State and third parties – except private individuals. The debts were confirmed at the time of acquisition of any of the above properties or were confirmed while they had the specific property (and this, regardless of whether they later rejected this property in any way or for any reason). Also, for the debts that were confirmed regardless of the dissolution or not of the SA, but were born or go back to the time they had this relevant status (art. 25 §3 law 1882/1990).

It was clarified, in fact, by an explicit legislative regulation (:469PC) that “…in the application and in the table of debts, the debts arising from the non-execution of fines imposed by a criminal court are not included and are not calculated for the determination of the person’s responsibility the related surcharges, interest and other charges as well as the debts from the offenses standardized in article 66 of the Tax Procedure Code together with the related surcharges, interest and other charges”. The legislator, in other words, authentically removed the charge of violation of the principle of the prohibition of double jeopardy (ne bis in dem).

Laundering of Proceeds of Criminal Activities

It should be pointed out, however, that the above crime of tax evasion is included in some of the “basic crimes” for establishing liability in terms of money laundering (Law 4816/2021). In other words: the crime of legalization coincides, cumulatively, with the crime of tax evasion. The threatened penalties for the above offense of money laundering are not at all negligible (: the offense in its basic form is punishable by a prison sentence of up to 8 years and a cumulative fine of 300 to 1,000 daily units).

The responsibilities of the board members are extremely extensive. They (also) derive from the provisions of the law on SAs. However, the other relevant regulations are probably the most important. Among them, the provisions concerning the liability of the members of the Board of Directors and administrators of the SA for the non-payment of the latter’s tax obligations are of great importance. The liability of the liable legal entity and the co-obligatory natural persons is joint and several. But more important, for many reasons, are the relative criminal responsibilities of the latter. If we consider, in fact, that those responsible will potentially be prosecuted for money laundering, we understand that the relevant responsibilities are not at all simple. Neither are they negligible.-

Stavros Koumentakis
Managing Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 10th, 2023).

Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

In our previous article, we were concerned with the intra-company (internal) responsibility of the managers of the SA. Is it possible to remove such responsibility with the approval by the General Assembly of the overall management of the administrators of the SA (art. 108 of law 4548/2018)? And, further, what is the possible or appropriate content of such an approval?

The regulation

According to the law (article 108 §1 paragraph a): “By decision of the general assembly, taken by open vote after the approval of the annual financial statements, the overall management that took place during the corresponding corporate year can be approved”.

This arrangement deviates significantly from the previous legislative regime. The General Assembly does not “absolve”, as in the past, the Board of Directors “from all responsibility” (a provision that had created intractable legal problems, especially regarding the position of this “exemption” in the system of responsibility of the Board). The GA approves, on the contrary, the “overall management”, the governance, that is, of the company in general. It does not approve individual acts or omissions that have, possibly, damaged the company. The responsibility of the Board of Directors remains intact, and is judged based on the relevant provisions (especially articles 102 et seq. – see also Memorandum to law 4548/2018 on article 108).

With such a decision, the General Assembly evaluates and (as a rule/custom), approves the way the company is managed by the Board during the monitored corporate year. It demonstrates, that is, with its approval, the satisfaction (or not) of the General Assembly with the way the SA was managed. It is, for this reason, also characterized as a “political decision” or a decision with “moral significance/value”).

As in all its decisions, the General Assembly is not obliged to make a reasoned decision on the approval (or not) of the overall management. And, as such a (positive) decision is not binding for the General Assembly, it is possible to freely recall, after the fact, the members of the Board of Directors (art. 77 §2 section b’).

Decision on Overall Management

Objective

The above decision of the General Assembly has as content the approval or not of the management of those who managed the SA during the past fiscal year. This evaluation can take the form of confirmation or, alternatively, of criticism of the business strategy and action of the Board. The negative decision of the General Assembly, in the last case, will demonstrate the unsuccessful, from a business perspective, management on the part of the administrators.

Time of the Decision

The GA decides on the issue of approval (or not) of the overall management after the approval of the annual financial statements. In this way, the shareholders have at their disposal a valid basis and sufficient, presumptively at least, information to make their decision in question.

The shareholders’ meeting can take the relevant decision either at the regular General Assembly regarding the approval of the financial statements or at a later point in time (: extraordinary General Assembly). In the first case (necessarily) the issue of financial statements precedes the agenda.

It is recalled that the latest point in time for the approval of the financial statements is, most commonly, September 10 of the year following the end of the corporate year – when the corporate year ends on December 31. Accordingly, March 10 when the corporate year ends on June 30 (art. 119 §1). However, there is no limitation in the law regarding the time of making the decision for the approval of the overall management.

Persons Affected by the Decision

The Board of Directors is responsible for the management of the company and, by extension, the management of the company’s assets. It is reasonable, therefore, for the decision of the General Assembly to concern the members of the Board. This does not mean that the decision names specific advisors but, on the contrary, it concerns the entire Board as a whole. It is not excluded, however, that the management of some members will be approved while the management of some others will not. The decision to approve the overall management also covers (art. 102 §5) any substitute bodies (art. 87).

The relevant decision, however, does not concern the auditors of the company for whom an independent decision is made.

Voting

Procedure

As the law expressly states, voting is public. This is justified by the nature of the relevant decision and the need for transparency.

Under the previous legislative regime, the corresponding provision (art. 35 n. 2190/1920) provided for voting by roll call. This did not necessarily mean, however, that the relevant vote was overt. It was argued, then, that after the roll call, the respective shareholder voted by ballot. However, the new provision dispelled earlier doubts in favor of open voting.

Finally, voting is special. The relevant provision already existed from the previous legislative regime and is still valid (although it is not explicitly provided for). This means that the management approval decision is discrete. It is, i.e., a separate agenda item from the approval of the financial statements, for which an independent decision is taken.

Participation right

The shareholders of the company participate, of course, in the voting of the General Assembly on the approval (or not) of the overall management. The participation of advisors as shareholders or shareholder representatives in said voting is not prohibited. They can, in principle, directly exercise their (potential) right to vote.

However, according to a special regulation (art. 108 §2) the members of the Board of Directors are entitled to participate in this vote: (a) only with shares of which they are owners or (b) as representatives of shareholders, provided that they have received the relevant authorization with express and specific voting instructions.

Therefore, advisors can be authorized to vote on behalf of (other) shareholders. The relevant authorization requires explicit and specific instructions. The purpose is to avoid serving the same interests of the members of the Board of Directors and securing a vote in favor of the overall management. Therefore, it is necessary not to leave room for the authorized-consultant to decide on the approval of the management.

The same applies to the authorization (and participation in the relevant vote of the General Assembly) of the company’s employees. And this is because the latter could be influenced by the management due to the dependent nature of their work and their eventual participation in the management under evaluation. These persons can be either ordinary employees of the company or substitute bodies (therefore what was pointed out above applies to the members of the Board of Directors), who are called upon to exercise the right to vote of third-party shareholders.

Legal Consequences

The law distinguishes the decision to approve the overall management from the company’s waiver of its claims due to the responsibility of a member of the Board of Directors or its compromise . These actions of the company can take place “…only under the conditions of paragraph 7 of article 102”. As already, above, we established, regardless of the content of the decision of the General Assembly, the responsibility of the Board remains intact. It is judged according to the provisions on the responsibility of the members of the Board of Directors .

In the above context, the only legal (but also practical) consequence of the approval of the overall management is its consideration in any lawsuit aimed at the restoration of the company’s damage caused by acts or omissions of members of the Board of Directors. The eventual approval of the overall management will be taken into account – if it was provided – when the issue of liability will be decided in court (see Memorandum to law 4548/2018 on article 108). In essence, the defendant member of the Board of Directors can invoke, in the relevant trial, prior approval of the overall management by the General Assembly. Although, of course, this is not, by itself, a reason for exonerating them from any responsibility. Similarly, any non-approval is not proof of any liability, nor is it a prerequisite for a relevant decision on the matter.

In any case, it is possible that the General Assembly, despite the approval of the overall management, may later initiate claims against members of the Board. Although such an attitude may seem (and under certain conditions may be) abusive, the raising of claims by the company after a positive decision to approve the overall management may be justified. For the following, in particular, reasons: On the one hand, the shareholders may have become aware, at a time subsequent to the approval of the management, of the real facts that establish the responsibility of members of the Board of Directors. On the other hand, it is not excluded that the minority, representing 1/20 of the paid-up capital, seeks, as it has the right to, to establish liability against the members of the Board of Directors (art. 104 §1). A minority that, even if it had been formed at the time of approval of the management, could not have influenced the relevant voting and decision.

Therefore, in order to take into account the approval of the overall management (and to consider the raising of claims against the members of the Board of Directors abusive), the General Assembly should receive sufficient, relevant, information and decide based on them.

Finally, it should be pointed out that there is an open debate as to the time when the approval of the overall management can be taken into account. Part of the legal theory holds that consideration is possible only at the stage of the main trial for the compensation of the company by members of its Board of Directors – as, after all, the law provides. However, it seems more correct that such an approval can also be taken into account during the stages of investigating the feasibility of filing a corporate lawsuit (art. 105 §2 section c and 105 §6).

Based on the previous law, the General Assemblies of the SA took decisions “on the exemption of the Board of Directors from all responsibility”. Such decisions and formalities no longer have any legal basis or legal value. The possibility provided by the law to approve the management of the members of the Board of Directors can, apart from its moral value, acquire particular importance in a trial for the restoration of the damage of the SA at the expense of a member/members of the Board. We should, therefore, be absolutely careful either as the providers of approval and/or as the applicants for its receipt.-

Stavros Koumentakis
Managing Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (July 16th, 2023).

Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

We have already established the critical role of the Board of Directors for the SA. We referred, in the context of our related article, to the beginning of its collective action. The legal making of its decisions requires a number of conditions. On them, but also on the representation of its members, the present article.

The Principle Of Collective Action Of The Board; Its Assurance.

From the principle of collective action of the Board of Directors mentioned in the introduction (art. 77 §1 ed. b’ of Law 4548/2018) it follows that the specific body acts, in principle, collectively. Ensuring the possibility of the participation of all the members of the Board of Directors proves, in this regard, to be particularly important. Let it be reminded, parenthetically, that from the principle in question, statutory deviations are tolerated (: the common practice) [ ind.: the appointment of a substitute body and the sovereignty of the president’s vote in the event of a tie (art. 92 par. 2 sub. b’)].

In order to ensure the participation of all the members of the Board of Directors in the decision-making process, specific conditions must be met: the existence of a legal composition and the concentration of the quorum and majority prescribed by law and/or the articles of association. If a decision is taken, without observing them, the consequence is that it becomes defective (according to art. 95). In fact, it results in the absolute nullity of the decision (art. 174 CC), which is considered as if it did not take place (art. 180 CC).

A later legal administration, however, can retroactively enforce invalid acts of the previous non-legal one, by approving them (ind.: 966/2014 Court of Appeal of Athens, NOMOS Legal Database). The same goes in the case of a subsequent approval by the same body, which legally meets and takes a decision.

Conditions for Valid Decision Making

Legal Composition of the Board of Directors

In order for the composition of the Board to be legal, it is required that: (a) the election or appointment of the Board does not contravene the law and (b) the number of members of the Board, as determined by the articles of association or the General Assembly, does not exceed the limits of the law and the statute – and neither falls short of them. The number of members of the Board of Directors (see for reference) cannot, by law, be less than three or exceed fifteen (art. 77 §3).

During the term of office of the Board, a member or members may lose their status in any way. In this case, in order for the composition of the Board to be legal (from that point on), their substitution or replacement is required (art. 81 and 82, respectively). This, of course, does not exclude a statutory provision for the continuation of the operation of the Board of Directors without replacing the missing ones (art. 82 §2). It is sufficient that the remaining members are more than half of those elected/appointed. Additionally: that they are no less than three.

Quorum

By Law

A prerequisite for the valid decision-making of the Board of Directors is the observance of the quorum, required by law (art. 92 §1 ed. a’). The Board is in a quorum and meets validly-by law, when at least half plus one of its members are present (:50%+1 advisors). Any fraction is omitted (art. 92 § 1 sec. b).

In no case, however, is it possible (here as well) for the number of advisors who are either present or/or represented to fall short of three. The older rule, which required, in any case, the physical presence of three members, was deemed unnecessary, since even in the case of the minutes signed in circulation (art. 94) the members of the Board of Directors can all be represented (see in this regard, Memorandum to law 4548/2018 on Article 92).

By the Statute

The provision for the legal quorum is of mandatory nature, in the following sense: It determines the minimum quorum percentages for making a valid decision of the Board of Directors. Determining, therefore-based on a statutory provision, lower percentages for the formation of a quorum than those required by law is not tolerated.

The articles of association, however, may require higher quorum percentages than those provided for in the law (: art. 92 §1). In fact, it is argued (not without objections) that the articles of association may require the presence/representation of all the members of the Board of Directors (: 100% of the advisors) for the formation of a quorum.

Basis of Calculation

To find the number of advisors required to form a quorum of the Board of Directors, the basis of calculation is the total number of its members. The specific number is determined, as a rule, by the articles of association. It is specialized, alternatively, by the General Assembly within the minimum and, respectively, maximum limits that may be set by the statute (art. 77 §3).

A condition for the formation of a legal quorum is the possibility to participate in the meeting of the Board of Directors of all its members. This means that in the event of a member losing their specific capacity, it does not matter if the remaining members of the Board of Directors are sufficient to form the required quorum. This is because the condition of the legal composition of the Board of Directors is not met (1408/2010 Supreme Court, NOMOS Legal Database). It is, however, possible for the number of remaining members of the Board to be the basis for gathering the required quorum. This, provided that the continuation of the operation of the Board of Directors is allowed by the statutes – without the replacement of any missing members.

In the case of an impediment to the participation of a consultant in the decision-making of the Board of Directors, the specific member is not included in the determination of the quorum. Without, in fact, the need to substitute them. This occurs in case of a conflict (in the obstructed person) of own and corporate interests (855/2007 Court of Appeal of Athens, 6648/1999 Court of Appeal of Athens, NOMOS Legal Database). Possible participation of the obstructed party in the taking of the contested decision results in its nullity. Much more so, when the vote of the disqualified person was a decisive for the taking the relevant decision.

Time of the Calculation of the Quorum

The start of the discussion of the Board of Directors marks the time of verification of the required quorum in each case. Mandatory, however, for the legitimacy of the decision of the Board of Directors, that its percentage be maintained throughout the meeting.

Majority

Majority set by the Law

The final condition for the valid decision-making of the Board of Directors is the observance of the required, by law, majority. The decisions of the Board of Directors are validly taken by an absolute majority of those members who are present as well as those who are represented during the meeting of the Board of Directors (art. 92 § 2 paragraph a). Those cases where the law itself defines otherwise are excluded from this rule. Indicative: the requirement of an increased majority (2/3 of all the members of the Board of Directors) for the decision to make an extraordinary increase in the share capital of the SA (art. 24 §1).

Majority set by the Statute

Deviations from the specific rule can also be introduced by the statute by claiming increased (: exclusive) percentages for making a specific decision. Or even unanimity (with the existence, however, of an opposing position on the matter). What is certain, however, is that the introduction of relevant statutory provisions for all decisions of the Board of Directors (especially unanimity), will make decision-making more difficult and, at times, impossible.

Calculating method

The majority required for a decision by the Board of Directors is calculated based on the persons/members of the Board. Each director has (by law) one vote (principle of equality of board members).

An exception is brought about by any statutory provision for overriding the vote of the  . Only, however, if there is a tie (art. 92 §2 ed b) A related clause aims to remove situations of inability to make corporate decisions (“deadlock”). Statutory clauses that, possibly, refer, e.g., to overriding, in general, the vote of the president or member of the Board of Directors (ind.: depending on the method of their election/appointment) are not legal.

To calculate the majority, the votes of the present and represented members are counted. In the minority, on the contrary, the blank votes and those of the abstaining members are included (apart from the votes that express positions different from the majority).

A case of non-counting of a member for the calculation of the required majority constitutes, as happens in the calculation of the quorum, the case of the existence of a voting obstacle in the person of the member (ind.: art. 66 CC and 97 §3).

Waiver of the right to vote is not possible.

Representation of Members

In General

The presence in person of the advisors at the meetings of the Board of Directors is not necessary for their participation. The members of the Board of Directors, as already mentioned, have an (inalienable) right to participate in it and to exercise the right to vote (also) by proxy. In this way, the conduct of the discussions of the Board of Directors body is simplified and issues of actual impossibility of representation of its members are resolved.

The possibility of representation constitutes a compulsory right and cannot be abolished by the statute (6884/1995 Multimember Court of First Instance of Athens, NOMOS Legal Database).

Conditions

It is not necessary to follow specific formalities for the representation to be valid. Necessary, however, is the cumulative occurrence of the following conditions: (a) representatives of advisers are appointed, exclusively, among the (regular or substitute) members of the Board of Directors (art. 92 § 4) and (b) each adviser can, validly, represent one, only, other advisor (art. 92 § 3).

Representation Content

The power of representation is exercised, in principle, within the limits and orders that may have been provided by the represented person. However, a vote of the representative contrary to the instructions they received from the represented member is considered (and correctly) as not rendering the decision of the Board defective. Even if the representative’s vote was decisive for achieving the majority (application by analogy of art. 128 §3).

However, the case of the presence of an obstacle regarding the participation of the representative (e.g. conflict of interest) is different. In this case, the represented person must provide the representative with a special instruction regarding the exercise and content of the vote (5834/1991 Single Member Court of First Instance of Athens, NOMOS Legal Database).

Participation with a representative in a meeting of the Board of Directors remains unacceptable, however, when the represented member faces an obstacle to participation (e.g. conflict of interest).

Although not the highest hierarchically, it could certainly be argued that the Board is the most important body of the SA. Its involvement, moreover, in defining the strategy, approving the business plan, budget, financial statements and, in general, in making important decisions is all the proof one needs. However, precisely because of the importance of the Board of Directors, it is understandable that the participation of its members should be protected by all means, and so must the alignment with what the law and the statute require for its operation. As, in fact, the law provides sufficient, relative, leeway, the statute must be adapted to the needs of each SA and, first of all, to the rules set by its shareholders. The decisions taken by the Board of Directors must be recorded, for the aforementioned (and many other reasons), in its relevant minutes. About them, however, see our next article.-

Stavros Koumentakis
Managing Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 5th, 2022).

Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

We have already examined the important role of the Board of Directors in our previous article. We were also concerned with its function and members; the rule and exceptions as to the manner of electing members and their alternates; the conditions of eligibility and the defects of their election or appointment. Finally, the scope of the powers of the Board of Directors and the possibility of appointing substitute bodies. In the present article, we will look into issues related to the convening of the Board of Directors: the place, the time and the conditions for a legitimate convening. Also, its head: the Chairman of the Board and their role.

The Chairman of the Board

Generally

The role of the chairman of the Board of Directors is critical for the operation of the Board of Directors.

Under the previous regime, matters relating to the chairman of the board (and their deputy) were tackled in practice on the basis of, usually, relevant statutory provisions. Under the current regime, it was considered appropriate to have such provisions in the relevant law, for the sake of completeness and to avoid disputes, taking into account: (a) the existence of scattered references in the law on SAs to the powers of the chairman (and his deputy) and (b) the lack of provision for the case of non-appointment of a president (see Explanatory Report n. 4548/2018 on article 89).

The relevant legislative provision (art. 89 n. 4548/2018) regulates issues related to the election (or appointment) of the president and their deputy, their replacement as well as the powers of the president.

Election/Appointment of Chairman (And Deputy) of the Board

As provided in the law (art. 89 §1), the president is (usually) elected by the Board of Directors, at its constituent sitting. Their election may be subject to certain conditions, provided for in the articles of association.

It is possible to appoint the first president from the statute-during the founding stage of the SA. Also by the General Assembly during the election of the members of the Board. It is therefore clearly concluded that the chairman of the board must also be a member of it. There is, however, an important exception: if there is no president (nor a deputy), the shareholder with the largest number of voting rights can temporarily act as president (art. 89 §1). The purpose of this regulation is to deal with emergency situations that arise in the absence of the president (and their deputy). The duties of the said (temporary) chairman may be to convene the Board of Directors for the election of a (new) chairman and to issue copies of the Board and General Assembly minutes.

The articles of association, the General Assembly and/or the Board of Directors may also elect a deputy president (usually: vice-president), in order to replace them in cases of unavailability or absence.

Replacement

The Board of Directors can (art. 89 §2) replace the president and their deputy – at any time.

In order to take the relevant decision of the Board of Directors, as long as there is no more specific regulation, a simple quorum and majority is required (according to art. 92 §§1 and 2). However, in case the president and the deputy have been designated by the statute or the General Assembly, then an increased quorum (2/3 of all members) and a majority (2/3 of those present) are required for the decision to replace them.

If the president (or their deputy) is replaced (or resigns), they still remain an ordinary member of the Board.

Responsibilities

The chairman of the Board of Directors exercises the powers provided by the law and the statutes (art. 89 §3). Their responsibilities are mainly of a coordinating nature regarding the functioning of the Board. The president convenes the Board of Directors and determines the agenda (art. 91 §2). They are charged with the authority to receive requests to convene the body. They decide on the entry of an opinion in the minutes of the Board of Directors and issues copies thereof (art. 93 §§1 and 2 respectively). They give the floor to the substitute members to speak to the Board (81 §3). The vote of the president prevails, in case of a tie, for the decision of the Board of Directors – as long as there is a relevant statutory provision. The chairman of the board, in one sense, can be granted a veto right when making decisions of the board.

In addition to the above, important powers for the operation of the Board, the chairman of the Board signs the amended statute (art. 4 §3). Receives requests to convene the General Assembly (art. 121 §2 and 141 §1). Is the temporary president of the General Assembly until the election of the final president (art. 129). Signs the balance sheet (art. 147 §1).

The chairman of the board may also be the managing director of the SA (or have such responsibilities, as executive chairman) – unless, however, it is provided otherwise, such as e.g. in financial institutions.

Board Meeting Place

Physical session

According to the general rule, the Board of Directors must meet in the municipality where the seat of the SA is located (art. 90 §1). In the articles of association, it is possible to provide for another place of meeting of the Board of Directors – even abroad (art. 90 §2). In case of more alternates, the choice of the place of the meeting of the Board of Directors rests with the president who convenes it. The Board of Directors, however, validly meets in any (other) place, as long as all its members are present or represented and no one objects (art. 90 §3). Similarly, in this case, the choice of the place of meeting belongs to the chairman of the Board of Directors. The latter must, however, ensure, in advance, the consent of the members of the Board of Directors for the off-site meeting.

Video conference

If there is a relevant statutory provision, the invitation to a meeting of the Board of Directors may stipulate that it will be held by teleconference (art. 90 §4) with respect to some and/or all of its members. In this case, the invitation must include the necessary information and technical instructions for the members’ participation in the meeting. The Board of Directors can also meet this way (as a whole), as long as all its members agree – regardless of a lack of a relevant statutory provision.

Each member of the Board of Directors is entitled, subject to conditions (art. 90 §5), to demand the holding of the meeting by teleconference only for them. Specifically, if: (a) they reside in a different country from the one where the meeting takes place or (b) there is another important reason, in particular illness, disability or epidemic.

Frequency of Board Meetings

In terms of the frequency of the meetings, there is no provision for a minimum number or for meetings at specific, regular intervals. The Board of Directors meets whenever the law, the statutes or the needs of the company require it (art. 91 §1).

Convocation of the Board of Directors

Power of Convening & Invitation

The Board of Directors, as we have already established, is convened by the chairman or their deputy (art. 91 §2, section a’) or, in their absence, by the majority shareholder (art. 89 §1).

For the legal convening of the Board of Directors and, by extension, its valid decision-making, a timely invitation of its members is required: (a) two working days before the meeting or (b) five working days, if the meeting is to be held outside of the company’s headquarters (art. 91 §2, section a’). For these deadlines, the day of the invitation and the day of the meeting of the Board of Directors are not taken into account. It is not necessary to publish the invitation to the General Assembly, nor to officially serve the invitation to the members of the Board of Directors with a bailiff (according to art. 122 et seq. of the Civil Code). It is sufficient to notify it in any convenient way (4377/2004 Multimember Court of First Instance of Athens) – e.g. to the e- mail that has been provided to the SA.

Furthermore, the items on the agenda must be clearly stated in the invitation. Issues that are not listed on the agenda can be the subject of a decision if all the members of the Board of Directors are present or represented and no one objects to the decision-making on them (art. 91 §2, section b).

Convening at the Request of Two Board Members

The initiative, competence and authority to convene the Board of Directors and determine the agenda items does not belong, exclusively, to its president. The convening of the Board of Directors may be requested by at least two of its members with a (preferably written) request to the president or their deputy. The latter two are required to convene the Board of Directors in a timely manner, so that it meets within seven (calendar) days from the submission of the application.

If the Board is not convened (by the president or their deputy) within the specified seven-day period, the requesting members are allowed to convene the Board themselves. The relevant invitation can be addressed to the other members within five days after the previous seven-day period has passed. If the five-day deadline elapses, it is considered that they (the requesting members) have waived their right to convene it.

Differentiation of Conditions and Deadlines for Convening the Board of Directors

In derogation of the publicity formalities and the deadlines set by the law (no. 91), it is possible, with a statutory provision, to shorten the deadlines for convening the Board of Directors as well as to define other formalities. The specific possibility concerns, exclusively, non-listed SAs. In any case, however, any statutory regulations should not make it more difficult, in the end, to convene the Board of Directors.

The role of the President of the SA Board is pivotal for the functioning of the body and, ultimately, of the SA. They ensure, among other things, the convening, meetings and smooth operation of the Board. In the case, however, that they are unavailable, unable or refuse to fulfill their duties, the law provides important freedoms and adequate safeguards. Their utilization is imposed not only through the activation of the other members of the Board of Directors and, possibly, the shareholders, but also through the appropriate statutory regulations. It is a given that all this will work in favor of the SA. They will also contribute to the smooth and optimal taking of the appropriate decisions of the Board of Directors, which, however, will be further explored in our next article.=-

Stavros Koumentakis
Managing Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 29th, 2022).

Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.