When entering into contracts, changing the legal representative of the company or participating in transactions and other activities, enterprises should ascertain the competence of the board of directors and the general meeting of shareholders to guarantee correct compliance with current legal regulations.
1. The competence of the board of directors (BOD) and the general meeting of shareholders (GMS) depend on certain values and objects of the contract:
The BOD has the right to approve contracts of purchase, sale, loan or any other contracts worth 50 per cent or more of the total asset value recorded in the most recent financial statement of the company, or a smaller percentage if otherwise provided for in the company charter.
However, in case of contracts and transactions between the company and the following persons/entities:
– Shareholders or authorised representatives of shareholders owning more than 35 per cent of the total ordinary shares of the company and their related persons;
– Members of the BOD, director or general director;
– Members of the BOD, members of the control board, director, general director, or other managers of the company owning capital contribution or shares; or their related persons individually or jointly holding capital contribution or shares greater than 35 per cent of the charter capital of another company;
The GMS must base on the value of contracts and transactions to determine which case belongs to the competence of the BOD, specifically:
If the value of contracts and transactions is less than 50 per cent of the total asset value recorded in the most recent financial report of the company or a smaller percentage as regulated in the company charter, the competence to make decisions belongs to the BOD. On the contrary, the decision-making authority will be the GMS in case of contracts and transactions other than those previously mentioned herein.
2. New share offering:
The types and total quantity of shares of each type permitted to be offered will be proposed by the BOD, on which the GMS shall have the right to make decisions.
The BOD is responsible for determining the offering price.
Furthermore, the annual amount of dividend per share shall be proposed by the BOD and decided by the GMS.
In the event of any inconsistency between the provisions of the company charter and the above mentioned, the charter shall prevail.
3. Change of the legal representative of the company:
In case changing of the legal representative of the company leads to change in the content of the company charter, the decision-making competence shall be of the GMS.
In contrast, if changing the company's legal representative does not affect the contents of the company charter, the BOD shall have the authority to make decisions.
One should also note that the following activities of a company must be approved by the BOD:
Establishing a branch, subsidiary, or representative office;
Appointing, dismissing, and entering into labour contract with a director or general director and other important managers stipulated in the company charter.
PLF – LAW FIRM