Legal guide for company directors and CEOs in Monaco

In Monaco, there isn’t any legal obligation concerning ESG reporting. However, some companies subject to ESG reporting in France may publish data concerning Monaco into their Extra-Financial Performance Statement (EFPS).

However, there are some legal obligations that can be categorised as ESG relevant.

Concerning the environment, there is the inventory of greenhouse gases (GHG) and atmospheric pollutants (Ministerial order n°2020-916) and energy audit (Ministerial order n°2018-613)

Concerning employee welfare, a harassment referent must be designated and receive reports of any act of harassment (law 1.547 of 2017).

All companies, regardless of their size, status or sector of activity can implement a corporate social responsibility (CSR) approach.

In this regard, directors may have obligations relating to ESG considerations relating to health and safety in accordance with Order n°4.789 of 8th September 1971 which provides the creation of Health and Safety Committee, responsible for adapting the regulations on health and safety of workers to each company.

These Committees are mandatory for a) industrial, construction and public works companies with at least 50 employees on a regular basis and b) commercial enterprises with at least 500 employees it being specified that this obligation may be extended to companies not having the above-mentioned workforce by ministerial order or by formal notice from the labour inspector.

These committees have to:

1. carry out an investigation on the occasion of each accident or each serious occupational disease;
2. proceed to the inspection of the establishment to ensure the application of the legal and regulatory prescriptions as well as the instructions relating to hygiene and safety;
3. ensure the proper maintenance of protective devices; organise the training of the teams in charge of the fire and rescue service ; give its opinion on any measure related to the purpose of its mission;
4. develop by the most effective means the sense of professional risk.

Furthermore, any company in Monaco can subscribe to a non-binding agreement such as:

• Monaco’s national pact for energy transition (2018) signed by nearly 200 companies, institutions and associations.

This charter sets out the three main areas of the energy transition concerning mobility (with the development of low carbon travel modes), waste (through an active policy of recycling, waste reduction and the fight against food waste) ad energy (through energy savings and the development of renewable energies).

Each year, an assessment (for example an interview) is carried out with the members in order to know their progress, success and challenges in the realisation of their commitments

• The charter on wood (2011)

This charter is aimed at Monegasque companies wishing to invest in a responsible approach to the use of wood, paper and furniture. As a result, companies commit to promote to customers and suppliers wood and wood-based products certified FSC or PEFC or from legal and sustainable forestry, as a means to fight deforestation; favouring the recycling of woods and scraps; ensure the traceability of wood and derived products.

As it is a voluntary process, the steering committee organises a follow up of the signatory companies and contacts all the organisations that have to answer an online questionnaire about their actions on wood, paper and furniture.

• Monégalité charter (2019)

It consists in a series of commitments to be adopted in a process of progress in gender equality at work in the framework of recruitment, training, promotion and career development, of access to positions of responsibility and equal pay.

As Monaco is one of the main European centres for private banking activities but also committed to sustainable development, a working group called “Monaco Sustainable Finance” has been created. The Association of Financial activities and the Financial Activities Control Commission are part of this group alongside the Minister of Finance and the Economy.

Friday 1st October 2021, during the third reunion of the group, the participants agreed to move forward in 2022 along the following lines: 

• Setting up a “dedicated ESG” correspondent within the establishments.
• Extension of “sustainable finance” training to all employees, in addition to client managers and the management team.
• Defining, together with local professionals, ESG reporting recommendations for clients, with simple criteria shared by all.
• Organisation of an international conference on the theme of sustainable finance in Monaco. 

 There are currently no ESG reporting obligations in Monaco.

The answers given hereunder focus on the “Société Anonyme Monégasque” (SAM). They do not address the rules on other limited liability companies such as the “Société à Responsabilité Limitée”.

In a SAM, the board of directors is composed of at least two directors. One president can be chosen among them. 

However, to be appointed as director and be part of the board of directors, the directors must be shareholders and hold at least one share in accordance with the company’s articles of association (which may provide for the need to hold more than one share). 

The directors appoint a president (by a board of directors' meeting) who will represent the company in its relationships with third parties and delegate powers of governance. 

The board of directors can convene general meetings and make certain decisions provided for in the articles of association. 

These notions do not exist in commercial companies in Monaco. 

However, there is a difference between: 

• Simple directors who are part of the board of directors without delegated powers;
• Managing directors who will have specific powers delegated by the board of directors (example: to sign documents for the bank up to a certain amount, etc.);
• President managing director (called in short “president”) who will have specific powers delegated by the board of directors (representation of the company, possibility to sign alone agreements, sign documents for the bank up to certain amount, etc.).

Every legal person and natural person can be appointed as director, satisfying all the eligibility requirements (legally and mentally capable).

When a legal entity is appointed as director, a permanent representative must be appointed to represent the legal entity on the board. This permanent representative must satisfy all the eligibility requirements which apply to directors.

It’s important to note that depending on the activity that the Company exercises in Monaco, the director appointed as president will need to have some specific skills (confirmed by a diploma or professional qualification). 

At the time of the company’s incorporation, the first directors of a SAM are appointed by the constitutive general meeting. 

Following the incorporation, the directors are appointed by an ordinary general meeting.

The articles of association indicate the term of office which in practice rarely exceed 6 years. 

Directors are eligible for re-appointment unless the articles of association provide otherwise.

There is no publication of the appointment in the Journal of Monaco but the registration formalities to the Monegasque government must be done to obtain an up-to-date certificate of registration (Ebis) in which the directors are mentioned.

The mandate of a director is revocable ad nutum. 

Directors may be removed from office by the general meeting that appointed them, in compliance with an adversarial procedure allowing the director to be informed of the proposed removal to present his observations. 

The revocation may occur without just cause but must not be considered as humiliating, brutal or vexatious (in this case, an abusive revocation could be characterised by a judge who could award damages to the director in question).

The board of directors has the legal authority to represent the company as a collegial body.

It can delegate power to an "administrateur-délégué" (managing director, most often also president) to fulfil the corporate purpose of the company in all circumstances on its behalf, in compliance with the articles of association and the law.

Without such delegation, a simple director is not a legal representative of the company.

The board of directors of a SAM has all the powers to carry out the company’s corporate purpose and take all decisions in its interest, except for matters expressly reserved to the general meeting by law or by the articles of association. Practically, the managing director exercises most of these powers (in accordance with his delegation).

Certain decisions are expressly reserved to the board: convening general meetings, drawing up the company’s accounts and annual management reports, appointing and revoking the president and managing director, deciding their remunerations, etc.

The articles of association set out the number of directors composing the board.

The board of directors is a collegial body. Its decisions must be taken by an absolute majority of the directors present or represented.

The directors are bound by their mandate, the articles of association and Monegasque law.  

Directors may be remunerated by directors’ fees of an annual basic amount to reward their regular attendance at board meetings. Additional extraordinary remuneration may be granted by the board of directors who carry out specific activities (specific missions or mandates). This must be approved by the board of directors. 

The Monegasque law applicable to public limited companies states that no person may be a member of more than eight boards of directors of commercial companies having their headquarters in Monaco.

So there is a legal limit to avoid a director to sit in the board of too many Monegasque companies.

The articles of association or internal board rules may include other restrictions to prevent conflicts of interest.

The agreements entered between the Company and a director need previous approval by the board the directors and are ratified at each annual ordinary general meeting

The director, as a member of the board :

• must act in accordance with the corporate purpose and in the interest of the company;
• must attend board meetings and has a duty of confidentiality for the decisions taken.

The directors have the duty to keep updated the registers of the company, in particular the board of director register, the general meeting register and the transfer of shares register. 

The director owes duties towards the board as a collegial body and ultimately the company.

In the event of a loss of three-quarters of the share capital, the directors shall convene an extraordinary general meeting to decide whether to continue the company or if it should be dissolved.

If the shareholders decide on the continuation of the company’s activity, the capital losses must be recovered within two years.

Directors are not personally liable for the decisions of the board unless they have acted outside their mandate. 

The board of directors and ultimately the company can be liable for the decisions taken by the board.

The board of directors can precisely define areas of responsibility of a director who has been delegated. 

In principle, the director cannot be held liable if he has acted within the framework of his mandate in the interest of the company and in accordance with its purpose.