A director must manage the company and act on behalf of the company in line with its business purpose, best interests and in accordance with instructions given by the shareholders and the current legislation. A director must act with the diligence of a conscientious and fair manager. Under the rules on financial operations, insolvency proceedings and compulsory dissolution, a director has to act with a higher standard of diligence, as stated below.
A director is generally responsible for the operative management of the company. Many of the director’s duties are regulated by law, while some additional duties may be included in the management contract, employment contract or any other contract regulating the relationship between the company and the director. Breach, neglect or omission of his/her statutory or contractual duties will constitute a valid reason for the removal of the director.
Directors’ duties include, inter alia, the following activities:
- to enter the establishment of the company into the court register and to enter changes to the entered data
- to convene a shareholders’ meeting
- to prepare and execute the decisions of the shareholders’ meeting
- to set up financial statements and disclose financial statements to shareholders and to the public
- to execute a decision of the shareholders to decrease the company’s share capital, and
- to bring an action against a shareholder,who has not paid in his subscribed contribution(s).
Additionally, some of the director’s duties refer to the financial management of the company. Directors have to ensure that the company is operating in accordance with the financial operations, insolvency proceedings and compulsory dissolution laws and the rules of corporate finance. Directors have to act with the diligence of corporate finance professionals and endeavour to ensure that the company is always short- and long-term solvent.
Duties related to the financial management of the company require directors to, inter alia, submit a financial restructuring plan to the shareholders or supervisory board (if existent) when the company becomes insolvent, initiate court insolvency proceedings in due time, and to submit financial statements and reports (annual, quarterly) to the shareholders’ meeting and the supervisory board (if existent) and to competent national agencies/bodies.
Furthermore, the director must ensure that the company meets its obligations under public law – in particular with regard to, but not limited to, tax and social security laws.
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