Board of directors

What it means

The board of directors is the statutory body of a joint-stock company and of a cooperative: it runs the company and acts in its name towards third parties. It is collective, so it decides as a body, while the articles set how its members sign and the register records it.

It is not the supervisory board, which does not manage but oversees, and not the managing director of a limited company. Board members need not be shareholders, and a shareholder has no claim to a seat on it.

Board members must act with professional care and in the interests of the company and all its shareholders. If they breach that duty they are jointly and severally liable for the damage, much as with a managing director’s liability; a member escapes it by proving they acted with professional care and in good faith.

How it works in practice

The general meeting elects the members unless the articles hand the election to the supervisory board. Every change of line-up goes without undue delay to the commercial register, because towards outsiders the register is what counts.

Pay and duties are governed by the service contract, which has to be in writing and approved by the general meeting. Without one the relationship falls under the Commercial Code’s mandate rules, so the office is paid at the usual rate; unpaid service has to be agreed expressly. The board answers for keeping the books, convening the general meeting and filing the financial statements in the register.

The annual accounts of a joint-stock company are prepared and signed by the board, reviewed by the supervisory board and approved by the general meeting. We therefore plan the timetable backwards from the date of the general meeting, so the board has the figures in time and the supervisory board has enough time to review them.

What to watch out for

A member resigns by e-mail and treats the matter as closed. Resignation only takes effect at the meeting of the body that elects the board, or after the statutory period, and until the register is amended the requests and fines for unfiled statements keep arriving in their name.

A registered signing rule that does not match practice is another risk. If the register says two members act jointly and one signs a contract alone, the other party may later challenge its validity. For loans and property transfers, banks and the land registry check this and send the documents back.