Board of directors (one-tier)

What it means

The board of directors in a one-tier system (in Slovak správna rada) is the governing body under a so-called monistic model of corporate governance. It combines management and supervision, sets the company's direction, oversees its activities and appoints executive directors who run day-to-day business.

Slovak commercial companies normally use a two-tier model in which the management board is separate from the supervisory board. In company law the správna rada therefore appears mainly in the European company, which may choose either model.

Other legal forms use the same name, but in a different role. In a foundation the správna rada is the supreme body that decides on assets and appoints the foundation's administrator, and in a non-profit organisation providing public benefit services it elects and dismisses the director.

How it works in practice

When a European company is set up, its articles state whether it will have a one-tier or two-tier system. The one-tier system suits smaller structures or holdings where the owners want management and oversight concentrated in a single body.

Executive directors represent the company externally as its statutory body or part of it, depending on the articles. They may also sit on the board, but the law usually requires a majority of non-executive members to ensure independent oversight.

In foundations and non-profit organisations, the správna rada approves the budget, the financial statements and the annual report and decides key matters. It is therefore wise to align meeting dates in advance with the deadlines for filing the accounts and depositing the annual report in the register.

What to watch out for

Care is needed in translation, because the English board of directors can mean either a správna rada or a management board. In contracts with foreign partners it is best to state exactly which body is meant and what powers it has, so that the validity of signatures is not in doubt.

Board members are liable for damage caused by breaching their duties, just like members of a management board. In a foundation or non-profit, where the role is often unpaid, not everyone realises this, so liability insurance is worth considering.