Executive director and shareholder – different roles in the company

SHAREHOLDER

Behind the birth of a company and its incorporation, there is always a shareholder. As the owner or co-owner of the company, he or she becomes a member of the general meeting, i.e. the supreme body of the company. Among other things, it elects an important person in the company structure: the executive director. The shareholder has the right not only to vote at the general meeting but also to raise questions or comments to the management of the company.

EXECUTIVE DIRECTOR

JAs mentioned above, the general meeting decides on the election of the executive director(s). They are chosen from among the shareholders or other natural persons. Depending on the size of the company, the general meeting will elect one or more executive directors.

In smaller companies, the shareholder (owner) and executive director can be the same person. Upon election, he or she becomes the statutory body of the company. By law, he or she must responsibly manage or participate in the management of the economic activity of the company and ensure the proper keeping of records and accounting. He or she is also responsible for ensuring the registration of shareholders and their regular notification about the company's affairs. To qualify for the position of executive director, a natural person must meet certain conditions under the law:

  • full legal capacity
  • at least 18 years old
  • clean criminal record

The executive director acts on behalf of the company, signs contracts, and decides about financial matters. The Commercial Code states that all executive directors may act on behalf of the company independently unless specified otherwise in the memorandum or articles of association of the company. Here it is also possible to restrict some authorizations of executive directors.

If the company has more than one executive director, the consent of a majority of them is required for business decisions, unless the memorandum of association provides otherwise.

Even if a natural person meets the conditions for election as an executive director, there are also obstacles that make this impossible. These are specified in more detail in Section 8 of the Trade Licensing Act, which states that a business cannot be run by a natural or legal person:

  • on whom bankruptcy has been declared
  • for whom an insolvency petition was rejected due to lack of funds to pay for the insolvency proceedings
  • who has received a penalty or administrative penalty imposed by a court or administrative authority in the same or a related field
  • whose trade licence has been revoked

According to the Commercial Code, there are other restrictions for executive directors arising from their function, and therefore a prohibition on activities in the same or similar field.

If you need information about the persons appointed as executive directors in a specific company, you can find it in the Commercial Register together with other information.

As far as the management of the company is concerned, while we cannot handle everything for you, if you use our services we can help you with many matters, such as in regard to appointment of an executive director, shareholder or accounting.

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