Statutory executives: Who are they and what are they responsible for?
In the establishment of small and medium-sized enterprises, attention is usually focused on the business idea, customer acquisition, financing and marketing, while the adjustment of the procedures of the statutory body is often considered only a formal matter.
However, the importance of setting the mode of action on behalf of the company is omitted. The statutory body acts on behalf of the company, i.e. acts externally towards third parties, which later in the life of the company can be a risk in the incorrect or only formal set-up of this relationship.
In the following sections of the article you will find a basic overview of the statutory bodies of individual forms of companies, their obligations, regulation of relations and potential advantages or disadvantages.
Statutory bodies in individual forms of companies
Public company (ex. o. s.)
In this form of business, they are a statutory body All Companions. Each member acts on behalf of the company (unless the partnership agreement provides otherwise), whereby the members in the general partnership are jointly and severally liable for its liabilities with all their assets.
Limited Partnership (k. s.)
The Statutory Authority is Complementary— that is, those partners who guarantee the entire property. The commissioners (who guarantee only up to the amount of the deposit) are not statutes, however, if they enter into a contract on behalf of the company without a power of attorney, they guarantee to the same extent as the complements.
Limited Liability Company (s. r. o.)
The most common form for small and medium-sized enterprises is s.r.o. The Statutory Authority is a director or several directors.By law, it is considered that each director is entitled to act on behalf of the company independently, unless the partnership agreement provides otherwise. The managing director manages the company's ordinary activities, represents it externally and ensures that the company fulfills its legal obligations.
Joint stock company (a.s.)
Within the framework of a joint-stock company, it exercises the powers of the statutory body Board of Directors. Similar to the forms above, the law assumes that each member of the board of directors may act on behalf of the company, unless the Articles of Association provide otherwise.
For smaller businesses, a joint-stock company is less common, but in the case of larger growth plans, it can be attractive.
Simple stock company (j.s.a.)
The statutory body may be similarly to a.s. Board of Directors, whereby decisions on certain matters may be entrusted to another body of the company on the basis of the statutes.
Cooperative
The team is outwardly performing Board of Directors, which, in addition to managing the activities of the cooperative, decides on all matters of the cooperative that are not entrusted by law or statutes to another body.
Obligations of Statutory Bodies
The statutory body is bound not only by the Commercial Code, but also by special regulations (e.g. tax, accounting or labour law).
Among the basic duties are:
- act with professional care and in accordance with the interests of society,
- adhere to the principle of loyalty (i.e. the prohibition to prioritize their interests, the interests of only some shareholders or the interests of third parties over those of the company,
- to ensure proper accounting,
- monitor the economic health of the company (when, for example, there may be an obligation to file for bankruptcy — we covered this topic in this article: https://www.brichta.sk/novinky/zodpovednost-statutarneho-organu-za-nepodanie-navrhu-na-konkurz),
- refrain from acting contrary to the law, the partnership agreement or the articles of association.
Relationship Edit
The Commercial Code gives the founders/members of the company the possibility to adjust the rights and obligations of the statutory body (to a limited extent externally and to a wider extent internally) according to their needs. It is up to the companions' decision and risk to what depth they will go and how they will set up these relationships. They may entrust the proceedings on behalf of the company to one director, who may be a partner or a third person, or decide to set up a collective body composed of several directors, to whom powers may be divided or a stricter approval mechanism established in certain areas.
Number of members of the statutory body — advantages and disadvantages
Each company can evaluate how it is interested in performing externally.
The advantage of a single externally acting member of the statutory body is:
- clear responsibility — it is clear who acted for the company and in the event of damage, objective responsibility applies
- speed of decision making — the advantage is clearly efficiency in signing contracts, solving problems within the authorities
- Cost-effective — the remuneration of a manager relates to one person
- Consistency — i.e. a clear strategy in the management of the company, even in the case of the general meeting, instructions are addressed to one person and the control of their compliance/non-fulfillment is directly identifiable
- Sufficient for small companies
The advantages of a number of externally acting members of the statutory body are:
- the company may decide to divide the competences to individual managers (one manager will be entrusted with financial affairs, the other with technical security and security, the third would have business development and customer care, the fourth would ensure the planning of activities and the strategy of the company)
- collective know-how — with several managers we have the opportunity to draw on a wider range of experience
- mutual control and greater trust in decisions, at the cost of a longer process if there is no agreement
- Flexibility in representation
- the need to establish mutual relations and regular executive meetings
Collective Statutory Body
The advantages of the collective statutory body described above are used in large companies, especially start-ups, where there is a greater need for investor control.
The exercise of the competences of the collective statutory body takes place, for example, in the form of meetings of directors. In other words, minutes of the meeting are drawn up, where each of the directors can express their different opinion, suggestions and comments on the subject of the meeting, which can be advantageous, for example, in the evaluation of responsibilities.
Conclusion
When starting a company, it is important to adjust the structure of the company consistently. Clarify the competencies, internal functioning of the company as well as external actions, evaluate the advantages/disadvantages of the minimum legal standards against the sophisticated structure of the company, with which we can effectively help you.