ARMENIA Law and Practice Contributed by: Aram Orbelyan, Narine Beglaryan, Artur Hovhannisyan, Lilit Karapetyan, Sarkis Knyazyan and Shushanik Stepanyan, Concern Dialog
Under its articles of incorporation, the company may declare and set forth the collective executive body. The Powers of the General Meeting The general meeting approves the amendments to the articles of incorporation, decides on reorganisation and liquidation of the company, approves final, interim and liquidation balance sheets, and appoints the liqui - dation committee. The general meeting approves the number of board members, elects board members, terminates their powers and appoints and dismiss - es the executive body (unless these authorities are delegated to the board of directors). Increasing and reducing the charter capital, approving the company’s annual report, distributing dividends, and approving significant transactions and transactions with conflicts of interest are powers of the general meeting as well. The Board of Directors The Law on LLCs does not explicitly define the pow - ers of the board of directors, allowing flexibility for these powers to be outlined in the articles of incorpo - ration or charter. However, the board cannot exercise powers exclusively reserved for the general meet - ing or executive body. Conversely, the Law on JSCs provides a specific list of exclusive powers for the board of directors. It stipulates that, in the absence of a board of directors, these powers are exercised by the general meeting – except for those relating to the organisation of the general meeting itself, which then fall under the competence of the executive body. The board of directors of a JSC determines and approves the strategy of the company, decides on using the reserve fund and other funds of the com - pany, and approves (i) internal documents regulating the activities of the company’s governance bodies; (ii) the administrative and organisational structure of the company; and (iii) a list of the company’s staff posi - tions. It also establishes branches and representative offices and exercises the powers related to conven - ing the general meeting and other powers defined in the law. The Executive Body The single-person executive body or head of the collegial executive body is responsible for the com - pany’s day-to-day activities and has the authority to
represent the company without requiring a letter of authorisation. The director is entitled to issue letters of authorisation, conclude agreements and contracts, perform banking operations, issue orders, directives, and binding instructions, supervise their implemen - tation, decide on employment and dismissal, apply incentives, and impose disciplinary action on employ - ees. 3.5 Directors’, Officers’ and Shareholders’ Liability Liability of Board Members and Executive Body Both the Law on LLCs and the Law on JSCs (the lat - ter consists of more detailed regulation on the mat - ter) determine the liability of board members and the executive body. The rules are the following: the board members and executive body must act for the benefit (in the inter - est) of a company in good faith and reasonable man - ner and avoid actual and possible conflicts of inter - est while exercising their rights and performing their obligations (fiduciary duty). The Law on JSCs also forbids a person who may, by virtue of participation in the charter capital of the company or other circum - stances, have a material impact on the decisions of the company from inducing board members or the executive body to make decisions that contradict the interests of the company or the legitimate interests of shareholders who cannot have a material impact on the decisions of the board. Members of the board and the executive body may be released from liability if (i) no damage was caused through their fault or, where damage has occurred, if (ii) they voted against the relevant decision, (iii) they did not participate in the meeting, or (iv) they acted in good faith and in a reasonable manner, avoiding actual or potential conflicts of interest between their own interests and those of the company. The resig - nation, recall or dismissal of a board member or a member of the executive body does not exempt them from liability for any damage caused to the company. If the damage was caused to the LLC by one of its board members or the executive body, any share - holder (participant) of the company and the company may apply to court on behalf of the company against
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