ARMENIA LAW AND PRACTICE Contributed by: Aram Orbelyan, Narine Beglaryan, Artur Hovhannisyan, Lilit Karapetyan, Sarkis Knyazyan and Shushanik Stepanyan, Concern Dialog
governance bodies; (ii) the administrative and organisational structure of the company; and (iii) a list of the company’s staff positions. It also establishes branches and representative offices and exercises the powers related to convening 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 company’s day-to-day activities and has the authority to represent the company without requiring a letter of authorisation. The direc - tor 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 employees. 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 latter consists of more detailed regulation on the matter) 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 interest) of a company in good faith and reasonable manner and avoid actual and pos - sible conflicts of interest 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 circumstances, have a material impact on the decisions of the company from inducing board members or the
executive body to make decisions that contra - dict the interests of the company or the legiti - mate interests of shareholders who cannot have a material impact on the decisions of the board. The board members and executive body may be released from liability if (i) there is no damage caused by their fault (applicable only to LLCs), (ii) they voted against the decision, (iii) they did not participate in the meeting, or (iv) they acted in good faith – ie, did not know or could not have known that the company would incur losses as a result of their actions or omissions (applicable only to JSCs). The resignation, recall or dismissal of a board member or the executive body does not exempt them from liability for the damage caused to the company. If the damage was caused to the LLC by one of its board members or the executive body, any shareholder (participant) of the company and the company may apply to court on behalf of the company against that board member or execu - tive body and claim damages. If the damage was caused to the JSC by one of its board members or the executive body, the claim for compen - sation of damages against that board member or executive body might be brought against the company or its shareholder(s) (jointly) owning 1% or more of the placed common (ordinary) stocks of the company. A breach of fiduciary duty might cause criminal liability for a board member or executive body if their actions or omissions cause essential damages. Shareholders’ Liability Under Armenian law, the separation of liability of a legal entity from its shareholders’ liability is determined. Armenian legislation allows for the “piercing of the corporate veil” in specific cases of activi -
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