ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Suren Sloyan, HAP
Executive Directors Executive directors are typically members of senior management (eg, CEO, CFO) and con - tribute insights on daily operations. They also implement the board’s strategies and policies. Non-Executive Directors (NEDs) Non-executive directors (NEDs) do not engage in day-to-day operations. They provide strate - gic guidance and external perspectives and help with risk management and accountability. 4.3 Board Composition Requirements/ Recommendations The composition and structure of a BoD in Armenia is primarily governed by the LJSC, which outlines specific requirements and rec - ommendations to promote effective corporate governance. Mandatory Board Establishment The board must be established in a company with 50 or more shareholders. If a board is not established in a company with up to 50 share - holders, its powers are exercised by the general meeting. Board Composition Requirements Independence In OJSCs, at least one-third of the board mem - bers must be independent. The LJSC specifies criteria to determine a director’s independence to ensure that these members do not have sig - nificant ties to the company that could impair their impartiality. Separation of roles To prevent conflicts of interest, the roles of the chief executive officer (CEO) and the chair of the board cannot be held by the same individual in OJSCs. This separation ensures a clear distinc -
tion between the management and oversight functions within the company. 4.4 Appointment and Removal of Directors/Officers The appointment and removal of directors and officers of a company are primarily governed by the LJSC and LLLC, along with the company’s charter. Appointment of Directors and Officers In LLCs, the general meeting of participants appoints the director(s). In JSCs, the BoD (if one exists) or the general shareholders’ meet - ing appoints the executive director or manage - ment board. Types of Directors/Officers The executive director or CEO is the primary managing officer of the company. The BoD (if applicable) is a corporate governance body that is usually found in JSCs. Other Officers These include the chief financial officer (CFO) or other executives, depending on the company’s structure. Appointment Process The general meeting (or the board, if applicable) votes on the appointment. A contract is signed with the director, outlining duties, remuneration and term of service. Removal of Directors and Officers The general meeting of participants/sharehold - ers has the power to dismiss a director. In some cases, the BoD may also remove the executive director (CEO), depending on the company’s charter.
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