ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Suren Sloyan, HAP
There are certain legal restrictions on who can serve as a director in Armenia. General Requirements The director must be a legally competent natu - ral person. Foreign nationals can be appointed unless restricted by specific laws. Certain industries, such as banks or financial institutions, may have additional regulatory requirements for directors. Special Rules for Government Officials Some government officials cannot serve as directors of private companies. This is to prevent conflicts of interest. 4.5 Rules/Requirements Concerning Independence of Directors The framework governing the independence of directors and the management of potential con - flicts of interest in Armenia encompasses various mandatory legal requirements. Board Composition and Independence OJSCs are required to ensure that at least one- third of their board members are independent. The law specifies the criteria for determining a director’s independence to promote transpar - ency and accountability. Separation of Leadership Roles In OJSCs, the roles of the board chair and the CEO cannot be held by the same person. This separation aims to prevent conflicts of interest and promote effective oversight. Approval of Transactions with Potential Conflicts Procedures have been revised to enhance trans - parency in transactions that may involve con - flicts of interest. These revisions ensure that the
essential terms of the transactions are clear, decision-makers remain independent and actual or potential conflicts are eliminated. 4.6 Legal Duties of Directors/Officers The main legal duties of directors and officers of a company are primarily governed by the CC, LJSC, LLLC and other related regulations. These duties include the following. Fiduciary Duties Directors and officers have a fiduciary responsi - bility to act in the best interests of the company and its shareholders. This includes: • acting in good faith and honestly; • avoiding conflicts of interest; and • not using corporate opportunities for personal gain. Duty of Care and Diligence Directors and officers must exercise reasonable care, skill and diligence while performing their functions. This includes: • making informed business decisions; • ensuring compliance with legal and regulatory obligations; and • overseeing financial management and risk assessment. Duty to Act Within Powers Directors and officers must act within the author - ity given by: • the company’s charter (articles of associa - tion); • the decisions of the general meeting of share - holders; and • applicable laws and regulations.
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