ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Suren Sloyan, HAP
Regulatory Authorities Regulatory bodies in Armenia, such as the State Revenue Committee or the CBA (for financial institutions), can investigate and penalise direc - tors for breaches related to tax, financial or securities laws. Consequences of a Breach If a director is found to have breached their duties, the consequences may include the fol - lowing. Civil liability The director may be required to compensate the company for financial losses caused by their actions. Courts may invalidate transactions made in breach of duty (eg, conflicts of interest or unauthorised deals). Criminal penalties If the breach involves fraud, embezzlement or tax evasion, the director could face criminal charges, including fines and imprisonment. Directors in Armenia are primarily accountable to the company and its shareholders but credi - tors and regulators can also enforce breaches in certain cases. Penalties range from financial liability to criminal prosecution, depending on the severity of the breach. 4.9 Other Bases for Claims/Enforcement Against Directors/Officers In addition to breaches of fiduciary duties and general corporate governance violations, direc - tors and officers in Armenia may face claims or enforcement actions on the following grounds. Breach of Statutory Duties Directors are required to comply with Armenian corporate laws, such as the CC and LJSC.
Violations (eg, failure to maintain proper records, mismanagement of shareholder rights) can lead to administrative fines or legal claims. Fraud and Misrepresentation Directors can be held personally liable if they engage in fraudulent activities, such as misstat - ing financial statements, hiding company liabili - ties or engaging in misleading transactions. Shareholders or regulators (such as the State Revenue Committee) may bring actions in these cases. Failure to Prevent Insolvency or Wrongful Trading If the cause of the insolvency (bankruptcy) of the company is the activity (inaction) of the director, who has the right to give binding instructions to the company for execution or the ability to otherwise determine the activities of the com - pany, then in the event of non-fulfilment of the property belonging to the company, additional (subsidiary) liability may be imposed on those shareholders or other persons for the company’s obligations. The actions (inaction) of the director will be con - sidered the cause of the insolvency (bankruptcy) of the company only if they used their rights or abilities as a director to force the company to perform or not perform certain actions, knowing in advance that this would cause the company to find itself in a state of insolvency (bankruptcy). Tax and Regulatory Violations Directors are responsible for ensuring the com - pany complies with tax laws, customs regula - tions and other state obligations. The State Revenue Committee and other reg - ulators can impose penalties or even criminal
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