ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Suren Sloyan, HAP
charges for tax evasion, failure to report income or non-compliance with regulatory filings. Environmental and Consumer Protection Violations Directors in industries subject to environmental laws or consumer protection regulations can face liability for non-compliance, including fines or operational restrictions. Can the Liability of a Director or Officer Be Limited in Armenia? Director liability can be limited but there are important restrictions: Indemnification by the company Armenian corporate law allows companies to indemnify directors for legal costs and damages except in cases of fraud, gross negligence or intentional misconduct. The company’s charter or internal regulations may include indemnification clauses. Directors and officers (D&O) insurance Companies can purchase D&O insurance to protect directors from personal liability, cover - ing claims from shareholders, creditors or regu - lators. However, D&O insurance does not cover crimi -
However, these clauses cannot override statu - tory liability (eg, fraud, tax evasion or wrongful trading). Legal Defences Directors can defend themselves by proving they acted in good faith, with due diligence and in the best interests of the company. The business judgment rule could serve as a defence if directors acted in good faith and with reasonable care. 4.10 Approvals and Restrictions Concerning Payments to Directors/ Officers The regulation of remuneration, fees and ben - efits payable to directors and officers of a com - pany in Armenia are primarily governed by the LJSC, the LLLC, the LC and relevant company charter provisions. Approvals Required JSCs BoD or general meeting of shareholders The general meeting of shareholders generally approves the amount and terms of remuneration for members of the BoD (supervisory board). If the company has an executive body (CEO, managing director), their remuneration is usu - ally set by the BoD (if such a board exists) or by the general meeting of shareholders, depending on the charter. Charter requirements Company charters may contain specific rules or limitations on compensation structures, requir - ing formal approval from shareholders or the board.
nal acts or deliberate misconduct. Limitation in corporate by-laws or agreements
Some liability protections can be included in employment contracts or corporate by-laws, such as requiring shareholder approval before a director can be sued in a personal capacity.
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