ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Suren Sloyan, HAP
LLCs General meeting of participants (shareholders) The general meeting of participants (sharehold - ers) approves the remuneration of the executive body. In single-member LLCs, the sole partici - pant makes these decisions directly. Restrictions While there is no general statutory cap on remu - neration, it must be: • consistent with the company’s charter; and • properly approved via internal corporate gov - ernance mechanisms. Conflicts of Interest Directors must avoid approving their own remu - neration without proper corporate approvals. Transparency Specific companies (especially listed ones) may have reporting obligations under securities laws or financial disclosure rules. Tax Compliance Compensation must comply with tax and social contribution laws, including proper classification Payments made without proper approvals may be deemed unauthorised or invalid and the recipient may be required to return the funds. Liability of directors Directors or officers who authorise or receive unlawful compensation may be held liable for damages to the company. (eg, salary v dividend v service fee). Consequences of Non-Compliance Invalidity of payments
Administrative or criminal sanctions In serious cases, especially where fraud or mis - appropriation is involved, criminal charges or administrative fines may apply. Tax penalties Improper classification or undocumented pay - ments may result in tax audits, penalties and interest for non-payment of taxes or social pay - ments. 4.11 Disclosure of Payments to Directors/Officers The disclosure of remuneration, fees or benefits payable to directors and officers is primarily gov - erned by the Corporate Governance Code. Beyond the Corporate Governance Code, Arme - nian legislation does not compel companies to publicly disclose specific details regarding the remuneration of directors and officers. However, certain sectors such as banking, insurance and investment fund management may have addi - tional disclosure requirements. Banks for example have to publish financial statements and audit reports, which could encompass information about executive com - pensation. While general disclosure of director and officer remuneration is therefore not com - pulsory, companies in specific industries may be subject to more stringent reporting obligations. 5. Shareholders 5.1 Relationship Between Companies and Shareholders The relationship between a company and its shareholders is governed by corporate law, pri - marily the CC and the LJSC or the LLLC. How
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