Invalid Decisions of the Board of Directors of Joint-Stock Companies
The board of directors of joint-stock companies is the highest-level manager of the company and makes important decisions. However, in some cases, the decisions taken may be legally invalid (void). Here is what you need to know about the reasons for invalid decisions of the board of directors of joint-stock companies and the consequences of these decisions:
1. Violation of Decision-Making Procedure
Explanation: Failure to comply with the procedures and conditions required for the board of directors to make a decision will cause the decision to be invalid.
Example: If the board of directors makes a decision without a sufficient number of members attending the meeting, the decision will be considered invalid.
2. Excess of Authority
Explanation: If the board of directors makes a decision exceeding its authority, the decision will be considered invalid.
Example: If the board of directors makes a decision regarding a matter related to the authority of the general assembly, this decision will be considered invalid.
3. Violation of Law
Explanation: Companies must comply with the rules determined by law. Decisions taken contrary to the law are invalid.
Example: If a board of directors’ decision violates the minimum capital requirement set for joint stock companies, this decision is invalid.
4. Violation of the Articles of Association
Explanation: Decisions that violate the company’s articles of association are also considered invalid. The board of directors must act in accordance with the provisions of the articles of association.
Example: If the general assembly is authorized to make a decision on a specific issue in the articles of association, the board of directors’ decision on this issue will be invalid.
5. Violation of the Company’s Interests
Explanation: If the decisions taken are contrary to the interests of the company, these decisions may be considered invalid.
Example: If the board of directors makes an investment decision that will put the company’s financial situation in trouble, this decision may be considered invalid.
6. Deficiencies in the Meeting Protocol
Explanation: It is mandatory to keep a protocol at board of directors’ meetings. Deficiencies in the protocol may cause the decision to be invalid.
Example: If the meeting minutes do not include information on the date the decision was made, the signatures of the participating members, or the vote count, this may cause the decision to be invalid.
7. Decisions Not Made in Good Faith
Explanation: If the decisions of the board of directors are made in line with personal interests rather than the interests of the company, these decisions are considered invalid.
Example: Decisions taken in cases where board members gain unfair profits from the company in line with their own personal interests are considered invalid.
8. Illegal Investments
Explanation: Decisions that use the company’s resources in an unlawful manner are also considered invalid.
Example: If the board of directors decides to use company resources for an illegal activity, this decision is invalid.
Conclusion
The board of directors of joint-stock companies must pay attention to the law, the articles of association and the interests of the company when making decisions that are critical to the future of the company. Invalid decisions both complicate the legal situation of the company and damage its reputation. Therefore, it is important for board members to be meticulous in the decisions they make. Companies can benefit from expert consultancy services in order to monitor decision-making processes and ensure compliance.
