The rules related to a company’s management will differ depending on whether it is a privatecompany (ApS) or a public company (A/S). To appreciate the difference between the management of a privatecompany and a public company, a distinction must be made between the 1-tier and 2-tier board systems.
The 1-tier board system (widespread in common law jurisdictions) places full managerial control in a single body. As opposed to the 1-tier board system, the 2-tier board system (predominantly found in Continental Europe) separates the day-to-day management of the business (which is controlled by the managerial body) from the policy and operational decisions (which are made by the board of directors).
The ApS is able to elect how managerial control is to be exercised and where that supreme managerial control is to lie. They may opt to use either the 1-tier or 2-tier system. This choice of management system lies with the promoter(s).
The A/S company must utilise the 2-tier system. The management board is headed by the managing director who answers directly to the board of directors. It is this managing director who supervises the day-to-day management, whereas the board of directors has ultimate control.
The management board of the A/S company is appointed by the board of directors – it consists of between 1-3 members. The Company Act further limits the extent to which members of the management board in an A/S may also act as members of the board of directors.
No restrictions as to nationality or place of residence of the managers apply.
Board of directors
The board of directors is, in most instances, the company’s supreme managerial authority. The members of the board of directors collectively act as the company’s agent, and together determine the company’s policies and their implementation.
In the ApS, the board of directors comprises at least one board member who is elected by the promoter(s). The powers of individual board members and the collective powers of the board of directors will typically be specified in the articles of association.
In the A/S, the board of directors is elected at the first general meeting and must comprise at least three members. The rights, obligations, and the powers of the board of directors will be specified in the articles of association as will the terms of appointment. In regards to remuneration, the members are entitled to a fixed remuneration and/or emoluments. This remuneration is subject to requirements of ‘reasonableness’, gauged by factors such as the duties of the office and the company’s financial position.
No restrictions as to nationality or place of residence of the directors apply.
Although the Company Act specify default provisions regarding the general meeting, it is the company’s articles of association which definitively establish how the general meetings are to be conducted.
The general meeting is the forum through which shareholders exercise their rights. In both ApS and A/S companies at least one general meeting must be held every year. This meeting must be conducted no later than five months after the end of each financial year.
For both ApS and A/S companies minutes of the general meeting must be prepared, and these minutes must be made available for shareholder inspection.
In the ApS, the requirement to conduct a general meeting can be circumvented if the articles of association provide an alternative forum for shareholder decision-making.
Where the general meeting mechanism is used, the meeting is convened by the company’s supreme managerial body. It is at this general meeting that proposed resolutions are presented to shareholders.
In the A/S, the general meeting is compulsory, and it is the board of directors which is responsible for convening the meeting. Prior to a general meeting, notice of and the agenda for the meeting must be provided to all shareholders. The agenda must include the presentation of the financial statements, the auditors’ report and annual report. The business of the general meeting is presided over by the chairman.
In both the ApS and the A/S, normal resolutions presented at the general meeting must be passed by a simple majority of votes and where a proposed resolution amends the articles of association, its adoption requires a two-thirds majority.