Book Nele Somers, day-to-day management in the company limited by shares


Book Nele Somers, day-to-day management in the company limited by shares

Nele Somers

One of our lawyers, dr. Nele Somers, has written a book on day-to-day management in the company limited by shares (the Belgian “naamloze vennootschap”/”société anonyme”, abbreviated into “NV”/”SA”). We asked her a number of questions concerning how you can incorporate the results of her research into your company.


1. Can you give us a few good reasons to appoint a managing director within the company limited by shares ?


Certainly. In the first place, it’s a fact that every company needs to take and execute decisions on a daily basis. Since it would be absurd to have to convene a board of directors’ meeting for this each time, the law provides for the possibility of establishing a daily management body, which then only has the authority to take ‘minor decisions’. What is unique,  is that the managing director in question can take and execute the decision on his own, which can have an impact on the actual balance of power in the company.


2. When you say that the managing director may only take minor decisions, what should we understand by this? In other words, what constitutes daily decisions ?


The irony is that daily decisions are not necessarily decisions that must be taken frequently. In fact, they are all decisions that are part of the ‘daily’ life of the company on the one hand and that are both urgent and less important on the other. The urgency and degree of importance should be considered in the light of the possibility of convening a board meeting for this decision, and this in due time. The emphasis is on the “and”, because until today, both conditions must be fulfilled: otherwise the decision is not valid.


3. When you emphasise ‘until today’, does that mean that changes are on the way, for example as a result of the new Companies Code that is coming soon ?


That possibility is considerable. In the business world, the authority of the managing director is in any case regarded as too limited. Which is why people now wish to extend this authority again. According to the current draft law, such authority would be extended to include three types of actions instead of two. If the law is enacted, the managing director will thus not only be able to take actions that are part of the daily life of the company, but also actions that are so urgent that they cannot wait for a meeting of the board of directors, and actions that are less important in the sense that it is not considered necessary to wait for a board meeting.


4. Suppose I am the managing director and CEO of my company limited by shares. May I give my managing director a clear list with powers ?


The difficulty is that what constitutes a minor decision varies from company to company. The authority of your managing director will therefore vary according to the size of the company, the corporate purpose and the nature of the action that is being taken. Problematic is the fact that a list of powers can be drawn up, but a judge need not take this into account and can declare the action null and void after the fact. Suppose now that a managing director concludes an extensive loan agreement. It is therefore possible that a court would declare this invalid after the fact. Then there is no loan. Another example: a managing director purchases 10 trucks and later has second thoughts. It is possible that he could reverse his decision if the purchase exceeded his authority. He then could get out of the contract without consequences, because the agreement can be declared totally invalid.


5. The conclusion in your book is that it would be better to abolish the body. Why are you suggesting this ?


In the first place, with a view toward internationalisation and simplification of the system. I compared our law on companies limited by shares in this area with a few neighbouring countries and have come to the conclusion that they do not have a similar institute. Thus day-to-day management is organised very differently. To attract foreign capital, it seems to me opportune to opt for an unequivocal system. Second, because of the uncertainty that clings to this body. Nobody knows precisely what the managing director can do. And although there are many mechanisms in our legal system to remedy cross-border activities – I am thinking of ratification and apparent authority – uncertainty still exists, certainly for third parties who must conclude a contract with the managing director of the company.  A managing director can take all actions that serve to realise the company’s purposes, and can grant management powers of attorney that could be published in the Belgian State Gazette, so that others cannot later say that they did not know the scope of the manager’s representative power.