We have already established the critical role of the Board of Directors for the SA. We referred, in the context of our related article, to the beginning of its collective action. The legal making of its decisions requires a number of conditions. On them, but also on the representation of its members, the present article.
The Principle Of Collective Action Of The Board; Its Assurance.
From the principle of collective action of the Board of Directors mentioned in the introduction (art. 77 §1 ed. b’ of Law 4548/2018) it follows that the specific body acts, in principle, collectively. Ensuring the possibility of the participation of all the members of the Board of Directors proves, in this regard, to be particularly important. Let it be reminded, parenthetically, that from the principle in question, statutory deviations are tolerated (: the common practice) [ ind.: the appointment of a substitute body and the sovereignty of the president’s vote in the event of a tie (art. 92 par. 2 sub. b’)].
In order to ensure the participation of all the members of the Board of Directors in the decision-making process, specific conditions must be met: the existence of a legal composition and the concentration of the quorum and majority prescribed by law and/or the articles of association. If a decision is taken, without observing them, the consequence is that it becomes defective (according to art. 95). In fact, it results in the absolute nullity of the decision (art. 174 CC), which is considered as if it did not take place (art. 180 CC).
A later legal administration, however, can retroactively enforce invalid acts of the previous non-legal one, by approving them (ind.: 966/2014 Court of Appeal of Athens, NOMOS Legal Database). The same goes in the case of a subsequent approval by the same body, which legally meets and takes a decision.
Conditions for Valid Decision Making
Legal Composition of the Board of Directors
In order for the composition of the Board to be legal, it is required that: (a) the election or appointment of the Board does not contravene the law and (b) the number of members of the Board, as determined by the articles of association or the General Assembly, does not exceed the limits of the law and the statute – and neither falls short of them. The number of members of the Board of Directors (see for reference) cannot, by law, be less than three or exceed fifteen (art. 77 §3).
During the term of office of the Board, a member or members may lose their status in any way. In this case, in order for the composition of the Board to be legal (from that point on), their substitution or replacement is required (art. 81 and 82, respectively). This, of course, does not exclude a statutory provision for the continuation of the operation of the Board of Directors without replacing the missing ones (art. 82 §2). It is sufficient that the remaining members are more than half of those elected/appointed. Additionally: that they are no less than three.
Quorum
By Law
A prerequisite for the valid decision-making of the Board of Directors is the observance of the quorum, required by law (art. 92 §1 ed. a’). The Board is in a quorum and meets validly-by law, when at least half plus one of its members are present (:50%+1 advisors). Any fraction is omitted (art. 92 § 1 sec. b).
In no case, however, is it possible (here as well) for the number of advisors who are either present or/or represented to fall short of three. The older rule, which required, in any case, the physical presence of three members, was deemed unnecessary, since even in the case of the minutes signed in circulation (art. 94) the members of the Board of Directors can all be represented (see in this regard, Memorandum to law 4548/2018 on Article 92).
By the Statute
The provision for the legal quorum is of mandatory nature, in the following sense: It determines the minimum quorum percentages for making a valid decision of the Board of Directors. Determining, therefore-based on a statutory provision, lower percentages for the formation of a quorum than those required by law is not tolerated.
The articles of association, however, may require higher quorum percentages than those provided for in the law (: art. 92 §1). In fact, it is argued (not without objections) that the articles of association may require the presence/representation of all the members of the Board of Directors (: 100% of the advisors) for the formation of a quorum.
Basis of Calculation
To find the number of advisors required to form a quorum of the Board of Directors, the basis of calculation is the total number of its members. The specific number is determined, as a rule, by the articles of association. It is specialized, alternatively, by the General Assembly within the minimum and, respectively, maximum limits that may be set by the statute (art. 77 §3).
A condition for the formation of a legal quorum is the possibility to participate in the meeting of the Board of Directors of all its members. This means that in the event of a member losing their specific capacity, it does not matter if the remaining members of the Board of Directors are sufficient to form the required quorum. This is because the condition of the legal composition of the Board of Directors is not met (1408/2010 Supreme Court, NOMOS Legal Database). It is, however, possible for the number of remaining members of the Board to be the basis for gathering the required quorum. This, provided that the continuation of the operation of the Board of Directors is allowed by the statutes – without the replacement of any missing members.
In the case of an impediment to the participation of a consultant in the decision-making of the Board of Directors, the specific member is not included in the determination of the quorum. Without, in fact, the need to substitute them. This occurs in case of a conflict (in the obstructed person) of own and corporate interests (855/2007 Court of Appeal of Athens, 6648/1999 Court of Appeal of Athens, NOMOS Legal Database). Possible participation of the obstructed party in the taking of the contested decision results in its nullity. Much more so, when the vote of the disqualified person was a decisive for the taking the relevant decision.
Time of the Calculation of the Quorum
The start of the discussion of the Board of Directors marks the time of verification of the required quorum in each case. Mandatory, however, for the legitimacy of the decision of the Board of Directors, that its percentage be maintained throughout the meeting.
Majority
Majority set by the Law
The final condition for the valid decision-making of the Board of Directors is the observance of the required, by law, majority. The decisions of the Board of Directors are validly taken by an absolute majority of those members who are present as well as those who are represented during the meeting of the Board of Directors (art. 92 § 2 paragraph a). Those cases where the law itself defines otherwise are excluded from this rule. Indicative: the requirement of an increased majority (2/3 of all the members of the Board of Directors) for the decision to make an extraordinary increase in the share capital of the SA (art. 24 §1).
Majority set by the Statute
Deviations from the specific rule can also be introduced by the statute by claiming increased (: exclusive) percentages for making a specific decision. Or even unanimity (with the existence, however, of an opposing position on the matter). What is certain, however, is that the introduction of relevant statutory provisions for all decisions of the Board of Directors (especially unanimity), will make decision-making more difficult and, at times, impossible.
Calculating method
The majority required for a decision by the Board of Directors is calculated based on the persons/members of the Board. Each director has (by law) one vote (principle of equality of board members).
An exception is brought about by any statutory provision for overriding the vote of the . Only, however, if there is a tie (art. 92 §2 ed b) A related clause aims to remove situations of inability to make corporate decisions (“deadlock”). Statutory clauses that, possibly, refer, e.g., to overriding, in general, the vote of the president or member of the Board of Directors (ind.: depending on the method of their election/appointment) are not legal.
To calculate the majority, the votes of the present and represented members are counted. In the minority, on the contrary, the blank votes and those of the abstaining members are included (apart from the votes that express positions different from the majority).
A case of non-counting of a member for the calculation of the required majority constitutes, as happens in the calculation of the quorum, the case of the existence of a voting obstacle in the person of the member (ind.: art. 66 CC and 97 §3).
Waiver of the right to vote is not possible.
Representation of Members
In General
The presence in person of the advisors at the meetings of the Board of Directors is not necessary for their participation. The members of the Board of Directors, as already mentioned, have an (inalienable) right to participate in it and to exercise the right to vote (also) by proxy. In this way, the conduct of the discussions of the Board of Directors body is simplified and issues of actual impossibility of representation of its members are resolved.
The possibility of representation constitutes a compulsory right and cannot be abolished by the statute (6884/1995 Multimember Court of First Instance of Athens, NOMOS Legal Database).
Conditions
It is not necessary to follow specific formalities for the representation to be valid. Necessary, however, is the cumulative occurrence of the following conditions: (a) representatives of advisers are appointed, exclusively, among the (regular or substitute) members of the Board of Directors (art. 92 § 4) and (b) each adviser can, validly, represent one, only, other advisor (art. 92 § 3).
Representation Content
The power of representation is exercised, in principle, within the limits and orders that may have been provided by the represented person. However, a vote of the representative contrary to the instructions they received from the represented member is considered (and correctly) as not rendering the decision of the Board defective. Even if the representative’s vote was decisive for achieving the majority (application by analogy of art. 128 §3).
However, the case of the presence of an obstacle regarding the participation of the representative (e.g. conflict of interest) is different. In this case, the represented person must provide the representative with a special instruction regarding the exercise and content of the vote (5834/1991 Single Member Court of First Instance of Athens, NOMOS Legal Database).
Participation with a representative in a meeting of the Board of Directors remains unacceptable, however, when the represented member faces an obstacle to participation (e.g. conflict of interest).
Although not the highest hierarchically, it could certainly be argued that the Board is the most important body of the SA. Its involvement, moreover, in defining the strategy, approving the business plan, budget, financial statements and, in general, in making important decisions is all the proof one needs. However, precisely because of the importance of the Board of Directors, it is understandable that the participation of its members should be protected by all means, and so must the alignment with what the law and the statute require for its operation. As, in fact, the law provides sufficient, relative, leeway, the statute must be adapted to the needs of each SA and, first of all, to the rules set by its shareholders. The decisions taken by the Board of Directors must be recorded, for the aforementioned (and many other reasons), in its relevant minutes. About them, however, see our next article.-
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 5th, 2022).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.