In a previous article, we examined the important role of the Board of Directors of an SA. However, the legislator of Law 4548/2018 is not limited to the provision of an administrative body which by definition will be composed of more than one member. On the contrary, they introduced (: art. 115), the institution of the Single-Member Administrative Body (or, otherwise, the so-called “Consultant-Manager” – to distinguish it from the administrator of other corporate types). About this topic, the present article.
Purpose of Regulation: Advantages & Disadvantages
The innovation of the institution of the single-member administrative body aims to cover a previous gap, highlighted by the business and economic reality.
It is not uncommon to choose the SA corporate type, even if the business activity is very small or of a small scale. Its advantages, compared to Private Companies, for example, are obvious. However, under the regime of the previous Law 2190/1920, those who carried out business activity through small or very small businesses (especially family businesses with the aforementioned characteristics) and chose the SA corporate type faced significant problems: First, they often had to “recruit” people in order to complete the (at the minimum) three-member Board of Directors. And this, although in practice the administration was exercised by a single person, while the others played “…a simply decorative role” (see in this regard, memorandum to law 4548/2018 on art. 115). Consequently, they were burdened with additional costs and, not infrequently, with unnecessary delays in decision-making. At the same time, those who formally presented themselves as members of the Board of Directors were not unlikely to be exposed to responsibilities, without actually acting as board members with a decisive capacity.
Taking into account the above, the legislator, on the occasion of the reform of the law on SAs, seized the opportunity and provided the possibility of a single-member body for small and very small SAs (although the existence of a multi-member board is better suited to the structure of SAs). Through the possibility of this specific institution, the legislator aims to reduce the operating costs of SAs, which, due to their size, do not justify the employment of more people in an administrative position. In addition, the possibility of electing an administrator-advisor simplifies – as will be explained below – the regulations to which the company is subject (see, in this regard, Memorandum to law 4548/2018 on art. 115). Moreover, decision-making by a single person is characterized by greater flexibility and speed.
However, this feature is not without drawbacks. In particular, the delegation of management authority to a consultant-manager is likely to prove detrimental to corporate interests. This is because, in contrast to the collective Board of Directors, the consultant-manager is not accountable and is not supervised during the exercise of their duties (as would be the case with a multi-member Board of Directors). In addition, the consultant-manager is easier to manipulate by the shareholders, as a result of which, among other things, their independence is called into question. By extension, as a rule – in this particular case – the separation of responsibilities desired by the legislator between the bodies of the General Assembly and the Board of Directors does not exist. Finally, it is not excluded that the (external) image of the company will be negatively affected, for example towards prospective investors.
Finally, it should be pointed out that the existence of a single-member administrative body does not necessarily mean the removal of the legal personality of the SA and its identification with its (only?) shareholder.
Subjective Field of Application Conditions for Appointment of a Consultant-Manager
The institution of the consultant-manager is not addressed, as mentioned above, to all, without exception, SAs. It concerns, on the contrary, “small” and “very small” SAs not listed on a regulated market (as deduced, by contrast, from the provision of art. 115 § 6). For the evaluation and classification of entities as “very small” and “small”, it is necessary to fulfill (at least two of) the criteria of Article 2 § §2 and 4 of Law 4308/2014. Specifically:
“Very small entities” are those that “…at the date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 350,000 euros. b) Net turnover: 700,000 euros. c) Average number of employees during the period: 10 people.’.
Whereas, as “small entities”, those that “…at the date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 4,000,000 euros. b) Net turnover: 8,000,000 euros. c) Average number of employees during the period: 50 people.’.
Conditions of Existence of a Consultant-Manager
In order to elect a Consultant-Manager, it is necessary to have a relevant statutory provision that allows it or, as the case may be, requires it (art. 115 § 1 para. a’). In practice, however, it usually constitutes, simply, an alternative (instead of, that is, the election of the Board of Directors). Therefore, the General Assembly will be competent to grant the power of administration, at its absolute discretion, and essentially, to “choose” between the two alternatives available to it.
The appointment of more than one Consultant-Manager is not permitted. A board with two members is also still not be tolerated (see Petition Report n. 4548/2018 on art. 115).
It should be noted, finally, that a consultant-administrator can be, exclusively, a natural person (art. 115 § 1 para. b’).
Regulatory framework
The legislator, in the provision of article 115 § 2, tried to define those regulations of law 4548/2018 that concern the consultant-manager by referring, for the rest, ” to the rules that apply to the board of directors, to the extent that they are compatible with the character of the consultant-manager, as a single-member body”.
In the above context and given the differences presented by a single-member institution in relation to a multi-member one, it is necessary to examine which arrangements can be applied to both institutions. Clearly, issues of compatibility arise with regard to provisions relating to tenure, powers and authorities, remuneration and so on.
Appointment/Election of Consultant-Manager & Exercise of Powers
First of all, in terms of the method of appointment/election (and by extension the related defects) as well as the eligibility conditions of application, in general, what applies in the case of the Board of Directors. However, some differences are also found.
In this context, given the one-person nature of the specific body, and although its emergence is possible: (a) either by its appointment, upon the establishment of the SA – directly from the statute (art. 78 § 2), (b) or following his election, during the time of operation of the SA, by the General Assembly (art. 78 § 1), it does not mean directly appointing him by the shareholder(s) (art. 79), nor any election based on lists (no. 80).
It is desirable that the General Assembly has elected, at the same time, an alternate member (no. 81). And this is because, in case of loss of the relevant capacity of the consultant-manager (e.g. due to death, disability, etc.) and the non-existence or unwillingness of a substitute person, the company falls under the status of lack of management. Replacement or the continuation of the management and representation of the company by remaining members – as in the case of the multi-member Board of Directors (art. 82) – is not allowed. In the absence of a substitute body, the only way is to appeal to the court for the appointment of a temporary administration (:temporary administrator – art. 69 of the Civil Code) – unless an unsolicited and universal General Assembly intervenes to elect a new one.
At the same time, given that the body does not act collectively, awarding of titles and offices is not possible. Where the law or statute refers to duties e.g. of the , these concern the consultant-manager.
Furthermore, as noted above, there is no possibility of appointing a legal entity to the position of consultant-manager. However, it is possible for the consultant-manager to delegate, pursuant to Article 87 § 1, the management and representation of the company to a third, substitute body, which may be a legal entity. Clearly, the consultant-administrator will bear the responsibility of overseeing the performance of the powers of the substitute body.
Finally, regarding the (mentioned above) SAs subject to this regulation, the formation of an executive committee does not seem to be of any practical interest (art. 87 § 4).
Decision Making
Due to the one-member character of the body, the Consultant-Manager, of course, does not (co)decide. Therefore, there is no reference to issues of compliance or non-compliance with the -legal or statutory- procedure ( the body, etc.) which, after all, belongs to the Board of Directors.
In the above context, it is excluded that questions of illegal, e.g., composition and, by extension, defectiveness of the decision taken by the one-person body, due to failure to reach the required quorum and majority, may arise.
The infringement of the validity of the decision of the consultant-administrator can, in any case, be based on the general provisions of the Civil Code (due to incapacity, e.g. to legal action).
An obligation to register in the SA minutes book exists only for those decisions, which either do not concern issues of current management or are registrable in the Business Registry These decisions (and only) are subject to a review of defectiveness, according to the legislator’s explicit reference to the proportional application of the provision of article 95 (art. 115 § 4).
Conflict of Interest: Consultant-Administrator VS AE
from the obligation of loyalty (art. 97 § 3) when exercising his powers. In fact, the latter must refrain, on the one hand, from actions that are contrary to the corporate interest. On the other hand, from making decisions on issues for which they (or the parties connected to them – art. 99 § 2) is in a situation of conflict of interest. In this case, exclusive, decisive competence of the General Assembly is established (art. 115 § 3 para. b’).
Referral of the matter to the General Assembly is pointless in case the consultant also recommends the sole shareholder of the SA. After all, according to the monistic view, there is not even a conflict of interest in this case (so that it can be treated accordingly). It is therefore sufficient to comply with the written form (art. 101 §4).
Obligation to Inform Shareholders
The consultant-manager bears the obligation to inform the shareholders in the corresponding cases where a member of the Board of Directors has such an obligation towards, however, the other members. The consultant-manager must inform the shareholders individually, in compliance with the requirements of the principle of equal treatment or in the context of the General Assembly (art. 115 § 3).
Manifestation of the said obligation is the direct information of the shareholders on, if any, assistance to the person of the obstacle which mandates the activation of the relevant provisions (art. 99 et seq.)
Claims Against Consultant-Manager
The raising of any claims by the SA against the consultant-manager becomes possible – in case of non-replacement – through, and in this case, the appointment of a special representative (no. 105).
The choice of establishing a Single-Member Administrative Body/Consultant-Manager in the SA (instead of the Board) was a wise choice of the legislator who came to face a reality where single-shareholder (small or very small) SAs (or two, at most, shareholders) were looking for three persons for their board of directors. The choice ended up being, basically, forced for persons who, to a large extent, did not have the freedom of choice. The most important: persons who were unaware of their responsibilities, rights and obligations as members of the Board. Still, even today, the role of Consultant-Manager is not without responsibilities. Therefore, both the selection of the person and the latter’s exercise of powers should be done prudently.-
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 1st, 2023).
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.