ArticlesBoard of Directors or a Consultant-Manager? 

Board of Directors or a Consultant-Manager? 

1. Preamble

His unique personality and work are why the Austrian – American university professor, writer and advisor Peter Ferdinand Drucker, received, during his life of almost a hundred years (:1909-2005), the highest honors and titles. Some people gave him the title of the “Founder of modern management”. Although, since his time, his views have been challenged, his quotes still are of value. Among his others quotes: “The leader of a team must be able to say: “This has to be done. You will do it. In that way.” The survival of the team is depending on this unquestionable power. Without it, no one feels safe”.


2. Facts change

The multimembered/multi-shareholder and financially stronger business schemes are, in most cases, S.A.s. An essential part of an S.A.’s function: its Board of Directors. This collective body is the one that is, by law, exclusively given the power of the S.A.’s management.

Until 31.12.2018.

The management of an S.A., usually and essentially, is at the hands of the (capable or less capable) “leader of the team”, as Peter Drucker found, and that is such a person in every company.

Facts have already changed (since 1.1.2019) for the Small and Very Small Businesses (as those are defined in Act 45488/2018) and for the unlisted companies.


3. “Single-Member Administrative Body” or “a Consultant-Manager”

According to Article 115 of Act 4548/2018, the Board of Directors of an S.A. can be replaced by one only manager – until now, that was the case only for Partnerships and other limited companies.

This specific provision, since it constitutes a very important diversion from the pre-existing legal framework, seems to be the most “famous” among the one hundred and ninety (190) provisions in total of the new Act.

The title meant to be given to this one person (which can now officially operate on its own, substituting the Board of Directors) is: “Single Administrative Body” or “Consultant-Manager” (from this point forward “Consultant-Manager”).

Since 1.1.2019 (and as long as there is the relevant provision in the company’s statute) the Small and Very Small Businesses as well as the unlisted companies, can (now formally) trust their management to a single person.


4. The legal framework around theConsultantManager

The provision of article 115, par.2 of the new Act of S.A.s regulates the issues concerning the Consultant-Manager, by referring to the “rules in place for the Board of Directors, to the point they are compatible to the nature of the single-membered body”. A special (although indicative, par.5 of the same article) reference is made in this specific provision to the issues of appointment, conditions of electing, term of office, responsibilities, duties, powers of the Consultant-Manager, the appointment of its alternate, the Consultant-Manager’s civil and criminal liabilities, its payment and other relevant subjects to these, by referring to the relevant provisions in the Act set for the Board of Directors.


5. The obligation of informing the “Consultant-Manager”, keeping Minutes and conclusion of agreements in which the “Consultant-Manager” has any interest.

Among the obligations each member of the Board of Directors has, is the obligation to inform the other members of the Board (e.g. the obligation to reveal to them about any self-interests or conflicts of interest with the corresponding interests of the company – article 97 par.1). Given the lack of “other members”, the obligation of informing the rest of the BoD members is in this case an obligation to inform (article 115, par. 3) the company’s shareholders in a general assembly or each one individually.

Furthermore: the decisions of the Consultant-Manager (the ones that are outside the sphere of the decisions taken regarding the “every day running of the business”) are recorded (article 115 par. 4) in the relevant book of Minutes (article 93), which can be kept digitally, as happens with the Board of Directors.

Finally: for the conclusion of agreements between the Consultant-Manager and the S.A., the decisions (according to article 99) are taken and approved by the General Assembly (article 115 par.3) – instead of the, non-existing in this case, Board of Directors.


6. Electing a Consultantmanager instead a Board of Directors can be useful

The explanatory report of the new act of S.A.s mentions, among others, regarding this specific, new, article: “this is hoped to reduce the functional cost of the unlisted companies that wish to adopt this system, if they don’t have the size to justify a bigger number of people in administrative positions. Experience has shown that in many small S.A.s, there essentially is only one administrator, while the other members simply have a decorative function.”

This specific assumption, although not expected in the context of an explanatory report, reflects the reality. And that is because it verifies, very vividly, the (true) observation that there is a “leader” in every team and also that in small (and not only) businesses in our country, the role of the Board of Directors is decorative.

By selecting a Consultant-Manager instead of a Board of Directors, the management of the S.A., responds better to current conditions, because it is appointed to the only person that truly exercises this authority anyway. Additionally, it costs less and is more flexible. Afterall, the same explanatory report mentions: “Additionally, the ability to elect a “Consultant-Manager” simplifies the obligations in which the limited company has.”

These reasons are not the only ones that point towards an S.A. electing a Consultant-Manager instead of the, until recently necessary, Board of Directors.

We have already mentioned in previous articles (New Law on SAs: the Liability of the Member of the Board of the Directors and Other Liabilities of the Members of the Board of the Directors of a S.A.) the kinds and the extend of the liabilities of the members of the Board of Directors. Not rarely, the primary (usually one) businessman was in search, “using the lamp of Diogenes the Cynic”, of members to fill the empty seats of the (at least three-membered) Board of Directors. It is not uncommon either for people who accepted the, out of necessity (or out of wickedness, it doesn’t really matter) invitation from the businessman to «grace with their presence” this specific body and ended up being dragged to courts trying to prove their innocence or that “they don’t have blood in their hands”… In other words: when we limit the number of people involved, we automatically limit the range of people that could possibly be implicated in legal disputes or/and be exposed, in any way, to legal risks.


7. Risks that come with this choice

This choice (the election of a Consultant-Manager instead of a Board of Directors) is not without risks: The shareholders should consciously and in a formal manner accept the “ruling of one man” and everything good (and of course everything dangerous) that comes with it.

What about the public image of the business? Will the potential future shareholders, investors or financiers accept the, at least in a first place, uncontrolled management of the Consultant-Manager?

It does not seem very likely…

Do the risks for the Consultant-Manager and/or the only (or primary) member of the shareholding scheme of the company increase?

There is a long, ongoing, discussion regarding the issue of the requirements for “lifting the corporate veil” (of formally “seeing” in the legal world the owner of the company as the person behind it, and thus being able to claim from the owner what was initially due by the company). This can more easily be implemented where there are only a few shareholders or just one shareholder holding a company. In any case, one thing must be clear: Choosing a Consultant-Manager instead of a Board of Directors, is not by itself going to make the S.A.’s only representative liable for everything the company does. The lifting of the corporate veil, under the terms and requirements (mainly) set by precedents, cannot be referred in this case. The lifting of the corporate veil foremost refers to the cases where only one shareholder or partner take over (or tend to take over – directly or indirectly) the capital and the function of the legal person – hiding behind its legal form. But taking over the management of the S.A. by its Consultant/Manager who also happens to be the sole shareholder will, undoubtfully, push a court towards lifting the corporate veil.


8. In Conclusion

Thucydides, in his work “Stories”, outlines the personality of Pericles and while assessing its way of practicing politics mentions [2.65.10]: “It was in name a democratic state, but in fact a government of the principal man”. The distance between democracy and monarchy, in this case, is significantly smaller.

The operation of an S.A. has, for the last one hundred years, gone hand in hand with its Board of Directors. This specific collegiate body functioned/functions, in most cases, only typically – as the explanatory report of the recent Act of S.A.s, bravely, admits. The BoD actual meetings have been replaced by the written BoD Minutes, that rarely need to be signed by the BoD members. In many cases those Minutes were/are only signed after they are published on the HELLENIC BUSINESS REGISTRY (in the past on the Government Gazzette) and after exact copies and excerpts of them have been issued by Drucker’s “leader” and Pericles’ “principal man”.

This newly introduced provision of a Single-member Administrative body / Consultant-Manager is here to shift the legal frameworks and at the same time align it with everything reality and experience are demanding. It is here to make life and S.A.s’ function a lot easier. It is here to minimize the number of persons liable before the Government, Social Insurance Institutions and others that are possibly able to impose an indefinite number of administrative, criminal and civil liabilities on them.

A careful application of this provision and a conservative use of it can, no doubt, make it successful.


Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (June, 16th, 2019).

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(+30) 2310 27 80 84

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