ArticlesInternal Audit and Executive Committee of the SA

January 24, 2023by Stavros Koumentakis

In our previous article, we were concerned with the possibility (but also the need) of delegating part of the (organic) power from the Board of Directors to its substitute bodies. In this context, the existence of an Executive Committee, which can and should function as a mini Board of Directors, being accountable to it. On the occasion of the substitute bodies of the Board of Directors, we also found the value of designing a secure system of commitment and representation of the company; for the protection, in advance, of the SA and the persons involved. The (always valuable) possibility of establishing an Internal Audit of the SA is moving in the latter direction. On them, the present article.


Internal Auditors

In General

The subject of risk management of the SA (: enterprise risk management – part of which is the internal control of the SA) is extremely important and particularly broad. We limit ourselves in the present article -out of necessity, to the provisions of the law on SAs (art. 87 §1 c. b. law 4548/2018) for the establishment of an internal control system. The articles of association of the SA, according to the law, may allow the board of directors (or, as the case may be, compel it) to delegate its internal control to one or more non-members. The use of this discretion, especially for non-listed SAs, can (and should) work as a tool for modernization and transparency. Much more so if its nature, share composition or management and representation system require it.


(a) Statutory provision: First of all, a necessary condition for the Board of Directors to delegate internal control (to one or more persons) is the existence of an explicit, relevant, statutory provision. The relevant assignment by the Board of Directors will appear as optional or mandatory, depending on what is defined in the articles of association.

However, for specific categories of SAs, the operation of an independent internal control unit escapes the statutory powers. It is, on the contrary, imposed by special legislative provisions. This applies, mainly, to listed SAs (art. 15 and 16 of Law 4706/2020 on corporate governance), companies in the general financial sector (e.g. credit institutions) and enterprises of public interest (art. 44 Law 4449/2017). In the latter cases, the further expansion of the content and scope of the internal auditors’ powers will remain at the initiative of the shareholders.

However, there should be no confusion between internal auditors and external auditors. The latter are exclusively responsible for carrying out the regular-annual audit of the company’s financial statements, where required.

(b) Qualification of internal auditors: A further condition is the assignment of internal audit to third parties who are not members of the Board of Directors. On the contrary, the possibility of delegating the internal control of the company to members of the Board of Directors, as it was foreseen under the previous regime (art. 22 §3 sec. c’ of Law 2190/1920), has now been abolished. The purpose of this repeal is to avoid situations of conflict of interest. Also, the assurance of impartiality and independence in the person of the auditors in the exercise of their powers (see, in this regard, Explanatory Report of Law 4548/2018 on art. 87).

Not having the status of a member of the Board of Directors is, therefore, a condition for the legal establishment of the internal audit service. The corresponding ones, of course, also apply to the special categories of SAs mentioned above.


The responsibilities of internal auditors are not specified in the law. First of all, they are assigned the power to carry out financial audits in the SA. It is argued, however, that their role is not exhausted, exclusively, in their capacity as auditing bodies for financial matters. On the contrary, they take on the position of the Board of Directors (according to the proportional application of the above provisions for listed companies) and certain supervisory duties. In particular, they become responsible for the protection of the lawful operation of the SA and the protection of its interests.

Their authority (more precisely: their obligations) includes -indicatively- the monitoring of the implementation of the statutory provisions and legislative obligations. They must, moreover, report to the Board any incidents of conflict of interest (between the members of the Board and the company) in order to take the appropriate measures. They cooperate, if deemed necessary, with the competent supervisory authorities. In any case, internal auditors should have access (also) to the company’s confidential information.

Internal Auditors-SA Relationship

Internal auditors (unlike substitute bodies) do not exercise organizational powers of management and representation. On the contrary there exists, between them and the SA, exclusively, some kind of contractual relationship (ind.: provision of independent services, dependent work). They report to the Board of Directors.

Sub-delegation on the part of the auditors of their responsibilities is possible, only, by power of attorney. The appointment of substitute bodies by them is beyond their powers.


Executive committee

In General

In addition to the internal auditors, in the same provision regarding powers, we find an important innovation: the possibility of setting up an executive committee within the Board of Directors of the SA (art. 87 §4 Law 4548/2018). As expressly provided, by provision of the articles of association or by decision of the Board of Directors, if the articles of association allow it, it is possible to set up an executive committee. This committee is assigned specific powers or responsibilities of the Board. Members of the executive committee can be both members of the Board of Directors and third parties (see, in this regard, Explanatory Report of law 4548/2018 on art. 87).

With this specific provision the permissibility of setting up such committees was clarified and their role was established. The permissibility of their establishment and operation was disputed under the previous regime. It was questioned, in particular, whether the possibility of delegating powers of the Board of Directors to specific members could also include the creation of a committee with the ability to make decisions (see in this regard, Explanatory Report to law 4548/2018 on art. 87). It should be clarified, however, that (even under the prevailing legislative framework) in practice such bodies existed and successfully, as a rule, operated and made decisions.

Deviating, therefore, from the standards of the – otherwise established in Greece – monist system, the operation of the executive structure in question in the context of the SA seems to resemble the binary system of corporate governance (which is made up of two bodies: the supervisory and managerial).

Conditions of Establishment

Statutory provision: The establishment of the executive committee could only require a special statutory provision. This may also concern (apart from what is permitted by its constitution) other, individual, issues. E.g.: its composition, responsibilities, tasks and the way of making decisions. Also, any other matter concerning its operation. It is noted that, as we have already pointed out in our previous article, the specific possibility of “direct” statutory regulation of such issues is not omitted in terms of the company’s Board of Directors (with the exception of the composition and powers of the first Board of Directors).

It is not excluded, however, that both the decision on the formation and the individual operational issues of the executive committee belong to the Board itself. A previous/relevant statutory provision is also required in this case.


If it is not explicitly defined, the assigned duties of the said committee seem to belong to the “executive” powers of the Board. In accordance with what applies to substitutes, it is prohibited to delegate to the executive committee powers that belong, by law, to the Board of Directors as a collective body (incl.: approval of the transfer of reserved shares, certification of the payment of share capital). However, it is not possible to assign supervisory powers to the executive committee.

Decision-making power does not, however, rest with the individual members of the executive committee. On the contrary, the committee is competent as a (collective) body. Therefore, it constitutes, in this case, a “substitute body” of the Board of Directors.

The delegation of powers to the executive committee does not overturn the given responsibility of the Board and its members. The Board remains charged with the duty of overseeing corporate affairs. Also, with the task of supervising the actions of its individual members – of course he executive committee included.


Distinctions of Board Members

Especially with regard to listed SAs, the members of the Board of Directors are distinguished, by law, based on their duties into executive, non-executive and independent (art. 5 et seq. of Law 4706/2020). The topic here is also extremely extensive. We limit ourselves, out of necessity, to the absolutely necessary.

A similar arrangement for the distinction of the members of the Board of Directors does not exist for non-listed SAs. It is possible to proportionally apply the provisions on the need for executive, non-executive and independent members of the Board of Directors (but also on corporate governance-in general) to non-listed SAs as well. As long as there is a relevant statutory provision (art. 87 §5). In this case, the supervisory and sanctioning powers of the Capital Market Commission do not apply to the SAs in question.

However, in relation to the common SAs, any executive committee is usually mostly accompanied by executive members of the board.

The role of the executive members of the Board of Directors is crucial. They are involved in the day-to-day management of the company and are responsible for the implementation of the corporate strategy. They are, however, supervised during the exercise of their duties by the non-executive and independent members.


The operation of the SA Board of Directors can be assisted, under certain conditions, by an executive committee. The latter will, in this case, be included in the making of important decisions. In this case, the risks will be limited by assigning them to individual representatives. The operation of a potentially multi-member Board of Directors will be relieved, making its operation more flexible and efficient. All this, however, is not enough! The (internal) control of the SA and the corresponding framework to ensure its lawful and in accordance with the statute and the law operation is necessary; in fact, regardless of legal obligations which (in the vast majority of SAs) are lacking.-

Stavros Koumentakis
Managing Partner


P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 22th, 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.

Stavros Koumentakis
Nikis Avenue & 1, Morgenthau st., 54622 Thessaloniki
(+30) 2310 27 80 84

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