Alla kategorier › Company Law ›

Board of Directors and the Managing Director

Sweden has on the management level a system consisting of a board of directors and a managing director. This system is mandatory for public companies. For private companies only one management level is mandatory, namely the board of directors. The owners of a private company can therefore decide on the appropriate management organisation.

Number of directors

A public company shall have a board of directors consisting of at least three members. In a private company it is enough with one or two members if there is at least one alternate member. Members of the board are, as the main rule, elected by the general meeting.

A public company must, as indicated above, have a managing director. In a private company, the board of directors may appoint a managing director. At least half of the members of the board of directors and the managing director must be residents of the European Economic Area, unless special permission is obtained.

The board’s and the managing directors responsibilities

The board is responsible for (i) The company’s organisation (ii)  The management of the company and (iii) The internal control of the company’s affairs. The managing director shall be in charge of the day-to-day management of the company according to the guidelines and instructions given by the board.

Difference between the day-to-day management and management reserved for the board

The borderline between the day-to-day management and the management decisions reserved for the board of directors is not always easy to define. Normally the managing director cannot handle matters which are of great importance or unusual with regard to the scope and nature of the company’s activities.

Guidelines for the board of directors

The board of directors has a duty to establish procedures for its work. The work procedures (SW: arbetsordning) must cover 1. The delegation of responsibilities among the board members 2. Duties of the alternate member and 3. The timetable for the meetings.

If a company has a full-time working chairman, his duties must be stipulated in the work procedures. Every year the procedures must be approved by the members of the board of directors.

Listed companies

A company whose shares are listed on a regulated market in Sweden must have an audit committee. According to the SCCG a company must have a remuneration committee with the purpose of preparing proposals on remuneration and other terms of employment for the executive management.

Managing director

If a company has a managing director the board of directors shall specify the division of responsibilities between the board of directors and the managing director. This also applies if the company has in its organisation operational organs.

Financial information

The board of directors shall continuously assess the financial situation of the company and the board of directors must establish a reporting system that can provide the board with financial information.

External matters

In external matters the board of directors represents the company and signs the company name. The board has the power to authorize a person, who may be a director, managing director or someone else, to represent the company and sign on behalf of the company. This is not the case when such delegation of authority is prohibited by the articles of association. The board of directors has the power to prescribe that the right to represent the company and sign for it may only be exercised by two or more persons jointly. The board has the power to revoke an authorization concerning the right to sign for the company.

The managing director can always represent the company and sign the company name for matters concerning day-to-day business.

The chairman of the board

The chairman of the board must be a member of the board. The board of directors elects the chairman unless otherwise is provided for in the articles of association or decided upon by the general meeting. The chairman shall be in charge of the work of the board of directors and ensure that the board fulfil its duties, especially that the board establishes work procedures, issues directives for the work of managing director and other committees and that the board receives financial information.  

Decisions taken by the board of directors

The general principal is that all decisions by the board of directors shall be adopted by a simple majority vote of the board members present. The board can normally only make a decision if more than half of all the members are present at the meeting.

Restrictions

A member of the board and the managing director may not take part in agreements between himself and the company. The same applies to agreements between the company and a third party if he has a considerable interest in the agreements contrary to that of the company. A managing director or a member of the board is also disqualified to take part in agreements between the company and another company where he is a director or managing director.

Worker representation

Worker representation on the board of directors is regulated by the Act on Board Representation for Employees in the Private Sector (1987:1245). It is not the employees, but rather the trades unions that have concluded collective agreements with the company, which have the right to appoint directors.  In companies with 25 or more employees the union or unions appoint two directors and two alternates. In companies with at least 1,000 employees and activities in different branches of trade and industry, the union(s) has/have the right to appoint three directors and three alternates. Union-appointed directors and directors appointed by the shareholders are normally bound by the same rules.

Do you have questions relating to the board of directors or the managing director? Contact Pocket Lawyer today!