The obligations and responsibilities of the Members of the Management Board

Management board members have an obligation arising from law (Commercial Code, Bankruptcy Act, Competition Act, etc.) to manage the companyorganise the accounting and represent the company.The Taxation Act stipulates an additional area of responsibility in the field of taxation according to which a member of the management board must ensure the timely and complete settlement of monetary and non-monetary obligations of the company arising from taxation law. In summary, it could be concluded that laws have subjected members of the management board to the obligation of being informed from all perspectives of the company’s business activities and use of financial resources. The objective of stipulating such an obligation is the protection of the creditors’ interests in addition to the protection of the owners’ interest and the objective of the law is definitely also to provide an opportunity for supervisory bodies to examine the business activities of a company if necessary in order to ensure that activities are compliant with legislation. In order to enable supervisory activities, the law stipulates that the members of the management board are subjected to the obligation of organising the accounting and record-keeping of the company. A situation where a member of the management board assigns the organisation of business activities and control over financial resources to a third party under a civil law contract does not correspond to the spirit of the law. Such civil law contract cannot release a member of the management board from their responsibility.

The Commercial Code stipulates that a member of the management board of a private limited liability company (OÜ) has the obligation to organise the company’s activities with due care of a business owner. Court precedent states that a member of the management board must be diligent, adequately informed in order to make decisions and should not assume risks on behalf of the company that are unwarranted. If a member of the management board fails to act with a level of diligence that a normal reasonable individual would demonstrate under similar conditions in such a position, this constitutes a violation of the duty of care on the part of the management board member and this may result in liability. Therefore, a member of the management board must take all measures in order to achieve the best outcome for the company.

An individual that gives their consent for being elected as a member of the management board must educate themselves as to what consequences this may entail and what their scope of activity is. The individual must understand that action or inaction on their part may result in liability. Serving as a member of the management board cannot be purely formal.