Legal Analysis of the Managing Director Authorities in the Private Joint Stock Company

دانشنامه حقوق اقتصادی

Article 1, Volume 26, Issue 15, July 2019, Pages 1-31   

Document Type: Scientific research

DOI: 10.22067/le.v26i16.54045

Authors

Saeed Mohseni^* ; Mahsa Robati

Ferdowsi University of Mashhad

Abstract

Introduction
Due to the important role that managing director plays in managing a private joint stock company, increasing clarity of the scope of his or her ​​authority is important. This is while on the one hand, the ambiguity, brevity, and sometimes vacuum in the laws, and on the other hand, the divergence of views in the legal doctrine, has deepened the ambiguity of the aforementioned scope. Therefore, reinforcing the managing director's position as the executive lever in the economy's most popular form of the commercial companies, that is, the private joint stock company, requires the delineation and highlighting of his authority. The nature of the managing director's powers from the point of being inherent or delegated, the limitations on those powers, and the status of the encroachment from the drawing scope, in response to the latter two questions, are the most important leading questions.
Theoretical frame work
This study on the one hand highlights the scope of the powers of the managing director (generally and in varying assumptions) and on the other hand explains the restrictions imposed on those authorities. Finally, the assumption of managing director’s encroachment from the scope of his or her authority and the effects of this action, has been analyzed.
Methodology
This study attempts to answer the main questions of this research based on the descriptive-analytical method by criticizing and analyzing various statutes, regulations, cases and legal doctrines and sometimes with a comparative study of French law.
Results & Discussion
The board of directors by giving over the necessary authorities to the managing director provides for him the possibility of practical managing. These authorities are limited to the items that the board gives the managing director over in the process verbal of choice of him or in a separate contract. Despite this, it is possible that the article of association considers authorities and limitations too. In this case, the board cannot decrease or increase those authorities. In addition of mentioned limitations, there are other limitations that is imposed by law to the authorities of managing director. Although, for being valid the actions of managing director, it is necessary for him to observe the scope of the determinate authorities whether by law, by article of association or by board of directors, however, except the limitations that is imposed by law, and always is opposable against third parties, limitations imposed by the board of directors and the article of association can be opposable against third parties if they have been published. If these limitations are not published, it must be considering these limitations in opposable against third parties and must be consider the actions of the managing director outside the mentioned scope valid toward third parties.
Conclusions & Suggestions
Contrary to the powers of the Board of Directors, which include all the powers necessary to govern the affairs of the company, the principle is that the manager director has no authority and his or her powers are limited to the Statute and delegated by them. Representation behalf the company and the right to sign of the manager director as defined in Article 125, does not mean that these rights are monopolized by the CEO, but rather by the powers conferred on him by the Board. It is natural that such a delegation does not deprive the delegate of its right. In addition to the limitations that the Board may impose on the manager director, certain statutory restrictions on the Board's powers also limit the scope of the manager director's powers. These limitations are sometimes to prevent the manager from abusing the authority and sometimes to the principle of separation of powers. Despite these restrictions, the manager director may go beyond his powers and take actions outside of his delegated powers. Among these restrictions, the restrictions imposed by law on the powers of the manager director, such as the specific powers of the general assemblies and the board of directors, transactions, as well as acts that the manager director is prohibited by law, such as obtaining a loan or credit from company and the observance of the subject matter of the company in the assumption that the subject matter of the company constitute the domain of its capacity, due to its reflection in the law and the assumption that everyone is aware of the law, must be opposable to third parties. In contrast, those limitations on the manager director's powers may be in opposable to the third parties that have not been issued or published by the board or general assembly. In fact, the legislator, using the legal entity of in opposability, while discrediting these types of actions by the manager director, has considered them valid in the eyes of third parties in good faith. It is natural that in opposability sanction that properly gathers two apparently conflicting interests, is more appropriate than other sanctions. Because the said sanction, while validating and affirming the limitations of the manager director's authority, discredits it to third parties, it thus protects the interests of third parties while maintaining relationships between shareholders, managers and company.
 

Keywords

manager director authorities; stock company; memorandum of association; board of directors; management the stock company

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