Board members are liable for any fault committed in the management of the company’s affairs. Since 2007 this strict liability regime has been somewhat eased by the business judgement rule, which protects board members from liability as long as they can be shown to have acted as prudent businessmen (that is, their business decisions were reasonable and taken in good faith, on the basis of adequate information and with the sole purpose of serving the company’s interests). In practice, the general meeting of shareholders often adopts a resolution limiting board members’ liability or protecting them from liability for actions or resolutions taken during the previous financial year. However, the company may bring a civil action for compensation against a director, if the GSM decides so by an absolute majority or if shareholders representing one third (1/3) of the paid-up capital so request.
Directors may also be subject to criminal liability pursuant to various legal provisions. A director remains criminally liable even after he resigns from the board, the company has been declared bankrupt or has entered into liquidation.
An indicative overview of the major potential sources of personal liability for directors is as follows:
A director who actually participates in the management of the Company is personally liable for the payment of the company’s taxes which are due. This liability covers inter alia debts due to income tax, VAT payments, withholding taxes and capital concentration tax. Enforcement measures may be taken by the state against the property and assets of such directors if they are found to be in breach of the relevant tax requirements. In such a case, a director may be prohibited from leaving the country or may be even subject to imprisonment. The duration of the prison sentence depends upon the type and amount of the debt.
In the event that a company is found guilty of tax evasion, a director who actively participates in the management of the company may be subject to imprisonment ranging from one (1) to ten (10) years.
Directors may be held criminally liable and subject to a six (6) month to five (5) year prison sentence alongside fines ranging from EURO15,000 to EURO150,000 in the event that the company violates competition law provisions, including the regulations prohibiting concerted practices or an abuse of dominant position by the company.
A director who actively participates in the management of the company may also be held criminally liable for breaches of labour law committed by the company, including nonpayment of accrued salaries, labour related accidents or when the employees work overtime illegally. These offences carry up to a six (6) month sentence and non-compliance with the relevant regulations on safety and hygiene carries a sentence of up to one (1) year.
Directors may face imprisonment for up to ten (10) years and fines from EURO20,000 to EURO2,000,000 in cases where income has been generated from criminal activities and breach of anti-corruption legislation.
No indemnity clause can validly be included in the Articles of Incorporation of Greek corporations, since director’s liability is regulated by compulsory law provisions of Greek Law 2190/1920, as amended and in force, which cannot be deviated or waived. Such clauses may be inserted in labour contracts with directors, if they have an employment relationship with the company too.
No one specific period of limitation exists for a director’s breach of the relevant legislative provisions. For example, when considering criminal liability the statute of limitation will be a period related to the maximum penalty for the crime; although not necessarily equal to it. However, generally, the statute of limitation of civil matters is five (5) years.
Your powers can be delegated and assigned to specific individuals, (eg a Managing Director or other officers) should the Board of Directors resolve to do so.