A board member's duties may arise from the law, the company's articles, general meeting resolutions and other agreements between the parties.
Alongside specific duties arising from legislation, the articles, shareholder or board resolutions and any contract, section 35 of the General Part of the Civil Code Act imposes general duties of care and loyalty on management body members.
What does the duty of care mean?
A board member must act in good faith and in the company's interests, obtain sufficient information for decisions and avoid unjustified risks.
Loyalty includes avoiding conflicts of interest and not putting personal interests ahead of those of the company.
A member must act loyally towards the company, including cooperating constructively with other board members.
What may constitute a breach of loyalty?
A breach may arise where a board member enters into a transaction with a related company on terms different from market terms.
To establish disloyalty, the member should have preferred personal interests, or the interests of a related third party, over those of the private limited company in making the transaction.