The General Director is the sole executive body of a company in charge of overall management within the powers granted by law and the company charter. He is responsible for business results of the legal entity and for the safety of its employees and property. The risks arising from the position of the General Director was the main focus of the “Business Breakfast” titled “Responsibility and liability of the General Director in Russia” held on December 15th in the St. Petersburg office of SCHNEIDER GROUP. In comparison with Western countries, the General Director in Russia has a significantly higher responsibility in front of state bodies.
Together in a deep discussion with the Audience and guest speakers from the insurance company AIG, specialists from SCHNEIDER GROUP Ms. Ekaterina Polyakova, Legal Specialist, Mr. Christopher Schagerl, Director and Ms. Nadezhda Kharkovskaya, Senior Project Manager presented an update to the:
- Role of the General Director in Russia
- Personal liability of the GD
- Typical risks during the life-cycle of a company, including the financial impact of fines
- Temporary solutions for outsourcing the GD-Function
AIG was represented by Mr. Vladimir Kremer, who spoke on the topic of “Director’s and Officers’ liability insurance” and what should be borne in mind when insuring the company’s Management.
During the lively discussion it turned out that for General Directors it is difficult to oversee in detail all (bureaucratic) requirements that the law has foreseen for the GD. Not following the legislative requirements may cause:
- Civil Liability;
- Administrative Liability or even
- Criminal Liability for the person being the GD of a company in Russia.
Fines vary from smaller monetary fines of a few hundred Rubles up to disqualification of the GD and even imprisonment, when matters concern a large scale. To enlarge the overview of existing fines, SCHNEIDER GROUP agreed to provide the participants with a list of common risks and their legal and financial impact for both – the company and the GD. Within a company, through delegation of duties and responsibilities, the risk and liability can be shifted in some cases from the General Director to other employees and specialists by means of issuing respective internal documents.
During the life-cycle of a company the organization and the GD face risks in different spheres such as risks associated with
- violations in areas of finance and taxation and of currency legislation;
- violation of immigration laws, labour code and the law on labour safety;
- import of goods;
- organizational and legal form of the Company;
- violations in the field of fire safety or the company’s property.
Concerning the outsourcing of the General Director it is possible either via a physical person taking over the position of the GD or a Management Company. This is not a measure to shift or transfer risks, but is often an opportunity to focus on the core of the business, while an experienced professional is taking over the functions typically covering serious workload of the GD. Not only during the start-up phase, liquidation or dormant period of an organization this is an ideal opportunity, but also during usual business. As the GD acts on clear regulations, agreed with the HQ, he can act as the “eyes and ears” of the HQ in the local subsidiary.
Considering the high interest of the participants we at SCHNEIDER GROUP will continue to inform all interested companies and their representatives about changes and updates in legislation on this important topic.