The General Director is, as 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 the business results of the legal entity and for the safety of its employees and property. Risks arising out of holding the position of the General Director was the main topic of our Morning Tea event “Risk factors for General Directors in Russia” on October 26th, 2017 in the Moscow 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 discussion with the Audience, SCHNEIDER GROUP experts, Alex Stolarsky, Rechtsanwalt, Director for Legal, Compliance & Tax and Christopher Schagerl, Director, presented the update to the:
- Personal liability of the General Director
- Risk Management
- Typical risks during the life-cycle of the company
- Temporary solutions for outsourcing the GD
During the lively discussion it turned out that for General Directors it is difficult to oversee in detail all (bureaucratic) requirements the law has foreseen for the GD. Not following the legislative requirements may cause:
- Civil Liability
- Administrative Liability
- Disciplinary Liability or even
- Criminal Liability
The fines vary from smaller monetary fines of a few hundred roubles to disqualification and in some cases even imprisonment.. Through well segregated and concretized delegation of duties,responsibilitiesand tasks, the risk and liability can be partly shifted from the General Director to other company officers and specialists by issuing the respective internal documents.
During the lifecycle of a company the organization and the GD face risks in different spheres, such as risks associated with:
- violations in the areas of finance and taxation and of the currency legislation
- violation of immigration laws, labour code and the law on labour safety
- import of goods
- the organizational and legal form of the Company (“corporate housekeeping”)
- committing administrative offences in the area of personal data protection
- violations in the field of fire safety or the company’s property
Outsourcing of the General Director 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 often reasonable to focus within the organization on the core business, while an experienced professional is taking over the functions typically covering the serious administrative workload of the GD. Not only during the start-up phase, liquidation or dormant period of an organization is this 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.
During the Q&A session it was mentioned how important it would be to have a clear overview of the legal requirements and their administrative, disciplinary, civil or criminal liability to give the participants the opportunity to check the implementation stage in their organization. Therefore SCHNEIDER GROUP will provide the participants with a list of common risks and their legal and financial impact for the company and the GD.
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