!Корпоративное право 2023-2024 / 2013-study-analysis_en

		employees, and
		the public
		welfare
Luxembourg	Art. 1859(2) Code	Not defined in	May be included,	May be included,
	Civil: ‘l’intérêt de	the statute; it is	depending on the	depending on the
	la société’	a fluctuant and	type of corporate	type of corporate
		case-law defined	activity, see left	activity, see left
		concept that
		does not
		correlate with
		the interests of
		the
		shareholders.
		What the
		corporate
		interest is
		depends on the
		nature of the
		corporate
		activities; for
		some types of
		company the
		shareholder
		value theory
		might be
		adequate,
		whereas for
		other types the
		stakeholder
		theory
		applies
Malta	Art. 136A(1)	Relevant are	Not included	Not included
	Companies Act:	both the short-
	duty to act in good	term interests of
	faith in the best	the present
	interests of the	members and
	company	the long-term
		interests of
		future members
		→ shareholder
		primacy
Netherlands	Interest of the	Stakeholder	Included	Included
	company not	theory, but no
	defined in	statutory
	statutory law,97	definition
	but understood as
	“inclusive” system
Poland	Mentioned several	No statutory	To some extent	To some extent
	times throughout	definition; the	included, but	included, but
	the Code of	meaning is not	shareholder	shareholder focus
	Commercial	settled. The	focus (see left)	(see left)
	Companies, e.g.	literature argues
	Art. 249	that the interests

97 But see Article 2:129 of the Dutch Civil Code: management in “the interests of the Corporation and of the enterprises connected with it” (emphasis added).

71 Directors’ Duties and Liability in the EU

			of the company
			are derived from
			the economic
			interests of the
			groups involved
			in it
			(shareholders
			and other
			stakeholders),
			but that
			shareholder
			interests should
			have the
			strongest
			influence on
			the interpretation
			of the concept of
			the company’s
			interests
	Portugal	For example in	Art. 64(1)(b):		Included, but it is	Included, but it is
		Art. 64(1)(b) Code	The interests of		argued by the	argued by the
		of Commercial	the company are		literature and	literature and held
		Companies	equated with		held by some	by some courts
			‘the long term		courts that	that priority should
			interests of the		priority should be	be given to the
			partners and		given to the	interests of the
			taking into		interests of the	shareholders
			account the		shareholders
			interests of other
			relevant parties
			such as
			employees,
			clients and
			creditors in
			ensuring the
			sustainability of
			the company’
	Romania	-	- Not defined in		The majority of	The majority of
			the Companies		the literature	the literature
			Act or the New		argues that	argues that
			Civil Code		directors do not	directors do not
			- High Court of		have to take the	have to take the
					interests of	interests of
			Cassation: the
					stakeholders into	stakeholders into
			company’s
					account → pure	account → pure
			interests are
					shareholder	shareholder value
			represented by
					value approach	approach
			the common
			intention of the
			shareholders to
			associate with a
			view to obtaining
			a profit
			- Literature: the
			company’s
			interest
			comprises the
			72	Directors’ Duties and Liability in the EU

		common,
		collective, and
		legitimate
		interest of the
		shareholders to
		have a share in
		the profits
		(influenced by
		the neoliberal
		French doctrine
		of the ‘intérêt
		social’)
Slovakia	For example in s.	- No definition in	Not included	Not included
	194(5)	the statute or in
	Commercial Code	case law
		- Literature:
		Shareholder
		primacy
Slovenia	For example in	The company’s	Included, but	Creditors’
	Art. 508 (the	interests are	subordinated to	interests are
	general meeting	understood as	the shareholders’	generally
	must be convened	including the	interests	subordinated to
	if it is necessary	shareholders,		the shareholders’
	for the interests of	management,		interests; but as a
	the company)	employees,		company nears
		other market		insolvency, the
		participants (e.g.		creditors’ interests
		suppliers,		prevail and
		banks), the		directors have to
		state, and the		act primarily to
		public at large.		protect them
		The
		shareholders’
		interests shall
		take priority, but
		limited by the
		interests of other
		stakeholders.
Spain	Art. 226 Ley de	The concept is	Not included	Not included
	Sociedades de	not well
	Capital: ‘interés	developed in
	social’	Spanish law.
		Frequently, the
		interests of the
		company are
		equated with
		those of the
		majority
		shareholders.
		Supreme Court:
		to be interpreted
		in line with
		shareholder
		primacy
Sweden	Various sections	No general	-	-
	of the Companies	definition, but

73 Directors’ Duties and Liability in the EU

	Act	understood as
		going beyond a
		pure
		shareholder-
		centric
		approach
United Kingdom	s. 172 CA 2006:	Enlightened	Included, s.	Included if vicinity
	duty ‘to promote	shareholder	172(1)(b), but	of insolvency, s.
	the success of the	value approach	directors must	172(3)
	company’		primarily consider
			the interests of
			the shareholders

Discussion

Companies, as legal persons, only “exist” in the realm of the law. As such, any question about the “interests of the company” is, in essence, necessarily a question about the content of the law. The table above summarises the legal position of the Member States in relation to this question.

Why is this important in the context of directors’ duties? First, as will be explored in more detail below,98 the behavioural expectations of the law in relation to directors’ actions are often defined by reference to the interests of the company. Where directors owe a duty of loyalty to the company, this duty can only be interpreted if and to the extent that we have a clear understanding of the legally relevant interests that the director should guard.

Second, and related to this point, the interests of the company also play a role in shaping the role of managers in the corporation. Where the interests of the company are defined in a way that includes multiple constituencies, the managerial role necessarily involves the balancing of these interests. As explained above, the extent to which such balancing is required of or permitted to corporate managers also influences the degree of managerial discretion that a legal system grants to directors.99

2.4 Duty of care

The duty of care addresses one of the main aspects of the agency problem between the shareholders and the company. It aims at ensuring that directors devote sufficient time, care, and diligence to managing the company, act only on an informed basis, possess the necessary skills and experience to make sound business decisions, and consider the likely outcome of their decisions carefully. In this sense, it is a concept familiar to all legal systems. However, the legal systems differ with regard to the precise behavioural expectations that the duty of care imposes on directors, for example the definition of ‘due care’, the responsiveness of the duty to different types of director (e.g., executive vs. nonexecutive director, or member of board committees, such as the audit committee, vs. other directors) or the distribution of responsibilities among the board members, and the burden of proof for showing due care (or lack thereof).

Apart from the aim of constraining the directors’ discretion, the duty of care has another side. It is often argued that directors may become risk averse if the liability risk faced by them is too high. Since directors operate under conditions of uncertainty and the ex post judicial review of business decision may give rise to hindsight bias, they may forgo investment opportunities with a positive net present value in favour of less risky alternatives.100 This problem is appreciated in most jurisdictions. One solution is the famous business judgment rule, which emerged in the US as early as 1829,101 and

98See in particular Sections 2.4 and 2.5.

99See e.g. M Gelter, ‘Taming or Protecting the Modern Corporation - Shareholder-Stakeholder Debates in a Comparative Light’

(2011) 7 NYU Journal of Law & Business 641.

100See, e.g., S.M. Bainbridge, ‘The Business Judgment Rule as Abstention Doctrine’ (2004) 57 Vand. L. Rev. 83, 114-116.

101See below n 130.

74 Directors’ Duties and Liability in the EU

which has recently spread, in one form or another, to several jurisdictions in Europe. However, the response of the Member States is not uniform. Even those jurisdictions that have adopted the business judgment rule differ with regard to the scope of the rule, the threshold requirements that have to be satisfied for directors to be protected, and the possibilities to rebut the protections of the rule.

In the following subsections, we discuss the dogmatic foundation of the duty of care (2.4.1.), the behavioural expectations established by the duty (2.4.2.),102 and the existence and content of the business judgment rule or equivalent mechanisms (2.4.3.).

2.4.1 Dogmatic foundation

Summary of the country reports

Table 2.4.1.a: Dogmatic foundation of the duty of care

Country		Statutory		Contractual /	Tort law	Other
		corporate law		fiduciary
				principles
Austria		Yes, s. 84(1)		-	Yes, for liability	-
					towards third
					parties, provided
					the director
					breaches a
					provision which is
					designed to
					protect that third
					party
Belgium		Internal liability,		-	External liability	-
		Art. 527 CC:			according to tort
		liability for faults			law (Art. 1382
		committed in the			Civil Code): for
		exercise of the			breaches of the
		directors’			general duty of
		management			care and
		(referring to			breaches of
		contract law, i.e.			statutory
		rules of agency			obligations.
		apply by analogy			However,
		where
					personal liability of
		appropriate)
					directors to third
					parties requires
					an individual fault,
					e.g. breach of a
					statutory
					obligation that is
					addressed to the
					director.
Bulgaria		Yes, s. 237(2)		-	-	-
		Commercial Act
Croatia		Yes, s. 252(1)		-	-	-
		Companies Act

102 This comprises the issues raised above: (1) How is the standard of care defined? (2) Does the standard of care differ depending on the role and position of the director and the type of company? (3) Is the standard of care modified if directors delegate duties? In particular, are directors required to monitor and supervise the discharge of the delegated functions? (4) Who bears the burden of proof for showing due care (or lack thereof)?

75 Directors’ Duties and Liability in the EU

Cyprus	No	-	Yes, tort of	-
			negligence
			(adopted from
			English law)
Czech Republic	Yes, s. 194(5)	-	-	-
	Commercial Code
Denmark	Yes, s. 361(1)	-	-	-
	Companies Act
Estonia	Yes, § 35 Civil	-	-	-
	Code for all
	members of the
	directing body of a
	legal person; in
	addition § 315(1)
	Commercial Code
	for the members
	of management
	boards of
	companies
Finland	Yes, Companies	-	-	-
	Act, Ch. 1, s. 8
France	Yes, Art. 225-251	-	Art. 1382 Code	-
	(for the unitary		Civil for liability of
	board SA), but no		de facto directors
	statutory definition
	of the standard of
	care
Germany	Yes, s. 93(1)	-	-	-
Greece	Yes, Arts. 22, 22a	Art. 22a(1) derives	-	-
	of Law 2190/20	from a general
		fiduciary principle
		that requires
		directors to act
		prudently
Hungary	No	Principles of	General tort law	-
		general civil law	principles apply
		apply (law of
		service
		contract/breach of
		contract)
Ireland	No	Yes, the duty of	-	-
		care is regarded
		as both an
		equitable and a
		common law duty
Italy	Yes, Art. 2392(1)	-	-	-
	Civil Code
Latvia	Yes, Commercial	-	-	-
	Law 2000, s
	169(1)
Lithuania	Yes, Civil Code,	-	-	-
	Art. 2.87(1)
Luxembourg	Art. 59(1)	One legal basis	General tort law	-

76 Directors’ Duties and Liability in the EU

		Companies Act	for the duty of		(Arts. 1382, 1383
		does not directly	care as such (as		Civil Code) are
		impose a duty on	opposed to the		interpreted by
		the directors, but it	legal basis for		case law as
		constitutes the	liability, see left) is		containing an
		legal basis to	the agency		underlying duty of
		bring an action	relationship		prudence and
		against a director	between the		diligence that is
			director and the		imposed on any
			company, Arts.		individual in any
			1984 et seq. Civil		circumstance of
			Code. But see		his life, making
			right: the courts		them liable to all
			also apply tort law		those to whom
			principles		they cause
					damage. The
					courts holds that
					Art. 59(1) is
					merely an
					application of Arts.
					1382 and 1383
					Civil Code
Malta		Yes,	-		-	-
		Art. 136A(3)(a)
		Companies Act
Netherlands		Derived from s.	-		-	-
		2:9 Civil Code
Poland		Yes, Art. 483	-		-	-
		Code of
		Commercial
		Companies
Portugal		Yes, Art. 64(1)(a)	-		-	-
		Code of
		Commercial
		Companies
Romania		Yes, Art. 144(1)	Initially fiduciary		-	-
			principles arising
			from the law on
			agency, but since
			2006 codified in
			the Companies
			Act
Slovakia		Yes, s. 194(5)	-		-	-
Slovenia		Yes, Art. 263(1)	-		-	-
		ZGD-1
Spain		Yes, s. 225 LSC	-		-	-
Sweden		The duty of care is	-		-	-
		not expressly
		provided for in the
		Companies Act;
		however, it is
		implicitly
		contained in Ch.
		8, § 23, 34 and
			77	Directors’ Duties and Liability in the EU

	41.
United Kingdom	Yes, s. 174	-	Originally the duty	-
			of care stemmed
			from the tort of
			negligence

Discussion

All legal systems analysed by this study have behavioural constraints in place that address the problem of mismanagement or lack of due care by the directors and that can, accordingly, be summarised under the heading ‘duty of care’, even though the legal system may not always be familiar with this term. An example is the Dutch Civil Code, which merely stipulates that directors are responsible for ‘a proper performance of the tasks assigned to [them]’.103 It is commonly accepted that, following this rule, directors have to act diligently and carefully in managing the company and that they are, in principle, liable if they do not meet the required standard of care.

However, the dogmatic foundation of the duty of care varies greatly across Member States. In some jurisdictions, the duty is not codified, but derives from case law (e.g., Cyprus and Ireland), in the majority of legal systems it is laid down in the company legislation. Where it is not codified, the exact dogmatic foundation and the relationship with general principles of tort law remain sometimes ambiguous. Where it is codified, some legal systems provide for one general standard of care (for example, Germany, the Netherlands, UK) and some for different, more specific duties (for example, Spain, which combines the general duty of directors to perform their duties with due diligence and the specific additional duty to be informed).

A substantive difference does not follow from these variations in regulatory techniques. Rather, the effectiveness of the duty of care as a mechanism to align the interests of the directors and shareholders and, at the same time, grant the directors a sufficiently broad margin of discretion in order to promote innovation and efficient (but not excessive) risk-taking depends on the precise definition of the standard of care and the restraint that the courts show in reviewing business decisions. We have no reason to conclude that these elements can be specified in a more appropriate way by one regulatory technique, rather than another. The discussion below will show that countries that share a common legal origin and adopt similar regulatory strategies may still differ in the formulation of the required behavioural standard and the approach of their courts to reviewing business decisions, whereas jurisdictions from different traditions may well arrive at similar results.

2.4.2 Behavioural expectations

Summary of the country reports

Table 2.4.2.a: Content of the duty of care

Country		General standard		Differences in		Delegation	Burden of proof
		of care:		the standard of			for showing due
		1) definition		care depending			care/lack of due
				on the director’s			care
		2) objective /
				position and
		subjective etc.
				type of company
Austria		1) Care of a		Yes, the standard		Failure to monitor	Director, s. 84(2)
		diligent and		depends on size,		or negligent
		conscientious		business, financial		delegation leads
		business leader		situation etc. of		to liability
		2) Objective: does		the company and
103 Dutch Civil Code, Art. 2:9.
				78	Directors’ Duties and Liability in the EU

		not depend on the	the responsibility
		director’s abilities	of the director
		→ normal	within the co.
			(case law)
		negligence
		standard
Belgium		1) Art. 527 CC:	- In general, a		No general legal	Claimant; except
		directors must	director’s		requirement to	Art. 528 CC
		manage the	competences or		supervise other	(liability for
		company	membership of a		directors, but	breaches of the
		prudently and	committee are not		failure to monitor	CC and the
		diligently →	formally elements		may be qualified	articles, i.e.
		normal negligence	of the judicial		negligence in	breaches of an
		2) Objective, but	determination of		case of systematic	obligation of
			liability, although it		absenteeism	result):
		scope for
			cannot be ruled		overstepping the	presumption of
		individual
			out that courts		margin of	fault, which can
		characteristics of
			may take the		discretion	only be rebutted if
		situation through
			membership of			the director shows
		‘margin of
			audit or			that he/she (i) did
		appreciation’;
			remuneration			not participate in
		ignorance/
			committees into			the contested
		inaptitude/
			account when			decision (e.g. by
		absenteeism are
			determining what			remaining absent
		not accepted as
			‘similar given			from the meeting,
		defences
			circumstances’			provided that
			are			his/her absence
			- Professional			was excusable, or
						by having voted
			managers are
						against the
			judged more
						decision); (ii) is
			strictly in practice
						not blameworthy;
						and (iii)
						challenged the
						decision at the
						earliest general
						assembly meeting
						(or, in case of
						members of the
						executive
						committee, the
						earliest meeting of
						the board of
						directors).
Bulgaria		1) The due	Point of reference		When the power	Claimant
		diligence of a	is the professional		to act on behalf of
		good merchant	group to which the		the company is
		who acts in the	director belongs,		delegated to one
		interest of the	but the standard		of the board
		company and all	of care of all		members
		shareholders;	board members is		(executive
		higher than the	principally equal		director), the
		ordinary	(s. 237(1)		delegating
		negligence	Commercial Act		directors continue
		standard because	and Court of		to be subject to
		it is owed by	Appeals Burgas)		behavioural
		professionals			expectations
					similar to those of
			79	Directors’ Duties and Liability in the EU

		2) Objective			non-executive
					directors
Croatia		1) The care of a	Yes, what is		Delegation does	Director, except
		prudent	prudent for a non-		not exclude	when the creditors
		businessman =	executive director		liability	enforce the claim
		the care which	is not necessarily
		would be taken by	prudent for an
		an independent	executive director
		entrepreneur,
		aware of his
		duties, who
		manages not his
		own, but other
		people’s assets
		2) Objective, but
		directors have to
		use special
		abilities or
		knowledge that
		they have
Cyprus		The Companies	Generally the		No case law	Claimant
		Law does not	same standard is
		specify the	applied to
		required level of	executive and
		skill and care; it	non-executive
		has been held that	directors
		if a director acts in
		good faith he or
		she cannot be
		held responsible
		to pay damages,
		unless guilty of
		grossly culpable
		negligence in a
		business sense.
		The Cypriot courts
		have not
		developed their
		own interpretation
		of the duty of skill
		and care but refer
		to the common
		law approach in
		Re City Equitable
		Fire Assurance
		Co. [1925] Ch 407
Czech Republic		1) No definition of	No rules in the		No rules in the	Director, s. 194(5)
		the standard of	Commercial		Commercial	Commercial Code
		care in the statute.	Code, no case law		Code, no case law
		Literature: the
		care that a
		professional
		equipped with the
		necessary
		knowledge and
		skills takes with
			80	Directors’ Duties and Liability in the EU