Who typically serves on the governing body and are there requirements that govern board composition or impose qualifications for directors regarding independence, diversity or succession?

Corporate Governance

Austria Small Flag Austria

Supervisory board members used to be primarily white, male and over 40 years of age. There are restrictions as to the maximum number of mandates in other supervisory boards (usually 10, 8 for listed companies) and regulations that require the shareholders’ meeting to consider diversity (age, gender, international background) while electing the board members. Since January 2018 listed companies as well as companies with more than 1000 employees need at least 30% female and/or 30% male members of the supervisory board, provided that the board consists of 6 members or more and at least 20% of the employees are female /male. Elections to the board that do not fulfill this requirement are void. This is the first enforceable diversity/gender equality regulation in the history of company law.

Special regulations apply to companies like banks, very big or listed JST etc and require single board members to have special qualifications (e.g. financial expert for the audit committee).

Brazil Small Flag Brazil

The Brazilian Corporation Law sets for that the board of directors shall be composed of at least three members, who are not required to be Brazilian residents.

In the case of the companies currently listed on the Novo Mercado, considering the changes approved in its Listing Rules in 2017, they must observe the following rules: (1) until the ordinary shareholders’ meeting that shall approve the financial statements related to the fiscal year of 2020 - the board must be composed of at least five members and at least 20 per cent of the members must be considered to be ‘independent’; and (2) as from the ordinary shareholders’ meeting that shall approve the financial statements related to the fiscal year of 2020 – the board must be composed of at least three members and at least two or 20 per cent of the members, whichever is greater, must be considered to be ‘independent’. For the companies that have become listed on the Novo Mercado as from 2 January 2018, it shall apply the rule provided in item (2) above, as from its listing.

In the case of the companies currently listed in the Level 2 segment, the board must be composed of at least five members and at least 20 per cent of the members must be considered to be ‘independent’.

The requirements for the appointment to occupy a position on the board of directors are established in the Brazilian Corporation Law. In broad terms, the director must be someone with an unblemished reputation who has not been convicted in an administrative or judicial procedure in relation to corporate crimes or irregularities. Furthermore, unless waived in a shareholders’ meeting, individuals who hold positions in companies that may be regarded as market competitors of the company, or who have any interests that conflict with those of the company, should not be elected as board members.

Up to one-third of the board members may be elected for executive board positions cumulatively. Pursuant to the rules of the Novo Mercado, Level 2 and Level 1 listing segments, the positions of chairman of the board of directors and CEO cannot be accumulated by the same individual. Notwithstanding, the accumulation of those positions is allowed, on an exceptional basis, for a maximum period of three years counting from the date that the company’s shares starts to be traded in the special listing segment.

For companies currently listed on the Novo Mercado, considering the changes approved in its Listing Rules in 2017, the company’s bylaws must stipulate that the positions of chair of the board of directors and CEO must not be accumulated by any one person. The Brazilian Corporate Governance Code also indicates that this accumulation should be avoided, but that the CEO should participate in board meetings whenever invited.

France Small Flag France

French law and the AFEP-MEDEF Code set out rules and recommendations for board composition in respect of gender diversity, employee representation, the presence of independent board members, maximum number of board positions held, retirement age and maximum term of office.

Gender diversity on boards is prescribed by law. An SA is to aspire to the general goal of “balanced representation of women and men” on boards (C. Com. article L. 225-17). Companies which are publicly traded or with at least 500 employees and €50 million in either turnover or assets are required to have at least 40% of board members of each gender (the 500-employee threshold is to decrease to 250 employees in 2020).

Employee representatives are required on the board of directors or supervisory board of any SA or SCA which employs (or belongs to a group that employs) at least 1000 staff in France or at least 5000 worldwide. In such cases, a board of 12 or fewer members must have one employee representative and those above that threshold must have two (the proposed Loi PACTE mentioned above would lower this threshold from 12 to 8). In addition, in a publicly traded company which has more than 3% of shares held by employees of the company or certain affiliates, those shareholders have the right to at least one board seat. There are restrictions on the right of a board member also to have an employment contract with the company. Note that, in addition to employee representatives who are members of the board, representatives of the workers council are entitled to attend board meetings and express their views but have no voting rights.

In respect of independent board members, the law requires only that, for publicly traded companies (and certain financial-services and other companies), the board constitute an audit committee which includes one independent board member (having financial, accounting or compliance expertise). However, the AFEP-MEDEF and Middlenext Codes suggest that the board of directors or supervisory board include one-half independent members if the company’s shares are widely held with no controlling shareholder and one-third independent members for other publicly traded companies. The Middlenext Code also recommends that the board include at least two independent members.

An individual cannot hold more than five memberships on boards of directors or supervisory boards of French SAs or SCAs or more than one DG or management board position for such companies (a DG position coupled with a membership of the board of directors counts as one position for purposes of this limit). When one of these positions is with a company having more than 1000 employees in France or 5000 worldwide, no more than two other positions may be with other publicly traded companies. There are exceptions to these rules for board/DG positions held with certain affiliates.

Each term of a member of a board of directors or supervisory board cannot exceed six years, but the AFEP-MEDEF Code recommends that terms not exceed four years and be staggered, and typically board members of large listed companies have terms of three or four years (but incumbents can be re-elected). The Middlenext Code recommends staggered terms but no specific duration.

Age limits for board members and the DG of an SA, and supervisory and management board members of an SA or SCA, may be set out in a company’s bylaws but, if they are not so defined, individuals holding those positions are automatically considered to resign at the age of 65 and no more than one-third of board members can be over 70 years old.

Succession plans are not required by law but are required under the AFEP-MEDEF Code and recommended by the Middlenext Code.

Germany Small Flag Germany

The stock corporation law provides certain criteria for reliability that a Management Board member must have. The articles of association can provide for limited further requirements such as a certain qualification.

The GCGC provides for a number of recommendations:
The Management Board shall consist of several members and shall have a chair or spokesperson, and rules of procedure shall govern the work of the Management Board, in particular the allocation of duties among individual members, matters reserved for the Management Board as a whole and the required majority for resolutions (unanimity or resolution by majority vote). When appointing Management Board members, the Supervisory Board shall take diversity into account. The Supervisory Board determines targets for the share of female Management Board members (but there is no mandatory minimum percentage), and shall inform the shareholders what it deems to be a sufficient number of independent members on the Supervisory Board (no mandatory minimum number). Together with the Management Board, it shall ensure that there is long-term succession planning.

The Supervisory Board of a company with more than 500 German employees must consist of one third of employee representatives. The Supervisory Board of a company with more than 2,000 German employees must consist of an equal number of shareholder representatives and employee representatives ("Parity Co-determination"). Companies which focus on political, religious, academic and artistic purposes as well as media companies are excluded from these rules.

The Supervisory Board of a listed company subject to Parity Co-determination must consist of at least 30% women and at least 30% men. The Supervisory Board of companies that are listed or subject to Co-determination must set targets for the proportion of women on both the Management Board and the Supervisory Board.

The stock corporation law provides certain criteria for reliability that a Management Board member must have. The articles of association can provide for limited further requirements such as a certain qualification.

The GCGC provides for a number of recommendations:
The Management Board shall consist of several members and shall have a chair or spokesperson, and rules of procedure shall govern the work of the Management Board, in particular the allocation of duties among individual members, matters reserved for the Management Board as a whole and the required majority for resolutions (unanimity or resolution by majority vote). When appointing Management Board members, the Supervisory Board shall take diversity into account. The Supervisory Board determines targets for the share of female Management Board members (but there is no mandatory minimum percentage), and shall inform the shareholders what it deems to be a sufficient number of independent members on the Supervisory Board (no mandatory minimum number). Together with the Management Board, it shall ensure that there is long-term succession planning.

The Supervisory Board of a company with more than 500 German employees must consist of one third of employee representatives. The Supervisory Board of a company with more than 2,000 German employees must consist of an equal number of shareholder representatives and employee representatives ("Parity Co-determination"). Companies which focus on political, religious, academic and artistic purposes as well as media companies are excluded from these rules.

The Supervisory Board of a listed company subject to Parity Co-determination must consist of at least 30% women and at least 30% men. The Supervisory Board of companies that are listed or subject to Co-determination must set targets for the proportion of women on both the Management Board and the Supervisory Board.

The proposed language of the reformed GCGC places a much higher emphasis on the independence of Supervisory Board members from their governing bodies, a controlling shareholder or any personal or business interest of the members. The Supervisory Board shall screen each member against a (non-exhaustive) list of indicators of non-independence. Moreover, certain proportions of independent Supervisory Board members shall be met. For example, no more than two former members of the Management Board shall be members of the Supervisory Board, more than half of the shareholder representatives shall be independent from the company and the Management Board, and at least two shareholder representatives shall be independent from the controlling shareholder (unless the Supervisory Board is composed of only three members).

Greece Small Flag Greece

A natural person who does not have full legal capacity may not be a member of a board of directors or a representative of a legal person who is a member of the board of directors.

Any additional conditions, incapacity or incompatibility provided for by other provisions of the applicable legislation are not prejudiced. The articles of incorporation may provide for further eligibility conditions for members of the board of directors, provided that these conditions do not conflict with other provisions. The maximum term of the board of directors is six (6) years.

The members of the board and any third person to whom powers have been delegated to, shall, in the performance of their duties and responsibilities, comply with the law, the statutes and the lawful decisions of the general meeting of the shareholders. They must manage corporate affairs in order to promote the corporate interest, supervise the execution of the decisions of the board of directors and the general meeting and inform other members of the board of directors on corporate affairs. The members of the board of directors must observe the legal records, books and records and make sure that the required publications according to the financial standards are made regarding the financial statements of the company.

The Board of a public company is composed by executive and non-executive members. The non-executive members should not be less than the 1/3 of the members of the BoD. Among the non-executive members of the BoD at least two members should be independent. Independent non-executive members of the BoD should not hold a stake of more than 0.5% in the company and should not have a dependence relationship with the company or related parties or individuals. The independent BoD members are elected by the General Meeting of the shareholders of the company and the non-executive members are appointed by the BoD. If an independent member of the BoD is substituted for any reason by an interim member, the interim member should also be elected as an independent member.

The CGC usually adopted by listed companies, provides for additional requirements in relation to the qualifications of the members of the BoD. Criteria for the diversity of the composition of the BoD are applied and the company should publish at its annual corporate governance declaration data on the diversity policy applied in relation to the managers and the directors, as well as the percentages of gender respresentation in the company.

The Law sets out rules for a) loyalty, b) non-compete and c) transparency obligations for the members of the board of directors.

In brief,

a) Loyalty (fiduciary duty): The board members should: (i) not pursue own interests contrary to the interests of the company, (ii) disclose in due time to the other members of the board their own interests, which may arise from the transactions of the company, which fall within their duties, as well as any conflict of their interests with those of the company or its affiliates, (c) maintain strict confidentiality for company affairs and business secrets, which have become known to them as a consultant.

b) Non- compete: It is prohibited for the members of the board of directors who are involved in any way in the management of the company to act for their own account or for the benefit of third parties without the permission of the general meeting or the provision of the articles of incorporation for their own account to the purposes of the company, as well as to participate as general partners or as sole shareholders or partners in companies pursuing such purposes.

c) Transparency: The conclusion of contracts between the company and members of its board shall be prohibited and shall be void, as well as the provision of collateral and guarantees to third parties in favor of such persons without special permission granted by a decision of the board of directors or of the general meeting shareholders. Said provision contains numerous exclusions from the general prohibition.

Hong Kong Small Flag Hong Kong

Although the Companies Ordinance does not set out any requirement in respect of board composition, the Corporate Governance Code requires the board of a listed company to have a balance of skills, experience and diversity to fit the business needs of the company. A listed company should maintain a balanced composition of executive, non-executive directors and independent non-executive directors so that the board has a stronger level of independence (paragraph A.3 of the Corporate Governance Code). Board diversity here is made up of numerous elements including but not limited to the directors’ gender, age, cultural and educational background, or professional experience, subject to the circumstances of each company.

  • Independence: Independence is of utmost importance to some of the board committees. Rule 3.13 of the Main Board Listing Rules and rule 5.09 of the GEM Listing Rules set out factors that will be taken into account by the Hong Kong Stock Exchange when determining independence. For instance, independence is more likely to be questioned if the director holds more than 1% of the number of issued shares of the listed company, has received an interest in any securities of the listed company as a gift, or by means of other financial assistance, from a core connected person or the listed company itself, has a material interest in any principal business activity, or is involved in any material business dealings with the listed company, its holding company or their respective subsidiaries or with any core connected persons of the listed company, or when a non-executive director has served on the board for more than 9 years (paragraph A.4.3 of the Corporate Governance Code). Listed companies are also required to have at least three independent non-executive directors who represent at least one-third of the board (rules 3.10, 3.10A of the Main Board Listing Rules; rules 5.05, 5.05A of the GEM Listing Rules), and to establish an audit committee comprising non-executive directors only, with a majority of independent non-executive directors (rule 3.21 of the Main Board Listing Rules; rule 5.28 of the GEM Listing Rules). Similar provision is provided by the Corporate Governance Code where the nomination committee of the board is required to comprise a majority of independent non-executive directors (paragraph A.5.1 of the Corporate Governance Code).
  • Qualification: Listed companies are required to have at least one independent non-executive director who possess appropriate professional qualifications or accounting or related financial management expertise. The Hong Kong Stock Exchange would expect such person to have experience with internal controls and in preparing or auditing comparable financial statements or experience reviewing or analyzing audited financial statements of public companies (rule 3.10 of the Main Board Listing Rules; rule 5.05 of the GEM Listing Rule).
  • Succession: Every director of a listed company, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years. For those directors appointed to fill a casual vacancy, they should be subject to election by shareholders at the first general meeting after appointment (A.4.2 of the Corporate Governance Code).

In July 2018, the Stock Exchange has announced certain amendments to the Listing Rules and the Corporate Governance Code with effect from January 1, 2019 (Hong Kong Stock Exchange, “Consultation Conclusions – Review of the Corporate Governance Code and Related Listing Rules”, July 2018). In particular, the nomination committee (or the board) will now be required to have a policy concerning diversity of the board members, and shall disclose the policy on diversity or a summary of the policy in the corporate governance report. The board is also required to explain how an individual contributes to the diversity of the board when the board proposes to elect an individual as an independent non-executive director at the general meeting.

Japan Small Flag Japan

Executive directors are often elected from shareholders or employees, but this is not a statutory requirement to being a director. Regarding the board composition, all listed companies are required to elect and disclose the name of at least one independent officer pursuant to TSE regulations. To qualify as an independent officer, he/she must be an outside director or outside statutory auditor defined under the CA, and must also not (even potentially) have a conflict of interest with shareholders. In addition, If the company has a board of statutory auditors, at least half of the statutory auditors must be outside statutory auditors under the CA.

Other than these, there is no specific requirement on independence, diversity and succession of the board. With respect to the committees, the majority of audit and supervisory committee members and three committees members must be outside directors.

Portugal Small Flag Portugal

In limited companies the managers may be shareholders or not (commonly being so).

Stock companies shall comply with composition requirements in relation to the supervisory bodies: incompatibility rules apply to all companies, whilst independence (including independence tests, such as the number of years in office and the relationship with shareholders) and expertise requirements apply to public-interest entities and significant private companies (e.g., such body in listed companies shall have a majority of independent members – including the chairman and a financial expert - and sector expertise).

Listed companies and certain private companies in regulated sectors (such as credit institutions) are also subject to gender diversity requirements applicable to the administration and supervisory bodies.

Finally, under the IPCG Code, diversity and independence recommendations also apply to governing bodies and specialised committees (for instance, recommending that at least 1/3 of the members of the board of directors are independent).

South Korea Small Flag South Korea

Subject to certain basic standards set forth below, no specific restrictions exist on the qualifications of a director. Under the KCC, a corporation may not serve as a director of a Company, and statutory auditors may not serve as directors of the Company or the Company’s subsidiaries.

On the other hand, under the KCC, some restrictions exist on the qualifications of an outside director. An outside director is defined under law, as a director who does not engage in the business of the Company on a full-time basis and who does not meet any of the disqualification criteria listed in the relevant statute (such as being the largest shareholder or an officer of the Company). For listed Companies with total assets of KRW 2 trillion or more, the majority of the BOD must consist of outside directors, and for listed Companies with total assets of KRW 100 billion or more, at least one-fourth of the BOD must consist of outside directors.

Under the KCC, an outside director is subject to certain qualification restrictions. Among the several restrictions, the following persons cannot serve as outside directors: (i) directors and employees who are engaged in regular business of the relevant Company; (ii) if the largest shareholder of the Company is a natural person, the principal, his spouse and lineal ascendants and descendants; (iii) if the largest shareholder of the Company is a corporation, directors, auditors and employees of the corporation; (iv) spouses, lineal ascendants and descendants of directors, auditors and executive officers; (v) directors, auditors, executive officers and employees of a parent or subsidiary company of the relevant Company; (vi) directors, auditors, executive officers and employees of a corporation that has a significant interest in the relevant Company; and (vii) directors, auditors, executive officers and employees of another corporation for which directors and employees of the relevant Company work as director, auditor, executive officer or employee.

Outside directors of listed Companies must also meet additional basic qualifications, and the following persons cannot serve as outside directors of listed Companies: (i) minors or incompetent persons; (ii) a person subject to bankruptcy adjudication without his rights having been reinstated; (iii) a person subject to imprisonment or heavier punishment during the past 2 years; (iv) a person dismissed or removed from office during the past 2 years due to violation of financial regulations as determined by a Presidential Decree; (v) the largest shareholder and its specially related persons, (vi) a shareholder owning more than 10% of the total issued and outstanding shares, other than non-voting shares or exerts de facto influence on important matters of listed Companies and his spouse and lineal ascendants and descendants; and (vii) a person determined by a Presidential Decree, as having difficulty performing duties of an outside director or who may have influence on the management of listed companies.

A Company must have at least 3 directors. In the case of a Company with total paid-in capital of less than KRW 1 billion, the number of the directors may be one or two.

Switzerland Small Flag Switzerland

The board of directors of larger and in particular listed companies is typically mainly composed of non-executive, outside directors who have entrusted the executive committee with the operation of the company. The SCBP recommends that the majority of the board should be independent, which it defines as non-executive members who have never or at least not for the previous three years been members of the executive committee and who have no, or only minor business relations with the company.

The number of board members is not specifically regulated by law, but minimum and maximum numbers may be imposed by the articles of association. Where there are different classes of shares, the articles of association must stipulate that the holders of each share class are entitled to elect at least one representative to the board.

Swiss law does not require particular knowledge or qualifications (e.g., in strategic, financial or accounting matters) and there are no gender or diversity requirements. In respect to the latter, it is currently proposed to introduce a gender quota on a comply-or-explain basis for the board and executive management of listed companies. The SCBP recommends already today that the board of directors should be comprised of male and female members with the necessary abilities to ensure an independent decision-making process in a critical exchange of ideas with the executive management. Also, companies are free to incorporate qualifications into their articles of association and/or the organizational regulations.

United States Small Flag United States

While there are no general laws imposing requirements for serving on the board of a corporation, certain stock exchange listing standards impact board composition for publicly traded companies and shareholder expectations significantly influence board composition for all companies.

For corporations with securities listed on either the NYSE or NASDAQ, the majority of the board must be comprised of independent directors. An independent director is generally a director who is not an employee or executive officer of the company and who has no current or prior relationship with the company that would interfere with an independent exercise of judgment. Additionally, it is common for the CEO to serve on the board as a non-independent director.

For all corporations, including those not listed on any exchange, shareholders’ expectations and public opinion influence board composition. If ignored, corporations expose themselves to shareholder activism, negative public opinion and other consequences.

For example, there has been recent pressure from shareholders to increase board diversity, including diversity of the directors’ experience, gender, age, ethnicity and tenure. Due in part to this pressure from shareholders, diversity on boards has increased over the last decade. The 2018 U.S. Spencer Stuart Board Index (“SSBI”) reports that the percentage of new female independent directors joining S&P 500 boards increased from 18 percent in 2008 to 40 percent in 2018. Additionally, approximately 90.5 percent of the top 200 companies now have at least one minority director, defined as African-American, Hispanic/Latino and/or Asian.

Directors can come from a variety of backgrounds depending on a corporation’s needs. Typical backgrounds include current or retired corporate or financial executives, academics, consultants or, increasingly, individuals with careers in the technology or telecommunication sector.

Whether there are requirements or qualifications for serving as a manager of a LLC is governed by the terms of the LLC operating agreement. Typically, LLCs are not subject to the same constraints as corporations in selecting managers.

United Kingdom Small Flag United Kingdom

The boards of premium listed companies generally comprise a mix of executive and non-executive directors. The UK Corporate Governance Code contains detailed recommendations on board composition, including that at least half the board, excluding the Chairperson, should comprise independent non-executive directors, and the Chairperson should be independent on appointment and that the board include an appropriate combination of executive and non-executive (especially independent non-executive) directors to avoid dominance by an individual or small group.

Independence is tested against a list of (non-exhaustive) criteria, including whether a director has been a group employee in the last five years, has had a material business relationship with the group in the last three years, has close family or other ties with any of the company's advisers, other directors or senior employees, holds cross directorships or otherwise has significant links with other directors, represents a significant shareholder or has served on the board for more than nine years. Companies are required to identify independent non-executive directors in their annual reports.

A focus on boardroom diversity is also a key part of the UK corporate governance regime. The Government regularly publishes reports on gender and ethnic diversity. Listed companies are also required to disclose details of diversity policies annually.

The UK Corporate Governance Code recommends that boards establish a nomination committee to lead the process for appointments, ensure plans are in place for orderly succession for board and senior management positions and oversee the development of a diverse pipeline for succession. The Chairperson should not chair the nomination committee when it is dealing with the appointment of their successor.

Canada Small Flag Canada

Any person serving as a director of a CBCA corporation must be 18 years of age or older, must not have an “unsound mind”, must be an individual, and must not be bankrupt. Additionally, at least one quarter of directors of a CBCA corporation must be Canadian residents. If there are less than four directors of a CBCA corporation, at least one director must be a Canadian resident. Other Canadian provincial or territorial corporate statutes provide for a variety of residency requirements, including in some statutes there being no such requirement.

Corporate statutes generally require that public companies have not less than three directors, a majority of whom are not officers or employees of the corporation or any of its affiliates, while securities laws require, subject to certain exceptions, that a board be comprised of at least three directors that are “independent”. Non-binding securities regulatory guidelines also generally provide that a boards of directors should have a majority of “independent” members. A director is considered “independent” under securities law if he or she has no direct or indirect material relationship with the corporation, its subsidiary or any controlling shareholder that would reasonably be expected to interfere with the exercise of a director’s independent judgment.

While diversity, especially gender diversity, has been a recent corporate governance trend, there are currently only securities regulatory guidelines and disclosure requirements concerning diversity, with no binding requirements on inclusive practices.

Italy Small Flag Italy

On the one hand, SMEs and closely-held companies are typically managed by the majority shareholder or a trusted representative of the latter, who usually acts as managing director (amministratore delegato) and/or chairperson.

On the other, large companies are typically managed by non-investor professionals, while majority and qualified-minority investors hold offices as non-executive chairperson or directors.

In any case, pursuant to Art. 2382 ICC, one cannot be appointed as director – and, if appointed, terminates from office automatically – if he/she is: (i) interdicted, (ii) incapable, (ii) declared bankrupt, (iv) prevented from carrying out public offices or executive directorates.

Further suitability requirements apply to those holding offices as directors of listed companies, banks and financial institution, provided that the by-laws may voluntarily set forth specific requirements (Art. 2387 ICC).

With reference to independence: (i) listed companies’ board of directors shall include at least 1 or 2 independent directors, depending on whether the board is composed of up to or more than 7 members (“independence” is defined under Art. 147-ter and 148 CFA and the CG Code, (ii) banks’ board of directors shall include 25% of independent members (“independence” is not defined by the applicable laws and regulations, therefore each entity’s by-laws shall provide a definition).

Statutory diversity requirements are provided for: (a) listed companies, which shall reserve at least 1/3 of the board seats to the least represented gender, and (b) banks, which shall ensure the appointment of board members with an adequate degree of diversity of competences, background, age, gender, internationalization.

No mandatory provisions are set out as regard succession plans.

Turkey Small Flag Turkey

In JSCs, the board members serve on BoD and the BoD is comprised of one or more members appointed by the GA or by AoA in establishment. Board members can be a real person or a legal entity. In case a legal entity is appointed as a member of the BoD, then a real person representative must also be determined by the legal entity to act on behalf of the legal entity (TCC, article 359). In addition, provided that it is set forth in the AoA, the right to be represented in the BoD can be granted to certain share groups and to shareholders who form a specific group with their characteristics (TCC, article 360). Their terms of duty are 3 years at maximum. The BoD members may appoint one or more managers (representatives) to execute their duties. However, there must be at least one BoD member who will be responsible and authorized to act on behalf of the company.

In LLCs, the managers serve on BoM and BoM can be comprised of one or more shareholders or third parties. However, at least one member of the BoM has to be a shareholder of the company having the management and representation authority. Managers can either be a real person or a legal entity. In case a legal entity is appointed as a manager, then a real person representative must also be determined by the legal entity to act on behalf of the legal entity (TCC, article 623). In addition, in case there is more than one manager in the company, one of those shall be elected by the GA as the chairman of BoM regardless of whether this manager is shareholder or not (TCC, article 624).

With respect to the companies having their shares traded on the stock exchange, the BoD must be consisting of at least 5 members and the majority of BoD shall be the members who do not take part in execution. This majority has some independent members carrying out the activities without being prejudiced by somebody else. The number of independent members cannot be less than one-third of the total number of members. In any case, the number of independent members may not be less than two. Term of office for the independent members is 3 years and it is possible for them to be re-elected (CGP, article 4.3). There are rules as to the qualification of the members under the CGP. A board member fulfilling all the criteria below is considered as an independent board member:

  • Not having any employment relationship at an administrative level in the last 5 years and not having any significant commercial relationship with companies and corporations whose management is controlled by the company that member is working in. Additionally, the member should not have had more than 5% of the capital, voting rights or privileged shares of the said company or corporation together or alone.
  • Not to be shareholders having 5% and more shares or not to be an employee at an administrative level in companies with whom the company purchases and sells goods and services in the last 5 years.
  • Having the necessary professional education, knowledge and experience to carry out the duties properly as an independent member.
  • Not being a full-time employee in state institutions and organizations after the appointment except being a faculty member.
  • Residing in Turkey in accordance with Income Tax Law.
  • Having strong ethical standards, professional reputation and experience in order to be able to impartial and to contribute to the company activities.
  • Being able to allocate time for the corporation business.
  • Not being a board member for more than 6 years within last 10 years.
  • Not being an independent member of more than 3 companies (more than 5 companies in companies whose shares are traded on the stock exchange) whose control is held by the member’s company.
  • Not being a registered and announced representative of the legal entity appointed as board member.

(CGP, article 4.3.6)

Additionally, a company must aim a percentage, which cannot be less than 25%, and a time for the number of the female member rate in BoD and must create a policy to achieve these objectives (CGP, article 4.3.9).

Luxembourg Small Flag Luxembourg

There are no formal qualifications or requirements governing the composition of the board of a SA or a SàRL.

With respect to qualifying listed companies, the LSE Principles indicate that the Board shall be composed of competent, honest, and qualified persons and that a certain number of directors of a company are sufficiently independent meaning that a director must not have any significant business relationship with the company, close family relationship with any member of the executive management, or any other relationship with the company, its controlling shareholders or members of the executive management which is liable to impair the independence of the director’s judgment. The choice of the directors shall take account of the specific features of the company. The board shall be large enough for its members to contribute experience and knowledge from different fields and for changes in its composition not to create undue disruption.

Ukraine Small Flag Ukraine

There are two types of directors in a supervisory board: representatives of shareholders and independent directors.

A representative director is nominated by a shareholder or group of shareholders. The GM elects representative directors along with independent ones. However, representative directors may be substituted by their principal shareholder at any time.

Meanwhile, an independent director should be completely detached from any shareholder influence and must act impartially in the best interests of the entire company, not certain shareholder(s). The law sets rigid requirements for independent directors. For instance, a person is not independent if he/she was a member of any governing body in the company during the last five years, worked in the company or its affiliates for the last three years, owns five percent or more shareholding in the company etc.

There are no statutory requirements regarding the diversity of the supervisory board so far. However, there are legislative initiatives to implement a 40% minimum for any gender in the supervisory boards of state-owned enterprises. As for succession, any director may be reelected for an unlimited number of times. Nevertheless, if a person was a board member for 12 years, such person may not be elected as independent director.

A board of a public JSC should consist of at least five directors. Moreover, a public JSC should have no less than 1/3 (or at least 2) of independent directors on its board. Private JSCs are not obliged to elect independent directors but are encouraged to do so by the Commission`s Principles of Corporate Governance.

Australia Small Flag Australia

A proprietary company must have at least one director who must ordinarily reside in Australia. The board of a public company must have at least three directors, and at least two directors must ordinarily reside in Australia. In both cases, a company’s constitution may provide for a higher minimum number.

Boards of ASX listed companies typically include both executive directors and non-executive directors. The ASX Governance Principles recommend that a majority of the board should be independent (i.e. the director is not allied with the interests of management, a substantial shareholder or other relevant stakeholder, for example, major customers or suppliers), and that the chair be an independent director.

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The board of directors/managers shall be appointed in accordance with the articles of association of the company.

For the individuals serving as members of the governing body, the Companies Law indicated specific parameters of directorship that shall be satisfied for the eligibility to appointment, those parameters are as follows:

a. the Director must not have a criminal record;
b. the Director must accept the appointment in writing; and
c. the Director must not be a Board member in more than one joint stock company without the approval of the said companies.

Furthermore, subject to the restrictions mentioned above and the restrictions on specific cases in relation to the capacity and profession of the nominated directors, for unlisted companies there are no mandatory requirements regarding the qualification of directors. However, the corporate governance guidelines provide that the majority of the board members shall be non-executive directors among them at least two independent directors.

General Authority for Investment and Free Zones (“GAFI”) has recently issued a clear definition for the criteria of the independent director as follows: the independent director shall be non-executive, not shareholders, not representing any of the shareholders and does not have any material transactions with the company. Additionally, the independent director shall not receive any remuneration/salary, commission or fees from the company other than the remuneration as a board member. Moreover, the independent director shall not have any relation with any of its shareholders or board of directors up to the second degree. Furthermore, the independent director shall not have been part of the consultants of the company, key employees or auditors for the three years preceding the appointment. Finally, the independent director shall not be a member at the board for more than six years.

Updated: September 19, 2019