DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER

DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER Carmen TODICĂ ABSTRACT The designation of the trading company's administration bodies can be performed by incorporation document for the first managers, but also by resolution of the shareholders' general assembly for the subsequent managers, elected during the company's operation. It must be stated that the designation of the administrators by incorporation document presents importance regarding the revoking or limitation manner of their power, as these operations logically determine the modification of the incorporation document through which they have been assigned. KEYWORDS The Law no. 31/1990, designation methods of the managers, clauses regarding the management bodies 1. GENERAL CONSIDERATIONS Unlike the general assembly, 'a body without resonance in relationships with third parties, generally manifested within the closed company's circle, in internal relationships' 1, the liability of the company's management pertains to the managers, as administration bodies. In the possession of the company's current administration, the managers effectively fulfill the operational management position, both under the organizational abilities and of the possibility to capitalize human resources and materials of the trading company. Lect., Ph.D. cand., Titu Maiorescu University, Faculty of Law. 1 O. CăpăŃână SocietăŃile comerciale [Trading Companies], 2nd Edition, Lumina Lex Publishing House, Bucharest, 1996, p. 324. 182

DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER The main role of the trading companies' managers, to carry out the company's object of activity, explains the exception provisions foreseen by the trading companies Law no. 31 1990, with the subsequent modifications, regarding the managers' appointment and identification, as well as the multitude of legal modifications occurred in the last two years in the field of trading companies' administration. 2. DESIGNATION METHODS OF THE TRADING COMPANY'S MANAGER The designation methods of the managers varies according to the legal form of the trading company, but in all circumstances, their designation (appointment) 2 can be performed upon the company's incorporation, by an explicit clause in the incorporation document, as well as subsequently by decision of the general assembly of the shareholders. Although the law regulates both modalities for designating the administration bodies, it does not foresee in an explicit manner the coerciveness of their appointment even from the company's incorporation stage. Reason from which, the doctrine 3 asserted that the notes regarding the manager is not a compulsory clause for the incorporation document, as he/she can be designated subsequently to the company's incorporation, by decision, respectively by resolution of the shareholders. Still it is hard to believe that in practice there are actually numerous cases of incorporation documents that do not identify the manager, as the law explicitly requires the registration of a such provision in the incorporation document. In case it is not registered the judge appointed from the trade registry is entitled to decline the company's registration in the trade registry. 2 Some authors use the ther 'managers' appointment' (I.L. Georgescu - Drept comercial român [Romanian Business Law] All Beck Publishing House, BuC., 2002, vol.ii, p. 465 469) and others use the collocation 'managers' designation' (S.D. Cărpenaru Drept comercial român [Romanian Business Law] ALL Beck Publishing House, p.212; O. CăpăŃână SocietăŃile comerciale [Trading Companies], 2nd Edition, Lumina Lex, 1996, p.324; S. Angeni, M.Volonciu, C. Stoica Drept comercial [Business Law], 3 rd edition, Ed. All Beck, Buc, 2004, p. 204). In comparison with the provisions of the trading companies' law, which under Article 45 differentiates 'the company's representatives appointed by incorporation document' from the 'ones elected while in operation', we consider the expression 'manager's designation' to be more adequate, implicating to a wide extend (latosensu) both the appointment modality for the managers signing the incorporation document and the one for appointing the subsequent managers. 3 Gh. Piperea ObligaŃiile şi răspunderea administratorilor societăńilor comerciale. [Obligations and Liability of the Trading Companies' Managers] NoŃiuni elementare [Basic Notions], All. Beck Publishing House, 1998, p. 57-58. 183

ANALELE UNIVERSITĂłII TITU MAIORESCU SERIA DREPT Anul VIII So, we can not agree to the opinion according to which the designation of the first managers by incorporation document is optional. First of all, there is the question of the person exercising the trading company's managing and representation position up to the subsequent designation of the administrator. The doctrine solved the problem in an over-simple manner 4 In case the incorporation document does not indicate the company's managers and has no provisions regarding the company's management manner, it is supposed that each shareholder has a management mandate on behalf of the other associates, being entitled to complete all operations necessary for exercising the company's trade, the provisions of the Article 1517 Civil Code being applicable. Therefore, within persons' companies and even within limited liability companies, up to the manager's designation, this position can be held by any shareholder, and within stock companies, by the founders. 5 Still, we believe that it is not proper for the uncertain situation to persist, in which the company lacking the managing bodies, it is managed by some of the founding members. Under such provisions, the uncertainty status would generate a lack of credibility on the market, and the company's activity would not be developed under normal parameters. Regarding the opinion according to which, if no manager is appointed by incorporation document, it is assumed that each shareholder is entitled to manage the company, we feel that such a hypothesis is difficult to encounter in practice and would be equivalent to a non-fulfillment by the trade registry office of its duties, as Article 7 letter e) from the Law no. 31/1990 explicitly requires for the company's incorporation document in collective name, in limited partnership or limited liability to designate the managers. The dogmatic solution was also embraced by the legal practice. In such manner, the jurisprudence 6 established 'in lack of an explicit provision 4 It was affirmed that, if in the company's contract in collective name there were no provisions regarding the company's management, the right to manage the company in collective name pertains to any shareholder, given the unlimited and solitary character of the shareholders' liability (C. Bârsan, V. Dobrinoiu and Collaborators -, vol. I, p.198). 5 Gh. Piperea op.cit., p.58. It must be noted that the author himself criticizes the stock companies' management by the founders. 6 Decision no. 427 from November 20th 2001 of C.A. Braşov, commercial section in INDACO. The solution is justified as being a compromise one, with a limited applicability in time, between the termination period of the former manager's mandate up to the appointment of a new administrator, so in the vacancy hypothesis of the manager position, when in lack of a habilitated person to represent the company in relationship with third 184

DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER of the Law no. 31/1990 regarding the person entitled to represent the company in case there aren't any managers, are subject to the common law provisions under Article 1517 Civil Code, according to which, in lack of a special provision regarding the management manner, it is assumed that the shareholders granted each other the right to manage one another'. We cannot accept such a solution, as according to Article 7 letter e) of the Law, the incorporation document of a company must include the shareholders representing and managing the company or the non-associated managers, as well as the powers entrusted to them and their exercise manner. Furthermore, the compliance with these legal provisions is subject to the legal control exercised by the judge assigned by the trade registry office, according to Article 37 from the law, the penalty being the rejection of the application registration for the company whose incorporation document does not include the clauses expressly foreseen by law. Second of all, the provisions of the Law no. 31/1900 are relevant under the analyzed aspect, reserving specific regulations for each company, more or less elaborated, regarding the appointment of the administration bodies. In this manner, in case of companies in collective name and limited partnership company, Article 77 paragraph 1 from the law foresees, in a principle regulation, both modalities for manager designation: 'the shareholders... can choose one or more managers among them, determining their powers, the appointment period and their possible remuneration'. As a consequence, from the grammatical interpretation of the text it comes out that the designation of the persons' companies managers by resolution of the shareholder's general assembly is optional. In the same respect, Article 197 paragraph 1 from the law also contains orders regarding limited liability companies, according to which: 'the company is managed by one or more managers, appointed by incorporation document or by general assembly'. So, the text states that the manager's appointment is performed alternatively, by incorporation document or by resolution of the general assembly. This text, as well as the previously mentioned one must be interpreted in the sense that the appointment of the first managers is performed by incorporation document (signatory managers) and the appointment of the other administrators, elected during the company's parties, it is binding that any of the shareholders would be able to manage the company in the purpose of continuing to perform the object of activity. 185

ANALELE UNIVERSITĂłII TITU MAIORESCU SERIA DREPT Anul VIII operation (subsequent managers) is performed by resolution of the general assembly. 7 Interpreted as such, the provisions of the law regarding the stock company's administration are in full compliance with the above presented opinion. So, within the unitary administration system, 'the managers are assigned by the ordinary general assembly of the shareholders with the exception of the first managers, appointed by incorporation document' (Article 137 1 par. 1). In a similar manner, within the dual management system of the stock company 'the members of the surveillance board are appointed by the general assembly of the stockholders, with the exception of the first members, appointed by incorporation document (Article 153 6 par. 1). As a consequence, the mentioned texts explicitly exclude the possibility that the first managers, respectively the first members of the surveillance board are appointed subsequently to the company's incorporation, by decision of the stockholders' ordinary general assembly. In other words, in case of the stock companies, the law makes an explicit distinction between the first managers / members of the surveillance board appointed by incorporation document and the managers / board members although subsequently by stockholders' decision 8. A third argument in the sense that the incorporation document must compulsory contain mentions regarding the first managers, come out of the provisions of the Law no. 31/1990 regarding the contents of the company's incorporation documents and documents attached to the registration application, necessary for the company's incorporation. In this manner, Article 7 letter e) from the law determines that the incorporation document in collective name, in limited partnership or limited liability must foresee 'the shareholders representing and administering the company or the non- 7 See C.Cucu, M.V. Gavriş, C.G.Bădoiu, C.Haranga - Law of the Trading Companies no. 31/1990. Bibliographical references. Judicial Practice. Resolutions of the Constitutional Court. Annotations, Hamangiu Publishing House, 2007, p. 444. In the same respect, O. CăpăŃână op. Cit, p. 328. The author also states that the manager's appointment normally occurs within the company's incorporation document. Subsequently, within the collective entity operation, the appointment is performed, for the company in collective name and limited partnership companies by the shareholders representing the majority of the joint stock, and within the other associative forms by the general assembly in compliance with the usual majority. 8 In a diametrically opposed opinion, expressed as a matter of fact according to the previous regulation, but that is not even then justified, within the stock company and stock partnership company 'the first administrators can be appointed by the company's contract but also by a subsequent decision of the stockholders' general assembly (Gh. Piperea op.cit., p.58). 186

DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER associated managers, their identification data, the powers granted to them and if they will exercise them together or separately'. In the same respect, Article 8 letter g) and i) foresees the same, that is 'the incorporation document of the stock company or stock partnership company will include:...g) the identification data of the first members of the administration board, respectively of the first members of the supervision board'; i) clauses regarding... administration,...number of the administration board or determination manner of this number'. In conclusion, the clauses regarding the management bodies are compulsory within the company's incorporation document. And in the situation in which the incorporation document does not contain the elements requested by law, the judge assigned by the trade registry may decline the company's registration, in exercising the legality control foreseen by Article 46, paragraph 1 from the law 9. That is why, in practice it is hard to picture a situation in which the incorporation document does not contain provisions regarding company administration and the appointment of the first managers is left at the appreciation of the general assembly. Furthermore, Article 36 letter f) from the law foresees the inclusion among the appendixes of the company's registration application, the notarized statement of the first managers, respectively of the first members of the supervision board that they fulfill the provisions foreseen by law 10. 9 According to Article 46, paragraph 1 from the Law no. 31/1990: 'when the incorporation document does not include provisions of the law or contains clauses in breach of an imperative law provision or when a legal requirement for company's incorporation was not completed, the publicly assigned judge or on request of any other persons formulating an intervention request, will reject, by completion, in a motivated manner, the registration application, aside from the case in which the associates remove such irregularities. The assigned judge will acknowledge the performed regulations.' 10 According to an isolated opinion, the lack of notes in the incorporation document regarding the managers' identity is no reason for denial, as long as the company submitted the notarized statements and the proof of the professional insurance policy existence. It was argued that the mention of the managers' identity in the incorporation document is superfluous, the data regarding them being registered at the trade registry together with the submission of the statement and professional insurance completion proof, documents without which their mandate is outside the law. So, any third party can find out data regarding the managers based on information request, as long as they have been assigned, without being nominated in the incorporation document (S.Bodu - Effects of Noncompliance with the Legal Provisions Regarding the Registration of the Trading Company in R.R.D.A no. 5/2007, p. 58). We cannot agree with this opinion based on the fact that the incorporation document represents the materialization of the shareholders' act of will and as long as the managers are not nominated in this incorporation document it means that they have not been assigned, as the shareholders did not give their consent regarding their 187

ANALELE UNIVERSITĂłII TITU MAIORESCU SERIA DREPT Anul VIII 3. THE IMPORTANCE OF DESIGNATION METHODS OF THE TRADING COMPANY'S MANAGER In comparison to the above mentioned, we can conclude that the designation of the trading company's administration bodies can be performed by incorporation document for the first managers, but also by resolution of the shareholders' general assembly for the subsequent managers, elected during the company's operation. It must be stated that the designation of the administrators by incorporation document presents importance regarding the revoking or limitation manner of their power, as these operations logically determine the modification of the incorporation document through which they have been assigned. So, the cancellation or limitation of the power belonging persons and limited liability companies' managers, appointed by incorporation document can be performed only by vote of all associates, according to the mutuus consensus, mutuum dissensus principle. In change, the dismissal of managers appointed by resolution of the shareholders' general assembly will be performed with the same majority foreseen by law for their appointment, that is absolute majority of joint stock 11. In the same line of ideas, the judicial practice itself settled down the requirement of unanimity regarding the dismissal of managers appointed by incorporation document. 12 Also in the case of the stock company the appointment of the first administrators, respectively of the first members of the supervision board and establishment of their attributions by incorporation documents, presents appointment. Furthermore, the notarized statements and the proof of the professional insurance policy required by law for the managing bodies of the stock company, are operations subsequent to their appointment having another role that the one of supplying information regarding their identification data. Furthermore the provisions of Article 8 1 of the law would also be breached, that explicitly foresee the identification data of the legal entities or physical persons managers which the incorporation document must contain. 11 According to Article 77, paragraph 2 from the Law no. 31/1990 'with the same majority, the shareholders can decide upon the dismissal of managers or upon the limits of their powers, aside from the case in which the managers were appointed by incorporation document'. 12 Decision no. 4109/1998 of C.S.J., Business section, on no. 10/1999, p.153. ('if the managers of the company in collective name have been appointed by company contract, their dismissal from position as well as the modification of their remuneration can be decided only with the shareholders' unanimity and not the shareholders representing the absolute majority of the joint stock, as it results from the per a contrario interpretation of Article 77, par. 2, final thesis'). 188

DESIGNATION FEATURES OF THE TRADING COMPANY'S MANAGER importance in the hypothesis of modifying these clauses. In this case the competency falls exclusively upon the extraordinary general assembly of the shareholders according to article 113 letter m) establishing in its task the passing of any resolution for modifying the incorporation document. Regarding the members of the administration board or of the subsequently assigned members of the supervision board, the competency for their dismissal belongs to the body that elected them, respectively to the ordinary general assembly, according to Article 111 letter b) from the law. In the same respect it orders the judicial practice regarding the possibility of the trial court to order as penalty the manager's dismissal. So, 'the dismissal penalty is ordered by the court for the managers appointed by the general assembly of the stockholders and is decided by the extraordinary general assembly for the managers appointed by the company's incorporation document. That is because, the dismissal of the managers appointed by the company's incorporation document determines the modification of the respective document'. 13 13 Decision no. 4030/2002 of C.S.J., Business section, Com., in R.R.D.A. no. 9/2003 p.112. 189