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Board of Directors at LLC: a unique tool for solving the problems of owners

The Board of Directors as a corporate body is widely represented in joint-stock companies, while in limited liability companies it can be rarely seen. The main reason is the peculiarities of the legal form. An LLC is, first and foremost, a company for the personal participation of owners, while the joint-stock companies combine capital. It is indirect participation in the activities of a joint stock company that requires a collegial body to represent and protect the interests of all shareholders, which is the Board of Directors. However, do not underestimate the opportunities offered to the owner by including the Board of Directors in the organizational structure of the LLC. Its advantages are as follows:

1. Legislation flexibility
Unlike the legislation on joint-stock companies, which regulates the activities of AOs in detail, the law on LLC provides for a more free approach to the creation and activities of the Board of Directors. The procedure for formation and activity, competence, as well as the procedure for terminating the powers of members of the Board of Directors must be provided for in the Charter. Moreover, the decision-making procedure by this body should not be fixed in the Charter (a document open to third parties), but in the Regulation on the Board of Directors – a local act of the company. It will contain all the tricks of making such decisions in order to exclude the possibility of falsification. The lack of information about the members of the Board of Directors of the LLC in open sources (USRLE) will also make it difficult to draw up decisions allegedly on their behalf.

Restrictions: the director of the company (manager) cannot simultaneously be the chairman of the Board of Directors, and members of the collegial executive body (board) cannot constitute more than one fourth of the composition of the board of directors. This is quite logical, because the Board of Directors is still a body of control over the executive bodies of the company (director, board).

It is possible to consolidate decision-making on the issue of approval of major transactions (for example, transactions with significant property) and related-party transactions for the Board of Directors. In addition to the competence of the Board of Directors can include such important issues as:

Profit distribution and dividend payment based on the results of the first quarter, six months, nine months and a financial year, and

Approval of annual reports and annual financial statements.

changes to the charter or approval of its new edition,

reorganization and liquidation of the company,

increase of the authorized capital of the LLC disproportionately to the shares of participants or due to the adoption of a third party, etc. (total 5 positions)

2. Hidden ownership
The lack of information on the composition of the Board of Directors in the Unified State Register of Legal Entities, unlike the participants in the company and its director, can serve as an effective means of ensuring covert control over the company, the essence of which is as follows.

Suppose there is company A. Its real owner does not want to appear in the Unified State Register of Legal Entities and other sources as a participant and sole manager. In this case, the participant and director of the company may be a certain authorized person – N. However, the broadest competence in the Company should be assigned to the Board of Directors, which should be chaired by the owner of the company “A”. Thus, it is about N that the information in the register will be indicated. But his powers as a participant and director of the company will be minimal, which will allow virtually all the reins of the board to be transferred to the current owner through the Board of Directors.

This raises the logical question: will a proxy change as a member of the company, the chairman of the Board of Directors? There are several tools to eliminate this. One of them is cross ownership. Company A will own Company B, which in turn owns the first.

The main positive point of Cross-ownership is that in fact the control over the group of companies belongs to its management. In our case, to the Board of Directors, or rather, to its Chairman. And without the consent of this body it is impossible to remove him from his post, make fundamental decisions regarding the company, include third parties in the composition of the participants in companies, etc. Although other instruments are possible, excluding the arbitrariness of the nominal participant.

3. Motivation
The board of directors may be an alternative to the idea of ​​including top managers or other “partners” in the LLC participants, who often visit the heads of owners. It is not at all necessary to introduce an employee to the composition of participants in the company in order to motivate his share in profit. The inclusion of key employees in the Board of Directors, receiving remuneration from net profit, will be in the best possible way with the idea of ​​motivation and will solve the following problems.

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