Trust and integrity form the basis of successful company management. One of the company's governing bodies - the board - plays a key role in shaping the company's strategic vision, ensuring accountability of the CEO, and transparency of operations. However, we often forget that the board's authority is limited by terms.
According to Lithuanian law, board meetings are the central venue for making important strategic decisions, overseeing the activities of the CEO, and giving approval for significant transactions. It is especially advantageous for businesses operating across multiple jurisdictions to institute a board, ensuring a cohesive governance structure throughout diverse legal landscapes. Additionally, an active board can help avoid conflicts and ensure consistent adherence to corporate principles and values in all countries.
Article 34, paragraph 3 of the Law on joint-stock companies of the Republic of Lithuania establishes the limit of the board's term - four years. However, according to the legal regulations established in Lithuania, for both the board as a whole and individual board members the number of tenure is unlimited - it is allowed to re-elect all or only certain members of the board for another term. During the tenure, the board is responsible for determining the conditions of the CEO's work, preparing annual reports, making decisions regarding assets valued at more than 1/20 of the authorized capital, evaluating the material provided by the CEO regarding organizational activities, financial condition, and operational results.
When a shareholder ensures timely renewal of the board's authority, it demonstrates not only compliance with legal requirements but also the shareholder's commitment to responsibly organize the smooth operation of the company. Additionally, it shows that the company cares about conducting its activities correctly and employs internal control measures. This increases trust among partners.
The repercussions of not renewing board terms can be severe. A lapsed term may lead to the nullification of board decisions, as adjudicated by the judicial system. Notaries might also refuse to accept decisions or agreements if they were approved by an outdated board. Auditors may also make similar remarks. Additionally, failing to timely renew the board may invalidate the conditions of directors' civil liability insurance.
It is very important to align your company's practices with legal requirements and strategic business goals. In order to ensure that your company remains at the forefront of effective management and compliance, we invite you to consult with our legal experts. Our team is ready to help you understand the nuances of board governance and corporate management, ensuring that your operations remain strong and resilient in a dynamic business environment. We proactively monitor the duration of clients' board terms and draw attention in advance when it is time to make decisions regarding board term renewal. This way, we ensure that clients can focus on business decision-making, while we ensure the legal compliance of those decisions.
We invite you to get in touch and discuss how Grant Thornton Baltic legal advisory service department can help you achieve your goals and experience smooth and pleasant cooperation with. We are proud to have a 9.1/10 client satisfaction rating
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