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Management board member duties and obligations in Estonia

For an Estonian company board member, it is important to know the Estonian company board member’s role, representation, duties, taxation and Liability. The main source of information would be the Commercial Code (Äriseadustik) which is available in English here which we strongly recommend to study:

The board member represents the Company in all legal matters. Board members have the power to bind the Company in contracts and other legal documents. Board members are also responsible for organizing its accounts, incl having the annual reports and other required documents with the Estonian Commercial Register.

The board member has a duty to act in the Company’s and its shareholders’ best interests. Board members must exercise due care, skill and diligence in the performance of their duties. Board members must avoid conflicts of interest and disclose any material interests in transactions entered into by the Company.

If there are more than 1 board members the roles should be divided and it is common to also sign separate board member agreements. If there are 3 or more board members the board needs to elect a chairman of the board. In case there are more than 1 members one of the decisions to be made is the right or representation - does the board represent all together (jointly) or does each member have a separate right of representation. Joint representation has to be visible in the commercial registry.

The management board shall organize the accounting of the private limited company

This means that the board member is liable to organize the accounting and not do the accounting.

Members of the management board who cause damage to the private limited company by violation of their obligations shall be jointly and severally liable for compensation for the damage caused. A member of the management board is released from liability if he or she proves that he or she has performed his or her obligations with due diligence.

The members of the management board shall preserve the business secrets of the private limited Company.

Finally we point out out that if a legal person is clearly permanently insolvent, the members of the management board or the body substituting for the management board shall submit a bankruptcy petition.


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