Release from Liability of Member of the Board by Decision of the Shareholder: Abstract

Abstract

The current legislation in force in the Republic of Latvia grants to any member of the board of any capital company wide powers to dispose of the company’s property. The duty to act with the care and diligence of a prudent and careful manager does not allow a CEO to act contrary to the company’s interest. However, if a member of the board has caused damage to the company, they may be released from liability by a lawful resolution of the shareholder. The current study analysed the standard of an honest and careful manager in accordance to Article 169 of the Commercial Law and the obligation to follow this pattern of conduct in order to avoid potential liability for losses. However, a member of the Management Board may also be released from liability if such a decision is taken by the shareholders in accordance with Article 173 of the Commercial Code. Although a decision may obviously release a Member of the Board, such a decision is not binding in all cases. Only if there is a belief that the board member has performed their duties in good faith, they can enjoy the immunity afforded by a decision of a shareholder.