A set of rules of procedure is a statutory document that aims to set the framework for the board’s tasks. The Board of Directors has several statutory tasks, but also several other tasks where rules of procedure can be a tool for the Board of Directors to make further provisions on the performance of the Board members’ tasks.
Rules of procedure must ensure that the work of the Board of Directors is carried out in an appropriate manner, while at the same time making it easier for any new Board members to familiarize themselves with the performance of the tasks in the assumed role.
It follows from section 130 of the Companies Act that a limited liability company or private limited company must draw up rules of procedure if the board of directors consists of several members. If you have a company where the supreme governing body is an executive board, rules of procedure are not mandatory; however, it may still be a good idea to draw one up, as they help to set guidelines for the work of the management in the company, which are drawn up in agreement with all members of the management.
The drafting of the rules of procedure must be based on the company’s activities and needs. A set of rules of procedure must therefore be adapted to the individual company, and there can thus be a big difference in content.
Form and Content of the Rules of Procedure
When formulating the rules of procedure, the board of directors should decide whether the rules of procedure should contain provisions on:
- The structure of the company;
- Division of labour;
- Supervision of the executive board’s day-to-day management;
- Keeping books, protocols, etc.;
- Written and electronic meetings;
- Professional secrecy;
- Alternates;
- Accounting control;
- Signing of audit protocols; and
- Ensuring the existence of the necessary basis for audit.
Rules of procedure should not be confused with the company’s articles of association. If the content of the rules of procedure does not correspond to the articles of association, it will always be the articles of association that apply. The rules of procedure cannot therefore give board members rights or powers that are not also given to them in the articles of association.
As can be read, rules of procedure are not only, in some cases mandatory, but also an important supplement to a company’s business operations. This is why it is important that they meet the company’s needs, so that operations are structured optimally, and business can be carried out in a responsible manner.
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Do you have questions about the rules of procedure in joint-stock companies and limited liability companies? Or if you have other commercial legal issues, you are more than welcome to contact us.
