How to elect a board of directors

The Board of Directors or the Supervisory Board is the governing body in business companies, which include joint stock companies and limited liability companies. This body is selective, its members are elected by general meetings of shareholders or participants in companies. There are certain rules for the election of the Board of Directors.

Instruction manual

1

Any person - an individual can be elected a member of the Board of Directors. However, he may not even be a shareholder or participant in this company. But there are some restrictions regarding interaction with the executive body. If it is collegial, then the number of its members should not be more than one fourth of the quantitative composition of the Board of Directors. If the executive body exists in the person of one person, then this person does not have the right to occupy the chair of the chairman of the Board of Directors.

2

The election of the Board of Directors is mandatory for joint-stock companies, the number of shareholders of which exceeds 50 people. The number of members of the Board of Directors should not be less than 5 people. If the number of joint-stock companies is more than 1000 people, then the minimum number of members of the Council is set to 7 people, if more than 10, 000 - at least 9 people. In joint-stock companies of more than 1000 people, the governing body is elected only by cumulative voting, for an LLC - both by cumulative voting and by determining a simple majority among those who voted at the general meeting.

3

The current legislation contains virtually no restrictions on the procedure for the election and formation of the Boards of Directors of LLCs, therefore its activities and the procedure for election are governed by the charter of a particular LLC and internal documents approved by the general meeting of participants.

4

The board of directors of joint-stock companies is elected annually; shareholders with at least 2% of the shares are entitled to nominate candidates. In this case, personal consent of citizens elected to the Board of Directors is required. It is better if it is received in advance in writing in order to exclude a subsequent refusal and a second vote.

5

Participants in the meeting have the right to receive complete information about each candidate: their age, education, and the positions they held in the past five years. The information that is provided additionally is stipulated by internal documents of the company, for example, the regulation on the Board of Directors.

6

When a simple vote is taken, the shareholders vote with their shares for the candidates they elect. In this case, the members of the Board of Directors are those who gained the most votes.

7

To protect the rights of shareholders with a small number of shares, cumulative voting is used, in which the number of votes owned by each shareholder is multiplied by the number of seats on the Board of Directors. This allows any shareholder to cast their votes in full to one candidate or to distribute them among several. This voting procedure guarantees the possibility of a minority shareholder becoming a member of the Board of Directors or delegating his candidate to it.