Kazakh Legislation Regulating Liability of Board Members
One of the most important and most commonly discussed problems, though not carefully studied problem of corporate governance in Kazakhstan, is the necessity to step up and specify the liability of members of boards of directors. This is due to their desire to prevent their participation in actions, which can cause internal corporate scandals, lawsuits, fall in profitability or even the bankruptcy of a company. European countries pay more attention to the problem of corporate governance and liability of persons in charge of administration. In our country, this topic is quite undeveloped. For example, back in the late nineties a British commission on legislation prepared a report on boards of directors — “Company directors: settlement of conflict of interests and definition of duties”1. It is believed that in order to increase the standards of management at the level of the board of directors, the company should have a minimum list of requirements regarding the activities of board members, which they should adhere to all the time. The higher the minimum standards, the higher the general level of corporate governance in a company. Thus, the higher the general level of corporate governance, the better the situation for all. Thus, Western countries envisage a lot of formal duties that are designated to improve the contribution of board members in the general management of companies.
One of the most important and most commonly discussed problems, though not carefully studied problem of corporate governance in Kazakhstan, is the necessity to step up and specify the liability of members of boards of directors. This is due to their desire to prevent their participation in actions, which can cause internal corporate scandals, lawsuits, fall in profitability or even the bankruptcy of a company. European countries pay more attention to the problem of corporate governance and liability of persons in charge of administration. In our country, this topic is quite undeveloped. For example, back in the late nineties a British commission on legislation prepared a report on boards of directors — “Company directors: settlement of conflict of interests and definition of duties”1. It is believed that in order to increase the standards of management at the level of the board of directors, the company should have a minimum list of requirements regarding the activities of board members, which they should adhere to all the time. The higher the minimum standards, the higher the general level of corporate governance in a company. Thus, the higher the general level of corporate governance, the better the situation for all. Thus, Western countries envisage a lot of formal duties that are designated to improve the contribution of board members in the general management of companies.
Joint stock companies, as a rule, and since they are large companies, make a huge contribution in the economic well-being of a country. They possess huge economic, social, and even political force2. Taking into account the importance of various joint stock companies and their significant role in the national economy’s development, legislators undertake serious steps to improve legislation so as to protect the rights and interests of shareholders and joint stock companies as independent entities in the market.
Clause 6, Article 1 of the On Joint Stock Companies Act of the Republic of Kazakhstan qualifies members of board of directors as officials of a joint stock company. The board of directors carries out general management of a joint stock company, defines the strategies of a company, and carries out one of the main functions of corporate governance of a joint stock company. The main function of board members in the course of their activity is diligent performance of assigned duties using ways that best reflect the interests of a company and its shareholders.
It is believed that board members should protect the interests of not just a specific shareholder (group of shareholders), but all shareholders of a company and, hence, should bear responsibility for the success of the entire company. But one should not forget about large shareholders who elect “their” representatives to the board and who pursue their own interests. It is logical that the issue exists of protection of rights and interests of minority shareholders who are similar to other shareholders represented by an independent director3. In fact, the independent director is the most qualified manager (as a rule, engaged from Western countries), who has authority in society and protects the interests of business itself. Legislators believe that an independent director can make a significant contribution to the appropriate management of a company. Such a director should openly and freely express his or her point of view, which may be disliked by those who protect and lobby the corporate interests of separate groups of shareholders.
If you have any questions or if you need any additional information on this subject, please, do not hesitate to contact Rashid Gaissin, Managing Partner, GRATA Law Firm or Yerlan Beyssembinov, Senior Lawyer, GRATA Law Firm
If you have any questions or if you need any additional information on this subject, please, do not hesitate to contact Rashid Gaissin, Managing Partner, GRATA Law Firm or Yerlan Beyssembinov, Senior Lawyer, GRATA Law Firm
