Powers and responsibilities of the management of a limited liability company

Blogs September 13, 2013

The company management’s duty is to promote the interests of the company through prudent action. This involves both the duty to be loyal and to take care of the company and act in its best interest. This duty also defines the boundaries regarding their judicial powers in relatively general terms, and consequently also regarding the management’s liability for damages.


The CEO is responsible for the company’s day-to-day management in accordance with the instructions and regulations of the board of directors. The CEO may undertake unusual and extensive measures if authorised by the board or to prevent material harm to the company. The definition of what is far-reaching and unusual depends on the company, its operating sector and on how duties have previously been divided between the CEO and the board. In addition to being in charge of day-to-day management, the CEO is responsible for organising the company’s accounting and reliable organisation of the finances. The CEO also has other specific duties, such as taking the initiative in matters beyond day-to-day management.

The board

The board has been assigned various duties in the Limited Liability Companies Act, such as appointing, dismissing and supervising the CEO, and organising meetings whenever necessary. The board is specifically responsible for ensuring the interests of the company’s creditors. In addition to specific duties of the board, the Limited Liability Companies Act confers the board general judicial powers to take care of the company’s management and appropriate organisation of its operations. The content of the general judicial power is impossible to define accurately, because it has been deliberately described in general terms as companies vary from each other. However, the scope of these powers can be described to cover such duties that have not been specifically assigned to any other body. These include, but are not limited to, representation of the company, organising the company’s operations and supervision, and ensuring the appropriate operation of the company.

The management’s powers and therefore the scope of its responsibilities are impossible to define accurately and universally. The definition of the company’s scope of operations has considerable bearing on the board’s powers: any decision that does not fall within the scope of the company’s operations specified in the articles of association cannot be considered to fall within the board’s powers. In borderline cases, what matters is the management’s general duty to act in the best interest of the company, as any action contrary to that duty will lead to liability for compensation pursuant to the Limited Liability Companies Act. The company management is personally responsible for any loss to the company if they have not taken care to act in the best interests of the company. Any member of management is also responsible for any loss to the company, shareholder or other person resulting from actions in breach of the Limited Liability Companies Act or the articles of association, whether undertaken deliberately or through carelessness. Any responsibility by the management does not mean, however, that risks should be avoided when making decisions – as long as they can justify their decisions as having been made in the best interests of the company.