Management of a BV: the main lines and main points of attention

What does it actually mean to manage a BV?

The board of directors is responsible for managing the company. That sounds spacious, and it is. In any case, governance includes leading, deciding, determining direction and using the BV's resources. So it's not just about the daily operation, but also about policy, strategy and the choices that determine where the company moves. This is relevant for a startup or scale-up, because it is precisely in growth phases that many essential decisions are made at the board level.

In addition, the administrative task does not stop with running the company. The board also implements decisions of other bodies, prepares meetings, has an obligation to inform the general meeting and must contribute to the fact that other bodies of the company can function properly. The administration, preparation of the financial statements and the representation of the BV are also part of the core of the board.

The board must act in the interests of the BV

One of the most important principles is that, when performing their duties, directors should focus on the interests of the company and the company associated with it. This means that a director cannot simply follow the interests of one shareholder, one investor or just his own position. The consideration must be broader. Depending on the situation, the interests of staff, creditors, suppliers, customers and the company as a whole can also play a role.

This is an important point for startups. In young companies, the roles of founder, director and shareholder are often intertwined. Legally, this is not the same thing. A shareholder can think from the point of view of shareholders' interests. A director must look more broadly and put the company's interests first. Especially when it comes to funding rounds, exits, restructuring or difficult cash decisions, that difference can become very concrete.

In principle, the board decides as a college

If a BV has more than one director, those directors together form the board. The law therefore assumes that the board acts as a college. That is more than a formality. It means that the administrative task and administrative authority lie in principle with the joint administration, even if internal tasks are divided.

In practice, division of labor is of course very common. One director is concerned with product and technology, the other with finance or commerce. This division of tasks is allowed, but it does not mean that every director is responsible for the general course of events. So a director can't hide too quickly behind the thought that something was “not in his portfolio”. This is particularly relevant in the case of rapid growth, when governance often lags behind operations.

The statutes may also contain rules about voting relationships within the board. For example, more than one vote can be given to a director, but not so much that that director can cast more votes than all other directors combined. A veto right is therefore not obvious via this route. Here, too, the organization of the board must be in line with how the BV is actually run.

Autonomy of the administration, but not without borders

In principle, the board has an autonomous position when managing the BV. The board therefore does not decide anything until shareholders have signed everything. At the same time, this autonomy is not unlimited. Laws and statutes may set limits, and some decrees may be subject to approval from another corporate body. In addition, the statutes may stipulate that the board must follow instructions from another body. At the BV, this can even be set up quite concretely.

This instruction option does have a clear limit. The board does not have to follow instructions if they are contrary to the interests of the company and its affiliated company. This is an important correction mechanism, especially in relationships where one shareholder, a parent company or an investor has a lot of influence. For founders and management teams, this is an essential point: control is not the same as unlimited control over the board.

In addition, not everything falls under the administrative task. Decisions that the law assigns to other bodies, such as certain appointments or amendments to the articles of association, are not included. Even with a BV, the board cannot take care of everything just because it runs the company. In exceptional situations, even very drastic transactions, such as a transfer that actually amounts to liquidation, may require approval from the general meeting.

Conflicting interest calls for a step back

A director may not participate in deliberation and decision-making if he has a direct or indirect personal interest that is contrary to the interests of the company and the company. This is a core rule for the governance of a BV. So it's not just about voting, but also about contributing ideas and having a say in the decision.

For a startup or scale-up, this is faster than sometimes thought. Examples include private transactions with the founder, agreements with an affiliated holding company, a bonus structure, an investment where a director sits on both sides of the table, or a deal with a party in which a director personally participates. In such situations, it is crucial to identify the possible conflicting interest in time and to focus decision-making accordingly.

If, due to the conflict of interest, a valid management decision cannot be taken, decision-making will in principle shift to the Supervisory Board and, if there is none, to the general meeting, unless the statutes provide otherwise. If a director with a conflicting interest nevertheless participates in the decision-making process, this can make the decision touchable. In addition, it can form the basis for liability.

Representation: who can act on behalf of the BV?

In addition to governing, it is also about representing. The board represents the BV in and out of court. In legal matters, this is an essential point, because the question is not only who can decide something internally, but also who can legally bind the BV externally.

It is important that a limitation of administrative authority does not automatically mean that the power of representation is also limited. In other words: internally, approval or instruction may be necessary, while an act of representation will still be taken externally. This makes good statutes, a clear division of tasks and correct registration in the trade register extra important. Especially in growth companies, where people act quickly and contracts are sometimes signed under time pressure, a lot can go wrong there.

In the case of a multi-member board, the statutes may regulate that a director may not represent independently, but only jointly with someone else. If this individual authority is missing, unauthorised action may be appropriate. Then it comes down to the precise structure of the statutes and what is known about them, including via the trade register.

Power of attorney is also possible. Indeed, in practice, the BV is often not only represented by directors, but also by others who have been authorized to do so by statute or by proxy. This can be practical, but requires a tight definition. Representative power without clear boundaries is a classic recipe for discussion afterwards.

Appointment, suspension, dismissal and continuity of the board

For a BV, directors are appointed for the first time in the deed of incorporation and then by the general meeting, or, if the statutes so provide, by a meeting of holders of shares of a certain type or description. The latter may be relevant in venture and joint venture structures, for example if certain shareholders have an influence on the composition of the board.

A director is only a director if it is based on a legally valid appointment decision. That seems obvious, but in the practice of informal startup governance, this is sometimes dealt with too loosely. Someone may already be acting as a “de facto CEO”, but without a correct appointment, the legal position is not automatically clear.

Directors can be suspended and dismissed at any time by the body authorized to appoint. The statutes may contain additional thresholds for this, but that scope is not unlimited. A BV also requires that the statutes contain a regulation for the prevention or absence of one or more directors. That is not a detail. Without a workable arrangement, a BV can be in a vulnerable position if a director drops out, leaves or is temporarily unable to function.

Especially for startups, this is a point that often gets attention too late. As long as everyone is on board, an injunction or absence scheme seems theoretical. But as soon as conflict occurs, someone goes out for a long time or a founder leaves abruptly, it becomes clear how important it is that the statutes are not only formally correct, but also practical.

Accountability and liability are part of the administrative task

Governing also means being accountable. The board owes information to the general meeting and, if there is one, to the supervisory board. This also includes the preparation and submission of the financial statements. In principle, in a BV, the adoption of the financial statements is not the same as discharge. This normally requires a separate decision, although the BV has a special arrangement in specific situations when all shareholders are also directors and the legal conditions have been met.

Moreover, discharge is not a license. Essentially, it means that the company no longer holds directors liable for what has been accounted for through the financial statements and further explanations. The scope is therefore strongly related to what was actually announced to the general meeting. Things that have remained out of the picture are not automatically included.

In addition, the general standard applies that every director is obliged to perform his duties properly. Each director is responsible for the general course of events and can be liable for improper management, unless, also in view of the division of tasks, he cannot be seriously blamed and he has not been negligent in taking measures to avert the consequences. For founders, this is an important reality check moment: the title director not only brings influence, but also serious responsibility.

What does this mean in concrete terms for startups and scale-ups?

For young tech companies, the biggest pitfall usually lies not in a lack of ambition, but in a lack of governance discipline. Administrative decisions are made informally, roles are not sufficiently separated, interests are mixed up and statutes no longer match reality. That doesn't have to go wrong right away, but it does increase the chance of discussions as soon as the company is under pressure.

Good governance of a BV therefore starts with a few simple but fundamental questions. From a legal point of view, who manages the company? Who can bind the BV externally? What decisions does the board take itself, and when is approval or involvement from another body necessary? How are conflicting interests dealt with? And what happens if a director drops out or is no longer able to act? Getting those questions clear at an early stage often prevents a lot of hassle when the company just needs speed.

Lock

The management of a BV is the company's legal engine, but that engine only runs properly if powers, responsibilities and decision-making are clearly organized. For startups and scale-ups, this is not a bureaucratic luxury, but a prerequisite for agile and sustainable growth.

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