Short term director/supervisor appointments

[viciam]

Hi guys,

I was wondering if someone has any experience of a company that has as a policy to only have directors and supervisors in there positions based on 3 year terms. So after every 3 years the board and supervisors are changed and shareholders must vote in the new directors and supervisors/managers

Why would a company have this policy? What are the advantages of this?

 

[Country Lad]

Never heard of it. 3 year terms are common but the director can stand for re-election. Many of the NFPs as companies limited by guarantee have a restriction that directors can serve no more that say 2 or 3 terms.

Such a situation as you describe seems to be against the best interest of the company by not allowing continuity of experience.

Cheers
Country Lad

 

[Garpal Gumnut]

Hi guys,

I was wondering if someone has any experience of a company that has as a policy to only have directors and supervisors in there positions based on 3 year terms. So after every 3 years the board and supervisors are changed and shareholders must vote in the new directors and supervisors/managers

Why would a company have this policy? What are the advantages of this?

It depends on the Constitution of the company.

The Constitution dictates the terms and re-election and the methodology of the choice of new directors.

The AICD http://www.companydirectors.com.au/ has information ++ on this.

gg

 

[viciam]

Ok I think I found the answer

The company I was looking at is based in China.

Chinese company law:

Article 46 The term of office of a director shall be stipulated by the company's articles of association, but each term of office shall not exceed three years. A director may, if reelected upon expiration of his term of office, serve consecutive terms.

And this following from a Chinese law firms website explains the thinking behind it.

The supervisors did not exist in the very beginning. In modern companies where ownership and management/controlling rights are separated, the shareholders who enjoy the ownership benefits cannot always take part in the daily management of Companies, and would have to entrust the standing board of directors to manage and control the company. In this situation, the directors’ power will be too much. In common sense, “Power tends to corrupt; absolute power corrupts absolutely”. So to prevent the directors to abuse their powers and put their own benefits above the benefits of the Company, the Supervisors come into being, who are appointed to supervises and monitor the policy-makers of the directors (and the managers they hire).

 

[Garpal Gumnut]

Ok I think I found the answer

The company I was looking at is based in China.

Chinese company law:

Article 46 The term of office of a director shall be stipulated by the company's articles of association, but each term of office shall not exceed three years. A director may, if reelected upon expiration of his term of office, serve consecutive terms.

And this following from a Chinese law firms website explains the thinking behind it.

The supervisors did not exist in the very beginning. In modern companies where ownership and management/controlling rights are separated, the shareholders who enjoy the ownership benefits cannot always take part in the daily management of Companies, and would have to entrust the standing board of directors to manage and control the company. In this situation, the directors’ power will be too much. In common sense, “Power tends to corrupt; absolute power corrupts absolutely”. So to prevent the directors to abuse their powers and put their own benefits above the benefits of the Company, the Supervisors come into being, who are appointed to supervises and monitor the policy-makers of the directors (and the managers they hire).

Sorry I did not realise it was in China.

Consult The Great Khan as to what he would do.

gg