Authority
E. The Working Procedures of The Board of Commissioners
1. The President and Board of Commissioners Meetings
Best Practices
More specifically, the President Commissioner facilitates the work of the Board of Commissioners by:
• Facilitating decision-making on agenda items.
• Encouraging open discussions on issues in a friendly and constructive atmosphere.
• Providing Board of Commissioners members with an opportunity to express their points of view on matters being discussed.
• Steering the Board of Commissioners towards a consensus.
In doing so, the President Commissioner should act with conviction and, at all times, in the best interests of the company. Moreover, the internal regulations or other internal documents should impress upon the President Commissioner the responsibility to:
• Encourage commissioners to freely express their opinions on agenda items and other issues.
• Discuss opinions of commissioners openly.
• Initiate the drafting of the Board of Commissioners’ decisions.
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Board Meetings.
The Board of Commissioners must follow legal requirements in making valid decisions, or risk having them overruled by the courts upon complaints.
Written Resolutions.
Written Resolutions. Except to the extent that the AoA or internal regulations require action by the Board of Commissioners taken at a meeting, an action required or permitted to be taken by the Board of Commissioners may be taken without a meeting. In regards with this issue, Article 116 of the ICL stipulated that the Board of Commissioners shall be obliged to prepare a minute meeting of the Board of
2. The Board of Commissioners Meetings
Best Practices
Commissioners should ensure that Board of Commissioners and committee meetings are well-organized and held on a regular basis. Commissioners should actively participate in the Board of Commissioners meetings and each director should:
• Take part in discussions and voting
• Participate in the work of Board of Commissioners committees, if he/she is a member of the committee
• Demand a Board of Commissioners meeting to discuss matters of concern
• Notify the Board of Commissioners when he/she is unable to attend meetings.
In addition, Board of Commissioners members should have sufficient time for the performance of their functions. The Board of Commissioners should develop rules to regulate the participation of its members on other companies’ Boards of Commissioners. The general rule for directorship on multiple Board of Commissioners should, however, be based on time- constraints. If a commissioner does not have the time, he/she should not take on the responsibility.
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Commissioners which contain all proceedings and resolutions taken and keep the copy thereof. Further, a standard AoA of a limited liability company may stipulate as follows:
• Any matters that are discussed and decided in the Board of Commissioners’
Meeting should be drawn-up in the Minutes of Meeting. The Minutes of Meeting shall be prepared by a person who attended the meeting and assigned by the Chairman of the Meeting, and the Minutes of Meeting shall be signed by the Chairman of the Meeting and another member of the Board of Commissioners appointed by the Meeting.
• The Board of Commissioners may also make a valid decision without convening a Board of Commissioners’ Meeting, provided that all members of the Board of Commissioners have been notified in writing and all members of the Board of Commissioners have granted their approval to such written proposal and signed such resolution.
• A resolution made in such manner shall have the same force as a valid resolution made in a Board of Commissioners’ Meeting.
The first meeting of the Board of Commissioners is not regulated in the ICL nor the CG Code, and so the Board of Commissioners or the newly appointed one is encouraged to have it regulated in its article of association or manual along with other internal arrangements.
3. The First Board of Commissioners Meeting
Best Practices
The first meeting of a newly elected Board of Commissioners should be held no later than one month after it is elected. As a matter of convenience, the first Board of Commissioners meeting can be organized to follow the GMS. In addition, it is recommended that the first Board of Commissioners meeting:
• Define and confirm the priorities of the Board of Commissioners.
• Establish committees if appropriate.
• Elect committee chairman.
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A company may also wish to develop an induction training for new Board of Commissioners members that cover, among other topics, an overview of the company’s:
• Industry and sector of operation
• Business operations
• Current financial situation
• Strategy
• Business risks
• Key employees’ background and skills.
The article of association or the internal regulations/manual can specify the procedures for convening and conducting Board of Commissioners meetings.
4. The Schedule of Board of Commissioners Meetings
Best Practices
The Board of Commissioners should have a working plan in addition to a schedule for meetings that includes the topics to be addressed. The Board of Commissioners should hold regular meetings. The Board of Commissioners should meet at least four times a year. The Board of Commissioners may, however, wish to hold meetings as often as deemed necessary.
Here is some guidance on conducting productive and efficient Board of Commissioners meetings:
• Develop an annual calendar of meetings. This will allow commissioners to slot the meetings in their agendas. Note that this calendar should serve as a guide, i.e. the Board of Commissioners should hold additional meetings when warranted and, vice versa, cancel meetings when there are no issues to be resolved.
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• Set an agenda well in advance. Commissioners will thus be able to properly focus on and prepare for the task at hand. The President Commissioner may wish to send a draft agenda in advance, allowing for comments and suggestions.
• Place important issues at the beginning of the agenda. Commissioners often have other commitments and might need to leave early.
Scheduling meetings for the early, rather than latter part of the day, is thus often more conducive to foster interactive discussions.
In addition to regular meetings, the Board of Directors needs to organize a meeting to review and approve the annual report. This Board meeting needs to take place at most two months prior to the AGM.
A standard article of association of a limited liability company may include provisions on the Board of Commissioners meetings, such as a Board of Commissioners’ meeting may be held at any time if deemed necessary.
The President Commissioner normally convenes regular Board of Commissioners meetings. However, an article of association of a company may state that a Board of Commissioners’ meeting may be held by one or more member of the Board of Commissioners, or upon a written request of the Board of Directors, or upon the written request of one or more shareholders jointly holding at least 1/10 (one-tenth) of the total number of shares with valid voting rights issued by the Company.
5. Who Has the Right to Convene a Board of Commissioners Meeting?
6. Proper Notice for Board of Commissioners Meetings
The necessary information and materials should be sent to commissioners together with the notice of the Board of Commissioners meeting sufficiently in advance to enable each commissioner to thoroughly review the information.
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Regulations on notice for the Board of Commissioners Meetings are usually stipulated in the article of association and further stated in more details in the charter/manual. For example a public company’s article of association regulates as follows:
• Notice for a Board of Commissioners Meeting shall be made by a member of the Board of Commissioners which is authorized to represent the Board of Commissioners
• Notice for a Board of Commissioners’ Meeting must be made in writing and delivered directly to each of the members of the Board of Commissioners with sufficient receipt, or by registered mail or courier services, or telex, or facsimile, or electronic mail (e-mail), no later than 3 (three) days prior to the said meeting, not including the date of the notice and the date of the meeting, or within a shorter time period for an urgent matter.
• The notice for the Board of Commissioners’ Meeting must contain the agenda, the date, the time and the venue of the meeting. The Board of Commissioners’
Meeting shall be held within the domicile of the Company or the place where the Company’s activities are conducted.
Best Practices
Commissioners should properly prepare themselves to participate effectively in meetings. They should not vote on items on which they have not been fully informed or which they do not understand. The internal regulations or other internal documents should determine the form of the notice and the way materials are delivered that is most convenient and acceptable to all commissioners (for example by mail, telegraph, fax, or e-mail). Such delivery method must ensure that the notice reaches the commissioner’s contact details which have been registered at the company.
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7. The Quorum for Board of Commissioners Meetings
8. How Commissioners Can Participate in Board of Commissioners Meetings
A quorum is the minimum number of commissioners that must participate in a meeting for decisions to be valid. Since the ICL does not specify the quorum for Board of Commissioners Meetings, the articles of association of a company may require that a quorum of the Board of Commissioners should consists of one half (1/2) of the total members of the Board of Commissioners that are present or represented in the meeting.
Commissioners can participate in voting when they are:
• Physically present at the meeting.
• Participating by conference call, video call or other means of communication (provided that all commissioners can see and hear each other clearly, and each commissioner may speak at the same time as other attending members if he/she wishes to do so).
• Absent, by assert his/her opinion in writing and by signing it, then delivered to the President Commissioner or to other member of the Board of Commissioners that will chair the Board of Commissioners’ Meeting, on whether he/she agree or disagree on the matters to be discussed, and his/her opinion would be considered as a valid vote in the Board of Commissioners’ Meeting.
A member of the Board of Commissioners may only be represented by another member of the Board of Commissioners by virtue of a power of attorney. A member of the Board of Commissioners may only represent one member of the Board of Commissioners.
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Best Practices
Although the law does not impose express requirement, certain items are of such importance that commissioners need to be physically present, and the company should consider making it compulsory that the commissioners adopt resolutions on such matters in a physical meeting (rather than by written resolution or in a telephone meeting). These items include:
• The approval of the strategic plan and the approval of the company’s financial and business plan.
• Calling the AGM, and making decisions on items related to the organization of the AGM.
• The preliminary approval of the annual report of the company.
• Convening or refusing a request by third parties to convene an EGM.
• The election of the President Commissioner.
• The creation and early termination of the authority of executive bodies.
• The suspension of the President Director and the appointment of an interim President Director.
• The reorganization or liquidation of the company.
• Increasing the charter capital and issuing shares.
Best Practices
When participating in Board of Commissioners meetings, each commissioner should:
• Listen and understand oral presentations.
• Ask questions. This is particularly important for presentations or reports given by executives during Board of Commissioners meetings, especially when these materials are presented in a complex or ambiguous manner.
• Request supporting materials. When presented with a particular issue that does not correspond to the commissioner’s area of expertise, additional information in the form of studies, independent appraisals or opinions, and other documentation on the subject should be requested prior to the meeting.
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9. The Consideration of Written Opinions (Absentee Ballots)
Good corporate governance suggests that the article of association or internal
regulations should specify that written opinions of commissioners can be considered in determining the existence of a quorum for Board of Commissioners meetings and the validity of the voting results.
Best Practices
The article of association, internal regulations, or other internal documents should enable Board of Commissioners members to make decisions by absentee vote. However, for resolutions required by the article of association to be adopted by voting in person, the votes of absentees expressing their opinion in written form should not be counted for the quorum. Companies should develop procedures for absentee voting, including the deadline for the delivery of voting ballots and deadline for the return of completed ballots.
It should give commissioners enough time to receive the ballots and make decisions on agenda items.
10. Board of Commissioners Decisions
The company articles of association may stipulate that a resolution of the Board of Commissioners’ Meeting must be adopted by deliberations to reach consensus. If no consensus is reached by deliberations, the resolutions shall be adopted by voting based on affirmative vote of more than ½ (one-half) of the total votes duly cast at the meeting.
In a tie vote, the President Commissioner of the Meeting shall cast the deciding vote.
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11. The Minutes of Board of Commissioners Meetings
Boards of Commissioners shall make minutes of meetings of the Board of
Commissioners and keep copies thereof.41 Articles of association of both public and non-public company regulates that any matters that are discussed and decided in the Board of Commissioners’ Meeting should be drawn-up in the Minutes of Meeting.
The Minutes of Meeting shall be prepared by a person who attended the meeting and assigned by the Chairman of the Meeting, and the Minutes of Meeting shall be signed by the Chairman of the Meeting and another member of the Board of Commissioners appointed by the Meeting. If the minute of meeting is made by a Notary, no signature is required.
The Minutes of Meeting shall serve as valid evidence for the members of the Board of Commissioners and to any third parties insofar as with respect to the resolutions made at the Meeting.
Best Practices
As legal and regulatory requirements of commissioners become more onerous, minutes are important records to show that the Board of Commissioners has discharged its duty of care. Under good corporate governance practices, the minutes will include the voting of each individual commissioner.
The Board of Commissioners is often required to designate a secretary of the Board of Commissioners to take notes and help prepare the minutes. In international practices, the Corporate Secretary often serves as the secretary of the Board of Commissioners and may sign the minutes as well.
41 ICL, Article 116 paragraph a
The minutes provide only a brief summary of the Board of Commissioners meeting. In addition to minutes, every meeting should be followed by making verbatim reports that contain a word-for-word account of discussions held. They should form an integral part of the minutes. Verbatim reports from the meeting are supposed to be kept in company’s records as a part of the minutes.
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Best Practices
Regardless of whether the company chooses to keep minutes and/or verbatim reports, the following documents should be preserved together with the minutes and/or the verbatim reports:
• The voting ballots
• The written opinions of directors who were not able to attend.
Each commissioner should also be given a summary of the deliberations of the Board of Commissioners. The company should establish a procedure which ensures that all commissioners will be provided with:
• Copies of the minutes and/or verbatim reports
• Reports detailing the outcome of the voting.
12. The Corporate Secretary and Board of Commissioners Meetings
The ICL as well as CG Code is silent on the role of the Corporate Secretary and Board of Commissioners meetings. However, the CG Code sheds some light on the Corporate Secretary position more related to support the Board of Directors function and not specifically mentioned to support the Board of Commissioners.
For more information on the Corporate Secretary, see Chapter 6.
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Best Practices
The Corporate Secretary should be responsible for administrative and organizational matters with respect to preparing and conducting Board of Commissioners meetings. While the decision to conduct a Board of Commissioners meeting is made by the President Commissioner, the Corporate Secretary should be responsible for handling such matters as:
• Notifying all commissioners of Board of Commissioners meetings
• Sending voting ballots
• Collecting completed ballots and absentee ballots
• Ensuring compliance with the procedures for Board of Commissioners meetings; and
• Keeping the minutes and verbatim reports.
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Each member of the Board of Commissioners shall perform in good faith, prudence, and full of responsibility to perform his supervisory duty and provide advices to the Board of Directors as contemplated in Article 108 paragraph (1) in the interests of the Company and in accordance with the Company’s purpose and objectives.42
It is important to note that when a court action is brought against a commissioner, reasonableness and good faith are presumed. However, the ICL does not define “good faith” or “reasonableness.”
Turning to other jurisdictions for guidance, for example the U.S. and U.K., the concepts of reasonableness and good faith are viewed as fundamental principles of a