Minimera din personliga risk i styrelsen

Minimize your personal risk in board work

Share on facebook
Share on twitter
Share on linkedin

Being a board member is an assignment that comes with a lot of responsibility. As a member, you can become personally responsible for the company’s duties. We list the risks you should be aware of and give tips on how to protect yourself and reduce your personal risk in board work.

According to the Swedish Companies Act (ABL), all limited liability companies must appoint a board of directors. It is then the board’s task to ensure that the company’s organization and management are managed correctly. By checking the accounting, the money in the company and other assets, the board can ensure that business operations are managed as well as possible, from a financial perspective.

Important laws and regulations to keep track of to reduce risk in board work

As a board member, there are many laws and rules to relate to. In addition to the Swedish Companies Act, the following laws deal with parts of the board’s work:

  • Annual Accounts Act
  • Accounting Act
  • Taxes and fees – Tax Procedure Act (tax payments) – Tax Crimes Act
  • Bankruptcy Law
  • Employment Protection Act
  • Act on board representation for private sector employees
  • The Work Environment Act
  • Equality Act
  • GDPR
  • Environmental Code
  • Penal code

In order to be able to do good board work, it can be a good idea to familiarize yourself with the various laws and regulations that must be followed in the company.

Good governance and what it means

In addition to complying with laws and regulations, it is also important that you as a board member follow good board practice. The purpose of the concept is to streamline the board’s work to ensure that the board fulfills its function, as described in the statute book. Good board practice is, for example, about ensuring independence requirements in larger companies and managing board work based on the company’s operations as a whole. The independent association Styrelseakademien has produced a guidance paper on good board practice.

Do you want to feel more secure in your board position?

Get full control and overview in a digital board portal

What are the responsibilities of the Board?

According to Chapter 8, Section 4 of the ABL, the Board of Directors is responsible for the company’s organization and management. It is the board’s job to continuously keep track of the financial situation and ensure that the company is organized so that the accounting and the company’s money can be controlled safely. More specifically, it is about payment liability, liability and criminal liability, but also about ensuring that the board acts as a control function for the company.

The role of control function

The fact that the Board has a control function means that you regularly review and follow the company’s financial development. This is done by the Board of Directors taking note of financial reports from management. The company’s auditor, in turn, has the task of reviewing the board’s handling of its data, in order to protect shareholders.

As a board member, you are thus responsible for:

  • Check and assess the financial situation in the company
  • Make sure that the organization in the company is designed in such a way as to make it possible to control the accounting, management and finances of the company
  • If there is a suspicion that the equity is less than half of the company’s registered share capital, it is the board’s responsibility to draw up a so-called control balance sheet
  • Keep a register of shareholders that is constantly kept up to date and that is stored for at least ten years after the company has been dissolved
  • Prepare annual report
  • Convene a general meeting within six months of the end of the company’s financial year
  • Ensure that minutes are kept at board meetings and general meetings

Then you become personally responsible for the company’s duties

If the board work is not handled correctly, you as a board member can in some cases become personally responsible for the deficiencies.

Liability

If someone on the board has acted incorrectly and thus made a violation of the Articles of Association, the Swedish Companies Act or the Annual Accounts Act, the board member becomes liable for damages. In these cases, it is a matter of the member having in some way harmed the company or its owners in his board role, intentionally or due to negligence.

However, during the general meeting, the board member may be discharged from liability. Then the limited liability company cannot bring an action for damages.

As a board member, you will thus be personally liable for:

  • You through negligence or with intent harm the company or violate current legislation in your role as a board member

Criminal liability

Members of the board face fines or up to a year in prison if they violate certain rules.

As a board member, you will be personally liable for criminal liability if:

  • Prohibited loans have been taken out in the joint-stock company
  • No register of shareholders has been kept
  • You have not made it possible for other board members to participate in board meetings and decisions
  • You advertised shares for private limited companies

Liability for payment

Part of the board’s duties involves ensuring that the company’s taxes are paid on time, that the annual notice is submitted on time and that the control balance sheet is drawn up. If this is not done, you as a board member can become personally liable for payment.

In order to minimize personal risks in the work of the board, it is also required that you intervene if you find that another member of the board is not fulfilling his obligations in a correct manner. Otherwise, you too may become personally liable for these errors.

Full control of equity

How to get constant access to up-to-date financial overview

How to reduce your personal risk in board work

Of course, you want to avoid getting into any of the above situations at all costs. Here’s what you can do to feel more confident on your record:

Board insurance – does it really cover everything?

One way to reduce your personal risk as a board member is to take out so-called board insurance. It is personal and often covers all of your board assignments, not just the boards of individual companies. The purpose of board insurance is to protect you and your relatives from being liable for damages. But does insurance provide adequate protection? Be careful when going through what a board insurance policy covers and for what period of time. The insurance must be valid when the basis for the insurance case arises and it must be in force when the claim is made.

Constant follow-up of finances and formalities

By far the most important measure to reduce your risk is to be well-read and familiar with the business’s situation.

Financial follow-up
The entire board should be involved in careful and ongoing monitoring of finances. This makes it easier to detect any lack of capital in good time (the company is obliged to draw up a control balance sheet if this is the case). This responsibility lies with the board members but can also affect the CEO. Feel free to get help from an accountant here.

Orderliness of formalities
Also, make sure that all documents and formalities are in place and laws and regulations are complied with. Document all decision-making data in the company and remember to reserve yourself if you do not want to be involved in decisions. On the market today there are lots of digital tools that can help you reduce the risk and to easily keep track of documents and formalities. Having a secure board portal is a good guarantor.

With a close eye on the finances, all formalities in place and a well-chosen insurance, you reduce the risk of problems later on.

Do you also want to streamline your board work? Try Boardeaser Board Portal for free today!

Laptop visar mötesprocessen i Boardeasers Styrelseportal

Do you want to improve and simplify your board work?

Book a free demo and try it free for 30 days.

Boardeaser’s financial tools make it easy for you as a member to follow the company’s financial development. Have access to the platform as a member or receive reports from the CEO or finance department. If the company also uses Boardeaser’s board portal , you can keep track of both the company’s finances and formalities in the same place. The data is always up-to-date and available to the entire board – an easy way to take responsibility.

Log in or register for free to test Boardeaser’s products.

Read more posts

Skriva vd-rapport

How to write a good CEO report

Are you going to write a CEO report? We sort out what your report must contain, how to choose key figures and how to present data so that the entire board understands.