Can the Parent Company’s Capital Representative Become an Independent Board Member at the Subsidiary?

Short answer: Not automatically. The authorized representative of the parent company’s capital contribution in the subsidiary and a member of the subsidiary’s Members’ Council are two different legal capacities. Members’ Council members are appointed by the company owner (the parent company); an authorized representative only exercises the owner’s rights within the scope of the authorization. One individual may hold both capacities concurrently, but there must be a separate appointment/authorization decision for each role.

Legal basis

• Article 49 of the Law on Enterprises 2020 — authorized representative of the owner;
• Articles 79–81 of the Law on Enterprises 2020 — organizational structure; Members’ Council of a single-member LLC owned by an organization.

Distinguishing the two capacities

• Authorized representative of the capital contribution: an individual authorized in writing by the owner to exercise the owner’s rights and obligations with respect to the capital contribution; the scope of rights follows the authorization document;
• Members’ Council member: a person appointed by the owner to the company’s highest management body, acting in the company’s name to exercise the rights and obligations of the Members’ Council;
• Authorizing capital representation is not the same as appointing to the Members’ Council, and vice versa.

Common practice

• Parent companies often assign the same person to serve both as capital representative and Members’ Council member — in this case both the authorization document and the appointment decision are needed;
• The capital representative reports to and seeks the parent company’s opinion before voting on matters within the owner’s competence;
• When exercising Members’ Council rights, that individual acts in the capacity of a Members’ Council member, bearing responsibility under the regulations on enterprise managers.

Notes on liability

• Members’ Council members bear personal liability when breaching duties of honesty and diligence causing damage to the company;
• An authorized representative exceeding the scope of authorization may be liable to the owner;
• The parent company should issue clear coordination rules between the two roles to avoid conflicts of interest.

If you need to determine the option best suited to your specific situation, you should discuss it with a lawyer in advance for dossier review and advice on the handling plan.

For quick advice, you may contact a lawyer at 0966.475.966.

Related articles

• The legal representative of an enterprise
• Organizational structure of a single-member LLC
• Who has the right to appoint the director of a joint-stock company?