Page 170 - Albanian law on entrepreuners and companies - text with with commentary

developed in recent years to strengthen this function. This has brought about a certain
convergence of the two models. The new standard supervisory measures introduced by the
new Company Law are the following:

 If board members are nominated Managing (or ‘executive’) Directors, it must be
guaranteed that the majority of the Board is composed of independent (!) non-
managing (non-executive) directors, Article 158 (1). A definition of
‘independence’ is given by Article 155 (4): An independent director is a person
free from conflicts of interests as defined by paragraph 3 of Article 13. In other
words, the Law refers back to the definition of ‘related’ or ‘connected’ persons in
order to establish a legal standard of independence for the entire Law that courts
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can handle. This definition also applies to Supervisory Board, Article 167 (4)
and see the discussion on Article 13 (2) showing that since it is extremely difficult
in law to define ‘independence’ it is more sensible to draft some soft law. The
Albanian Corporate Governance Code has some guidance on ‘independence’, see
particularly the section of Corporate Governance Code Applicable to Large and/or
More Complex Unlisted Companies, especially Principles 10 and 11. However
further information can be found in other countries’ corporate governance codes
and in the international corporate governance promulgated by the World Bank and
the OECD.
 Roles of Chairman of the Board and Managing (‘Executive’) Director must be
separated, Article 161 (2). In lock-in situations, the Chairman shall have the
casting vote, unless otherwise provided by the statute, Articles 162 (2), 167 (5).
 The Board may regulate itself through the establishment of by-laws, Articles 161
(1), 167 (5). While doing so it must be guaranteed that the majority of independent
non-executive directors can always effectively play its supervisory role. In key
areas, where the potential for conflict of interest is particularly high, the Law
recommends the creation of special committees, that is nomination, remuneration
and audit committees within the (supervisory) Board where the majority of
members are always independent and non-managing, Articles 161 (4), 167 (5). The
separation of these central board functions in the form of committees was
recommended by the High Level Group of Company Law Experts. 153 It appears to
be an organizational device to increase transparency of decision-making. EU
Recommendation 2005/162/EC ‘on the Role of Non-Executive or Supervisory

152 Cf. Section 13.1 of Commission Recommendation 2005/162/EC on the Role of Non-Executive or Supervisory
Directors of Listed Companies and on the Committees of the (Supervisory) Board: “A director should be considered to
be independent only if he is free of any business, family or other relationship, with the company, its controlling
shareholder or the management of either, that creates a conflict of interest such as to impair his judgement.”
153 See The High Level Group of Company Law Experts on A Modern Regulatory Framework for Company Law in
Europe, http://www.ecgi.org/publications/documents/report_en.pdf, accessed on 4/1/2016.; see also the Albanian
Corporate Governance Code, especially in the section of Corporate Governance Code Applicable to large and/or More
Complex Unlisted Companies, especially Principles 12.
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