Page 56 - Albanian law on entrepreuners and companies - text with with commentary

infringement is discovered in the course of an auditing carried out by the tax authorities,
the sanction shall be enforced by those authorities.

Comments:

1. Adequate organizational structures of the company and the distribution of competencies
between company organs are two of the most important corporate governance concerns.
Transparency and legal certainty are crucial in this respect. Those who are in charge of
managing the company must always be accountable for their business conduct to the
company, its investors, creditors and employees and also to other those who have any other
social interests recognized by law. A major concern in transition economies has been self-
dealing of managers and mistreatment of minority members or shareholders by dominant
members or shareholders. Where this is likely to occur, investors will either ask for an
excessive risk premium which is reflected in extremely low share prices that make equity
capital excessively expensive for the company, or investors will shy away from investing in
shares altogether. In any case, insufficient protection against self-dealing by managers or
oppression of minority members or shareholders will have a disastrous effect on economic
reconstruction. Adequate supervision of the company’s management as well as minority
protection is therefore absolutely essential for a viable law of companies. In order to avoid
mismanagement, company law must provide for supervisory bodies, put restrictions on
transactions by managers involving conflicts of interest, and provide for accounting and
disclosure rules which are essential for the proper functioning of the company. Furthermore,
company law must impose certain restrictions on the powers of dominant members or
shareholders in order to make sure that they cannot exploit the company at the expense of the
minority.

2. Article 13 must be seen in this context. This provision is actually part of managing and
supervising directors’ fiduciary duties which find their general expression in Articles 14 to 16
and are specified for directors in Articles 98, 163, 164 and 167. The old Law No. 7638 was
widely criticized for not providing sufficient regulation on directors’ duties. Following the
huge frauds committed by globally operating companies in recent years to the detriment of
investors, creditors, employees and the market ‘system’ as such, directors’ duties have
become one of the main regulatory mechanisms to prevent such situations and define what
today is called ‘good practice’ or ‘good governance’. This is the reason why also the new
Company Law dedicates a lot of regulatory space to directors’ duties.
In this respect, Article 13 (1) is an expression of the general interest in the fitness or
ability of persons capable of representing a company. ‘Unfitness’ is determined by subjective
and objective aspects. One can say that a director or representative is unfit if he is grossly
negligent and totally incompetent, i.e. wholly unable to comply with the statutory obligations
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which go with the privilege of limited liability. We will come back to directors’ fitness

88 See J. Dine, Company Law (Palgrave Macmillan, 5th ed., 2005), p. 229. See, in this respect, also the similarities to the
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