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ical details and ownership information referred to in recommen- dation 19. Directors must inform the company of any essential changes in the information supplied by them.

1) Chapter 1, Section 3 of the Companies Act: If a limited liability company exercises dominant influence over another domestic or foreign organisation, the former shall be a parent company and the latter shall be a subsidiary organisation. A parent company together with its subsidiary/ies forms a group.

A limited liability company shall be deemed to exercise dominant influence over another organisation, when it has: 1. a majority of the voting rights attached to all the shares, memberships or participants and this majority of voting rights is based on ownership, membership, Articles of Association, company agreement or rules corresponding thereto or other

contract; or

2. the right to appoint the majority of the members of the Board of Directors or other corresponding body of the other organisation or of a body with such power of appointment and the right of appointment is based on the same facts as the major- ity of voting rights referred to in paragraph 1.

When calculating the portion of voting rights in a limited liability company referred to in paragraph 2, a voting restriction based on the law, Articles of Asso- ciation, company agreement or rules corresponding thereto shall not be taken into account. When calculating the total numbers of votes in an organisation, the votes attaching to shares, memberships or participations belonging to the organisation itself or its subsidiary organisation or to a foundation under the influence of the organisation or its subsidiary organisation in the manner referred to in this section shall not be taken into account.

A limited liability company shall exercise dominant influence over another or- ganisation also when the limited liability company together with one or more of its subsidiary organisations or a subsidiary organisation either alone or together with other subsidiary organisations exercises the influence referred to in paragraph 2.

If a foreign company corresponding to a limited liability company exercises the influence referred to above over a Finnish limited liability company, the foreign company shall be deemed a parent company and the Finnish company subsidiary organisation in the application of the provisions chapter 11, sections 7 and 11, paragraph 3 as well as chapter 12, section 7, paragraphs 1 and 2.

2) Chapter 1, Section 4 of the Companies Act The related entities of a company shall consist of: 1. anyone who exercises the dominant influence referred to in section 3, para- graphs 2-4 in the company or who is under the control of anyone exercising domi- nant influence over the company or who belongs to the same group as company; 2. anyone who, on the bases of ownership, an option right or a convertible loan, holds or may hold at least one percent of the shares of the company or of the voting rights attached to shares of the company or a corresponding holding or correspond- ing voting rights in an organisation belonging to the group of the company or in an organisation or foundation exercising dominant influence over the company: 3. the Managing Director, member of the Board of Directors or Supervisory Board of the company and the auditor of the company as well as a person in a correspond- ing position in an organisation or foundation referred to in paragraph 1; 4. the spouse of a person referred to in subparagraphs 1-3 or a person having a common-law marital relationship with him, his sibling, half-sister or half-brother, a direct ascendant or descendant of a person referred to in paragraphs 1-3 and of his spouse or a person with a common-law marital relationship with him as well as the spouses or common-law spouses of the persons referred to ; as well as 5. an organisation or foundation over which a person referred to in subparagraphs 2-4 either alone or together with another person exercises the dominant influence referred to in section 3, paragraphs 2-4.

When calculating the holding or voting rights referred to in paragraph 1, subparagraph 2, the provisions of section 3, paragraph 3 shall be applied, and hold- ings and voting rights of a shareholder or member of the company shall include the holdings and voting rights of a person having him a relationship referred to in paragraph 1, subparagraph 4 as well as those of an organisation and foundation having with him a relationship referred to in subparagraph 5.

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5 Board Committees

The proper functioning of the management and proper organisa- tion of the operations of a limited company requires an effective organisation of the duties of the board. Establishing committees composed of some directors can enhance the effectiveness of preparation of matters belonging to the competence of the board. Directors working in the committees have the possibility to concentrate on the matters delegated to them more extensively than the entire board.

Recommendation 21 Establishment of a committee

Effective organisation of the duties of the board may require establishment of board committees.

It may be necessary to establish board committees in particular for the supervision of the reporting and control systems, nomina- tion of the management and the development of compensation systems of the company. Especially in companies that have extensive business operations, board committees increase the effectiveness of board work.

The committees assist the board by preparing matters belonging to the competence of the board. The entire board re- mains responsible for the duties assigned to the committees. The committees have no autonomous decision-making power and thus the board makes collectively the decisions pertaining to it.

If necessary, the board can also establish other committees in addition to those mentioned below in this Recommendation, and combine tasks assigned to various committees and decide that the entire board shall prepare a specific issue.

Recommendation 22 Reporting by the committees to the board

Each committee shall regularly report on their work to the board.

The company can internally determine the reporting details and schedule. As a minimum, the report shall include a summary of the matters addressed and the measures undertaken by the committee.

Recommendation 23 Charter of the committee

The board shall approve a written charter for the com- mittee’s work and describe its essential content.

A written charter helps to clarify the role of the committee in the company. Its duties and operating principles must be defined in a way enabling the effective function of the committee.

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