CAN AN ENTERPRISE DIRECTOR BE A NATURAL PERSON AT THE SAME TIME?
An individual may carry on business in various ways. Including becoming an entrepreneur. This conclusion follows from the provisions of Part 3 of Art. 128 of the Civil Code. At the same time Part 1 of Art. 50 of the CCU provides that restrictions on the right of an individual to engage in business activities are set by the Constitution of Ukraine and the Law of Ukraine “On Limited and Additional Liability Companies”.
The restriction of the director to be a FOP speaks, in particular, of item 1 of part 5 of Art. 40 of this Law: member of the executive body of the company:
– may not, without the consent of the general meeting of participants or the supervisory board (if established), carry on business as a private financial institution in the sphere of activity of the company
There are three points to note:
1) the general meeting may approve the director to carry out activities in the form of FOP in parallel with the management of the legal entity;
2) the activity of the director as an FOP requires the approval of the general meeting when the entrepreneur and the legal entity are operating in the same field.
3) the restriction is not related to the fact of the director’s registration as an FOP but to the fact of the activity of that FOP in the field in which the company operates.
In case of violations, the LLC and VAT Act establishes only one consequence: such a violation may be grounds for termination by the company of a contract (contract) with the offender without payment of compensation (Part 6 of Article 40 of the LLC and VAT Act).
Based on the provisions of Art. 40 of the Law on LLC and VAT we can conclude that violation of such rules is an internal problem of the company. After all, no controlling body can force to dismiss a director.
What should a director do with his FOP, which was registered before the LLC and VAT Act came into force? Do they fall under the restrictions and consequences of Part 6 of Art. 40 of the LLC Law? The law has no retroactive effect (Part 1, Article 58 of the Constitution of Ukraine). Therefore, this cannot be an excuse for his release with the application of Part 6 of Art. 40 of the Law on LLC.
Author: Anatoliy Perepelchenko
co-authored with Sharkov Alexander