Limits on the administrator

You are a partner in a company and, together with the other partners, appointed a sole administrator. However, after some time, they want to limit his powers for operations of a certain amount.

Well, even though the board of directors of the company is the one who holds the power of representation of the company, the partners can limit their powers. However, they must do so through the general meeting, which is the one that can condition or restrict these powers.

If finally the board imposes limitations and the administrator breaches them, the consequences will be different depending on whether we are in the internal or external scope of the company:

• Internal scope. If the administrator acts without authorization or breaches the instructions of the board, he must be accountable to the company, which may demand responsibilities from him and even dismiss him from his position.
• External scope. The limitations only operate in the internal scope of the company. Therefore, contracts or operations carried out with third parties will be valid and the company will be obliged to fulfill them (provided that they have acted in good faith).

 

In conclusion, if the general meeting's intention is to exercise greater control over the administrator, it can opt for the following alternatives:

• Appoint several joint administrators, a system that requires the signature of all of them for any act of representation of the company.
• Appoint two joint administrators (both will have to sign the most important matters) and allow the partner who was the sole administrator until now to have a power of attorney for ordinary matters (up to a certain limit).
• Establish a board of directors, formed by all the partners, in which decisions will be made jointly. In that case, the one who was the sole administrator until now can be appointed as a managing director, with the possibility of limiting his powers.

 

Our professionals will help you decide which type of board of directors is most suitable for your company and will also advise you in case the company wants to limit the powers of the administrator.