During its business operations, a company may find itself in a situation where it is left without a director. The reasons for this can vary (resignation, dismissal, death and similar). Besides the company itself, whose business operations become difficult or impossible, third parties, primarily creditors, also suffer consequences. To overcome such situations, the law establishes the institute of a temporary representative of the company.
In this article, we examine the issue of appointing a temporary representative to a limited liability company, as the most common legal form of business entities.
1. Conditions for Appointing a Temporary Representative
For a temporary representative to be appointed to a company, two basic conditions must be met:
1) the company must be left without a director,
2) a new director must not be registered in the register of business entities within the next 30 days.
2. Submission of a Proposal
The appointment of a temporary representative can be requested by a member of the company or another interested party, by submitting a proposal to the competent court.
The simplest case in practice is when the appointment of a temporary representative is requested by a member of the company. Simply by being a member, they prove they are authorized to submit this proposal.
When the appointment of a temporary representative is requested by another interested party, they must prove their interest. The most common interested parties are the company’s creditors, who prove their interest with relevant documents confirming their status as creditors.
However, interested parties are not only creditors. It is common in practice that the director is simultaneously the sole member of the company. After the death of that person, the company is unable to appoint a new director because there is no member who could make such a decision (except in cases where a temporary estate guardian has been appointed, which will be discussed further below). Interested parties in this situation are potential heirs of the deceased director, who do not have to wait for the completion of the inheritance procedure but only need to prove that they will be called to inherit.
3. Issuing a Decision
The temporary representative is appointed by the competent court in a non-litigious procedure. This procedure is urgent, and the court is obliged to issue a decision within eight days from the date of receipt of the proposal.
The individual to serve as the temporary representative is determined by the court, which may either independently choose or appoint the person indicated by the proposer in the proposal.
Meanwhile, until the temporary representative is appointed, declarations of will addressed to any member of the supervisory board, if one exists, or any member of the company, if there is no supervisory board, bind the company.
4. Difference Compared to the Temporary Estate Guardian
It is necessary to distinguish the temporary representative of the company from the temporary estate guardian, who is appointed by the court competent for conducting the inheritance procedure of the deceased company member, at the request of the company or one of the heirs of the deceased member. The temporary estate guardian, on behalf of and for the account of the heirs of the deceased member, exercises the member’s rights in the company, while the temporary representative has powers corresponding to those of the company director.
5. Possibility of Compulsory Liquidation
If the company does not register a new director or temporary representative within three months from the date of their deletion from the register of business entities, compulsory liquidation proceedings are initiated. This further highlights the need for timely appointment of a temporary representative to avoid serious consequences for the company and creditors.
Conclusion
The appointment of a temporary representative is an important legal mechanism that enables the uninterrupted business operations of the company in situations where it is left without a director. By timely submitting a proposal and issuing a court decision in an urgent procedure, the interests of the company, creditors, and other interested parties are protected. This institute significantly contributes to legal certainty in business operations, and knowing the possibilities and conditions for appointing a temporary representative is crucial for timely response and prevention of undesirable consequences.
Author:
Milena Đukić, Associate
Email: milena.djukic@prlegal.rs; legal@prlegal.rs;