What are the roles of shareholders and board members?

1. Shareholders

Ownership: Shareholders are the owners of the company. They hold shares that represent their ownership stake in the company.

Capital Contribution: Shareholders contribute capital to the company.

Voting Rights: Shareholders have voting rights proportional to their shareholding. They vote on important company matters, such as appointing or removing board members, approving the distribution of dividends, amending the Articles of Association, and dissolving the company.

Profit Distribution (Dividends): Shareholders are entitled to receive dividends, which are distributed from the company’s profits based on the number of shares they hold.

2. Board Members

Management: Board members are responsible for the day-to-day management of the company. They ensure that the company operates by its goals, laws, and regulations.

Representation of the Company: Board members have the right to represent the company in legal matters, sign contracts, and make binding decisions. However, the company’s Articles of Association can limit these powers.

Appointment by Shareholders: Board members are appointed (and can be removed) by the shareholders. In Estonia, it is common for shareholders to also serve as board members, especially in small companies or start-ups. However, they are not required to hold both roles. A person can be a shareholder without being a board member, and vice versa.

Liability: Board members have legal and fiduciary duties to act in the best interest of the company. They can be held personally liable for any harm caused to the company due to negligence or violations of their duties.

No Ownership Rights: Being a board member does not automatically make someone a shareholder. They may be employed by or work for the company without having any ownership stake.