(A resolution adopted by the general assembly absolving the board of directors of liability shall not result in the abatement of the civil liability of the members of the board for the faults committed by them in the performance of their functions. If the act causing the liability was presented to the general assembly and was ratified by it, the proceedings for liability will be time-barred on the lapse of one year from the date of assembly. However if the act attributed to the member of the board of directors constitutes a criminal offence, the proceedings for liability shall only be time-barred with the public proceedings)
This Resolution, we could say, is an important Resolution because it absolves all members of The Board of Directors of the company from all legal liabilities whatsoever. This resolution, in fact, works as a certificate of good conduct and excellent behavior issued and endorsed by all shareholders to the Board Members.
However such a resolution shall not give the Board Members full freedom and complete immunity in cases of gross negligence or criminal offences. While speaking about this important Resolution, we have to distinguish at this juncture, between the civil liability of the members of the Board of Directors and likewise their criminal responsibility.
In relation to civil liability, the Resolution absolves Members of the Board of Directors from the responsibility in relation to all acts exercised during and or while they are exercising their work, except acts of gross negligence. This means, from a legal viewpoint, the Resolution gives partial release and not full and complete release. Tort-feasors shall not rejoice and assume that they are not questionable for their tortuous wrongdoing and malpractice. I think this is very fair for both parties, the company and all Board Members.
In connection to what we are saying here regarding the responsibility of Board Members, an interesting question arises, that is to say for how long this responsibility follows and chases (the wrongdoing) Board Members?
In other words can a shareholder or a third party lodge a claim of negligence versus a Board Member or all Board Members after, say, five or six years? According to The Commercial Companies Law mentioned earlier, the civil right to sue in cases of gross negligence, is time- barred after one year from the date of the Resolution absolving members of the Board of Directors from liability.
This prevents the Board Members from being constantly under the dreadful impression that they can be sued at any time during their life endlessly. I strongly believe that, no body would like to be under such an impression, and this is why the Legislature closes the civil case or the right to sue after one year from the date of that Resolution.But, this is not the end of the matter. There are other points that should be very closely considered.
The one-year limitation principle applies only if the shareholders issue the resolution absolving members of the Board of Directors. In case the shareholders did not issue the necessary required Resolution absolving members of the Board of Directors, for any reason whatsoever, the limitation period shall be extended for a longer period of five years. As we can see, this is indeed a big difference i.e. to extend the period from one year to five years.
Now let us turn to the criminal responsibility of the members of the Board of Directors of the company. Basically the Resolution cannot and shall not be taken as absolving the members of the Board of Directors from the criminal responsibility, if any. Having stated this basic rule, now, an important question arises. Are they (the criminal responsibilities) time-barred also like the civil rights?
In brief, the answer is, No. This is because the criminal responsibility is a matter of public interest, whereas the civil right is a matter of personal interest. I have to stress here that, this is not the only reason or difference between the criminal responsibility and the civil right, however, discussing this issue in details will take me out of the concerned issue under discussion. Due to the public interest and other reasons, the concept of time – limitation is not applicable in criminal cases.
Any aggrieved person, could prosecute any member of the Board of Directors of the company at any time, for any criminal offence committed by him during his membership tenure. Offences to be committed by members of the Board of Directors are unlimited and uncountable. However, the most common offences normally committed, if any, could be summarized as criminal breach of trust, counterfeit, forgery, theft, false information, disclosure of classified information, abetment or willful
omission, etc.
According to The Commercial Companies Law , criminal offences against members of the Board of Directors are not barred unless the “ Public Proceedings “ are stopped or they became of no existence. In other words this means, as long as, the public proceedings are maintained, the criminal responsibility continues endlessly.
It would be interesting to mention, as we all know, that one of the ways and means of waving or ending the criminal responsibility could be through the process of what is called (The Nolle Prosequi Rule ) Legally speaking and according to this important rule , The Prosecutor General or The Attorney General of the country , could ask the concerned court to stop any or all criminal proceedings against any person on the basis of public interest .In such instances the concerned court is legally obliged to stop the proceedings unless the court is about to issue its final verdict regarding that particular case .
The law gives this unquestionable authority or discretion to The Prosecutor General or The Attorney General who should exercise such authority only when public interest demands. This discretion should not be used to cover-up the mistakes of certain individuals and to give them a chance to escape the law. There should be certain balance between public interests and private interests and public interests shall always prevail when applying this golden rule.
In this connection and with reference to offences committed by members of the Board of Directors of companies, generally speaking, I believe that there would be no public interest to protect the wrongdoers and therefore they should be questionable and punished for any criminal offence at any time. This attitude, of course, will help in protecting all companies from dishonest or criminal people, and will serve the public interest at the same time.
Dr AbdelGadir Warsama Ghalib
The author is a Legal Consultant on Banking, Investment & Stock Markets Laws.
Email: awghalib@hotmail.com.
