Internal Directive

An internal directive is the document by which the board of directors, based on authority in the articles of association, delegates management of the company in whole or in part to one or more members or third parties (TCC Art. 367). It sets out the company’s management organisation, duties, reporting relationships and reporting procedures.

Conditions

• The articles must authorise the board to delegate management.
• Delegation must be made through an internal directive issued by the board.
• Non-delegable duties set out in the Code cannot be delegated; these include top-level management, determining the management organisation, financial control and notifying over-indebtedness.

Content

• Which matters are delegated and to whom,
• Job descriptions and titles,
• Limits of decision and approval authority (authority matrix),
• Reporting: who reports to whom and when,
• The board’s supervision mechanisms.

Shareholders and company creditors may request written information about the internal directive.

Importance for Liability

Board members who delegate management through a proper internal directive are not liable for the delegates’ acts if they exercised reasonable care in selecting, instructing and supervising them (TCC Art. 553/2). Without proper delegation, all members face liability risk. The internal directive is therefore a key tool for limiting directors’ liability.

Delegation of representation is usually regulated together with the internal directive and registered with the trade registry; see Power of Representation.