Playing on Someone Else’s Pitch: How Not to Become a Hostage to Your Own Director

15.10.2025

In the business world, there is nothing worse than waking up one morning to realise that your company has a life of its own and the hired director is making decisions without your knowledge. Unfortunately, many business owners face precisely this situation: formally remaining the owners of the business while, in fact, losing control over it.

The Articles of Association: Your Constitution of Power

The first thing every owner must understand is that the company’s articles of association are not a mere piece of paper for registration, but a real governance tool. It is in the articles that there must be a clearly defined list of transactions for which the director is obliged to obtain your consent.

Imagine the situation: your director decides to take out a loan to develop the business in an amount equal to 19% of the company’s assets. By law, a major transaction is one starting from 20% of the value of assets, meaning, formally, participants’ consent is not required. But in practice such a loan may seriously undermine the company’s financial position.

Savvy owners do not rely on statutory thresholds; they determine in the articles which transactions are to be treated as major (and therefore require approval by the general meeting of participants or the supervisory board). The law expressly allows you to set your own criteria—for example, any transaction exceeding 10% or 15% of assets requires your consent. In addition, the rules on approval of major transactions may be extended to transactions falling under other criteria.

For example, to transactions exceeding fixed amounts (e.g., any transactions from 500,000 Belarusian roubles) or transactions involving specific assets (e.g., the sale of immovable property or a specified list of production equipment).

The Auditor: Independent Oversight

Another important protection mechanism is the auditor (or an audit commission in the case of larger companies). Many owners of Belarusian businesses overlook such a legal mechanism as an auditor, which is a mistake. By default, an auditor is entitled, at the request of participants in an LLC/ODO/ZAO/OAO or on their own initiative, to audit the company’s financial and business activities, including requiring the director to provide financial documents for analysis.

Unlike an accountant, an auditor is not an employee of the company (they are more akin to an independent representative of the owners), and therefore the director has no power to dismiss them. This creates continuous oversight and prevents the director from feeling like an all-powerful master. Accordingly, an experienced auditor can identify potential abuses of power by the director in a timely manner.

The key is to set out clearly in the articles the powers of the auditor (audit commission) and the procedure for carrying out audits, and to appoint them at the start of the next financial year (by law, an auditor is elected for one year), so as always to have a person in the company independent of the director under control.

Who Are Your Friends? The Register of Affiliated Persons

The question of whether your director holds interests in other companies may seem excessively suspicious. Practice shows the opposite. History knows many cases where managers created parallel structures and redirected profitable contracts to them.

A classic example: the company’s director registers a firm in the name of a relative to provide certain services and concludes a contract with it. As a result, funds gradually begin to leak from the company. Very often such transfers are relatively small against the background of the business’s revenue, but over a prolonged period they may amount to a significant sum. Formally, everything is lawful, but de facto this leads to revenue leaking from the company.

Maintaining an up-to-date list of the director’s and their relatives’ affiliated persons is not paranoia; it is basic business hygiene. Knowing where your manager has interests means controlling potential conflicts. Moreover, under the legislation the director has a direct duty to disclose to the company’s owners information about their own shareholdings and those of their relatives in other organisations, as well as the fact that they hold director positions in such organisations. If they do not do so, you should consider whether they are deliberately concealing such information.

Holding Multiple Posts or Betrayal?

Whether to allow a director to serve on the governing bodies of other companies is a philosophical question. On the one hand, it may bring additional connections and experience. On the other hand, it creates fertile ground for conflicts of interest.

By default, Belarusian law does not permit one person to combine the position of director simultaneously in several companies. To allow such combination, the possibility must be provided for in the articles or separately agreed with the business owners. Therefore, we recommend adhering to the golden rule: combination is permissible only with your consent and under your control. Let the director justify in each case why their involvement in another company will benefit your business.

It is important to understand, however, that the prohibition applies specifically to combining positions in the governing bodies of other companies (for example, director). It does not extend to holding a position as a deputy or other employee, or to being a founder in other businesses.

Non-Compete as Insurance Against Departure

If your company is a resident of the High-Tech Park, you have a powerful protection tool—a non-compete agreement. Decree No. 8 allows you to conclude an agreement with the director prohibiting them, for a specified period (no more than one year after dismissal), from working for competitors, creating a competing business or participating in the management of competitor companies.

For each month of compliance with such obligations you must pay the former director at least one third of their average monthly earnings. Does that sound expensive? It is much cheaper than losing key clients or trade secrets that the director may pass to competitors.

Trade Secrets: Your Shield Against Leaks

No less important a protection mechanism is the proper establishment of a trade secret regime. An employee (including the director) has no right to use confidential information for non-work purposes, and after dismissal—even more so—to transfer it to third parties.

At the same time, protection of trade secrets should not be treated as a mere formality. Simply concluding non-disclosure agreements on confidential information with the director is insufficient (although it must also be done). It is important that the company organises a comprehensive set of measures to protect trade secrets, including having a clear list of information protected as a trade secret, adopting technical measures (for example, creating an IT infrastructure to protect against data leaks and theft) and organisational measures (for example, restricting access to company premises where paper archives are stored), and that all necessary procedures are properly documented.

As a result, the director’s use of such information for any purposes other than employment-related ones may be recognised as a breach of the trade secret regime, after which the company may recover the losses incurred from them.

Dismissal Without Tears: How to Part Amicably

The moment of truth comes when trust in the director is irretrievably lost. Many owners then face a fork between two unappealing options:

• Meticulous formalisation of the director’s employment duties and dismissal for cause, which may take weeks or months during which the director continues to perform their functions; or
• Simply declaring that the director is dismissed and barring them from the workplace, which subsequently leads to litigation in which the dismissal is found unlawful and results in compensation of up to ten times the average monthly earnings.

To avoid these problems, you must protect yourself in advance. There are three mandatory conditions to be met at the hiring stage and during subsequent employment:

• the director must be engaged under a fixed-term employment contract (and not an open-ended employment agreement), which upon expiry must be re-concluded for a new term (so as not to transform into an open-ended employment agreement);
• the director’s contract must include a reference to Article 259 of the Labour Code, under which the general meeting of participants has the right to dismiss the director in the absence of culpable actions on their part (in other words, there is no need to prove anything);
• the amount of compensation for early dismissal must be clearly specified, for example, in the amount of one month’s salary or as a fixed sum (say, 3,000 roubles).

If these conditions are met, the correct algorithm is simple: convene the general meeting of participants, adopt a decision on dismissal, pay the compensation under the employment contract—and that is all. No emotions, only a clear procedure. Remember: a director in whom you have lost trust can cause the company more harm in one day than benefit in a month. Delay here is tantamount to disaster.

Details Decide Everything

In the end everything comes down to a simple principle: either you control your director through clearly defined rules of the game, or they control your business through your indulgence. There is no third option.

Do not rely on “statutory norms” and generic phrases in the articles. Set out powers and restrictions in detail, create a control system, and be prepared to take swift decisions.

Your business is your assets, and your task is to protect them. Creating a legally impeccable control system is a complex process requiring deep knowledge of corporate and employment law. To ensure maximum protection, it is better to entrust this work to professionals.

Authors: Nikita Tolkanitsa, Matsvei Shastsiarniou.