August 12, 2020 · 5 min read
The question of whether it is possible to continue or necessary to cease performing the duties of a company director while on vacation is not clearly regulated by Ukrainian legislation.
Quite often in such a situation, company managers continue to perform some of their functions – for example, signing payment orders in client-banking systems, sending reports electronically, etc.
The question arises: can transactions made by the director during their vacation period be recognized as invalid?
The director is the executive body of the enterprise, whose rights and obligations are prescribed in the Civil Code of Ukraine, which says nothing about the suspension of the director's powers during their vacation.
Perhaps this prompted the State Regulatory Service of Ukraine for Regulatory Policy and Entrepreneurship Development to state that the fact of granting leave to a manager does not terminate their powers, except in cases where a deputy has been appointed for this period (letter No. 8361 dated 17.10.2014).
If the management of the enterprise is carried out directly by the owner, then the conclusion of the letter can unequivocally be considered fair. However, if the director is an employee hired under an employment contract, then the provisions of Ukrainian labor legislation apply to them. In particular, vacation is guaranteed to all employees. It is logical that during the vacation period, an official cannot be held liable for improper performance of their duties. The provisions of Article 79 of the Labor Code of Ukraine regarding the possibility of recalling an employee from vacation also confirm that vacation itself does not imply the employee performing their labor duties.
This approach is shared by the Ministry of Social Policy (letter No. 376/06/186-16 dated 17.10.2016), emphasizing that during this period, the powers of the company director must be terminated.
If we proceed from the premise that during the vacation period, the director's official powers are temporarily suspended, then the facts of them performing transactions on behalf of the enterprise during this time can be considered as actions performed without proper authorization. Thus, there are formal grounds for controlling bodies to raise questions about the invalidation of transactions made by the director.
Furthermore, under such circumstances, the fact of the director signing official documents may formally contain signs of a crime stipulated by Article 366 of the Criminal Code of Ukraine (official forgery) as the entry by an official of knowingly false information into official documents, the forgery of documents, as well as the preparation and issuance of knowingly false documents.
We also know that in state institutions, it is common practice for managers not to sign documents dated on the day they are on vacation, on a business trip, or on sick leave.
Therefore, given that the question of whether it is possible to continue or necessary to cease performing their official duties by a director on vacation is not defined by legislative acts, there is a risk of the aforementioned negative consequences for an enterprise whose manager continues to perform their functions.
To avoid risks during the manager's vacation period, it is advisable to temporarily assign their duties to another official. If the director, according to the constituent documents, has the right to appoint such a person, they do so by their order (instruction). If the powers to appoint a deputy director fall within the competence of a higher body (owner, meeting of participants, etc.), then the decision to appoint a temporary acting manager is made by the respective higher body and formalized by a decision of the owner or a protocol of the general meeting of participants, followed by the issuance of an order for the temporary performance of the director's duties.
During such a period, the director should refrain from performing any transactions.
To avoid disruptions in the company's operations during the director's absence, we recommend considering some issues in advance, for example, regarding the signing of payment documents in internet banking; if necessary, electronic keys should be obtained for the person who will temporarily replace the director.
Tax reporting should also be signed by the person replacing the director. Tax authorities clarify that an authorized person can do this (categories 135.02, 135.03 ZIR). When submitting a report in "paper" form, documents confirming the authority of the signatory (charter, order or instruction, power of attorney, etc.) must be added to the package of documents. For electronic submission of reports, the deputy needs to obtain an EDS. This should also be considered in advance, as the State Fiscal Service (SFS) must be notified about the receipt of an EDS by the person replacing the manager. For this, the director must send a notification with information about the new certificate through the electronic service in advance.
Therefore, the most correct course of action in such a situation is to delegate the director's powers to another person in advance for the period of their vacation, formalizing it with a company order, and obtaining an EDS beforehand.
Accountant
Savosiuk Hanna
