Restriction on Competing Activity

Being a board member does not in itself prevent a member from running another business, being a shareholder in another company or belonging to the board of directors of another company. It is, however, somewhat unclear whether a member of the board of directors is allowed to practice activity competing with that of the company personally, as a shareholder in a competing company or as a board member in a competing company. There is no express legal provision on the prohibition of competition. It is, nonetheless, possible to conclude from the fiduciary relationship between the company and the board members that a member of the board may not participate in activity competing with that of the company. Whether it is a question of competing activity or not, is to be established separately in each case.

In a case where the prohibition of competition follows from the interests of the company and is based on the fiduciary relationship between the company and a board member, the company may grant permission for a board member to practice competing activity. In such a case the company, however, runs a risk and thus only the general meeting of shareholders has the right to grant such an exception.

After termination of the board membership a former board member may, as a main rule, freely practice competing activity. This right may be restricted only with a separate agreement.