The supervisory board in an s.r.o. and a joint-stock company: when to set one up and what it can do

Companies usually start talking about a supervisory board when an investor comes in, when the owners step back from day-to-day management, or when a family business is preparing to hand over to the next generation. The owners want an overview of what management is doing without having to approve every purchase order. A supervisory board is designed for exactly that, provided it has a clear task, access to information and the right people serving on it.

When a supervisory board is mandatory

In a Slovak limited liability company a supervisory board is optional:

A supervisory board shall be established where the memorandum of association so provides.

— Section 137 of Act No. 513/1991 Coll. (unofficial English translation)

Where the memorandum of association establishes one, it must have at least three members, its members are elected by the general meeting, and a managing director may not serve on it at the same time (Section 139). The supervisory board and its members are entered in the Commercial Register Section 11(l) of Act No. 29/2026 Coll.

In a joint-stock company the law treats the supervisory board as a standing body: the articles of association must specify the number of its members [Section 173(1)(f)] and the law assigns tasks to it directly (Sections 197 to 201). The supervisory board of a joint-stock company has at least three members elected for no more than five years. Where the company has more than 50 employees in full-time employment at the time of the election, one third of the members is elected by the employees (Section 200(1) of the Commercial Code).

The Czech rules are similar but differ in several respects. A Czech s.r.o. establishes a supervisory board where the memorandum of association or another legal regulation so provides (Section 201(1) of Act No. 90/2012 Coll.). A joint-stock company chooses its internal structure: the dualistic system with a board of directors and a supervisory board, or the monistic system with an administrative board (Section 396). In a Czech joint-stock company the employees elect one third of the supervisory board members only where the company has more than 500 employees, and the term of office is three years unless the articles of association or the service agreement provide otherwise (Section 448(2) and (3)).

What a supervisory board may do

The powers of the supervisory board in a Slovak s.r.o. are listed in Section 138: it oversees the activities of the managing directors, inspects the commercial and accounting books, reviews the financial statements and the proposed distribution of profit, and reports to the general meeting. Its members may require information and explanations from the managing directors on all matters concerning the company (Section 138(2) of the Commercial Code).

In a joint-stock company the supervisory board’s role is broader. The board of directors must submit to it in writing, at least once a year, the fundamental plans for the management of the business, and must inform it without delay of facts capable of materially affecting the company’s business and assets (Section 193(1)). The supervisory board convenes the general meeting where the interests of the company require it, and designates the member who represents the company in proceedings against a member of the board of directors (Section 199). Without its prior consent the company may not grant a member of the board of directors, a holder of procuration, persons close to them or the further persons listed in the Act any credit or loan, transfer assets to them or give them assets for use, or secure their obligations; and even with consent, only on terms usual in ordinary commercial dealings (Section 196a(1)). The articles of association may also provide that members of the board of directors are elected and removed by the supervisory board (Section 194(1)).

In Czechia, besides supervision and inspection of records, the supervisory board of an s.r.o. also brings an action under Section 159 (Section 201(2)). A shareholder wishing to assert a claim against a managing director on the company’s behalf must first inform the supervisory board in writing; where the supervisory board does not assert the claim in court without undue delay, the shareholder may assert it (Sections 158 and 159 of the Czech Business Corporations Act).

The supervisory board’s consent does not cover management

A common expectation is that approval by the supervisory board shifts liability from the managing directors to the board. Slovak law rules this out expressly:

Where the company has established a supervisory board, the managing directors are not released from liability where their conduct was approved by the supervisory board.

— Section 135a(3) of Act No. 513/1991 Coll. (unofficial English translation)

The same rule applies to the board of directors of a joint-stock company (Section 194(7)). A resolution of the general meeting has different effects, which we cover in the article on supporting documents and minutes as protection for directors. Members of the supervisory board also bear their own liability: in an s.r.o. the rules on professional care and on managing directors’ liability for damage apply to them mutatis mutandis, and they are subject to the non-competition rules (Section 139(4)); in a joint-stock company the position is analogous (Section 200(3)). Members of the supervisory board of a joint-stock company who are outvoted may require their position to be recorded in the minutes of the meeting (Section 201(3)).

Where the memorandum of association makes certain acts of the managing directors subject to the supervisory board’s consent, this is a restriction of their authority to act which is ineffective against third parties (Section 133(3)). A contract concluded without consent will generally bind the company, as we explain in the question on whether a contract above an internal limit binds the company. The same applies to restrictions on the board of directors imposed by the articles of association or by a decision of the supervisory board (Section 191(2)).

How to set a supervisory board up

A supervisory board is worthwhile where it is clear what it supervises. In the memorandum or articles of association it pays to specify which decisions the managing directors submit to it for an opinion or consent, the deadlines within which it receives information, and how often it meets. When an investor comes in, it must be decided who nominates the members. In a Slovak s.r.o. they are elected by the general meeting (Section 139(1)), so an investor’s seat on the supervisory board is generally secured through a voting undertaking in a shareholders’ agreement (Section 66c). A resolution of the general meeting conflicting with such an agreement is not, however, invalid on that ground (Section 66c(2)). In Czechia, the right to appoint a member of the supervisory board may be attached to an ownership interest (Section 448b in conjunction with Section 201(5)). In a company with one or two shareholders who run it themselves, it is usually simpler to specify clear matters reserved to the general meeting; a comparison is offered by the question on what to do when two managing directors disagree.

We design the supervisory board model as part of setting up company bodies and reflect the changes in the memorandum or articles of association. Where an s.r.o. is to have a supervisory board from the outset, we include it in the memorandum of association when incorporating an s.r.o. in Slovakia.