Liability of the CEO of a company in Armenia

1) Can a CEO of a private company be personally liable for the acts/omission and / or obligations of the company?

Under Armenian law, the CEO (general director) of a private company may bear personal liability, despite the principle of limited liability of the company. This occurs when the director violates the principles of good faith or reasonableness, acts against the interests of the company, commits a criminal offense, or causes the company to become insolvent (bankrupt) through his or her culpable inaction or abuse of authority, which may lead to subsidiary liability. Main cases of personal liability: criminal, administrative, civil (property) liability, liability in case of bankruptcy. 

2) In which cases may a CEO incur civil liability in connection with performance or a failure to perform his duties?

In Armenia, a CEO may incur liability for damage caused to the company - and exceptionally to third parties - due to improper performance of duties. Liability is fault-based (intent or gross negligence) under the Civil Code of the Republic of Armenia. It may arise in cases of breach of fiduciary duties, harmful transactions, illegal acts, or exceeding authority. In exceptional cases (abuse of control), personal liability may extend to company debts. The claimant must prove fault, damage, and causation. Liability generally covers actual damage and sometimes lost profits. 

3) What violations may trigger administrative liability of a CEO as a company official?

In Armenia, a CEO as the head of the executive body is recognized as an official and may be held personally liable under the Code of Administrative Offences of the Republic of Armenia for violations resulting from improper performance or non-performance of official duties. Administrative liability may arise in cases of tax and accounting breaches (such as inaccurate reporting, non-payment of taxes, or failure to submit financial statements), labor law violations (including employee misclassification, non-compliance with employment regulations, or safety breaches), corporate governance violations (breach of the company charter or failure to disclose beneficial ownership), and other regulatory or operational infringements (such as non-compliance with state inspections, environmental or data protection rules, or unlawful import/export activities).

4) Under what circumstances may a CEO face criminal liability?

In Armenia, a CEO may incur criminal liability under the Criminal Code of the Republic of Armenia if they intentionally or with gross negligence commit crimes through the company. This includes tax evasion, fraud, money laundering, deliberate bankruptcy, abuse of power, bribery, document forgery, safety or environmental crimes. From 2023, both the CEO and the company may be criminally liable. In cases of abuse of control (“piercing the corporate veil”), the CEO may be held personally responsible. In some economic crimes, exemption is possible if damages are fully compensated.

5) Can a CEO be held liable for the actions of subordinates, in particular, if he delegates a part of his authorities?

Yes. In Armenia, a CEO may remain liable for the actions of subordinates even after delegating authority. Delegation does not automatically remove responsibility under the Labour Code of the Republic of Armenia, Code of Administrative Offences of the Republic of Armenia, and Criminal Code of the Republic of Armenia. A CEO may be liable if delegation was improper (poor selection, lack of instructions, or lack of supervision). Liability may be administrative, criminal, or civil (damages). 

6) Does the business judgment rule apply to a CEO?

In Armenia, the business judgment principle applies to CEOs: they are protected from liability for losses if decisions are made in good faith, reasonably, on an informed basis, and without conflicts of interest. Liability arises only for gross negligence, intent, bad faith, self-dealing, or breach of fiduciary duties. Courts may assume a violation if the CEO cannot prove their actions were in the company’s best interest.

7) Can a CEO be held liable for his actions or omission after termination of their office?

In Armenia, a CEO remains personally liable for actions or omissions during their term even after leaving office. Civil liability covers damages caused by intent or gross negligence, and criminal liability applies for offenses like fraud, tax evasion, or bribery. In cases of misuse of the company, courts may pierce the corporate veil to reach personal assets. Liability relates to acts during tenure, regardless of when harm is discovered.

8) Can a CEO’s liability be limited by an employment contract, articles of association or internal corporate documents?

Yes, but only to a limited extent under Armenian law. A CEO’s liability cannot be fully excluded or waived, especially for bad-faith or grossly negligent conduct. Under Armenian corporate legislation (including the Law of the Republic of Armenia “On Limited Liability Companies” and “On Joint-Stock Companies”), the CEO (executive body) must:

• act in good faith;
• act reasonably and in the best interests of the company;
• exercise due care and diligence.

These duties are statutory. Therefore: Any clause in an employment contract, charter (articles of association), or internal policy that fully excludes liability for breach of these duties would likely be considered invalid.

9) Is a CEO liable for failure to comply with the tax, accounting and other reporting requirements?

Yes, a CEO (or head of an executive body) in Armenia is legally responsible and liable for failure to comply with tax, accounting, and other reporting requirements. Armenian legislation, including the Law on Accounting and the Tax Code, mandates that the executive head must organize, maintain, and present accurate accounting and tax reports. Key liability details for CEOs in Armenia include: administrative and financial liability (direct responsibility, fines for non-compliance, three-tiered fines, specific violations), tax liability (personal liability for acts/omissions, signed document liability), criminal and other liability. 

10) What practical steps can a CEO take to mitigate the risks of his criminal, administrative and civil liability?

Here are practical, legal steps to mitigate these risks based on Armenian legislation and corporate practices:

• Establish a formal compliance program: implement internal policies, establish internal controls and audits, appoint a compliance officer;
• Ensure strict tax and financial compliance: monitor tax thresholds, verify beneficial ownership, ensure proper accounting;
• Maintain corporate formalities and governance: documented decision-making, use the business judgment rule, regular audits;
• Protect against civil liability: include indemnification clauses, review employment contracts;
• Mitigate criminal and administrative risks: maintain safety standards, proper data processing, proactive settlement.

 Author: Ani Hakobyan