What is a Management Company

Business management can be carried out by a hired director and a management company that performs the role of a trustee. Like the director, the management company acts in the interests of the business owners. Management companies do not require special licenses or permits, but unitary enterprises cannot act as management companies. A management company is a structure consisting of a team of specialists, where management competencies are distributed among team members, unlike a hired director who makes decisions on operational management alone. Let’s look at the specifics of the management company’s work, functions, and capabilities.

Difference Between Managing a Company by a Director and a Management Company

The management of a business by a hired director and a management company differs somewhat. Here are some of the main differences:

1. Management Structure:

• Hired Director: One person makes all key decisions and is fully responsible for operational management.
• Management Company: A group of specialists distributes responsibilities and powers, allowing various competencies to be used.

2. Management Approach:

• Hired director: Management is often centralized; the director forms a strategy and manages its implementation.
• Management Company: Access to more experts; each specialist can focus on their field.

3. Responsibility:

• Hired Director: Full responsibility for business results lies with one person.
• Management Company: Responsibility is shared among team members, which can reduce risks.

4. Flexibility and Adaptability:

• Hired Director: May be less flexible in decision-making due to a one-person approach.
• Management Company: Can be more adaptive due to collective efforts and diverse opinions.

5. Legal Registration of the Relationship:

• Hired Director: A contract is signed with him within the framework of labour legislation. Specific experience and education may be required, depending on the type of business. The director receives salaries and other payments established by the contract.
• Management Company: A civil agreement is concluded with the company. The parties themselves determine the terms of such an agreement. The management company decides what competencies its employees need to fulfil the agreement. The management company performs the duties listed in this agreement for remuneration by its employees.

In general, the choice between a hired director and a management company depends on the organization’s specific business goals, needs, and structure.

Business Management Features of a Management Company

Features of business management by a management company:

1. A collective Approach:
The management company consists of a team of specialists, which allows you to solve tasks more effectively thanks to various expertise.

2. Delegation of Responsibility:
Different business lines can be managed by individual specialists, which reduces personal risks and distributes responsibility for results.

3. Flexibility in Strategy:
The ability to quickly adapt strategy and operational plans in response to market or internal factors changes through the exchange of opinions among experts.

4. Consistency and Standardization:
The management company may have established standard procedures and regulations that facilitate more effective management and control of processes.

5. Focus on Profiling Areas:
Management companies can specialize in specific industries or areas, providing more in-depth knowledge and skills.

6. Resource Optimization:
The organizational structure allows for a more rational use of resources, which can lead to lower costs.

7. The Possibility of Attracting External Experts:
Management companies can seek the help of consulting firms and experts to solve specific tasks.

8. Reporting and Control:
Stricter control and reporting systems are often formed, which allow you to track results and respond quickly to problems.

9. Project Management:
A management company can use project management methodologies to complete tasks and achieve goals effectively.

These features make business management by a management company more complex and multifaceted than a single hired director.

What Assets Can a Management Company Manage in Belarus

The management company can be trusted not only with all aspects of business management. Owners may reserve the right to make decisions on specific issues and transfer the following areas to management:

1. Management of Individual Real Estate Objects
When appropriate: This is relevant if the owners’ business is focused on renting commercial or residential real estate or if they are considering opening a new real estate-related business.

2. Securities Management
When appropriate: The transfer of securities management to a management company makes sense when the company does not have the proper securities market participant license for securities transactions or wishes to become a securities market participant. It may also be relevant in cases where a company sells its securities or partners offer securities transactions as mutual settlements.

3. Management of Rights that are Certified by Non-Documentary Securities
When appropriate: If a company owns undocumented securities, it may transfer the management of the rights certified by these securities to a management company. Such securities may provide the right to receive dividends and other financial assets. If the securities owner’s activities are not related to the securities market, the management of these assets can be delegated.

4. Management of Exclusive Rights
When appropriate: If a company is the rightsholder of exclusive rights to the results of intellectual activity, it may entrust the management company with the management of these rights. For example, a software copyright holder may transfer the management of this right to a management company to distribute subscriptions and advise users.

5. Management of the Pledged Property
When appropriate: The transfer of management of the mortgaged property is relevant if the company’s business processes allow it, and the analysis of financial flows with the mortgagee shows the benefits of this. It is important to notify the management company before the availability of collateral.

Which Assets Cannot be Transferred to a Management Company

The management company cannot be entrusted with the management:

1. Money as a separate object of trust management. In this article, we will not consider banks that manage corporate funds.

2. The company’s property has been transferred to it for management or management by the owner but is not its property.

How are Management Rights Transferred to a Management Company

To transfer the rights to manage the management company’s business and assets, an agreement must be concluded with it. Usually, a trust management agreement is used, and in the case of securities, management companies participating in the securities market offer their contracts.

The contract of trust management of property is drawn up in writing. When the management company takes over real estate management, this agreement must be registered with the territorial organization for state registration of real estate. Otherwise, it will be considered invalid.

The management company is obliged to:

• Open a separate bank account for transactions related to trust management.
• Keep separate records in the accounting department for the property transferred to its management.

Important Points of the Agreement with the Management Company

In the agreement with the management company, it is necessary to clearly define important points that will help the owner and the management company effectively manage property and assets:

1. Property description, assets transferred to the management company’s management, and their value.

2. Terms of use of the management company’s property and assets: what is allowed and what is forbidden.

3. The name of the trustee company that transfers the property to the management company is a mandatory clause in the agreement.

4. The amount and form of remuneration paid by the management company for managing the trustee’s property.

5. The procedure for reporting the management company to the trustee on property management issues.

6. The agreement’s term should not exceed 5 years.

The agreement can also consider additional conditions that are significant for the trustee.

How does the Management Company Interact with the Trustee on Issues Related to the Trustee’s Staff

The management company that manages the trustee’s business can work with the trustee’s staff. However, this depends on the conditions prescribed in the agreement. 

The main points of such an agreement related to personnel management:

1. Certain Rights: The agreement may provide that the management company has the right to interact with the trustee’s personnel to optimize processes.

2. Restrictions: If the agreement does not provide for such powers, the management company may not have the right to interfere in the trustee’s personnel decisions.

3. Collaboration: If permissible, the management company can carry out functions for training, management, or evaluation of staff performance.

4. Responsibility: It is important to discuss in advance and fix the issues of responsibility for actions related to personnel management in the contract.

Thus, interaction between the management company and the trustee’s staff is possible but must be regulated.