Form 20-F 2005

agreement to be authorized by the Board of Directors (unless such an agreement is a customary arm’s-length transaction) and
prohibits the Director in question from voting on the issue. Any agreement entered into in violation of these requirements may be
voided by the Commercial Court at the request of the Company or of any shareholder, if such agreement has caused damage to
the Company. French law further requires such an agreement to be submitted to an ordinary general shareholders’ meeting for
approval once entered into, upon presentation of a special report from the Company’s auditors.
French law also states that such agreements entered into in the ordinary course of business and with terms and conditions that
are not out of the ordinary are not subject to the prior authorization of the Board of Directors. Nevertheless, an interested party
must disclose such agreements to the Chairman of the Board of Directors unless they are not significant in terms of purpose or
financial impact. The list and purpose of such agreements must be communicated by the Chairman to the Board of Directors and
to the statutory auditors.
In consideration for their services on the Board, Directors are entitled to receive Directors’ fees (jetons de présence).
The total annual amount of Directors’ fees is set at the shareholders’ meeting; however, the Board determines the allocation of such
fees among the Directors. In addition, compensation may be granted to Directors on a case-by-case basis for special assignments.
A Director may not vote with respect to his or her own compensation. The Board may also authorize the reimbursement of travel
and accommodation expenses as well as other expenses incurred by Directors in the corporate interest.
Under French law, Directors elected by our shareholders are potentially liable for violations of French laws and regulations applicable
to sociétés anonymes, violations of our by-laws or mismanagement. They may be held liable for such actions both individually and
jointly with the other Directors.
Chairman of the Board
Pursuant to French law, the Chairman of the Board organizes and manages the duties performed by the Board and reports to the
shareholders’ meeting. He is also responsible for the proper functioning of the corporate bodies and ensures that the Directors are
capable of fulfilling their assignments.
In the event that the Chairman is temporarily incapacitated or dies, the Board may appoint a Director as acting Chairman.
In the event of temporary incapacitation, the said appointment will be made for a limited term and will be renewable. In the event
of death, the appointment will remain in effect until the election of a new Chairman.
Our by-laws provide for the retirement age of the Chairman. The Chairman cannot be appointed if he is 70 years old, whether or
not also acting as Chief Executive Officer.
The Board sets the Chairman’s compensation.
Chief Executive Officer
The Chief Executive Officer is vested with the broadest powers to act in any circumstance in the name of our Company, within the
limits of our corporate purpose, and subject to the powers expressly conferred by law upon shareholders’ meetings and upon the
Board of Directors. The Chief Executive Officer represents us in dealings with third parties. We are bound even by acts of the Chief
Executive Officer that are not within the scope of the corporate purpose unless we prove that the third party knew that the act was
outside the corporate purpose or that under the circumstances the third party could not have been unaware of this. However, mere
publication of our by-laws is not sufficient to constitute such proof. The Board may limit the powers of the Chief Executive Officer.
However, the limitation of his powers is not binding on third parties.
The Board of Directors establishes the duration of the Chief Executive Officer’s term. The Board sets the Chief Executive Officer’s
compensation. The Board of Directors may remove the Chief Executive Officer at any time. In the event this dismissal is not justified,
the Chief Executive Officer may claim damages, except if the Chief Executive Officer is also the Chairman of the Board.
64 Form 20 - F 2005 - Rhodia