Management Board Member Agreement

The agreement is concluded between a company and a management board member and it regulates their mutual relationship, including board member’s tasks, responsibilities, remuneration, benefits, holiday etc. The agreement is not an employment contract. The Avokaado Management Board Member Agreement:

  • is suitable for most private limited companies and board members
  • regulates the relationship between the private limited company and a board member
  • gives both parties assurance concerning their agreements
 

Price with Free plan 59 € / time ~15 min
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Frequently asked questions

What kind of agreement is the Management Board Member Agreement?

In essence, the Management Board Member Agreement is a service agreement (also called authorisation agreement), regulated by the Law of Obligations Act, not the Employment Contracts Act. Thus, the provisions of the Employment Contracts Act do not apply to the Management Board Member Agreement and all the agreements between the company and the board member have to be set forth in the agreement.

Who are the parties to the Management Board Member Agreement?

The parties to the Management Board Member Agreement are: the company, represented by a person appointed by the shareholders’ meeting (or the supervisory board if the private limited company has a supervisory board) and the management board member as a natural person.

Is a management board member entitled to a holiday?

Yes, if the parties have so agreed. It is advisable to provide all the agreements concerning a holiday in the agreement, as the holiday regulation of the Employment Contracts Act does not apply. It is therefore recommended that the contract state the board member’s number of holiday days, the method of determining the time of the holiday, the payment of holiday pay, if any, the accumulation of a holiday reserve upon holidays not being used, and other possible agreements related to holidays. It can also be established in the agreement that upon the parties’ agreement the relevant provisions of the Employment Contracts Act shall be applied in the matters listed in the previous sentence.

What taxes are paid on the remuneration of a management board member?

The remuneration of a management board member is subject to all the same employment taxes as a salary, except for the unemployment insurance payment. This in turn means that upon the expiry of their management board member status, former management board members may register as unemployed, but they will not receive unemployment insurance benefit.

Does a management board member receive severance pay?

Unlike in the case of a lay-off of employees, there is no automatic mandatory compensation upon the termination of the Management Board Member Agreement for whatever reason. The payment of compensation upon the termination of the agreement and the amount of compensation must be agreed in the agreement.

Can an employment contract be concluded with a management board member?

In addition to the Management Board Member Agreement, an employment contract for working in the same company may in certain cases be concluded with a management board member, but not for fulfilling the functions of a management board member. This means that a management board member may have an employment contract in parallel to the Management Board Member Agreement, if he or she performs duties at the company which do not overlap with the activities of a management board member.

When do the powers of a management board member enter into force and expire, and what is the importance of a Commercial Register entry?

The powers of a management board member enter into force upon the adoption of a relevant decision by the shareholders.

Although the entry made in the Commercial Register about a management board member is of importance towards third persons, the legal status of a management board member is not created by a Commercial Register entry – becoming a management board member and the expiry of the term of office is purely a matter of the relationship between the company and the management board member. A Commercial Register entry about a management board member discloses the relationship for third persons, but the entry does not create or terminate the relationship.

The powers of a management board member end upon the management board resigning or being recalled or upon the end of the term if the member has been elected for a specified term. However, the expiry of the powers alone does not automatically terminate the contract concluded with a management board member. The rights and obligations arising from the contract concluded with a management board member expire in accordance with the provisions of the contract or the Law of Obligations Act if the issues related to expiry have not been regulated in the agreement. 

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