CONTRACT ON PERFORMANCE OF DIRECTORSHIP AND CONCURRENCE OF OFFICES AFTER CIVIL CODE RECAST
19. 02. 2014
The Act on Commercial Companies and Cooperatives, also known as the Act on Corporations (AoC), imposes an obligation to align the existing contracts on performance of directorship in an authorized representative body of a corporation with the new legislation within 6 months after its effect.
Such contracts must be executed in writing and approved by the highest governing body of the corporation. The new legislation stipulates that unless the remuneration (and its individual components) are agreed upon in the contract in accordance with the Act (Sections 59 and 60 AoC), the office is performed without consideration. Only in some cases, a member of an authorized representative body will be entitled to remuneration considered usual.
It follows from the above that it is in the interest of the members of authorized representative bodies of corporations as well as in the interest of these corporations themselves to review the contracts on the performance of an office in an authorized representative body as soon as possible.
In that context it is worth noting that the new legislation has reopened the question of concurrence of offices.
Since the early nineteen-ninetieth, the relevant case-law of higher courts and later of the Supreme Court has evolved to endorse the opinion that concurrence of offices is not permissible. In their findings, the courts relied on the principle (inter alia in the context of the notion of dependent work) that activities which fall under the scope of work of authorized representative bodies cannot be carried out by the same person who is simultaneously employed by the same corporation (usually on the basis of an employment contract).
However, between 2012 and 2013, a certain form of concurrence of offices became permissible by way of a Commercial Code amendment of Section 66d (delegation of business management) which was adopted in response to the rulings of the Supreme Administrative Court in the context of social security issues. On the basis of the said provision and subject to particular rules, it became possible to serve in, in concurrence with the office of the member of the authorized representative body (the authorized representative body controls the entire business management of the corporation and the office is/was performed within a commercial relation), a management position (e.g. that of a sales director or CFO) within an employment relationship (typically under an employment contract). The scope of powers of this management position could have included general business management except for the overall direction (of the business management) of the company and several other competencies. This artificial and self-serving, atypical and incorrect construction is not explicitly included in the new private law (both NCC and AoC).
The current prevailing interpretation by legal experts is that the state preceding the above mentioned amendment has been re-established and the original case-law of the Supreme Court applies which does not permit concurrence of offices (including by way of delegation of business management pursuant to Section 66d of the Commercial Code).
In order to be sufficiently prudent, we may conclude that as of January 1, 2014 a corporation cannot sign a valid employment contract for a management position with a member of an authorized representative body should the scope of work overlap (albeit partially) with the scope of powers (tasks) of the authorized representative body of the corporation.
Finally, there have been some pronounced interpretations, which we do not share in the light of applicable legislation, that employment contracts in keeping with Section 66d of the Commercial Code have extinguished as of 1. 1. 2014 and no remuneration may be paid under such contracts.
- Legalink News: Covid-19 Pandemic in Czech Republic (01. 04. 2020)
- Current information Covid-19 / Employee Confirmation (16. 03. 2020)
- COVID-19 IMPLICATIONS FOR LABOUR RELATIONS (11. 03. 2020)
- THE REAL ESTATE BROKERAGE ACT (11. 02. 2020)
- AMENDMENT OF THE ACT ON THE RESIDENCE OF FOREIGN NATIONALS IN THE CZECH REPUBLIC AND CHANGES TO THE EMPLOYMENT REPORTING OBLIGATIONS (10. 10. 2019)
- Not registered in the Register of Beneficial Owners yet? What else you can manage to do by the end of the year? (26. 09. 2019)
- On the Draft Legislation on the Protection of Whistleblowers (19. 09. 2019)
- Legal governance of professional athletics in the Czech Republic (22. 08. 2019)
- Item of News - Personal Data Processing Act (31. 05. 2019)
- Personal Data Processing Act Adopted, Including New Rules on the Handling of Personal Identification Numbers (29. 03. 2019)
- Grace Period for Work Incapacity Abolished as of July 2019 (01. 03. 2019)
- Amended Trademark Law takes effect as of January 2019 (13. 02. 2019)
- Recording of beneficiary owners (26. 10. 2018)
- Laws and regulations in the pipeline businesses should watch out for towards the end of the year (13. 09. 2018)
- Amendment to the Public Procurement Act (30. 01. 2018)
- Vehicle transfer - registration (29. 01. 2018)
- Amendment to the act on special health-care services (31. 12. 2017)
- Labor code amendment (18. 12. 2017)
- Amendment of the employment act (14. 12. 2017)
- Amendment of the Labor Inspection Act (08. 12. 2017)
- The New Responsibility of Legal Persons to Disclose their Beneficiary Owner (21. 09. 2017)
- Amendment to the Building Act and Societies for the Protection of Nature and the Landscape (25. 08. 2017)
- Timely Preparation for the New Version of Personal Data Protection Regulation (30. 06. 2017)
- Prior Medical Instructions in Medical Law (13. 06. 2017)
- Copyright Act Amended (13. 04. 2017)
- The Insolvency Act Extensively Amended (07. 04. 2017)
- The Act on the Origin of Assets (30. 03. 2017)
- A New Legal Framework for the Protection of Personal Data (14. 11. 2016)
- The 2017 Minimum Wage (10. 11. 2016)
- CORPORATE CRIMINAL LIABILITY ACT AMENDED (14. 10. 2016)
- „RECAST“ OF THE LABOR CODE (05. 09. 2016)
- THE CZECH BAR ASSOCIATION CHARGED WITH ALTERNATIVE DISPUTE RESOLUTION (ADR) (05. 02. 2016)
- Consumer Protection Act Amended (25. 01. 2016)
- Travel Claims (01. 12. 2015)
- Entries to public registries recordable directly by notaries (03. 09. 2015)
- Code of Civil Procedure and Enforcement Rules Amended: more protection of the unencumbered spouse (02. 08. 2015)
- Notification of tax-exempt income - a new duty when filing individual income tax return (01. 06. 2015)
- Amendment to the Public Procurement Act (15. 05. 2015)
- HEALTH SERVICES AND HEALTHCARE IN THE LIGHT OF THE PRIVATE LAW RECAST – TWO-TRACK LEGISLATION (11. 03. 2015)
- Contract of Inheritance among Novelties in the Law of Succession (21. 01. 2015)
- Mandatory Electronic Communication with the Tax Administrator (19. 01. 2015)
- Topical Issue: Energy Performance of Buildings Certificate (03. 12. 2014)
- POSSIBILITY TO REGISTER MACHINES IN THE LAND REGISTRY, SO-CALLED RESERVATION FOR MACHINES (30. 05. 2014)
- NEW DUTY TO PUBLISH DATA ON THE INTERNET (28. 04. 2014)
- Beware of pre-contractual liability (31. 03. 2014)
- ARTICLES OF ASSOCIATION OF COMPANIES UNDER THE ACT ON CORPORATIONS (20. 02. 2014)
- Private Law Recast and the Labor Code (11. 02. 2014)
- Compensation of Wage or Salary during Sick Leave as of January 1, 2014 (28. 11. 2013)
- Legislation Accompanying the New Civil Code (29. 10. 2013)
- New Civil Code (02. 09. 2013)