Board members show considerable dedication and hard work to efficiently manage the organization. They perform a number of duties every day and it is natural that they should receive appropriate remuneration for this. Everyone will agree, however, that this is not a typical job. Should the company conclude an employment contract with a member of the management board?
Such a situation is not prohibited by law. In many Polish companies, this is how it works – the company concludes an employment contract with a member of the management board. Such an agreement often provides for additional provisions in relation to the typical model employment contract concluded with other employees (e.g. non-competition provisions during and after termination of employment, an obligation to keep confidential information obtained in the course of performing the function, etc.). However, this is not the only acceptable option.
In practice, it is common for members of the management board to perform their function and receive remuneration for this only on the basis of a resolution on appointment to the management board. In such a case, it is the resolution of the relevant body that will determine the amount of remuneration due. This is permissible under Article 2031 of the Commercial Companies Code (CCC) (in the case of a limited liability company, in the case of a simple joint-stock company, this issue is regulated by Article 30067 § 2 of the CCC, and in the case of a joint-stock company – Article 378 § 2 of the CCC).
It should also be remembered that in such a case, the member of the management board is not subject to social security in the Social Insurance Institution, but is only subject to health insurance. This means that the remuneration of a member of the management board will be reduced by the health contribution (9%) and income tax in the appropriate amount.
If you decide to conclude an employment contract with a member of the management board in your company, remember that in capital companies (limited liability company, simple joint-stock company and joint-stock company), a member of the management board – who is a person authorized to represent the company in relation to third parties – cannot sign an employment contract with himself. Nor can another member of the management board.
The provisions of the Commercial Companies Code provide for a special solution for this. With regard to a limited liability company, pursuant to Article 210 § 1 of the CCC, “in the agreement between the company and a member of the management board and in a dispute with him, the company is represented by the supervisory board or a proxy appointed by a resolution of the shareholders’ meeting” (in a simple joint-stock company and a joint-stock company, this is the case in the same way – this issue is regulated by Articles 30067 and 379 of the CCC, respectively).
The above regulation should be taken into account, because failure to comply with the above requirements entails the invalidity of the concluded contract. This means that the contract in question will not have any legal effects.
If you have any doubts as to what a resolution on appointing a given person to the company’s management board and awarding him or her an appropriate remuneration should look like, or a resolution appointing the company’s proxy to conclude an agreement with a member of the management board, please contact us. We will be happy to support you in these matters. Thanks to this, you will remain calm as to whether the resolution or agreement concluded with a member of the management board is valid, and the members of the management board will be able to focus on effective management of the organization.