Directorship agreement

What it means

A directorship agreement governs the relationship between the company and a director: scope of authority, remuneration, termination, confidentiality and non-competition.

It is not an employment contract. Holding office is not governed by the Labour Code, so in that role a director has no leave, no severance and no protection against dismissal.

The agreement is not what creates the office: a person becomes director on appointment, not on signing. Without an agreement, the relationship follows the rules of the mandate contract by analogy, and a claim to remuneration is hard to prove without a written arrangement. The agreement therefore does not create the office; it sets the terms on which it is held.

How it works in practice

The general meeting approves it. Without one, a director’s remuneration is hard to defend as deductible and is first in line at an audit, especially in a single-member company.

The remuneration attracts contributions and tax depending on how it is paid. The arrangement is therefore designed with a tax adviser: the options differ by tens of percent in total cost.

Where the sole member is also the director, we draft the agreement so that it clearly states the remuneration, when it is due and whether it is paid monthly or as a lump sum. The remuneration then runs through payroll and the payroll record, and the company withholds tax advances from it just as from a salary.

What to watch out for

A director may also hold an employment contract, but for work other than holding office. An employment contract "as director" is void, and an audit will revisit the payroll costs too.

An agreement signed once and never updated turns against the company when circumstances change. If the director receives more than the agreement and the general meeting resolution allow, the excess has no basis, and an audit may treat it as a non-deductible expense. Every pay rise therefore needs a new resolution and an amendment.