An agreement of the member of the management board is an agreement concluded between a legal entity and a member of its management board, setting out the rights and obligations of both parties.

The agreement is suitable for use in the following cases, among others:

• The member of the management board is paid remuneration for their work as a member of the management board;
• The management board has a supervisory board;
• The member of the management board is prohibited from working for competitors in any way at the same time;
• In the event of a breach of significant obligations, a contractual penalty may be imposed on the member of the management board, the amount of which is related to the remuneration of the member of the management board.

The agreement covers the following topics:

• Rights and obligations of the member of the management board;
• Duties of the member of the management board;
• Time and place of performance of duties by the member of the management board;
• Liability of the member of the management board;
• Safekeeping of the company’s assets;
• Restraint of trade;
• Remuneration and holiday of the member of the management board;
• Confidentiality;
• Amendment of the agreement;
• Communication of notices;
• Resolution of disputes;
• Termination of the agreement.

In what form must the agreement of the member of the management board be concluded?
The law does not specify the form that the agreement of the member of the management board must be concluded in. It may be concluded either verbally or in writing. Nevertheless, we recommend a written agreement to prevent possible damage to the company since various agreements with the member of the management board were not set out in writing, for example, regarding the performance of work duties during vacation or issues related to the liability of the member of the management board. Otherwise, the existence of a verbal agreement would have to be proven, which could prove to be quite complicated.

Are the provisions of the Employment Contracts Act applicable to the agreement of the member of the management board?
No. This is essentially a contract under the law of obligations, to which neither the requirements of the Employment Contracts Act nor social guarantees apply. The company and the member of the management board may agree on certain conditions typical of an employment contract (e.g., vacation, working hours, and place of work), but such agreements are not mandatory.

What taxes must be paid on the remuneration of the member of the management board?
In accordance with the law, the company must withhold income tax and funded pension contributions from the remuneration of the member of the management board if the member has joined the funded pension pillar. The company pays social tax on the remuneration of the member of the management board in accordance with the provisions of law. Unemployment insurance contributions are not withheld from the remuneration of the member of the management board, as according to the Unemployment Insurance Act, the member of the management body of a legal person is not subject to unemployment insurance contributions.

Can a person have a valid employment contract with the company at the same time as an agreement of the member of the management board?
If the member of the management board wishes to work in another position in the company, i.e. as a regular employee, this is permitted. To do so, an employment contract must be concluded with them in addition to the agreement of the member of the management board. For instance, if the member of the management board of a taxi service company wishes to also work for the company as a taxi driver, this is possible, and in such a case an employment contract must be concluded with the member of the management board in addition to the agreement of the member of the management board, stipulating their employment as a taxi driver.

If an employee of a company becomes a member of the management board but wishes to continue working in their current position in addition to being a member of the management board, their employment contract may not be terminated after the conclusion of the agreement of the member of the management board.

What are the differences between an agreement of the member of the management board and an employment contract?
The main difference between an agreement of the member of the management board and an employment contract is that under the agreement of the member of the management board, the company is not obliged to provide the member of the management board with various social guarantees, such as remuneration at least at the level of the minimum wage, paid leave, or a fixed working schedule. Although the company and the member of the management board may agree on such conditions, unlike an employment contract, they are not mandatory in the case of the agreement of the member of the management board.

There is also a difference in the withholding of taxes: remuneration paid under the agreement of the member of the management board is not subject to unemployment insurance contributions.

Does the member of the management board have the right to paid vacation under the agreement of the member of the management board?
According to the law, the company is not obliged to guarantee paid vacation to the member of the management board, but if the company wishes, it may offer it. In such a case, the duration of the vacation is also decided by the parties themselves.

Under what conditions is it possible to terminate the agreement of the member of the management board?
The Commercial Code stipulates that the supervisory board may remove the member of the management board regardless of the reason. If the company has a supervisory board, only the supervisory board may remove the member of the management board in accordance with the Commercial Code. The notice periods provided for in the Law of Obligations Act for authorisation agreements apply to the termination of the agreement of the member of the management board, which means that in this case, the supervisory board has the right to terminate the agreement of the member of the management board at any time if the parties have not agreed on notice periods. According to the Commercial Code, the member of the management board may resign from the management board regardless of the reason notifying the supervisory board. The rights and obligations arising from the agreement concluded with the member of the management board shall terminate in accordance with the agreement.

Our agreement template also stipulates that the company has the right to terminate the contract with the member of the management board at any time, without advance notice if necessary. According to our agreement template, the member of the management board may terminate the agreement by notifying the company in advance. The parties may agree on the notice period between themselves.

What are the legal responsibilities of the member of the management board?
The Commercial Code stipulates that the member of the management board must perform their duties with due diligence. This essentially means that they must do everything in their power to ensure that the company performs well. If members of the management board violate any of their obligations, they are jointly and severally liable for the damage caused to the company. The member of the management board is only released from liability if they can prove that they acted with due diligence.

The limitation period for claims brought by the company against the member of the management board is five years under the law, but the articles of association or the agreement of the member of the management board may provide for a different limitation period.