The corporate mandate (the "Mandate") implies the exercise of responsibilities and powers by the company director/manager in the interests of the company, whereas the employment contract (the "Contract") implies a subordinate relationship between the employee and the employer.
The practice of combining a Mandate and a Contract has developed gradually, with the aim of enabling the director/manager to benefit from the protection offered by employment law and the social security scheme.
Combining a Mandate and a Contract is only possible if the Contract is genuine and serious and corresponds to an effective employment.
In order for the combination to be legal, 4 cumulative conditions must be met:
- The Contract must relate to technical duties that are distinct from the duties carried out in the context of the Mandate;
- The director/manager must be placed in a relationship of subordination in the exercise of his salaried functions: the degree of control and direction of the employer is examined in particular in relation to the nature of the work performed;
- Remuneration must be received by virtue of the Contract, distinct from the remuneration received in respect of the Mandate (if any);
- No fraud of law: the Contract must be genuine, it must correspond to a function actually performed, characterised by a situation of subordination, and it must not be an empty shell intended to circumvent the provisions concerning the revocability ad nutum of corporate officers.
Public limited companies ("Sociétés anonymes"):
In addition to the conditions set out above, specific conditions apply to public limited companies with a board of directors. The combination is therefore possible when the following additional conditions are met:
- The director alone does not have the power to bind the company towards third parties;
- The director is a member of a board comprised of several members;
- The director is subordinate to the board of directors in respect of the specific employment duties arising from the Contract.
Private limited companies ("Sociétés à responsabilité limitée"):
In principle, it is possible for managers to hold both a Mandate and a Contract, if the common cumulative conditions are met, and specific criteria such as:
- The manager is not the sole manager of the company and that he has only a minority shareholding in the company.
- The manager's powers are not unlimited (not be able to bind the company in all circumstances by his sole signature);
- The business licence is not issued in the name of the manager.
To conclude, the Mandate and the Contract operate independently, i.e. the revocation of the Mandate does not imply automatically the termination of the Contract, and conversely, the dismissal does not imply automatically the loss of the Mandate.
In terms of social security, the director/manager's affiliation will depend on the form of the company and the nature of the contractual relationship. A company director/manager may be treated as an employee for social security purposes, or as a self-employed person.
If you would like more information on the validity of combining a Mandate and a Contract, on how to manage the risks due to the irregularity of combination, or on a question related to social security affiliation in case of a combination, feel free to contact our Employment experts, we will be happy to assist.
With several experts from our German Desk, a German-language version of the article is also available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
