Director or manager with an employment contract: is that possible?

Since the new Code of Companies and Associations (WVV) took effect on May 1, 2019, there is no longer any doubt: directors and managers of companies must exercise their mandates as self-employed individuals. Whether they are directors, managers, or members of the executive or supervisory board in a BV, CV, or NV, these duties may only be performed by individuals with self-employed status. This principle already applied in the past, but the new Companies Code has enshrined it clearly and comprehensively. Does this mean that these individuals are no longer permitted to perform any activities as employees within the company in which they hold a position? No. There are situations in which this is (still) possible. We’d be happy to explain.

Directors, members of the supervisory board, and members of the executive board of an NV, BV, or CV cannot be employees. The position of director must always be held on a self-employed basis. This has always been the case. The rules governing the social status of self-employed individuals already stipulated that corporate representatives are always self-employed. This now explicitly applies to directors as well as to members of the supervisory board and the executive board.

As in the past, a director may, in addition to his or her directorship, hold another position within the company under an employment contract. In that case, the employee’s duties must be completely separate from those of a corporate officer. The role held as an employee must be entirely different from that of a director. Furthermore, you must be able to demonstrate that the duties performed as an employee are carried out in a subordinate capacity within the company. An employee must always be under the authority of the employer and therefore must report to a body or person other than the director themselves. Furthermore, a person responsible for day-to-day management (such as a CEO or manager) can be both an employee and a self-employed individual. To qualify as an employee, however, there must again be a relationship of authority. This means that the employee must report to a body that ranks above that employee. If that is not possible—for example, because the person in charge of day-to-day management holds all authority within the company—then working under an employment contract is not possible.

Directors who were already performing their duties on a self-employed basis do not need to make any changes. In principle, they will already be enrolled in a social insurance fund for this activity, unless their position is entirely unpaid. Directors who are bound to their company by an employment contract have three options: 1. You have two roles within the company: one as a director and one as an employee, and the employment contract is unrelated to your duties as a director. You do not need to amend the employment contract unless the duties are not clearly specified therein. However, the director must also separately enroll in a social insurance fund for self-employed individuals (except in exceptional cases). 2. The employment contract relates solely to the duties as a director, member of the executive board, or member of the supervisory board. In this case, you must amend the articles of incorporation. The employment contract must be terminated, for example, by mutual agreement, and the director must enroll in a social insurance fund for the self-employed (except in exceptional cases). 3. The employment contract specifies duties as a director/member of the executive board/member of the supervisory board as well as duties as an employee. The employment contract may remain in effect, but only for the duties unrelated to the director’s mandate. It will therefore need to be amended. The director must also enroll in a social insurance fund for self-employed individuals (except in exceptional cases). It is important to review this carefully so that, as an executive, you do not run the risk of being reclassified as a “sham employee” and being required to register as self-employed (including retroactively). After all, penalties apply to companies and self-employed individuals who do not properly comply with the social security and tax obligations for the self-employed. Even if your executive becomes a self-employed representative, you can enter into a (self-employed) agreement for that purpose. We strongly recommend setting out the tasks and agreements clearly in writing in a management agreement.

Crauwels Advocaten will explain everything about the differences between an employment contract and the status of an independent director, and will assess whether your executives are working under a legal status that is appropriate for both them and your company. We’d be happy to guide you through all the necessary steps to make the right choice.