Directorships and employment in the same company
Directorships and employment in the same company
May 2022 – In public limited companies and limited liability companies, directorships cannot be combined with an employment contract. However, a person can be an employee and a director at the same time. How can this be explained?
Duality of functions
A company director may not be bound to the company by an employment contract. This is stated in the new Companies and Associations Code (CSA). This prohibition applies to :
for public limited companies, directors, supervisory board members and management board members; and
in the case of limited liability companies, the directors.
But what happens when a director also holds another position within the same company? This dual function is possible if three conditions are met.
Firstly, this other function must be clearly distinct from the director's function. There must therefore be no direct link with his directorship. For example, it could be a commercial or financial function, or a function as HR manager.
The second condition relates to the subordination link. This is an essential element of any employment contract. This condition is also the most complicated and sensitive of the three: when exercising his or her function as an employee, the director must perform his or her work in a subordinate relationship to his or her employer, even though he or she is also the head of the company.
Who should therefore exercise authority over this employee-director? This authority can be given to a company body or to a person appointed by the company.
The general meeting of shareholders cannot exercise any authority, as it only meets once a year.
It goes without saying that this condition cannot be met in a company with only one director. Even when a direct family member actually holds the main management positions, it is impossible to establish the presence of a subordinate relationship.
The third condition concerns remuneration. The employee-director must receive remuneration for his or her services - as if he or she did not hold a directorship. The director's fee cannot be considered as remuneration. The absence of remuneration for the services provided implies that he is only a director and does not exercise any salaried function.
Day-to-day management
The prohibition of being bound by an employment contract applies only to functions performed as a company officer. It does not apply to the body responsible for day-to-day management.
As provided for by the CSA, certain acts may be performed without going through the directors. This is particularly the case for acts which do not exceed the needs of the daily life of the company or acts which, due to their minor interest or urgent nature, do not justify the intervention of the administrative body.
As the CSA does not explicitly provide for the social status of the members of this body, the doctrine assumes that a social status as an employee is possible.
Labour law and NSSO
If it is established that the company representative also performs a function as an employee, two different regulations apply with regard to labour law and social security.
In the context of his salaried function, the person concerned benefits from the protection regime for salaried employees with regard to working hours, annual holidays and dismissal. The end of the director's mandate does not automatically imply the end of the employment contract. This would be contrary to the principle of dual functions. If the company and the director wish to terminate their relationship, both the rules on termination of the directorship and the rules on notice provided for in the law on employment contracts must be observed.
The duality also has an impact in terms of social security: as far as the director's mandate is concerned, this person is subject to the social status of self-employed persons, while as far as the employee's function is concerned, he or she is subject to the social security system for employees.
It should be noted that any person exercising a professional activity in Belgium without an employment contract is deemed to be exercising a self-employed activity and is therefore subject to the social status of self-employed persons. In addition, any person appointed as a proxy in a company - an entity which is therefore engaged in profit-making operations or transactions - is deemed to be engaged in an independent professional activity.
A director who exercises his mandate free of charge must be able to prove this. If he can prove that the mandate is free of charge, the director is not subject to the social status of self-employed persons.
If not, he has to join a social insurance fund as a self-employed person in his main capacity or as a self-employed person in a complementary capacity. The type of affiliation depends on the volume of services provided within the framework of his salaried function. Membership as a self-employed person in a supplementary capacity is possible if his salaried services represent at least 50% of a full-time job.
Taxation
Note also that the separation of these functions has no impact on tax matters. All remunerations are considered as remunerations of a company director, unless the person concerned is able to demonstrate that the director's function is exercised free of charge and that he/she only receives remuneration for the salaried function.
Clear agreements
A person who wishes to combine a directorship with an employment position should have sufficient documentary evidence. Combining the two functions is an exception to the rule.