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The Grand Chamber of the Supreme Court has recently ruled on a case where a member of the Board of Directors entered with the company he was working for into an employment contract under which he was employed with the company as a technical director. In that post, he was reporting directly to the company’s director and his job responsibilities included, among other things, supervising the Technical Department and participating in the overall management of the company.

The business management of the company includes organising and supervising its day-to-day running, in particular adopting decisions on the operation of the company’s plant and on the company’s related internal affairs. In this context, it is irrelevant whether the business is managed by the Board of Directors itself, independently by a member of the Board of Directors mandated by the Board, or by a third person. The prohibition to instruct the Board of Directors on business management means that a member of the Board of Directors who concurrently works, under an employment contract, as the company’s technical director cannot, while deciding on the company’s business management, report to and follow instructions of a manager (the company’s director) who is not a member of the Board of Directors and who is subordinate to the Board of Directors.

If virtually all of the activities that fall within the scope of the technical director’s role are part of the company’s business management, then the “technical director” is obliged to fulfil these responsibilities as a member of the Board of Directors and not on the basis of an employment contract. However, the employment contract concluded by the company and the member of the Board of Directors is not automatically null and void but needs to be treated as an executive service agreement or as an amendment to an executive service agreement (provided that the company and the member of the Board of Directors have, in addition to the employment contract, entered also into an executive service agreement). This is also connected with remuneration. If the general meeting (Supervisory Board) does not approve the “salary” provisions of the employment contract concluded by the company and the member of the Board of Directors, the member of the Board of Directors shall be entitled to receive usual pay rather than the “salary”.