Geschäftsführervertrag Österreich (managing director's service agreement)
What does a managing director's service agreement in Austria cover? Content, deadlines and legal basis for GmbH managing directors. Engelbrecht Rechtsanwälte, Vienna.
Definition
The Geschäftsführervertrag (managing director's service agreement) governs the contractual relationship between the company and its managing director. It is distinct from the articles of association and from the act of appointment. A written agreement is generally not mandatory, but is recommended for reasons of legal certainty. It usually covers remuneration, scope of duties, holiday, confidentiality obligations and termination arrangements. Where an employment relationship exists and no written employment contract is concluded, a written statement of particulars (Dienstzettel) pursuant to § 2 AVRAG must generally be issued.
Legal basis
The managing director's rights and obligations towards the company follow in particular from company law:
- §§ 15 et seq GmbHG: legal position of the managing director
Beyond that, the employment law classification of the relationship depends on how it is actually structured. A managing director's agreement may be structured as an employment contract or as a free service contract. Where, on the basis of the specific structure of the contractual relationship, the managing director is to be regarded as an employee, the following employment law provisions apply in particular:
- Salaried Employees Act (Angestelltengesetz)
- Holiday Act (Urlaubsgesetz)
- where applicable, collective agreements.
Social insurance classification
- ASVG: where the managing director is to be regarded as an employee.
- GSVG: in particular for shareholder-managing directors, where there is no compulsory insurance under the ASVG and the statutory requirements of the GSVG are met.
Deadlines
Key periods and terms for managing directors who are employees:
- Notice: Six weeks' employer notice, increasing with longer service, generally to the end of a quarter (§ 20 AngG). The contract may in particular provide for termination dates on the 15th and the last day of the month.
- Fixed terms: Permissible; where an employment relationship is repeatedly extended for fixed terms, the principles on chains of fixed-term contracts apply.
- Probationary period: For an employment relationship governed by the AngG, a probationary period of no more than one month may be agreed. During this period the relationship can generally be ended by either side at any time. This is rather unusual in managing director agreements.
Rights and obligations
Rights:
- entitlement to the agreed remuneration (fixed salary, bonuses, benefits in kind)
- entitlement to holiday, where the Holiday Act applies or a corresponding contractual entitlement exists
- entitlement to reimbursement of expenses
- entitlement to severance pay where agreed or where statutorily applicable
Obligations:
The managing director owes the company the following duties:
- duty of care and duty of loyalty towards the GmbH
- compliance with lawful instructions of the shareholders
- confidentiality regarding business and trade secrets
- the statutory non-compete obligation, which may be tightened contractually.
Common mistakes
The following mistakes occur particularly frequently in practice:
- No written agreement and therefore no legal certainty.
- Removal and termination not coordinated: despite removal, the managing director generally retains their claims under the service agreement until it is validly terminated.
- Unclear provisions on variable remuneration
- No post-contractual non-compete clause
- Automatic extension of a fixed term assumed: a fixed-term contract generally ends without notice on expiry of the agreed term.
- Pension commitment without an arm's length assessment: for shareholder-managing directors this may be treated as a hidden profit distribution.
Recommended steps
The following steps support a legally sound managing director's agreement:
- Conclude a written agreement, ideally before the appointment.
- Regulate remuneration, holiday and severance pay explicitly and completely.
- Assess the employment and social insurance classification of the managing director.
- Align notice periods and removal arrangements with one another.
- For shareholder-managing directors, carry out an arm's length assessment of any pension commitment.
Frequently asked questions
Must the managing director's service agreement be in writing?
No, a written agreement is generally not mandatory. For reasons of evidence and legal certainty it is, however, strongly recommended. Where an employment relationship exists and there is no written employment contract, a written statement of particulars (Dienstzettel) pursuant to § 2 AVRAG must generally be issued.
Does the Salaried Employees Act apply to managing directors?
Yes, provided the managing director's contractual relationship qualifies as an employment relationship and the requirements for applying the Salaried Employees Act are met.
Can a managing director's service agreement be for a fixed term?
Yes, fixed-term managing director agreements are permissible in Austria. The contractual relationship generally ends automatically on expiry of the agreed term, without notice being required. Where an employment relationship is repeatedly extended for fixed terms, the principles on chains of fixed-term contracts must be observed.
What happens if there is no managing director's agreement?
Where there is no written managing director's agreement, rights and obligations follow from the actual legal structure of the contractual relationship and the applicable statutory provisions. If the relationship qualifies as an employment relationship, the relevant employment law provisions apply in particular. In the absence of an agreed remuneration, appropriate remuneration may be deemed agreed pursuant to § 1152 ABGB. Where there is no employment relationship, statutory employment law entitlements such as holiday or continued pay during illness generally do not arise as a matter of course and should therefore be regulated contractually.
Who concludes the service agreement with the managing director?
The agreement is concluded by the GmbH. On the company's side it is generally concluded by shareholders' resolution, with the shareholders representing the company vis-à-vis the managing director. The managing director cannot simultaneously represent the company when concluding their own service agreement.
Any questions?
Do you need support in concluding or reviewing a managing director's service agreement? Our employment law specialists advise you quickly and reliably.
