Managing director's service agreement in a Czech s.r.o.: remuneration and approval

A managing director (jednatel) has a signed service agreement and the company has been paying him remuneration for several months. On reviewing the documents, however, no decision of the general meeting approving the agreement can be found. The problem is not just a missing piece of paper. In a Czech capital company, approval of the executive service agreement (smlouva o výkonu funkce) is a condition of its effectiveness.

The agreement governs the relationship between the company and a member of its elected body. It must be distinguished both from the decision appointing the person to office and from an employment contract. If the managing director also performs other work for the company, the documentation must reflect the actual content of each activity. Simply relabelling the management of the company as a job position does not resolve the rules on the performance of office.

Under Section 59 of the Czech Business Corporations Act, the relationship is governed in the alternative by the rules on mandate, unless the agreement or the law provides otherwise. In an s.r.o. and a joint-stock company, the agreement must be in writing. The supreme body approves not only the original agreement but also its amendments. When remuneration is increased, it is therefore not enough to file an amendment signed by the parties.

Approval, effectiveness and remuneration belong together

Without approval by the supreme body, the agreement does not take effect. The law also sets a default rule for when an approved agreement takes effect: unless the supreme body decides otherwise, the relevant date is the date the agreement was concluded or the date the office began, whichever is later. A review must therefore read the agreement together with the decision approving it and the documents on the commencement of office.

If remuneration in a capital company is not agreed in the agreement, the law as a rule presumes that the office is performed free of charge. This cannot, however, be reduced to a rule that without a valid agreement there is never a right to remuneration. Section 59(4) deals with situations where the obstacle lies on the company's side or other circumstances described by law occur; in such cases the customary remuneration may be decisive.

Where approval is missing or the arrangement is disputed, the cause and the sequence of events must therefore be established first. An automatic demand for the return of all payments, as well as automatically continuing to pay, may overlook a substantial part of the legal rules. Any remedy must be based on the documents and the actual course of the relationship.

Remuneration should be described so that it is possible to determine what the managing director is entitled to and how the amount is calculated. Section 60 requires all components of remuneration to be specified, including benefits in kind and other advantages. For a bonus, it must be distinguished whether an entitlement arises once the conditions are met, or whether the competent body still decides on awarding it. A general sentence about remuneration depending on company results often does not settle this question.

Beyond money, set out how the relationship works

The documentation should cover how expenses are reported and reimbursed, how information is provided to the company and how its materials are handled. For a company car, allowances or other benefits, the purpose and conditions of use must be clarified. The tax and accounting treatment of each benefit is a separate question best aligned with the company's advisers.

Other benefits for a member of a body are governed by Section 61. It depends on whether the right arises from the law, an approved agreement or the relevant internal regulation, or whether further consent and, where applicable, the opinion of the supervisory body are required. It cannot be assumed that any benefit approved by an operations manager automatically satisfies the corporate requirements.

The agreement should also explain the practical procedure when the office ends: handover of documents, work in progress and access rights, settlement of resources provided and confidentiality. This does not confuse the termination of office itself with the settlement of the relationship. The company's operations may require a handover even where the former managing director and the company are in dispute.

The liability rules do not derive from the agreement alone. Section 159 of the Czech Civil Code links acceptance of office with loyalty and the necessary knowledge and care. An internal allocation of tasks may help in managing the company, but the agreement is not a universal tool that can simply remove statutory duties.

When preparing or reviewing it, put side by side the agreement, its amendments, the approval decision, the articles of association and an actual overview of the benefits provided. It is precisely the difference between the documents and day-to-day practice that often reveals the problem. As part of our legal services for companies, we will assess how they fit together and prepare the necessary changes; related commercial documents are handled by our contracts practice.

Law as verified on 20 September 2026. Sources: Sections 59, 60 and 61 of Act No. 90/2012 Coll. (Business Corporations Act) and Section 159 of the Civil Code.

When a company changes owner, we deal not only with the position of the managing director but also with the transaction itself. The procedure is described in the article transfer of a share in an s.r.o.: contract, price and handover.