For many years, an established practice has been that an agreement with the director, when the company has only one director, is signed by the sole member of the company, i.e. by a person authorized by the shareholders’ meeting when there are multiple members. This practice has, to a certain extent, been “codified” through the opinions of the Ministry of Labour, which are important in inspections.

However, from the standpoint of the currently applicable Company Law (ZPD), such practice is unlawful.

In Chapter VI, the ZPD prescribes who may be representatives of the company: legal and other representatives, employees by virtue of employment and procurators. Article 173, paragraph 3 of the ZPD additionally introduces a special representative, but exclusively for signing an agreement on accession to the company. Given that the company already has a legal representative, the reasons for a special representative remain unclear, but that is not the subject here.

The key point is the following: the shareholders’ meeting is not provided for as a representative of the company in Chapter VI of the ZPD, nor is representation part of its powers. As a collective body, the shareholders’ meeting decides on status-related matters, appoints representatives, elects members of the supervisory board, gives consent to directors in certain cases, and adopts financial statements, but it does not represent the company.

The ZPD also does not grant the shareholders’ meeting the authority to appoint a representative “for special purposes” for the purpose of signing an employment agreement with the director, unlike the explicit provision of Article 173, paragraph 3, which relates solely to an agreement on accession to the company.

The question arises: what is the lawful solution?

The answer is simple and already exists in the ZPD. Article 42 provides that, when the director is the other contracting party, the agreement requires the prior approval of the shareholders’ meeting, except when the director and the member are the same person. Thereafter, once the approval of the shareholders’ meeting has been obtained, the agreement may be signed by the same person, on the one hand as the representative of the company, and on the other hand in their own name. And that is all. It is unclear why practice has imposed a solution under which a member signs the agreement with the director, disregarding the status-related powers of the corporate bodies and the rules for signing when the director is the other contracting party. This practice has created a tangle with problematic consequences that requires a creative, but lawful solution, aligned both with the ZPD and with the expectations of the Ministry of Labour.