Advice for executives and managing directors on their service agreements
In important respects, different rules apply to senior executives and managing directors than to other employees. Contract drafting, remuneration and separation therefore require particular legal consideration. We advise you when concluding your contract, during its term and on its termination.
The key points at a glance
Senior executives
Senior executives are employees and in principle enjoy protection against dismissal. However, in the case of senior executives with independent authority to hire or dismiss staff, the employer may, under § 14 Abs. 2 KSchG, apply for the employment to be dissolved in return for a severance payment without having to give reasons. Whether someone is a senior executive in this sense depends on their actual powers, not on their title.
Managing directors
Managing directors of a GmbH are generally not employees. The Dismissal Protection Act does not apply to them. A distinction must be drawn between removal from office under corporate law and termination of the service contract. Disputes are generally heard not by the labour courts but by the ordinary civil courts.
Contract drafting
Key aspects include the term and notice periods, variable remuneration, garden leave provisions, non-compete covenants, pension provision and change-of-control arrangements. Liability issues and insurance cover, for example through D&O insurance, should also be clarified. Many of these points are freely negotiable and are not governed by statute.
How we proceed
We clarify your legal position and examine your existing or proposed contract for risks and gaps.
We support you in contract negotiations, in the background or, if you wish, directly with the company.
In the event of removal from office or termination, we examine your claims, negotiate a termination agreement and, if necessary, represent you in court.
Frequently asked questions
Can I bring an action for protection against unfair dismissal as a managing director?
The Dismissal Protection Act does not, in principle, apply to members of governing bodies. However, termination of the service contract may be invalid for other reasons, for example because of a defective resolution, failure to observe deadlines or the absence of good cause in the case of summary dismissal. We examine this on a case-by-case basis.
Is a review worthwhile before the contract is concluded?
Yes, because at this stage most points can still be shaped. Provisions on term, severance, non-competition and variable remuneration in particular will determine any later separation. Subsequent amendments are usually possible only with the company's consent.
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