Managing directors: take action before the end of the year!

DGA's (directors-majority shareholders) who work via a management BV or personal holding company have to deal with various agreements and points of attention when performing their work. It is wise to regularly review these agreements and points of attention in order to be and remain up to date and compliant, also in the event of changes in circumstances and legislation and regulations. Below is an overview of important points of attention and possible actions for the DGA in the coming months.

Management agreement A legally and fiscally correct management agreement between the personal holding/management BV of the managing director and the operating company is essential. The managing director in person is not a party to the management agreement, unless he does not work via a personal holding/management BV. The management agreement must be a clear agreement of assignment and may not contain any elements that indicate an employment relationship. A management agreement that is not in order under civil law and/or does not correspond to the actual way of working in practice can be reclassified by the Tax Authorities as an employment contract. As a result, the operating company becomes liable for withholding payroll tax, national insurance contributions and possibly also for employee insurance premiums and pension contributions. The managing director then also has, for example, dismissal protection and the right to continued payment of wages in the event of illness. Tip: have the management agreement checked regularly to prevent legal and fiscal risks! Employment contract

An employment contract is also important for managing directors. Either with their personal

holding/management BV if they work through a BV or with the operating company if they work for the operating company without the intervention of a BV. Why is an employment contract important for the managing director? Because:

 it is a legal obligation.

 this is where the salary and other compensation and agreements are recorded.

 it is evidence for third parties. For example, for the tax authorities or in the case of financial

problems to creditors.

The determination of the salary is extra important for the DGA, because the DGA is legally obliged to receive a sufficiently high so-called customary salary. The determination of the customary salary varies per situation and can lead to discussions with the Tax Authorities. Tip: have the employment contract checked and updated regularly to prevent (fiscal) risks and to optimize the fiscal position! Social security

The DGA who owns the majority of the shares is normally not required to be insured for employee insurance. However, this can and will often be different for the DGA with a minority interest in principle, a minority shareholder is required to have insurance, unless he/she:

1. Has a joint majority interest with family members; or

2. Owns the shares in the operating company in equal proportions with other shareholders.

The management agreement plays an important role here: is it a pure management agreement or not? Tip: have the management agreement checked regularly to avoid risks and think about an alternative solution for incapacity for work!