Combining a corporate mandate and an employment contract is a recurring issue in company life: can a director simultaneously hold a corporate mandate and be an employee of the same company? The answer depends on the corporate form, the functions performed and compliance with strict conditions established by case law. A poorly structured arrangement exposes the director to having their employment contract set aside, losing the associated rights, and facing significant tax and social security consequences.
1. The principle of combining offices: general rules
1.1 – Corporate mandate and employment contract: two distinct statuses
A corporate mandate holder (chairman, chief executive, manager, member of the management board) performs their functions by virtue of a mandate conferred by the shareholders or partners. They are not bound to the company by an employment contract, unless the conditions for combining the two statuses are met. An employee, by contrast, is bound by an employment contract implying a legal relationship of subordination: they receive instructions, are subject to disciplinary authority and receive remuneration in exchange for their work.
These two statuses may coexist, but their combination is strictly regulated by statute and case law, the requirements of which vary depending on the legal form of the company.
1.2 – The condition common to all corporate forms: the subordination relationship
Whatever the corporate form, the combination is only valid if the employment contract corresponds to technical functions distinct from the corporate mandate, performed in a state of genuine subordination to the company. The Court of Cassation is consistent on this point: a director cannot be both employer and employee for the same functions.
Important note
The subordination relationship is assessed in concreto by the courts. A director who holds decision-making power without effective oversight by a superior cannot validly rely on an employment contract, even if that contract was regularly concluded and approved. Substance prevails over form.
2. Rules applicable according to corporate form
2.1 – The société anonyme (SA)
It is in the SA that the rules are most stringent. The combination is subject to cumulative conditions (Art. L. 225-22 of the Commercial Code for directors, Art. L. 225-44 for members of the supervisory board):
- The employment contract must predate the corporate mandate or be concluded in accordance with the conditions set out in the articles of association
- The contract must correspond to actual employment, with genuine technical functions distinct from the mandate
- The number of employee-directors is capped: they may not represent more than one-third of the board of directors
- The employment contract must be approved by the board of directors under the regulated agreements procedure
Key point: the case of the SA chief executive
The chief executive (directeur général) of an SA may combine their mandate with a pre-existing employment contract, provided that contract corresponds to distinct technical functions performed under genuine subordination. However, a CEO appointed without a prior employment contract cannot conclude one retrospectively for the same functions.
2.2 – The société à responsabilité limitée (SARL)
The majority manager (gérant majoritaire) of a SARL cannot, in principle, combine their mandate with an employment contract within the same company. A majority manager holds more than 50% of the company’s shares, alone or together with their spouse, civil partner or minor children. In this situation, they cannot be regarded as an employee because they are treated as the employer.
By contrast, a minority or equal manager (gérant minoritaire ou égalitaire) may combine their mandate with an employment contract, subject to:
- Performing technical functions distinct from the mandate
- Being in a state of genuine subordination to the company
- Having the contract approved by the shareholders in accordance with the regulated agreements procedure (Art. L. 223-19 of the Commercial Code)
2.3 – The société par actions simplifiée (SAS)
The SAS offers the greatest flexibility. No statutory provision expressly prohibits the combination for the chairman or other officers of a SAS. The combination is nonetheless subject to the requirement of genuine subordination and the exercise of distinct functions. The articles of association may provide for specific approval rules.
In practice, the chairman of a SAS is often also an employee in respect of their operational functions, but the reality of the subordination relationship remains the decisive criterion in the event of a dispute.
2.4 – Other corporate forms
In general partnerships (sociétés en nom collectif, SNC), partner-managers cannot be employees of the company. In civil companies (sociétés civiles), managing partners are in a similar position. These corporate forms leave little room for combining the two statuses.
3. Conditions for a valid combination
3.1 – Genuine and distinct technical functions
The employment contract must correspond to actual employment, with precise, identifiable and distinct responsibilities from those attached to the corporate mandate. A vague job description or functions that overlap with the mandate are classic grounds for challenging the combination.
Examples of functions that may justify a valid combination:
- Technical or IT director in a company whose mandate is purely administrative
- Head of sales in a holding company whose mandate relates to group governance
- Sector expert (engineer, doctor, architect) in a company whose management mandate is distinct from the professional expertise
3.2 – A genuine subordination relationship
The employee-director must be subject to the authority of a governing body or line manager who genuinely has the power to give instructions and monitor their execution. In a single-shareholder company or one where the director holds a majority of the capital, this condition is virtually impossible to satisfy.
3.3 – Separate remuneration
The remuneration under the employment contract must be distinct from the remuneration of the corporate mandate and correspond to the real value of the employed functions. A single global remuneration that is not broken down, or an employment contract with no separate pay, significantly undermines the validity of the combination.
3.4 – Compliance with approval procedures
In most corporate forms, an employment contract concluded with a director constitutes a regulated agreement subject to an approval procedure by the shareholders or partners. Failure to obtain proper approval does not necessarily result in the contract being voided, but exposes the director to personal liability for any loss caused to the company.
4. Risks of a poorly structured combination
4.1 – Reclassification of the employment contract as a corporate mandate
In the event of a dispute, in particular on dismissal or termination, the labour tribunal may reclassify the employment contract as a corporate mandate if the validity conditions are not met. The consequences are immediate:
- Loss of entitlement to notice and severance pay
- Loss of entitlement to unemployment benefit (France Travail)
- Challenges to pay slips and social security contributions paid
- Possible reassessment by URSSAF of employer contributions
Important note
Reclassification may occur at any time, including several years after the contract was concluded. A director who has received salary payments for years may find all their rights called into question if the contract is found to be fictitious or non-compliant with the legal conditions.
4.2 – Risks in insolvency proceedings
In the event of compulsory liquidation, creditors and the court-appointed insolvency practitioner systematically examine the validity of employment contracts concluded with directors. An employment contract reclassified as a corporate mandate deprives the director of their status as a preferential salary creditor, and therefore of the protection of the wage guarantee scheme (AGS).
4.3 – Tax risks
Remuneration paid under an employment contract is deductible from the company’s taxable income, unlike corporate mandate remuneration in certain regimes. A reclassified employment contract exposes the company to a tax reassessment concerning the deductibility of the sums paid.
4.4 – Corporate law risks
An employment contract concluded without complying with the regulated agreements procedure may be voided at the request of any shareholder or partner. This nullity may have significant consequences for the remuneration received and the director’s rights.
5. Frequently asked questions about combining a corporate mandate and an employment contract
No. The majority manager of a SARL, that is, the one who holds more than 50% of the shares alone or together with their spouse, civil partner or minor children, cannot combine their mandate with an employment contract within the same company. They are treated as the employer and cannot simultaneously be in a relationship of subordination to the company. Any employment contract concluded in such circumstances will be systematically reclassified as a corporate mandate.
Yes, subject to conditions. Statute does not expressly prohibit the combination for the chairman of a SAS. However, the employment contract must correspond to genuine technical functions distinct from those of the mandate, and the chairman must be effectively subject to the authority of a governing body. In practice, the subordination condition is difficult to satisfy where the chairman is also the majority or sole shareholder. Each situation must be analysed on a case-by-case basis.
It depends on the validity of the employment contract. If the combination is validly established and the employment contract is distinct from the corporate mandate, loss of the mandate does not automatically terminate the employment contract. The director then retains their employment contract, and if they are subsequently dismissed, they may claim unemployment benefit in respect of that contract. However, if the employment contract is reclassified as a corporate mandate, the director loses all entitlement to unemployment benefit.
Revocation of the corporate mandate does not automatically terminate the employment contract, provided that contract is validly distinct from the mandate. The revoked director may then either resume their employed functions or be dismissed in accordance with employment law rules. If the revocation is accompanied by termination of the employment contract without valid grounds, the director may bring a claim before the labour tribunal for dismissal without real and serious cause. The situation should be anticipated contractually to avoid any legal gap.
Several precautions are essential: drafting a precise employment contract with responsibilities clearly distinct from the mandate, setting separate and proportionate remuneration, complying with the approval procedure before the relevant corporate bodies, and ensuring that subordination is genuine and traceable (meeting records, written instructions, performance reviews). Prior consultation with a lawyer specialising in both employment law and corporate law allows risks to be anticipated and the combination to be soundly structured.
Your employment and corporate lawyer for combining a mandate and an employment contract
Combining a corporate mandate and an employment contract is a legally delicate arrangement, at the intersection of employment law and corporate law. Poorly structured, it exposes the director to losing all their employment rights at the very moment they need them most. Properly structured, it provides genuine protection and significant benefits.
As specialists in employment law, Patchwork Avocats assists directors and executives and companies in securing their status arrangements, drafting agreements and defending their rights in the event of a dispute.
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