Legal Q&A · Company & shareholders

Must a managing director have a service agreement, and what happens without one?

Law as at 5 September 2026

Short answer

No. Without a service agreement, mandate agreement rules apply as appropriate between company and director. A mandate is remunerated by law, but the general meeting decides directors’ pay, so entitlement is uncertain without its decision and payments may be challenged. Benefits, exit payments, post-office confidentiality and stricter non-compete duties lack contractual support. The agreement must be written and approved by the general meeting to be relied upon.

The director is registered, has run the company for years, and no one has ever drafted a service agreement. Pay follows an informal understanding, or there is none; the company car and phone are used without rules. Whether this is acceptable usually becomes an issue at the worst time: a shareholder dispute, the director’s departure or a company sale.

Without an agreement, mandate rules apply

The Commercial Code, Act No. 513/1991 Coll., does not require a director’s service agreement. It does specify what applies in its absence:

The relationship between a company and a member of its body or a shareholder in managing company affairs is governed as appropriate by the provisions on mandate agreements, unless a service agreement, if concluded, or the law determines the rights and duties otherwise. A service agreement must be written and approved by the general meeting or, in writing, by all shareholders with unlimited liability for the company’s obligations.

Section 66(6) of the Commercial Code, unofficial translation

A mandate is remunerated by law (Section 566(1)). If the amount is not agreed, customary remuneration is due (Section 571(1)). However, the general meeting decides managing directors’ remuneration (Section 125(1)(f)). Without its decision, entitlement is uncertain, and self-paid remuneration is often the first item challenged by a disputing shareholder or insolvency administrator.

What is left uncertain without a contract?

Mandate rules already provide reimbursement of expenses reasonably incurred for the company (Section 572). Other matters commonly settled by a handshake lack support: private use of a company car, insurance contributions, performance bonuses and exit payments on removal. The general meeting may remove a director at any time, effective on adoption of the decision (Section 66(2)). See how to remove an s.r.o. managing director.

The law primarily imposes duties: professional care, confidentiality concerning confidential information (Section 135a(1)) and a non-compete duty during office (Section 136). It does not address the period after office ends. Post-departure confidentiality and non-compete duties exist only if written into an agreement. If the director is also a shareholder, see shareholder remuneration without a contract.

What the agreement should contain

Our agreement addresses responsibilities and acting rules, remuneration components and due dates, benefits and expenses, exit payments where office ends without the director’s fault, continuing confidentiality, non-compete duties beyond the statutory minimum, handover and liability insurance. If it is concluded after years without one, it should also settle older director claims.

One thing it cannot do is limit statutory damages liability:

Agreements between a company and managing director excluding or limiting the director’s liability are prohibited. Neither the memorandum nor the articles may limit or exclude that liability.

Section 135a(4) of the Commercial Code, unofficial translation

The agreement reduces risk in other ways: clear duties, decision-making rules and liability insurance taken out by the company for its corporate bodies.

Form, approval and the sole shareholder

The agreement must be written and approved by the general meeting. In practice, retain its resolution or the sole shareholder’s decision with the agreement. If the director is also the sole shareholder, they sign on both sides. An agreement between the company and its sole shareholder acting for it must be written (Section 132(2)), and the sole shareholder’s signature on a director remuneration decision must be officially certified (Section 132(1)). We explain the distinction in certified signature or lawyer authorisation.

How we can help

We prepare the agreement and approval decision through our director’s service agreement service. If more than one agreement is missing, we organise the full s.r.o. corporate documentation. Where there are several directors or a supervisory board, we structure the company’s bodies so the agreement matches the memorandum.

If you are adding an agreement retrospectively, send us the Commercial Register extract and memorandum. We will explain what requires retrospective approval.

This answer provides general information on the law as at 5 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.

More legal questions

All questions and answers
  1. I sold my business share. Am I still entitled to profits from the previous year? Generally not. The right to a share of profits attaches to the business share, rather than the shareholder personally. A transfer passes all shareholder rights to the acquirer, including unpaid profits from earlier periods, unless the parties agreed otherwise or that particular claim was separately assigned. A former shareholder therefore generally cannot demand profits for the year preceding the transfer.
  2. How does liquidation of an s.r.o. work, and how long does it take for the company to cease to exist? Liquidation begins with the shareholders’ decision to dissolve the company and appoint a liquidator. Before registration of the liquidator, a €1,500 advance must be deposited with a notary. The company enters liquidation when the liquidator is registered in the Commercial Register, and liquidation cannot end earlier than six months after the entry notice is published. Tax arrears or a tax audit extend the period by another six months. If the company is over-indebted, the liquidator must petition for bankruptcy. A smooth process takes roughly nine to twelve months.
  3. What can a procuration holder sign, and what does procuration not cover? Procuration covers all legal acts arising in the operation of a business, including those otherwise requiring a special power of attorney. It does not cover disposing of or encumbering real estate unless expressly authorised, or acts unrelated to business operations. Its scope is prescribed by law, and internal subject-matter or financial limits do not affect third parties even if stated in the grant. Joint procuration and the statutory real-estate variant are available. In Slovakia, procuration takes effect on Commercial Register entry; in Czechia, on being granted.
  4. Can s.r.o. shareholders decide without a general meeting, by written resolution? Yes. The Commercial Code permits decisions outside a general meeting. A managing director or entitled shareholder circulates a draft resolution with a deadline for written responses. A shareholder who does not respond in time is treated as voting against, and the majority is calculated from all votes in the company. Decisions requiring notarial certification of the meeting proceedings, such as appointment or removal of a managing director, cannot reliably be adopted this way.

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Mgr. Patrik Tulinský, LL.M. Czech and Slovak attorney · SAK 300422 · ČAK 19654

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