Czech Republic: Statutory Body v Employee

Last Updated: 18 September 2012
Article by Veronika Odrobinová and Michaela Handrejchová

It is a common practice in the Czech Republic that the statutory body or member of the statutory body (executive in a limited liability company and board member in a joint stock company)1 is at the same time employed as a director. However, since 1992 the Supreme Court (SC) has steadily decided that this arrangement is not permissible, as the employment cannot overlap with the performance of the position of the statutory body, which must be performed in a commercial law relationship.

The main difference compared to employment is that the liability of the statutory body is stricter, with no limitations and no employment protection (eg, statutory vacation, notice period, severance payment, etc.). Further, statutory bodies are partly subject to different tax, social security and health insurance (SSHI) treatment.2

Although this point was regularly raised by lawyers, it was ignored in practice. Over 80% of companies, including such giants as ČEZ and Sazka, have used the incorrect scenario.

New court decision

Fresh air was brought in by the decision of the Supreme Administrative Court (SAC) published in spring 2011. Referring to the case law of the SC, the SAC decided that an executive of a limited liability company performing his activities in an (invalid) employment relationship is not entitled to sickness allowances because the sickness insurance payments he made to the system were based on an invalid employment agreement. Although this conclusion logically follows from the decisions of the SC, it has sparked a lively discussion in the Czech Republic. This reasoning about sickness allowances would also apply to pensions and health insurance.

The most usual example is an executive in a limited liability company with no contract and receiving no remuneration for this position who is, at the same time, employed as a general director/manager. This person has paid (high) SSHI contributions, but under an invalid employment agreement. Using the reasoning of the SAC, they are not covered by the SSHI meaning, for example, that no pension accrues for the period in question. Furthermore, they usually cannot recover the funds paid into the system as this is subject to strict time limitations.

Public debate, finally

As a result, a public discussion has finally started. The Ministry of Work and Social Affairs has published a position promising that the social security administration will not look into this when performing audits and will not challenge the right to pensions and other allowances. It is, however, questionable to what extent this position can be relied upon. Further, the Ministry cannot issue a position on health insurance companies where some of them are privately owned.

Amending the Czech Commercial Code

As a result of the media tempest, the performance of overlapping activities as employee should be solved by an amendment to the Czech Commercial Code prepared by the Ministry of Justice. The amendment should expressly allow the performance of certain business management activities by the statutory body in the employment relationship. Activities that may not be delegated to the employment relationship would include participation in meetings of the statutory body, decisions on the delegation of business management, and decisions on basic business orientation or further activities within the framework of the business management falling within the exclusive competence of the statutory body.

The liability of the statutory body stipulated by the Czech Commercial Code will remain unaffected by the delegation. It will thus be possible for the statutory body to have two relationships with the company, one under commercial law and another under employment law.

The amendment was recently approved by the Chamber of Deputies and no obstacles are foreseen in the Senate. It should take effect from 1 January 2012.

From that date, the treatment of statutory bodies from an income tax and SSHI perspective should also be harmonised with the treatment of employees. There is hope that the amendment will also solve the problematic history: it has been repeatedly recommended that the amendment state that SSHI contributions paid from an invalid employment relationship are deemed legal and create participation in the SSHI system.

After years of ignoring this "strange" issue raised by lawyers, it looks like at least a partial solution is on the way. A new start will then hopefully come with the recodification of the Czech civil law, expected to become effective from 1 January 2014.

The liability of the statutory body stipulated by the Czech Commercial Code will remain unaffected by the delegation. It will thus be possible for the statutory body to have two relationships with the company, one under commercial law and another under employment law.


1 In a limited liability company, each executive (jednatel) is considered a statutory body. In a joint stock company, the board of directors (představenstvo) is considered a statutory body and each board member is a member of the statutory body. For the purposes of this article, we use only the term statutory body. When referring to companies, we refer to limited liability and joint stock companies.

2 Currently, executive remuneration is subject to pension and health insurance but not to sickness insurance. It is fully tax deductible. On the other hand, the board member remuneration is not subject to social security or health insurance but is not tax deductible for the company.

This article was originally published in the schoenherr roadmap`12 - if you would like to receive a complimentary copy of this publication, please visit:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions