In October, we return to the issue of so-called “concurrence of functions” (Case No. 27 Cdo 2155/2024). To start, let’s recall that concurrence of functions arises when a company’s statutory body member has also concluded an employment contract with the same company. Whether the activity carried out under that employment contract overlaps with business management (a “true” concurrence) or not (a “false” concurrence) determines whether such concurrence is “permissible”.
If the employment contract covers activities that fall under business management, it cannot be treated as a standard employment contract. In fact, it is either a “managerial contract” (agreement on the performance of function) or an amendment to such a contract. For a statutory body member being in true concurrence to receive remuneration under such a contract, the contract must be properly approved.
In the present case, the managing director of an LLC had signed an employment contract instead of an agreement on the performance of function. The Supreme Court concluded, based on the contract’s content, that this was a true concurrence. However, an amendment to that contract was later concluded, under which the managing director was to receive an additional extraordinary remuneration for the activity which, according to its name, appeared to be the professional activity of engineering-geological survey.
In this context, the Supreme Court emphasized several key points:
- Business management is one of the core responsibilities of a company’s statutory body. It involves organizing and directing the company’s day-to-day business activities, particularly decisions concerning the operation of the business (enterprise) and related internal matters of the company. Business management primarily concerns the process of forming the will of (attributable to) the company which may (and typically will) subsequently manifest externally as juridical acts.
- Whether a specific activity falls under business management cannot be determined in general terms; it requires consideration of the specific circumstances of each case.
- In the present case, the courts did not establish whether the activity carried out under the employment contract amendment was carried out by the managing director as part of his statutory function or whether it was a standard employment activity under a typical subordinate-superior relationship, outside the scope of the managing director’s business management.
- The Supreme Court therefore concluded that if the managing director performed dependent work for the company—beyond the scope of activities falling under the powers of the statutory body—with the company’s knowledge and under its instructions, even without a valid employment contract, the company must return unjust enrichment. This enrichment arose because the company, as the employer, accepted performance (work performed) from an individual without a legal basis.
In other words, although the managing director did not have a valid employment contract for such activity, the path to his remuneration is not entirely closed. However, the remuneration takes the form of unjust enrichment, which arose on the part of the company as a result of the work activity carried out outside the agreed employment relationship (within the factual employment).
