The Legal Form of the Executive Service Agreement
The service agreement of an executive manager in Georgia is written under the chapter of mandate contracts of the Civil Code. It is precisely this corpus that determines the nature of the contract, the rules on remuneration, accountability, confidentiality and the termination regime. The corporate form of appointment as director is a separate matter governed by the Georgian Law on Entrepreneurs, but the contractual content of the parties' relationship is filled by the civil-law rules of mandate. At the same time, the norms of American executive employment agreements — at-will employment terminable at any moment, golden-parachute-type guarantees — are non-Georgian models and do not carry the content of a Georgian contract. The Georgian carrier is the system of the five mandate provisions.
The Concept of the Mandate Contract
Under a mandate contract, the mandatary must perform for the mandator one or more entrusted acts in the name and at the expense of the mandator. This definition precisely describes the position of a chief executive: he acts in the company's name and with its resources, and the scope of his authority is defined by the subject of the mandate. Every decision of the executive manager formalized in this form must be directed at the company's expense and for its benefit. Freedom of contract allows the parties to define a detailed list of acts, the level of decision-making and the format of accountability.
Remuneration and Its Presumptions
The mandator must pay the mandatary remuneration only in cases provided by the contract or by law. Remuneration is deemed tacitly agreed if, according to the circumstances, the performance of the act is expected only for remuneration — a rule of particular importance for an executive manager, since the nature of his activity excludes gratuitous service by itself. If the amount of remuneration is not determined, then, where any fee scale exists, fee-based remuneration is deemed agreed; likewise, where no fee scale exists, customary remuneration applies. In compensation structuring this means that the fixed remuneration, the rules on bonuses and other incomes must be expressly written into the contract; otherwise the risk of customary market remuneration arises.
Accountability and Confidentiality
The mandatary must give the mandator necessary information and, at the latter's request, provide reports on the progress of performance of the mandate, and after completion deliver an account. For an executive manager, this defines the basis of regular activity reporting: the company may at any time request progress reports, and upon completion of the mandate the executive delivers a full account. Importantly, an agreement by which the mandatary's duties to give information, reports and the account are limited or excluded in the future requires written form — an oral agreement restricting accountability is ineffective. At the same time, the mandatary must not disclose facts known to him in the course of his activity whose confidential keeping the mandator is legitimately interested in, unless a duty of disclosure exists on the basis of law or the mandator permits the disclosure. This duty protects the company's trade secrets, strategic plans and negotiation details.
It is particularly significant that the duty not to disclose facts survives the termination of the contractual relationship. The executive manager retains this obligation after dismissal or completion of the contract — a former director may not use information received while working at the company for a new employer or for his own business.
Termination of the Contract
Either party may terminate the mandate contract at any time, and an agreement waiving this right is void — this is an imperative rule that cannot be circumvented by contract. If the mandatary terminated the contract at a time when the mandator was deprived of the possibility to secure his interests otherwise, the mandatary must compensate the damage caused by the termination, except where he had a significant ground for it. If the contract is terminated by the mandator, he must reimburse the mandatary all necessary expenses incurred in performing the entrusted act, and, if the contract was for remuneration, pay remuneration in proportion to the work performed. Upon dismissal of an executive manager, these rules determine both the remaining remuneration and the reimbursement of incurred expenses.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
Which contract form suits an executive manager in Georgia?
The Civil Code mandate contract, under which the mandatary performs one or more acts in the name and at the expense of the mandator; the corporate form of appointment as director is determined by the Law on Entrepreneurs.
When is remuneration deemed tacitly agreed?
If, according to the circumstances, performance is expected only for remuneration; where the amount is undetermined, fee-based remuneration applies where a fee scale exists, and customary remuneration where none exists.
Can accountability be limited orally?
No — an agreement limiting or excluding the duties to provide information, progress reports and the final account requires written form.
Does the confidentiality duty survive the end of the relationship?
Yes — the duty not to disclose facts exists after the end of the contractual relationship as well, unless a legal disclosure duty applies or the mandator permits disclosure.
What happens upon termination at any time?
The parties may terminate the contract at any time and a waiver of this right is void; upon termination by the mandator, he reimburses necessary expenses and, in a for-hire contract, pays remuneration in proportion to the work performed.
How We Help on Legal.ge
Drafting an executive service agreement properly requires joint consideration of the mandate rules, remuneration presumptions, accountability format, confidentiality duties and termination risks. Our team will help prepare the contract draft, write the remuneration structure, set the reporting schedule and formulate confidentiality-protecting clauses. Contact us on Legal.ge — we will draft your executive manager's agreement protecting both the company's and the manager's interests.