An Executive Service Agreement is a specific contract regulating the relationship between a company and its top manager (director). Unlike a standard employment contract for regular staff, this document focuses more on management powers, strategic goals, fiduciary duties, and liability. In Georgia, a director's relationship with a company can be regulated by either an employment contract or a civil (mandate) service agreement. The choice depends on the nature of the relationship. A properly drafted agreement clearly defines the scope of the director's authority, conflict of interest rules, and, most importantly, liability issues, protecting both the company and the director from future disputes.
What Does Executive Service Agreement Drafting Cover?
Specialists on Legal.ge offer tailored drafting of director contracts, which includes:
- Defining Powers and Duties: Detailed description of what the director can do independently and for which issues they need partner approval (e.g., transactions above a certain value).
- Defining Fiduciary Duties: Explaining duties of "care" and "loyalty" in accordance with the "Law on Entrepreneurs" so the manager understands their responsibilities precisely.
- Termination Clauses: Mechanisms for ending the contract, notice periods, and Severance Pay for various scenarios (e.g., voluntary resignation vs. termination for cause).
- Confidentiality and Non-Compete: Strict conditions prohibiting the director from moving to a competitor or using company secrets after leaving the post.
- Liability Insurance (D&O Insurance): Provisions regarding Directors and Officers liability insurance, protecting the manager from personal financial loss for errors made while performing duties.
Real-World Scenarios When You Need This Service
This agreement is essential when:
- Appointing an Independent Director: When an owner hires an external manager, strict control mechanisms and accountability systems are needed.
- Attracting Investment: Investors often require long-term service agreements (rather than standard employment contracts) with key management, outlining vesting and non-compete clauses.
- International Expansion: When appointing a foreign director, an agreement considering tax residency and international norms is required.
- Protection from Liability: A director needs assurance that they will not be held personally liable for taking good-faith business risks. The agreement balances this.
Georgian Legal Framework and Regulations
Relationships with directors are regulated by the Law on Entrepreneurs, which establishes the director's status, duties, and liability. It is important to note that under Georgian Supreme Court practice, a relationship with a director can be either employment (subject to the Labor Code) or mandate (subject to the Civil Code). In the case of a mandate relationship, parties have more freedom regarding termination and setting conditions than under the strict Labor Code. Correct qualification and the appropriate contract form are critical in case of a dispute.
Service Process
Drafting an executive agreement on Legal.ge involves:
- Negotiation: Agreeing on key terms (Term Sheet) between the company and the director.
- Choosing Legal Form: Deciding between an employment vs. service agreement.
- Drafting: Preparing an individual contract that considers specific risks.
- Review and Signing: Finalizing and executing the document.
Why Choose Legal.ge?
The director's agreement is the most important contract in a company. A standard template will not suffice here. Corporate lawyers on Legal.ge will help you create a document that protects the company's interests, ensures director accountability, and at the same time is fair and motivating for the manager.
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