Employing company executives (Directors, Top Managers, CEOs, CFOs) differs significantly from hiring a regular employee. Under Georgian legislation, a director holds a dual status: on one hand, they can be an employee under the Labor Code, and on the other, the head of the company's representative body under the "Law on Entrepreneurs." This duality creates specific legal risks, particularly regarding dismissal, liability, and compensation. An executive employment contract is not a standard template; it is a complex agreement regulating fiduciary duties, bonus systems, and post-contractual restrictions.
Corporate and labor law experts presented on the Legal.ge platform offer high-level services in drafting and negotiating top management contracts. Services include:
- Drafting Hybrid Contracts: Creating contracts that combine labor and corporate elements to protect both the company's interests (ease of dismissal) and the director's guarantees.
- Structuring Compensation and Bonuses: Outlining KPI-based remuneration, Stock Options, and "Golden Parachute" provisions.
- Confidentiality and Non-Compete Agreements (NCA): Developing strict conditions prohibiting the director from joining a competitor or poaching clients after departure.
- Defining Fiduciary Duties: Detailing duties of "good faith" and "care" to prevent conflicts of interest.
- Severance Packages: Negotiating compensation terms upon termination of the relationship to avoid litigation.
The importance of executive contracts becomes evident at critical moments. For example, a bank hires a foreign CEO who needs a guarantee of substantial compensation in case of a change in shareholders. Conversely, the company wants to protect itself from a dismissed director taking strategic clients with them. Disputes are common where a director is dismissed under the "Law on Entrepreneurs" (loss of trust), but they demand reinstatement or compensation based on the Labor Code. A correctly drafted contract eliminates such ambiguity.
In Georgia, this field is regulated by the "Organic Law of Georgia - Labor Code," the "Law of Georgia on Entrepreneurs," and the Civil Code. Supreme Court practice indicates that the relationship with a director is predominantly corporate-legal, meaning that protective norms of the Labor Code, such as overtime pay or complex dismissal procedures, do not apply unless otherwise stipulated in the contract. This freedom allows parties to agree on flexible terms.
The process begins with an audit of the parties' interests. The lawyer clarifies what is priority for the company (stability or flexibility) and what the candidate requires. They prepare a draft contract and actively participate in negotiations. Special attention is also paid to tax aspects, as high salaries and bonuses require tax optimization.
On Legal.ge, you will find professionals who understand the nuances of corporate governance. A top manager's contract is the foundation of a company's success; our specialists will help ensure this foundation is solid and legally sound.
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