In its judgment of 21 July 2026, Case No. 21 Cdo 838/2026, the Supreme Court considered the validity of an employment contract concluded between a single-member company and its sole shareholder, who was at the same time the company’s sole managing director.
Factual Background
In 2017, the sole shareholder and managing director of the company entered into an employment contract for the position of an international truck driver, signing the contract on behalf of the company as employer and, at the same time, in his own name as employee. The work performed under the employment contract did not overlap with the duties associated with the office of managing director.
The employee subsequently suffered an occupational accident while performing his work and claimed compensation for the resulting harm. The insurer providing the employer’s statutory liability insurance for occupational accidents and occupational diseases refused to provide indemnification, arguing that no valid employment relationship had arisen between the managing director and the employee. The lower courts also considered the employment contract invalid, in particular due to a conflict of interest between the employer and the employee.
Conclusions of the Supreme Court
The Supreme Court confirmed that a member of a company’s statutory body may perform work for the company within an employment relationship, provided that the work performed does not constitute the performance of the duties of the statutory body.
The mere fact that the same person signs the employment contract on both the employer’s and the employee’s side does not automatically render the contract invalid on grounds of a conflict of interest.
Where that person is both the sole managing director and the sole shareholder of a company that has no supervisory board, the Supreme Court held that:
- it is not necessary for that person to notify himself of his intention to enter into a contract with the company;
- by signing the contract in his capacity as managing director, he simultaneously approves it in his capacity as sole shareholder;
- any potential conflict of interest does not prevent that person from representing the company;
- the contract is binding on the company from the outset and does not require subsequent approval.
In such a case, the general rules on conflicts of interest under Section 437 of the Civil Code do not apply.
Requirement for Officially Certified Signatures
At the same time, however, the Supreme Court emphasised that Section 13 of the Business Corporations Act may apply to the employment contract.
A contract concluded between a single-member company represented by its sole shareholder and that shareholder must be made in writing and bear officially certified signatures, unless it is a contract concluded in the ordinary course of business and on terms customary therein.
The purpose of this requirement is, in particular, to prevent subsequent alterations to the content or date of the contract and to protect the legal certainty of third parties, especially the company’s creditors.
A failure to have the signatures officially certified may be remedied subsequently. Such remedy takes effect only prospectively, i.e. from the date on which the formal requirements applicable to the contract were satisfied. At the same time, in each particular case it is necessary to assess whether, notwithstanding the failure to comply with the formal requirements, the purpose of the statutory rule was achieved by other means, for example where there is no doubt as to the content of the contract or the date on which it was concluded.
Practical Implications
The judgment confirms that an employment contract entered into by a sole managing director and sole shareholder “with himself” is not automatically invalid.
When entering into such a contract, however, it is advisable in particular to:
- clearly distinguish the employee’s type of work from activities falling within the competence of the company’s statutory body;
- conclude the employment contract in writing;
- have the signatures officially certified;
- retain documentation evidencing the agreed terms and the actual performance of dependent work.
The Supreme Court set aside the judgments of the lower courts and remitted the case to the court of first instance for further proceedings. The final determination as to the validity of the particular employment contract will therefore depend primarily on the assessment of the requirements under Section 13 of the Business Corporations Act and the circumstances in which the contract was concluded.
HR Legal Update 07,08/2026 here.