16 Exclusive representative authority

An important building block leading to the conclusion that the literature erroneously assumes that the current company law system results in remuneration determined by resolution possibly varying from remuneration included in the employment contract is that the statutory regulations governing the appointment, dismissal and remuneration of executives in my opinion deviate from the normal representation regulations. This statutory limitation affects the entire representative authority of the board, as follows from Art. 2:130.1 DCC. The belief that there is a statutory limitation on the extent or the autonomy of the representative authority based on Art. 2:130.3 DCC is in my opinion thus also incorrect. The body that is authorised to determine the remuneration on the basis of Art. 2:135.4 DCC is the only one that can bind the company to a certain remuneration. This then means that the body in question, in my opinion, also has the authority – as all other bodies are excluded – to enter into remuneration agreements with the executive on behalf of the company.

When entering into an employment contract/contract for services, the body with the authority to appoint in principle has the authority to sign these documents with regard to the appointment, the period of notice and other topics unrelated to remuneration provisions. If a different body holds the authority to enter into employment contracts than the body with the authority to determine remuneration, the latter body must also sign the employment contract/contract for services in order to bind the company legally to these remuneration provisions.

Although the current statutory regulations are sufficient, I would recommend that the legislator adapt Art. 2:135.4 DCC to remove the ambiguity outlined above. The first step would be to explicitly include that Art. 2:135.4 DCC encompasses a representation provision that departs from the regular representation regulations included in Art. 2:130 DCC. In line with this, the term ‘determine’ can be abandoned. This term dates from a time when the general meeting would determine unilaterally what the executive compensation would be. The legislator could make clearer that the body appointed within the meaning of Art. 2:135.4 DCC has the authority to bind the company to a certain remuneration, either by resolution or by contract.