Drafting a management agreement: this should be included

Drafting a management agreement involves carefully defining the services provided between the management BV and the operating company: which tasks, which remuneration, which notice period, and which liability. The most important aspect is that the agreement clearly constitutes a contract for services and is not a disguised employment relationship, and that remuneration, termination, and directors' liability are watertight. Below is a list of exactly what should be included.

The short answer

1. Parties and tasks: the holding company provides administrative and management services to the operating company.
2. Remuneration: management fee, amount, term, VAT and expenses.
3. Independence: no hierarchical relationship, own interpretation, entrepreneurial risk.
4. Termination: notice period and early termination.
5. Liability: limitation, plus the limits of directors' liability.
6. Non-competition: optional non-competition and non-solicitation clause.

Drafting a management agreement: the building blocks

A good agreement begins with a clear description of the parties and the services. State that the holding company (contractor) provides administrative and management services to the operating company (client), and that a specific person—the Director-Major Shareholder—actually performs those services. Describe the tasks concretely: day-to-day management, strategy, finance, personnel, or commercial.

The compensation

The remuneration — the management fee — is a key provision. Specify:

• Amount and term. For example, a fixed amount per month, excluding VAT.
• VAT. Management services are in principle subject to VAT; state that the fee is exclusive of VAT.
• Expenses. Which costs (travel, telephone, entertainment) are reimbursed and how.
• Indexation. Whether and how the fee is adjusted annually.
• Invoicing and payment terms. For example, monthly in advance, payment within 14 days.

Note the tax correlation: the fee is taxed under corporate income tax in the holding company, and the customary salary scheme applies to the salary that the director-major shareholder draws from his holding company.

Establishing independence

To prevent the relationship from being viewed as an employment relationship, the independent status of the contractor must be clearly evident. Include provisions that emphasize entrepreneurship:

• No mandatory working hours or attendance requirement.
• Independent interpretation of the work, no instructional authority regarding the manner of execution.
• The holding company bears the risk itself in the event of illness or inability to perform.
• The holding company works (or is permitted to work) for multiple clients, where appropriate.
• Invoicing with VAT instead of a net salary payment.

Cancellation and termination

Regulate how and when the agreement ends. Without a termination clause, the open norms of contract law apply, which leads to disputes. Specify:

• Duration. For a fixed or indefinite period.
• Notice period. For example, three or six months.
• Interim termination. In the event of urgent reasons, bankruptcy, or dismissal as a statutory director.
• Link to directorship. What happens to the agreement if the shareholders' meeting dismisses the director?

Liability and directors' liability

The holding company is the contracting party, which limits the personal liability of the managing director. However, directors' liability (Articles 2:9 and 2:248 of the Dutch Civil Code) remains: in the event of improper management, the director may be held personally liable—also through his holding company. Include a limitation of liability (for example, a maximum equal to the annual fee), but be aware that this does not exclude statutory directors' liability in the event of seriously culpable conduct.

Non-compete and non-solicitation clause

Unlike an employment contract, an assignment does not enjoy statutory protection under Article 7:653 of the Dutch Civil Code; therefore, you can freely structure a non-compete and non-solicitation clause. Consider this especially when the director-major shareholder might start a competing activity after leaving. Make the clause proportionate in terms of duration, geographical area, and scope; otherwise, the court may moderate it.

Practical example

Two entrepreneurs jointly establish an operating company, each through their own holding company. They draw up two identical management agreements: each holding company provides management to the operating company for €6,000 per month excluding VAT, with a three-month notice period and a one-year non-compete clause. In this way, the services and the mutual relationship are comprehensively regulated.

Honest recommendation

For a standard situation involving a single director-major shareholder and one operating company, you can draft a workable agreement using a solid template; a lawyer is not always necessary in this case. However, do engage expert assistance whenever there are multiple shareholders, a non-compete clause is intended to provide genuine protection, or the allocation of liability is a sensitive issue. The provisions regarding termination, liability, and independence are precisely the areas where a mistake can prove costly later on.

Read more: an example with the key provisions and have it drafted: costs and process. You can arrange this immediately via the management agreement.

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