What is a director-major shareholder employment contract? Explanation and usage

What is a DGA employment contract? It is the written employment agreement between a private limited company (BV) and its director-major shareholder, stating what the DGA earns, the duties he performs, and what applies in the event of illness, vacation, and departure. A unique aspect of this contract is that the DGA sits on two sides of the table: he is both an employee and (via the shareholders' meeting) an employer. Therefore, additional rules apply, ranging from the recording of remuneration by the shareholders' meeting to the customary wage scheme in payroll tax.

The short answer

• What: the employment contract between the BV and its director-major shareholder.
• Why: legal acts between the BV and its sole shareholder-director must be recorded in writing (Art. 2:247 BW).
• Tax-related: the wage must comply with the customary wage scheme (Art. 12a Wage Tax Act 1964).
• Social security: most director-major shareholders are not insured for unemployment benefits (WW), sickness benefits (ZW), and disability benefits (WIA).
• Position: the director-major shareholder is usually also a statutory director, with their own dismissal regime.
• In addition to the contract: a shareholders' resolution establishing the remuneration.

What is a director-major shareholder employment contract in a legal sense?

Legally, it is simply an employment contract within the meaning of Article 7:610 of the Dutch Civil Code: work, wages, and a relationship of authority. That last element raises questions for a director-major shareholder, because who gives the sole shareholder instructions? The prevailing view is that authority formally rests with the general meeting. The general meeting can give the director instructions and dismiss him, and that is sufficient to classify it as an employment contract.

For payroll tax purposes, the discussion is not even necessary. The employment relationship of a director with a substantial interest is treated as employment. The BV must therefore withhold and remit payroll tax, even if the director-major shareholder holds one hundred percent of the shares.

Two hats: manager and employee

The director-major shareholder typically holds three positions simultaneously, and you must keep them separate:

• Shareholder: owner of (a part of) the shares. Rights and obligations are set out in the articles of association and any shareholders' agreement.
• Statutory director: appointed by the general meeting (Art. 2:242 BW), with directors' liability and an advisory vote at the meeting.
• Employee: party to the employment contract, with wages, vacation days and continued payment of wages during illness.

The employment contract only regulates that third role. The decision to appoint and the dismissal as a director are handled by the general meeting and are separate from the contract. In practice, however, they go hand in hand: a decision by the general meeting to dismiss a director in principle also terminates the employment contract, unless a prohibition on termination applies (for example, during illness) or the parties have agreed otherwise.

Why the BV needs to put it in writing

There are three compelling reasons to formalize the contract:

1. Art. 2:247 BW. Legal acts between the BV and its sole shareholder who is also a director must be recorded in writing, except when they fall within the normal course of business and take place on customary terms. In the absence of recording, the legal act is voidable for the benefit of the company.
2. Determination of remuneration. The remuneration of directors is determined by the general meeting, unless the articles of association provide otherwise (Art. 2:245 BW). A salary increase that only appears in the records therefore lacks a resolution.
3. Proof to third parties. The Tax Authorities, an insurer, a bankruptcy trustee, or a buyer of the company wants to be able to see what has been agreed upon. Without a contract, any discussion regarding wages, pension, or a loan becomes more difficult.

The customary wage scheme

The fiscal core of the director-major shareholder contract is the salary. Pursuant to Article 12a of the 1964 Wage Tax Act, the salary of a substantial shareholder working for his BV must be at least equal to the highest of these three amounts:

• the salary from the most comparable employment;
• the highest salary of the other employees of the BV or an affiliated entity;
• a standard amount that is determined annually (in 2025 €56,000; check the amount for the current year).

The efficiency margin, which previously allowed you to stay below the salary from the most comparable employment, was abolished as of 2023. A lower salary is still possible, but you must demonstrate that it is justified: consider part-time work, a structurally loss-making private limited company (BV), or the start-up scheme for research and development. Document this substantiation and incorporate the deviating salary into the contract itself.

Finally, ensure that you do not replace salary with current account withdrawals. Excessive borrowing from your own company has been taxed in Box 2 since 2023 above a threshold of €500,000.

Social security and pension

Most director-major shareholders are not insured under employee insurance schemes. Pursuant to the 2016 Regulation on the Designation of Director-Major Shareholders, this applies, among other things, if the director, either alone or together with their immediate family, holds sufficient votes to prevent their own dismissal, or if all directors hold approximately equal shareholdings. The consequence: no unemployment benefits (WW) upon the cessation of the business, no sickness benefits (ZW), and no disability benefits (WIA) in the event of incapacity for work.

This makes two things important. Arrange disability benefits yourself, and explicitly agree in the contract on what happens in the event of illness. The obligation to continue paying wages under Article 7:629 of the Dutch Civil Code still applies, but the BV must pay for it itself. Self-administered pension schemes have not been possible since 2017, so if you accrue pension, this is done externally; include this agreement in the contract.

Brief practical example

An installation company consisting of a holding company and an operating company paid out only dividends for years and no wages. During a tax audit, the inspector adjusted the customary wage over several years, resulting in an additional assessment and tax interest. There was no employment contract and no shareholders' resolution, so there was little to substantiate. A contract with a sound justification for the wage level would have made that discussion considerably shorter.

Honest recommendation

You don't always need a lawyer for this. Are you the sole shareholder and sole director, do you work full-time, do you adhere to the standard amount, and do you have no pension scheme, non-compete clause, or bonus agreement? Then a solid template plus a shareholders' resolution in which the general meeting determines the salary will suffice. That will cost you an hour and nothing else.

Be sure to have it drafted or reviewed as soon as something unusual is involved: multiple shareholders or directors, a director-major shareholder employed by the holding company whose costs are passed on to the operating company, a deviating customary salary, a pension commitment, a non-compete clause, or an impending business transfer. In such cases, the contract touches upon the articles of association, the shareholders' agreement, and the tax position simultaneously, and the risk of a costly mistake is real.

Read more: drafting a director's employment contract and having a director's employment contract drafted. You can arrange this directly via the director's employment contract.

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