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What is a management agreement? It is a contract for services in which a management BV or holding company provides administrative or management services to another BV, usually the operating company, in exchange for remuneration. Consequently, the director-major shareholder does not work as an employee for the operating company, but invoices through their own holding company. This saves on payroll tax and offers structural advantages, but it also entails a risk: if the tax authorities or a court view the relationship as a disguised employment relationship, the rules of employment law will still apply.
The short answer
- Form: contract for services (Art. 7:400 BW), not an employment contract.
- Parties: the management BV/holding company provides services to the operating company.
- Core: the Director-Major Shareholder performs board and management duties, the holding company issues invoices.
- Remuneration: a management fee, often monthly, excluding VAT.
- Risk: in the case of a de facto hierarchical relationship, it may still be classified as employment.
What exactly is a management agreement?
A management agreement stipulates that one legal entity (the management BV or holding company) provides administrative and management services to the other (the operating company). The natural person behind the holding company—the Director-Major Shareholder—actually performs the work but is not legally an employee of the operating company. The contractual relationship exists between two BVs.
This is the standard structure in a holding company. The director-major shareholder holds their shares through the holding company, and that holding company returns the management to the operating company. In this way, liability, pension accrual, and assets remain separate from the operational business.
The difference compared to an employment contract
The legal distinction is fundamental. An employment contract has three characteristics: work, wages, and a relationship of subordination (Art. 7:610 BW). In a management agreement, the relationship of subordination is absent in principle — the holding company provides a service as an independent contractor, not as a subordinate.
- Protection against dismissal. An employee enjoys protection against dismissal; a contractor does not. The agreement ends in accordance with the agreed termination rules.
- Payroll tax. No payroll tax is withheld on a management fee; the holding company invoices with VAT and remits it itself.
- Continued payment during illness. The operating company is not required to pay wages during the illness of the Director-Major Shareholder; the holding company handles this itself.
- Liability. The holding company is the contracting party, which limits the personal liability of the DGA (except for directors' liability).
The hierarchical relationship and VAR risk
The main point of attention is the hierarchical relationship. The VAR (Declaration of Employment Relationship) was abolished in 2016; since then, the Tax and Customs Administration assesses the actual employment relationship itself, partly on the basis of the DBA Act. If an assignment is stated on paper, but the director-major shareholder works in practice as a subordinate employee, the tax authorities may still levy additional payroll tax.
For a director-major shareholder with a substantial interest (usually a shareholding of 5% or more), the customary salary scheme generally applies within their own company instead of an employment relationship. The risk arises primarily when the director-major shareholder provides management services to an operating company in which they have no or only a small interest, or when the actual working relationship closely resembles salaried employment. Therefore, clearly define the independence: no fixed working hours, discretionary role, replaceability, and entrepreneurial risk.
When do you use a management agreement?
- Holding structure. The director-major shareholder manages the operating company through his holding company.
- Multiple shareholders. Each director-major shareholder provides management to the joint operating company through their own holding company.
- Interim management. An external director temporarily provides services through his own private limited company.
- Tax optimization. Separation of assets, pension, and operational risk.
Practical example
Sanne is the sole shareholder of her holding company, which holds 100% of the shares in the operating company Bouwtechniek BV. Instead of becoming an employee of Bouwtechniek, her holding company enters into a management agreement with the operating company. The holding company invoices €8,000 per month plus VAT. This way, the profit remains within the holding company, Sanne can determine her own salary (the customary wage), and her private assets are separated from the operational risks.
Honest recommendation
A management agreement is the standard in a holding structure and certainly worth properly documenting. In a simple situation—one director-major shareholder, one operating company, 100% interest via the holding company—you can often manage on your own with a solid template; a lawyer is not strictly necessary in such cases. However, have it reviewed as soon as there are multiple shareholders, the director-major shareholder has little or no interest in the operating company, or the hierarchical relationship is questionable. In such cases, the risks of disguised employment and director liability outweigh the cost of advice.
Read more: drafting a management agreement and the pitfalls. You can have it drafted immediately via the management agreement.
Frequently Asked Questions
A contract for services in which a management BV or holding company provides administrative and management services to another BV, usually the operating company, in exchange for a management fee. The director-major shareholder works through his holding company, not as an employee.
In an employment contract, work, wages, and a hierarchical relationship are present. In a management agreement, the hierarchical relationship is absent: the holding company provides services as an independent contractor. There is no protection against dismissal, no payroll tax, and no continued payment of wages during illness through the operating company.
If the director-major shareholder effectively works as a subordinate employee, the Tax and Customs Administration may classify the relationship as disguised employment and levy additional payroll tax. Since the abolition of the VAR, the tax authorities assess the actual employment relationship themselves under the DBA Act.
No. The Declaration of Employment Relationship was abolished in 2016. The assessment of the employment relationship is now conducted via the DBA Act, in which the factual circumstances are decisive, not just the text of the contract.
Two legal entities: the management BV or holding company as contractor and the operating company as client. The director-major shareholder actually performs the work but is not legally an employee of the operating company.
Not regarding the management fee. The holding company invoices with VAT and remits it itself. For the salary of the Director-Major Shareholder in their own holding company, the customary salary scheme generally applies, not employment with the operating company.
Especially in a holding structure where the director-major shareholder manages the operating company through his holding company, with multiple shareholders each providing management through their own holding company, and in interim management via a private limited company.
