General Director Agreement in Russia

30.08.2016

In some countries, like Finland, the managing director or CEO of a company or corporation is not considered, from a legal point of view, an employee of the relevant company.

The Russian labour law follows the other path and subjects the general director to the Russian Labour Code and other labour regulations. At the same time, the Labour Code provides a number of special provisions applicable to the general director that are good to be aware of in particular at the stage of concluding an employment agreement with the general director of a Russian company.

LLC and JSC

The position of the general director of a limited liability company and a joint stock company is almost equal from the point of view of the labour law. The only difference is related to the signing of the employment agreement. In a limited liability company it is usually the chairperson of the general meeting of participants (shareholders) in which the general director was appointed that signs the agreement, while in a joint stock company it is usually the chairman of the board of directors that signs the agreement on behalf of the company.

Term of employment

The Russian Labour Code allows, without any specific grounds, to conclude fixed-term agreements with the general director of a Russian company. The term of the employment agreement can further be pre-determined by the articles of association of the company. In the latter case, the employment agreement should make reference to the articles of association.

Trial period

For ordinary employees, the maximum trial period in Russia is three (3) months. However, for the general director, the trial period can be extended to six (6) months.

Secondary employment

According to the Labour Code, the general director is prohibited from taking a second job without preliminary consent of an authorized body of the employer, such as the board of directors.

Grounds for termination

The Labour Code provides three additional grounds for terminating an employment agreement with the general director, namely:

(1) The company has become insolvent;
(2) The relevant company body has taken a decision thereof;
(3) On the basis of grounds specified in the agreement.

The second item means that the employment agreement with the general director can be terminated by the company unilaterally at any time and without any specific grounds. However, in such case the general director is entitled to a compensation equal to or greater than the medium salary of three (3) months. The third item means, on the other hand, that the company is able to specify grounds for termination in advance, such as failure to reach sales targets or similar.

MK-Law assists with the preparation of employment agreements for general directors in Russia as well as with terminating employment agreements when needed.

Further information and inquiries:

Jan Långstedt
Partner, attorney
Tel.: +358400538022
Email: jan.langstedt@mklaw.fi