In Luxembourg, there is no law banning a person from concurrently holding a corporate mandate (director/manager, managing director in charge of daily management) as well as an employee position. Nevertheless, case law has provided a legal framework for this by imposing four cumulative conditions for the concurrent holding of both activities:
- Existence of distinct technical duties: the employment contract must refer to technical duties different from those executed under the coporate mandate. Therefore, the person who wishes to benefit from the concurrent holding of both activities will have to prove the existence of specific professional duties.
- Existence of a relationship of subordination in the execution of the employee activities: the employer must be able to give instructions and orders to the director, control the proper execution of its employee’s activity and impose sanctions if necessary.
- Payment of a salary: the distinct technical duties as defined under the employment contract must be compensated for by the payment of a salary. Further, the remuneration must be different from the one received under the corporate mandate. Finally, the employee will not be able to waive the payment of this salary.
- The employment contract must be real and serious, must not be concluded in violation of the law and only aims to benefit from protection against dismissal and other favourable provisions provided by the Labour Code.
Currently, even though in most cases the situation seems to be theoretically well defined, the interpretation of the conditions given by the courts is not consistent and differs, especially regarding managing directors in charge of daily management. Indeed, case law is based on a range of indications appreciated in concreto in order to determine whether the conditions for the concurrent holding of both activities are fulfilled.
In order to assess the possibilty of a concurrent holding, the courts mainly rely on two notions, namely (i) the notion of distinct technical duties and (ii) the existence of a relationship of subordination.
Therefore, the courts tend to reject a concurrent holding for a managing director in charge of daily management if the following do not exist:
- distinct technical duties when there is no specific description of duties in the employment contract;
- a relationship of subordination when the director is able to represent the company before the courts or the reliance on the board of directors for the execution of some tasks.
This situation seems to be verified even when the worker is affiliated to the social security system as an employee, signs an employment contract, is a minority shareholder of the company, is part of a board of directors/managers, is not the beneficiary of the business licence, has fixed working hours and receives monthly payslips with fixed remuneration.