REMUNERATION OF COMPANY OFFICERS
For a corporate officer, the remuneration is freely set by the partners. No minimum is required by law and, contrary to what is provided for an employee, it is possible to consider that the functions are not remunerated.
The corporate officer can also benefit from an employment contract which will allow him to obtain social benefits similar to those of an employee of the company, but the combination of these two functions is only possible under certain conditions that law has well defined.
Thus, after having seen the main differences between an employment contract and a corporate office, we will observe the tax and social situations of corporate officers assimilated to self-employed workers or assimilated to employees.
Finally, to finish, we will see what are the necessary conditions to combine an employment contract and a corporate office.
I - The differences between social mandate and employment contract
First of all, a person with a corporate office should have the status of a management body. In the performance of his duties, the corporate officer, unlike the employee, is not linked to the company by a relationship of subordination.
Consequently, a corporate office can be formalized in the company's articles of association or in the minutes of the meeting, it is framed by the Commercial Code. On the contrary, the employment contract must be a written act signed by the employer and the employee. This contract is very precisely framed by labor law.
- Social protection: A person with an employment contract can claim unemployment insurance and must therefore contribute as such, which is not the case for a corporate officer.
When the corporate officer is affiliated to the self-employed workers scheme, no payslip must be drawn up for his remuneration.
- Remuneration: It is freely set by the partners. No minimum is provided for by law and it is possible to provide that the functions are not remunerated. On the other hand, for an employment contract, the law provides for a compulsory minimum remuneration (S.M.I.C.).
- Termination of functions: The manager cannot claim the benefits provided for by the employment law for employees (in particular severance pay). But statutory provisions may provide for compensation.
II - Corporate officers assimiled to self-employed
The corporate officers subject to the social security system for self-employed workers are:
- EURL managing partners;
- SARL majority managers;
- SNC partners.
Note: A SARL manager has a majority if he holds, with his spouse and minor children, more than 50% of the share capital or voting rights of the company.
- The EURL sole associate manager may decide to grant himself compensation for his duties, but this is not mandatory. It is thus possible to exercise his functions free of charge. He sets himself his own remuneration.
However, it should not be so excessive as to lead the company to bankruptcy. In this case, its responsibility would be engaged.
- The remuneration of the SARL manager can be fixed by the general meeting which appoints him or by the articles of association. It can also be fixed by a subsequent decision (ordinary general meeting).
The decision to take excessive remuneration by the majority manager can constitute an abuse of the majority, or even an abuse of social property.
- Regarding the managers of SNC, no legal provision provides for the fixing methods. The articles of association can therefore either specify the method of calculating this remuneration (fixed remuneration, proportional to profits or turnover, or mixed), or leave it to a collective decision of the partners taken by a majority that they determine.
- Social and fiscal status of remuneration
Social status: The directors mentioned above are subject to the social regime for self-employed workers. To know the advantages and disadvantages of this plan (compared to the employee plan) we invite you to refer to the article entitled "SOME INFORMATION TO HELP BUSINESS LEADERS TO CHOOSE THEIR SOCIAL STATUS" on our website.
- EURL sole associate manager: When EURL is subject to income tax, the sole managing partner is subject to income tax on the profit made. Depending on the activity carried out, this will be a BIC or a BNC. Remuneration is not deductible from taxable profit.
When the EURL is subject to IS, the sole associate manager is subject to income tax in the salary and wages category for his remuneration.
- SARL majority manager: The remunerations received by the SARL manager subject to corporation tax are subject to income tax in the category of salaries and wages.
When the company is subject to income tax, the remuneration received by the associate manager is reintegrated into its share of profit and is therefore taxable in principle in the BIC category.
- SNC partner: His remuneration is linked to the share of the profits due to him as a partner, it is therefore non-deductible. The remuneration is taxed with income tax in the category of BIC, BNC or BA.
III - Corporate officers socially assimilated to employees
- The leaders concerned
The directors concerned are:
- EURL non-associate managers;
- Minority or egalitarian managers of SARL;
- The chairmen of SAS and SASU and the general managers;
- The chairmen of the board of directors, chairmen of the supervisory board and managing directors of SA;
- The unassociated and remunerated manager of SNC.
- Procedure for determining the amount of remuneration
- The remuneration of the non-associate manager of EURL is fixed in the articles of association or in a unilateral decision of the sole shareholder. This decision must be recorded in the special register of decisions of the sole shareholder.
- The remuneration of minority or egalitarian managers of SARL is fixed under the same conditions as if he were the majority manager, i.e. by the general meeting which appoints him or by the articles of association. It can also be fixed by a subsequent decision (ordinary general meeting).
- The chairmen of SAS and SASU and the general managers receive remuneration that must be set out in the articles of association or when the decision on their appointment is made by the competent body. At the time of the vote, and in the silence of the statutes, the associate chairman can take part in the vote of his remuneration.
- For the chairmen of the board of directors, chairmen of the supervisory board and managing directors of SA:
- In S.A. with a board of directors, the directors receive a fixed annual sum, called attendance fees (“jetons de présence”). The annual amount is decided by the general meeting and the board of directors decides on their distribution among the directors. The chairman of the board of directors will be the only one able to receive, in addition to attendance fees and any exceptional remuneration for his duties as chairman. It is decided by the board of directors.
- In S.A. managed by a management board and a supervisory board, the remuneration of the members of the supervisory board is set according to the same system as that provided for the directors (see above).
Members of the management board receive compensation for their duties, which is set by the supervisory board.
- The unassociated and remunerated manager of SNC: The amount or method of calculating his remuneration may be provided for in the articles of association. Otherwise, the partners will have to make a decision to fix it.
- Social and fiscal status of remuneration
The executives referred to above are assimilated to employees affiliated to the general social security scheme, their net remuneration is calculated on a pay slip which is given to them monthly.
However, it should be noted that they are treated as executives, that they do not contribute to unemployment insurance and that they are therefore not covered for this risk.
From a tax standpoint, their net remuneration must be declared for income tax in the category of salaries and wages.
However, there is a specific feature in S.A., the attendance fees received by directors (in S.A. with a board of directors) and members of the supervisory board (in S.A. with management board and supervisory board), are not subject to social contribution, except the social package (“forfait social”) and are taxable in the category of income from movable capital.
IV - Combination of a social mandate and an employment contract
This accumulation allows the manager to benefit from the advantages granted to other employees of the company (collective agreements, unemployment benefits, etc.) but it can be applied only under certain conditions:
- The position held as an employee must correspond to an actual job within the company;
- The tasks performed as an employee must correspond to technical functions distinct from those performed as a manager;
- The manager concerned by the combination must be placed in a state of subordination vis-à-vis the company;
- The two remunerations paid (mandate and salary) must be distinct.
It is impossible to combine an employment contract with a corporate office for an associate manager in an SNC because he can never be an employee of the company.
In the S.A.R.L. this combination seems possible only when the manager is a minority because the relationship of subordination cannot be demonstrated when a manager has a majority.
In S.A. with a board of directors, only an employee already in office can become a director. Consequently, an administrator who does not hold a post will not be able to obtain it.
As a conclusion: we note that no corporate officers can benefit from the unemployment insurance provided by "Pole Emploi" service, but that they have possibility of subscribing an optional "loss of employment" insurance contract from the GSC association or another insurance company.