EXECUTIVE DIRECTOR AND SENIOR OFFICER. ADVISORY ON DUAL-CAPACITY SITUATIONS
Where the same individual holds a seat on the board of directors and simultaneously performs senior management functions —such as chief executive officer or chief financial officer—, one of the most complex and sensitive situations at the intersection of corporate law and employment law arises. The coexistence of two distinct legal relationships with the same company —one of a corporate-organic nature, derived from membership of the governing body, and another classified as a special senior management employment relationship— is not an uncommon anomaly but a regular feature of the business landscape that bears directly on the legal certainty of the company, the officer and its shareholders. Its proper structuring requires specialised, rigorous and multidisciplinary advice.
The correct characterisation of the relationship determines issues of singular importance. The competent jurisdiction, the applicable compensation regime, the financial consequences of an eventual departure and the validity of non-compete and lock-in covenants are all shaped by the initial assessment. Case law has consolidated three principal scenarios. The first is the prevalence of the corporate relationship, where integration into the governing body absorbs the special senior management employment link and the dispute is channelled into the corporate and civil sphere. The second is the coexistence of both relationships, where the ordinary employment relationship is distinguishable from the board position and each operates under its own legal regime. And the third is the survival or suspension of a pre-existing relationship, in exceptional cases where the prior employment link may continue or be held in abeyance depending on the terms agreed and the prevailing circumstances. The absence of foresight or any ambiguity in the structuring of these relationships significantly increases the risk of litigation and creates uncertainty regarding the rights and obligations of the parties.
WHERE THE CORPORATE DIMENSION AND EMPLOYMENT LAW CONVERGE IN A SINGLE INDIVIDUAL
The convergence of both legal dimensions in a single director-officer gives rise to recurring areas of tension that demand coordinated treatment, technical rigour and an approach tailored to the specific circumstances of each relationship. The characterisation and compatibility of the legal relationships constitutes the central question in any engagement in this field, given that a flawed assessment compromises the entire strategy. The remuneration regime of the executive director is subject to the requirements of the Spanish Companies Act (Ley de Sociedades de Capital) —approval by the general meeting, report of the remuneration committee, inclusion in the articles of association—, whereas remuneration as a senior officer is governed by Royal Decree 1382/1985 and by the contractual autonomy of the parties. Consistency between both frameworks is essential to prevent challenges and tax contingencies.
The termination of the relationship raises equally critical questions as to whether labour, corporate or dual compensation is due, and as to which court will have jurisdiction over the claim. Duties of loyalty and non-competition must be structured in full alignment with the director’s corporate position and senior management status, within the limits imposed by each legal regime. The duality of roles may trigger duties of abstention and disclosure obligations to the board where the officer’s personal interest conflicts with the corporate interest, giving rise to situations in which the proper management of the conflict of interest is decisive for the protection of both the director and the company. In an insolvency context, the classification of the director-officer’s claim and the potential treatment of that individual as a person with a special relationship to the debtor add a further layer of complexity requiring differentiated legal treatment.
AN ENGAGEMENT SPANNING FROM STRUCTURING TO LITIGATION
Lopezmarques advises on dual-capacity situations through teams that bring together rigorous expertise in both corporate law and corporate governance and in senior management employment law. That capacity for cross-disciplinary integration makes it possible to anticipate risks, design legally coherent solutions and effectively defend the interests of the client —whether the company, its governing bodies or the officer personally— before any court.
The engagement encompasses, first, the design of the contractual and corporate architecture from the moment the officer joins the board or is assigned executive functions, including the drafting and review of senior management contracts, executive director agreements and non-compete and lock-in covenants, ensuring their consistency with the corporate position and their validity under applicable law. It extends to the preparation of a risk assessment through the legal characterisation of the relationship, the analysis of existing corporate and contractual documentation and the evaluation of the remuneration framework. It equally covers the management of the director-officer’s departure —negotiation, execution of separation agreements and identification of viable claims and the procedural avenues it is appropriate to pursue, avoiding incompatible or poorly structured claims—, as well as representation before the labour courts and before the civil and commercial courts in disputes arising from termination, remuneration or breach of covenants. The engagement is directed, in every case, at maximising the legal certainty of the client’s position in light of the relationship found to prevail.
