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I am an administrator of a company : should I choose a mandate or a labor contract?

As it is well known, Law nr. 31/1990 on trading companies in it’s articles nr. 7 and nr. 8 disposes that the Articles of Association should contain the identification data of the person/persons who will have the power to represent the company.

In other words, the administrator/administrators have to be empowered from the very beginning, from the foundation process of a company, otherwise, according to article 46:

“When the incorporating instrument does not contain the particulars required by the law […] the delegated officer, ex officio or at the request of any persons presenting an application for intervention, shall by interlocutory judgment reject the registration application, providing reasons for doing so […]”

Empowered through the Articles of Association, the administrators’ duties and liabilities are governed by the provisions relating to the mandate and by those specifically stipulated by Law nr. 31/1990.

Once the foundation process is finished, the administrator can also make a labor contract with the company except for the case of a joint-stock company and of a limited partnership by shares. According to the common Order number 1.832/856/2011 of the Labor, Family and Equal Chances Minister and The National Institute of Statistics, the administrator of a company can be hired and make a labor contract, the code of this activity is nr.: 242111.

The only shareholder of a limited liability company who is also the administrator can the same way be hired and make a labor contract.


Important!: When choosing one of the two possibilities, the differences between the two legal institutions (mandate contract and labor contract) must be taken into consideration.

The taxation of the incomes (based on a mandate and on a labor contract) is similar. A quota of 16% is applied to the base of calculation. This base is determined as a result of deducing the madatory contributions from the gross annual salary.

In order to tax the salary, the following madatory contributions are deduced:

  • contribution to the social insurances found;
  • contribution to the health insurances found;
  • contribution to the health vacation and allowance found;
  • contribution to the unemployment benefit found;
  • contribution to the work accident and work illnesses insurance found;
  • contribution to the found for the assurance of salary debts;

For the taxation of the administrator’s incomes all madatory contributions are payed exept for: the contributions to the unemployment benefit found, the contributions to the work accident and work illnesses insurance found and the contributions to the found for the assurance of salary debts.

An other important aspect to mention is the mechanism of the two kind of contracts:

  1. The mandate contract is the instrument through which one of the parties (mandatory) obliges to make one or more privities in the behalf of the other party (mandator). When making a mandate contract the person of the mandatory is very much taken into consideration, the contractual relationship is based on trust and specific qualities of the mandatory. Due to this, the mandate can be revoked by the mandator once all the parameters related to the personality of the mandator do not stand anymore.

This juridical construction seems to be suitable for the legal relationship between an        administrator and a company. It is normal that the company, through the statutory authority, has the power to revoke the administrator since it is the competence of the statutory authority given by the law to make changes in the Article of Association (through which the administrator was empowered).

In case of a causeless and unexpected revocation, the administrator can sue the company for compensation, but he cannot ask to be reassigned in his position.

  1. Through the labor contract a natural person (employee) obliges him-, herself to work for and under the authority of the employer in the exchange of remuneration called salary.

The employee has the benefit of protective measures of the Labor Code. If fired unfounded or not for one of the reasons specified by the law, the employee can sue for compensation and can even ask to be reintegrated in his position.

A problem occurs when the statutory authority wants to change the administrator hired with a labor contract. This change can be made any time in the Articles of Association, but the Labor Code does not admit such motivation ( the will of the statutory authority) for the resolution of the labor contract. The resolution of the labor contract can happen only with the procedure and in the cases strictly listed by the law. The decision of a statutory authority to revoke the administrator is not on the list of the Labor Code.

As a conclusion, it seems like a labor contract is more safe for an administrator and less flexible for the statutory authority. But any need to provide more stability through a mandate contract can be fulfilled by the contractual freedom of the parties.

Borbély Erika
Legal adviser, Harghita Business Center – Odorheiu Secuiesc

Bertici Edith
Lawyer, Cluj-Napoca

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