Managing director is appointed by the board of directors and according to the Finnish Limited Liability Companies Act. The managing director is responsible for the day-to-day operations of the company pursuant to the instructions and orders given by the board of directors. Moreover, the managing director shall ensure that the accounts of the company are in compliance with the law and that the company’s affairs have been arranged in a reliable manner.
The managing director of a Finnish limited liability company is not considered as an employee and therefore the Finnish Employment Contracts Act is not applicable to managing directors. Similarly, Working Hours Act and Annual Holidays Act are not applicable either. The terms and conditions of the managing director’s engagement are based on a managing director agreement, in addition to which, the Finnish Limited Liability Companies Act regulates the managing director’s position as an organ of a company.
So, the terms and conditions of the managing director’s engagement are largely based on the agreement between the company and the managing director. Naturally, all the abovementioned laws can be incorporated to the agreement if so decided by the parties. Whether, and to what extent, this makes sense varies on a case-by-case basis.
Because the Finnish Employment Contracts Act is not applicable to managing directors, great care should be taken when drafting the managing director agreement. Important clauses in the agreement include remuneration, confidentiality, IPRs, non-competition and non-solicitation, and termination.
