Hiring C-Level Executives in the Czech Republic: Do You Really Need an Executive Agreement?

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
11.6.2026 | ARROWS law firm

If you are planning to hire a CEO, CFO or other c-level executive in the Czech Republic, this article will give you concrete answers on when you must have an executive agreement by law, when a standard employment contract is enough, and what risks you face if you rely only on appointment resolutions or template contracts. ARROWS Law Firm regularly advises Czech and foreign companies on structuring c-level roles and drafting executive agreements.

Photo shows a lawyer advising on Czech executive governance.

How Czech law views c-level executives and statutory bodies

In order to decide whether you really need an executive agreement, you must first understand how Czech law classifies senior managers. The Czech legal system distinguishes between statutory bodies of a company (for example the managing director, in Czech jednatel , of a limited liability company, or the board of directors of a joint-stock company) and other senior employees.

These other senior employees may have impressive titles such as “Chief Executive Officer” or “Chief Financial Officer” but do not formally act as the company’s statutory body. It is the statutory body that is authorised to act externally on behalf of the company and bears core duties under company law.

These duties include acting with due managerial care and loyalty in the interest of the company. C-level titles themselves are not legally decisive; what matters is whether the individual is registered in the Commercial Register ( Handelsregister ) as a member of the statutory body or other corporate body.

This distinction has very real consequences. Relations with employees, including senior managers who are not statutory representatives, are primarily governed by the Labour Code ( zákoník práce ). This code imposes mandatory rules on working hours, minimum paid leave, protection against dismissal, and statutory severance pay.

By contrast, the relationship between a company and members of its statutory bodies is treated as a private law relationship under the Civil Code and the Business Corporations Act. It is typically regulated in an agreement on performance of office ( smlouva o výkonu funkce ).

The Czech Supreme Court has repeatedly confirmed that the appointment of a director creates a commercial law relationship distinct from an employment relationship. For the same activities, it is not possible to be both a statutory body and an employee in the classic sense. This is often surprising for foreign investors or for HR teams used to more flexible systems.

The main statutory framework here is Act No. 90/2012 Coll., the Business Corporations Act, as amended. It sets out rules for the formation and internal organisation of limited liability companies and joint-stock companies, including the appointment and removal of directors and their duty of due care.

The Civil Code further supplements these rules and articulates the general duty of anyone acting as a director of a legal person to exercise due managerial care and loyalty toward the legal person. Labour law, specifically Act No. 262/2006 Coll., the Labour Code, then governs rights and obligations arising from employment relationships, including senior management employment relationships.

Any “executive agreement” that is in fact an employment contract must comply with these mandatory rules. ARROWS Lawyers regularly explain to clients that the correct classification of a c-level role at the outset is crucial: it determines which legal regime applies, what kind of agreement is needed and what risks the company assumes.

From a practical business perspective, when you say “hiring a CEO,” you might be doing at least two different things at once. You might be appointing a statutory director, for example a sole managing director of a limited liability company, by a shareholder resolution.

You might also be hiring the same person as a top employee under the Labour Code to manage operations. Alternatively, the “CEO” title may be held by a senior employee, while the formal statutory body role is held by someone else, for instance by the founder or by a holding company’s nominee.

Each of these configurations has different implications for whether you need an agreement on performance of office, an employment agreement, or both. Because of the complexity and the number of moving parts, ARROWS Law Firm often recommends that companies obtain a structured legal opinion before finalising the structure of their c-level team. If you are considering such a structure, you can approach ARROWS Law Firm at office@arws.cz.

1. Does every “CEO” in the Czech Republic have to be registered as a statutory director?
No. The title “CEO” is not a legal category in itself. What matters is whether the person is appointed as a statutory body member in the Commercial Register. If they are not, they will usually be a senior employee under the Labour Code. If you are unsure how to structure this, ARROWS Lawyers can assess your situation and propose a safe solution; write to office@arws.cz.

2. Can the same person be both managing director and employee?
Under Czech case law, a statutory director cannot validly be employed for the same management activities, as such an employment contract would be absolutely invalid. However, a separate employment contract for different work may be possible under strict conditions. This could include, for example, specialist R&D activities or production management, unrelated to the core statutory management function. In practice, the boundaries are subtle and mistakes are common. ARROWS Law Firm frequently reviews such dual-role setups for clients to prevent later disputes; if you have doubts about an existing arrangement, contact office@arws.cz.

Corporate function agreements versus employment contracts: Why the distinction matters

Once you know whether your c-level hire will be a statutory director, a senior employee, or both, the next step is to understand the two main contractual instruments you may need. For statutory body members, the basic contract is an agreement on performance of office, specifically regulated in the Business Corporations Act.

This agreement defines the rights and duties of the member of the corporate body, especially the scope of their function, their remuneration and any additional benefits. It must be approved by the competent corporate body, typically the general meeting or supervisory board.

If no valid agreement on performance of office exists or is not properly approved, the law presumes that the office is performed without remuneration. This is usually unacceptable for a c-level executive and may create tax and accounting complications.

By contrast, employment contracts are defined and regulated in the Labour Code. They create an employment relationship where the employee performs work personally in a relationship of subordination and for wage remuneration. An employment relationship can arise either from a written employment contract or by appointment in limited cases specified by law, such as certain public offices. This does not apply to statutory directors of private companies.

The Labour Code imposes mandatory content requirements on employment contracts, such as the type of work, place of work and the date of commencement. It confers on employees a wide range of protections, for example concerning working hours, minimum paid leave, and protection from dismissal.

Top managers who are employees are covered by these protections, with some limited derogations for so-called “senior employees”. This means managers directly managing other employees, and applies in areas like working hours and overtime.

The question of “overlap” between an agreement on performance of office and an employment contract has been the subject of intense litigation and Supreme Court case law. For many years, the courts took a strict stance that a statutory director could not at the same time be in an employment relationship with the company for the same management activities.

Any employment contract purporting to cover these duties would be absolutely invalid. In a 2018 Supreme Court decision (Pl. ÚS 40/14), this view was moderated by allowing the parties to agree that their commercial relationship would, to some extent, follow Labour Code rules by contractual reference.

This contractual reference would not convert the commercial relationship into a true employment relationship. Even after this shift, however, the mandatory rules of company law, including appointment and removal mechanisms and the predominance of duties like due managerial care, remain primary. These rules cannot be contracted out of by simply labelling a relationship as “employment”.

From a risk perspective, misclassifying a relationship or relying on an invalid contract can be very costly. If a purported employment contract for a statutory director's management activities is invalid, the executive may later argue that they were performing the function without remuneration and claim unjust enrichment or damage compensation.

Labour authorities and tax authorities may also challenge social and health insurance contributions or the tax deductibility of "remuneration." Conversely, if the relationship is treated as employment when legally it is a commercial function, risks arise.

These risks include misapplied dismissal rules, severance claimed where none was intended, or non-compete clauses not enforceable because they do not comply with Labour Code requirements. ARROWS lawyers regularly resolve disputes of this kind and re-structure executive arrangements for both Czech and foreign clients, drawing on their daily experience with cross-border cases. If you want to review your current executive contracts, you can reach ARROWS Law Firm at office@arws.cz.

Where the Supreme Court drew the line

The 2018 Supreme Court decision, often discussed by company lawyers, clarified that while the parties can incorporate certain Labour Code rules into their function agreement, this does not create an employment relationship.

In practice, this means you can agree that certain aspects of holiday or travel allowances will follow Labour Code standards, or that disputes will be resolved in accordance with some Labour Code procedures. However, you cannot thereby circumvent mandatory company law rules on appointment, removal and liability.

The court emphasised that mandatory business-law provisions, such as those governing how directors are appointed and recalled, fitness for office and the duty of due care, prevail over any conflicting provisions of the Labour Code that the parties might wish to apply.

Importantly, the Supreme Court confirmed that board members are still not employees of their companies, and the companies are not their employers, even if their agreement on performance of office refers to the Labour Code.

This has implications for, among other things, the jurisdiction of labour courts, the availability of certain employment-law protections, and the application of rules on non-compete clauses and severance pay. For foreign investors used to systems where directors can simultaneously be employees with full labour protections, this Czech approach can be counter-intuitive.

It also underlines why a well-drafted executive agreement, framed in the correct legal category, is indispensable. You cannot simply rely on foreign templates or internal HR precedents, especially those from common-law jurisdictions, without adapting them to Czech company and labour law.

Risks and sanctions

How ARROWS helps (office@arws.cz)

Invalid employment contract for statutory director : if a statutory body member signs an “employment contract” for their management role, the contract may be absolutely void for the relevant management activities, leading to disputes over remuneration, taxes and social security contributions.

ARROWS lawyers analyse existing executive contracts, identify invalid or risky provisions, and prepare compliant performance-of-office agreements and, where appropriate, separate employment contracts.

Unpaid but taxable benefits : absence of a valid function agreement or proper approval of remuneration may result in the presumption that the function is performed free of charge, while the executive still receives benefits that may be treated as taxable income without clear legal basis, potentially leading to tax reassessments.

ARROWS Law Firm structures remuneration packages and benefits in line with Czech tax, social security and corporate law, reducing the risk of disputes with authorities and executives.

Unintended severance and notice obligations : if a relationship is incorrectly treated as employment, the company may face claims for statutory notice periods and severance that were never budgeted for.

ARROWS Lawyers draft termination provisions and advise on recall, dismissal and settlement strategies to align corporate and labour-law consequences and avoid unexpected payouts.

Non-enforceable non-compete clauses : non-compete agreements that do not respect mandatory Labour Code conditions (duration, compensation, form) can be invalid and leave the company unprotected.

ARROWS Law Firm prepares non-compete, non-solicitation and confidentiality clauses tailored to Czech law and your business, maximising enforceability and deterrent effect.

Personal liability of directors for breach of duty of care : unclear allocation of responsibilities in contracts may expose directors to civil or even criminal liability if they cannot show they acted with due managerial care.

ARROWS Lawyers review governance structures, draft clear job descriptions and decision-making rules, and advise on D&O insurance, helping directors demonstrate compliance with their duties.

Do you really need an “executive agreement” – and in which situations?

With this background, we can address the core question: do you really need a special executive agreement when hiring c-level executives in the Czech Republic? Legally, the answer depends on the role.

For statutory directors, an agreement on performance of office is not only highly advisable but in practice necessary to regulate remuneration and benefits. Without such an agreement, or without its proper approval by the general meeting or supervising body, the default rule is that the office is unpaid.

The company may also encounter obstacles when trying to justify remuneration and bonus payments in its accounts. For top managers who are not statutory representatives, Czech law does not require a special form of “executive agreement”. However, any employment contract must still meet Labour Code standards and should reflect the specific features of senior management roles.

If you are appointing a managing director or board member, you should therefore envisage at least two baseline documents: the formal appointment resolution of the relevant corporate body and the written agreement on performance of office. The appointment resolution typically defines who is appointed, for what term and with what authority, and is filed in the Commercial Register. The performance-of-office agreement then defines the conditions under which the function is performed.

This includes remuneration, possible bonuses, reimbursement of expenses, benefits, and any additional rights or duties. This agreement must be in writing and approved by the same body that appoints the director; if not approved, it is generally ineffective until such approval is granted.

In practice, many companies still neglect these formalities, especially in the early stages of their existence. This later causes problems during audits, financing rounds or exits. ARROWS Law Firm frequently helps growth companies “clean up” their corporate governance documentation before investor due diligence. For c-level managers who are not statutory body members, such as a CFO in a larger corporation with a multi-member board based abroad, there is no statutory requirement to enter into a special “executive agreement.”

Here, a standard employment contract under the Labour Code is formally sufficient, provided it contains all mandatory elements and reflects agreed conditions. However, in business practice, companies often choose to prepare more sophisticated senior management contracts that differ from standard employee contracts in structure and content.

These typically address long-term incentive schemes, complex bonus structures, confidentiality, conflict-of-interest rules, and specific termination regimes that depart from the default Labour Code framework where this is permitted. ARROWS Lawyers prepare such tailored agreements regularly, ensuring that they are enforceable under Czech law and that they align with your internal HR and governance policies.

For many foreign companies, a specific challenge arises when they attempt to transplant an existing “Executive Service Agreement” or “CEO Employment Agreement” from another jurisdiction into the Czech environment. Provisions that may be standard elsewhere, such as broad at-will termination rights, very long non-compete periods, or certain stock option mechanisms, may not be compatible with Czech mandatory rules and could be unenforceable or create unexpected tax burdens.

Conversely, Czech law offers certain instruments, such as statutory non-compete clauses with mandatory financial compensation or reflexive damages for breach of director duties, that are unfamiliar to foreign HR departments. ARROWS Law Firm, as an international law firm operating in Prague, European Union, combines deep knowledge of the Czech legal environment with experience in cross-border transactions. It can help adapt foreign executive contract models so that they work under Czech law. If you are dealing with such a cross-border situation, you can contact office@arws.cz.

1. If we only pass a shareholder resolution appointing a director, is that enough?
No. The appointment resolution is necessary to create the corporate office, but it does not regulate remuneration or other conditions. Without an approved performance-of-office agreement, the director is presumed unpaid and many practical questions remain unresolved. ARROWS Law Firm can prepare or review your performance-of-office agreements to meet statutory requirements; for assistance, write to office@arws.cz.

2. Can we rely on our existing global “Executive Employment Agreement” template?
Only with caution. Many international templates conflict with Czech mandatory labour and company law, particularly in areas like termination, non-compete clauses and working time. It is essential to localise such templates. ARROWS Lawyers can adapt your global templates for Czech use; if you need to localise your contracts, contact office@arws.cz.

3. Is a separate executive agreement required for senior employees who are not statutory directors?
No special form is mandated, but the employment contract should be drafted with senior management features in mind, including variable pay, bonus metrics, and protection of confidential information. A generic employee contract is rarely adequate. ARROWS Law Firm drafts such senior management employment contracts regularly; for a review of your templates, reach out to office@arws.cz.

Key elements of a robust executive agreement in Czech practice

Even though Czech law does not prescribe a detailed content list for executive agreements, market practice and case law suggest a number of elements that should be addressed to reduce litigation risk and align incentives.

In function agreements for statutory directors, the starting point is a clear description of the scope of the function. This includes whether the director is a sole managing director or one of several, how they represent the company externally, and any internal limitations on their authority.

Although internal limitations cannot generally affect third parties if they are not registered in the Commercial Register, clarifying them in the agreement helps allocate responsibility between multiple directors and supports enforcement of the duty of due care.

Remuneration is another central element. An executive agreement typically specifies a fixed monthly fee, performance-related bonuses, and any equity-based incentives. This is alongside benefits such as a company car, housing allowance, or pension contributions.

For statutory directors, it is crucial that the remuneration structure be approved by the relevant corporate body. Under the Business Corporations Act, any remuneration not approved in the performance-of-office agreement may be considered ineffective, and the director may be obliged to return it.

For executives who are employees, the Labour Code will apply to wages and salary, but variable components and bonus schemes still need clear contractual definitions. This helps minimise disputes about entitlement and calculation. ARROWS Lawyers frequently encounter bonus disputes in practice and stress the importance of precise and objective bonus criteria in executive contracts.

Termination provisions deserve special attention because the interplay between corporate and labour law can be complex. For directors, the Business Corporations Act allows recall from office at any time, generally without cause, unless the memorandum of association or articles of association provides otherwise.

However, the agreement on performance of office can regulate what remuneration, if any, the director receives after recall. This could include contractual severance in case of recall without a serious reason or in a change-of-control scenario. For executives who are employees, the Labour Code requires that termination by notice be based on a statutory reason. A minimum notice period (usually two months) must be observed, and severance pay provided in certain cases, such as organisational redundancy.

Executive agreements need to harmonise these two regimes to avoid unintended liability. This is one of the areas where ARROWS Law Firm regularly identifies and corrects hidden risks when reviewing client documentation. Finally, a robust executive agreement should address compliance and liability issues. Directors and senior executives in the Czech Republic owe a duty of due managerial care, which includes both a duty of loyalty and a duty of competence.

They can be personally liable for damage caused to the company by breach of this duty. If they breach this duty and cause damage, they can be required to compensate the company for the harm. If they fail to do so, creditors of the company may in some cases sue them directly up to the amount of uncompensated damage. In extreme cases, serious breaches can trigger criminal liability, for example for breaches of duty in the management of property of another or credit fraud under the Criminal Code.

These risks are not theoretical; Czech courts have increasingly held directors personally liable, especially in insolvency situations where they failed to file for insolvency in time or engaged in detrimental transactions. Executive agreements cannot eliminate statutory duties, but they can significantly influence how disputes are resolved. For instance, contracts can specify what information and support the director will receive from the company to make informed decisions, or how conflicts of interest will be disclosed and managed.

They can also provide for indemnification arrangements and D&O insurance, within the boundaries set by law, to protect directors from the financial impact of certain claims. The business judgment rule, as developed in Czech law, offers protection to directors. This protection applies if they can show that they acted on an informed basis, in good faith and in the justifiable interest of the company, even if the outcome was negative. ARROWS Law Firm often helps clients implement decision-making protocols and documentation practices that support the application of the business judgment rule in favour of directors if disputes arise.

Fixed-term, open-ended and corporate terms of office: What can you agree?

A frequent question from clients is whether c-level executives should have fixed-term or open-ended agreements, and how this interacts with the term of their corporate office. Under the Czech Labour Code, fixed-term employment contracts are allowed but subject to strict limits. They can be concluded for a maximum of three years and may be extended or renewed at most twice.

This means the overall duration with the same employer does not exceed nine years, i.e., three consecutive three-year periods. If these limits are exceeded, or if the employee continues to work after the fixed term has expired with the employer’s knowledge, the contract may be automatically transformed into an open-ended employment contract.

There are some exceptions, for example for serious operational reasons or in the context of parental leave coverage, but these must be interpreted narrowly. By contrast, the Business Corporations Act does not impose a general maximum term for the office of statutory directors. The memorandum of association or articles of association may specify that a director is appointed for a fixed term (for example five years), or for an indefinite term.

This depends on the company’s preferences and the type of corporate body. When the term expires, the office automatically terminates, but this does not automatically terminate any parallel contractual relationships, such as an employment relationship. This is unless the contract clearly links its duration to the term of office. It is therefore entirely possible for a director’s office to end while their employment relationship continues, or vice versa, if the documents are not aligned.

From a risk management perspective, companies should carefully coordinate the term of office and the term of the executive agreement. If you appoint a managing director for a five-year term but conclude an open-ended employment contract with a high severance clause, you may find yourself constrained in changing leadership if performance is poor.

On the other hand, very short fixed terms may create instability and deter high-calibre candidates, especially in cross-border situations where relocation is involved. The Labour Code’s strict rules on fixed-term employment must be respected, so companies cannot freely mirror the corporate term in the employment contract beyond the allowed limits.

ARROWS Law Firm can help design structures that combine corporate and contractual terms in a way that respects the law and still provides the flexibility and security both sides need. If you are facing such a structuring decision, please contact office@arws.cz.

Termination, severance and liability: Managing the end of the relationship

No company likes to think about the end of a relationship when hiring a high-profile executive, but from a legal perspective, termination scenarios are among the most important parts of any executive agreement.

For employees, the Labour Code sets out an exhaustive list of reasons for which an employer may give notice, including organisational redundancy, long-term loss of medical fitness and serious breach of duties. Notice must be given in writing, state the specific reason and observe a minimum two-month notice period, which begins on the first day of the calendar month following delivery.

In certain cases, such as redundancy or occupational injury, the employee is entitled to statutory severance pay. This ranges from one to three months’ average earnings depending on length of employment, and can be higher in case of occupational health damage. For statutory directors, the Business Corporations Act generally allows recall from office at any time, without the need to state or prove a reason, unless the articles of association restrict this right. Recall is usually effective upon the decision of the appointing body or at a later date specified.

Recall from office does not automatically terminate any contractual relationship. If the director also has an employment contract, that relationship must be terminated separately in accordance with the Labour Code, unless the employment contract ends automatically with the office (subject to Labour Code limits).

Similarly, if the agreement on performance of office contains a clause granting contractual severance or a notice period following recall, the company may be obliged to pay this even if the recall was for poor performance, unless “cause” is clearly defined and proven. ARROWS Lawyers therefore consider termination provisions to be one of the highest-priority parts of any executive agreement review.

Restrictive covenants, confidentiality and post-termination duties

Restrictive covenants are another area where Czech executive agreements must be carefully tailored. Under the Labour Code, a post-termination non-compete clause is valid only if it is agreed in writing and limited to a maximum of one year after employment.

The employer must also undertake to pay the former employee compensation of at least 50% of their average monthly earnings for each month of the restriction. The non-compete must be reasonably justified by the nature of the information, knowledge, or working procedures acquired by the employee.

A contractual penalty may be agreed for breach, although this does not relieve the employer of its obligation to pay compensation. These rules apply to employees, including senior managers who have employee status. For statutory directors, the Business Corporations Act contains its own framework for non-compete obligations, often referred to as the statutory non-compete.

Unless the company’s constitutional documents provide otherwise, a director may not engage in business activities competitive to the company, among other restrictions. This includes, for example, being a member of a statutory or supervisory body of another company with a similar subject of business.

However, this statutory non-compete is relatively narrow and may not cover all situations the company would like to regulate. Therefore, function agreements often supplement statutory rules with contractual non-compete and non-solicitation clauses tailored to the director’s role and the company’s industry.

These clauses observe principles of proportionality and reasonableness to enhance enforceability. ARROWS Lawyers, who regularly draft and negotiate such clauses, emphasise that overly broad or punitive restrictions can be struck down or moderated by courts.

Confidentiality obligations (often regulated in non-disclosure agreements or NDA clauses) are also central to executive agreements. Czech labour law and civil law both support the protection of trade secrets and confidential information. To enforce them effectively, you must define clearly what information is protected, who is bound, and what exceptions apply. An NDA can be included as part of the executive agreement or as a separate document.

In either case, it should cover not only classic business secrets, such as customer lists and pricing strategies, but also internal know-how, IT systems, and sensitive HR or compliance information that executives handle daily. In the Czech employment-law context, contractual penalties are permitted for breach of non-compete clauses but not generally for breach of other confidentiality obligations. Unless explicitly allowed by law or case-law for specific situations, other enforcement tools such as claims for damages and injunctive relief must be considered.

Companies with an international presence must also consider how restrictive covenants in Czech executive agreements interact with those in other jurisdictions. It is quite common, for example, for a group-level US or UK non-compete to be governed by foreign law, while the Czech employment or function agreement is governed by Czech law.

This can create enforcement complexity and conflict-of-law questions. ARROWS Law Firm, thanks to its ARROWS International network and long-standing cooperation with foreign partner firms, is used to coordinating such cross-border arrangements. It can help ensure that your restrictive covenants are coherent and enforceable across the jurisdictions where your executives operate. If you are drafting cross-border non-competes or NDAs, you can consult ARROWS Law Firm at office@arws.cz.

Compliance, whistleblowing and HR processes around executives

Beyond the contract text, companies need to embed their c-level executives into a broader framework of internal rules, compliance systems and HR processes. Recent Czech legislation (Act No. 171/2023 Coll., on the protection of whistleblowers) requires employers with 50 or more employees to establish internal channels for reporting breaches of law. This legislation, effective from late 2023, prohibits retaliation against whistleblowers.

This applies equally to allegations involving c-level executives as to those involving lower-level employees. Executive agreements should therefore address how executives will support and not obstruct whistleblowing mechanisms.

They should also address what consequences follow if they retaliate against whistleblowers or fail to act on credible reports. ARROWS Lawyers increasingly include explicit references to whistleblowing policies and codes of ethics in executive agreements, reflecting the growing importance of compliance culture.

Czech law also contains robust anti-discrimination and equal pay provisions, which apply at all levels of employment. These are found, for example, under the Labour Code and Act No. 198/2009 Coll., on equal treatment and legal means of protection against discrimination.

Executives play a dual role: they are protected by these rules as employees and responsible for ensuring company compliance. Executive agreements can help by clearly assigning responsibility for HR policies, diversity initiatives, and responses to discrimination complaints. Under the Charter of Fundamental Rights and Freedoms and the Labour Code, employees are entitled to fair remuneration and equal pay for equal work. Employers bear the burden of proof in pay discrimination disputes.

Executive bonus schemes and remuneration structures must therefore be designed and documented with care to avoid unjustified disparities that could trigger claims or labour inspectorate inspections. From an HR-process perspective, hiring a c-level executive should be accompanied by a thorough onboarding process. This includes not only signing the executive agreement but also familiarising the executive with internal policies, corporate governance documents, and the legal environment.

This is particularly important for foreign executives unfamiliar with Czech law. ARROWS Law Firm often supports clients by providing onboarding training sessions, including explanations of directors’ duties, the business judgment rule, and key features of Czech labour law. They sometimes issue written legal opinions or “playbooks” that executives can refer to in daily decision-making. If you are planning to hire a foreign c-level manager or overhaul your executive onboarding, you can ask ARROWS Lawyers about tailored training and documentation via office@arws.cz.

Cross-border aspects: Foreign executives, choice of law and immigration

In a globalised economy, many Czech companies and Czech subsidiaries of foreign groups appoint foreign nationals to c-level roles. This adds an extra layer of complexity in terms of immigration, social security, tax and choice of law.

From an immigration perspective, foreigners from outside the EU/EEA generally need a work permit, Employee Card, Blue Card or similar authorisation to work in the Czech Republic. These are governed primarily by Act No. 326/1999 Coll., on the Residence of Foreigners, and Act No. 435/2004 Coll., on Employment.

Certain categories of statutory representatives who do not actually perform dependent work on Czech territory may be exempt from some permit requirements, but this is a narrow exception. The details depend on the executive’s nationality, residence plans and whether they will be employed or only hold a corporate office.

A misstep here can lead to fines for illegal employment and difficulties with residence applications. ARROWS Law Firm routinely coordinates with immigration specialists to ensure that executive agreements and appointment structures are aligned with immigration strategy.

Choice of law clauses are another sensitive area. Parties sometimes assume that they can simply choose the law of the parent company’s jurisdiction, for example German or US law, to govern an executive agreement with a manager working in the Czech Republic. While Rome I Regulation (EC) No 593/2008 allows a certain freedom of choice, that choice cannot deprive the employee of protection afforded by mandatory provisions of the law that would apply in the absence of choice.

This is typically the law of the place from which they habitually perform their work, meaning Czech law for an executive working in the Czech Republic. In practice, even if the contract says it is governed by foreign law, key Czech labour-law rules may still apply, especially in disputes before Czech courts.

For statutory directors, some leeway exists because their relationship is not an employment relationship. However, mandatory provisions of Czech company law and public policy still cannot be excluded. ARROWS Lawyers can advise on how to structure choice-of-law and jurisdiction clauses that are realistic and enforceable in cross-border executive agreements.

Tax and social security coordination can also be challenging. Executives who split their time between jurisdictions, or who receive equity-based compensation from a foreign parent, may fall under complex double taxation rules and social security coordination regimes.

Benefits common elsewhere, such as certain stock option plans or deferred compensation schemes, may be treated differently in the Czech tax system. Executive agreements should address who bears the tax risk, how gross-up clauses work, and what happens if tax authorities requalify certain income.

As a leading Czech law firm in Prague, EU, ARROWS Law Firm often cooperates with tax advisers to draft executive contracts that are tax-efficient and compliant, particularly for multinational corporate clients.

Executive summary for management

For busy owners, board members and top managers, the practical message is this: in the Czech Republic, you cannot safely hire a c-level executive on the basis of an informal understanding or a foreign template contract.

Statutory directors require a properly approved agreement on performance of office, and failure to have one can result in ineffective remuneration, tax problems and increased personal liability. Senior executives who are employees are subject to strict Labour Code rules on termination, fixed-term limits and non-compete clauses. Trying to copy “at-will” concepts from other jurisdictions will not work.

The most common and most costly mistakes involve unclear or conflicting relationships between corporate appointments, function agreements and employment contracts. This leads to unexpected severance obligations, disputes over bonuses, and even litigation about who is responsible for regulatory breaches.

ARROWS lawyers deal with these issues daily for more than 150 joint-stock companies, 250 limited liability companies and dozens of municipalities and regions. This means they can typically identify risks quickly and propose tested, pragmatic solutions.

If you are considering hiring or restructuring c-level executives in your Czech entities, it is usually more efficient and safer to have ARROWS Law Firm review your structures and contracts upfront than to fight over them later; you can initiate such a review by contacting office@arws.cz.

Conclusion of the article

Hiring c-level executives in the Czech Republic is not just about finding the right person. It is also about placing that person into the correct legal framework and documenting their role in a way that works with Czech company law, labour law, and your business objectives.

The question “Do we really need an executive agreement?” is, in practice, the question “Have we clearly and validly arranged the relationship between our company and this person, in the way Czech law expects?”

For statutory directors, a written and duly approved agreement on performance of office is essential. For senior employees, a carefully crafted employment contract that considers fixed-term limits, termination conditions, non-compete rules and bonus structures is indispensable.

The apparent simplicity of some steps, such as passing an appointment resolution, signing a contract or including a non-compete clause, hides numerous technicalities, exceptions and cross-links to other regulations that laypersons often underestimate.

ARROWS Lawyers have long specialised in this agenda and handle executive appointments and dismissals, performance-of-office agreements and senior management contracts for Czech and international clients on a daily basis.

Thanks to this experience, ARROWS Law Firm can significantly shorten the time you spend on documentation, reduce the risk of errors and help you avoid disputes, fines, and tax complications.

As a leading Czech law firm based in Prague, European Union, with a strong ARROWS International network, the firm is also well placed to coordinate cross-border executive arrangements and to harmonise Czech contracts with global group policies.

If you do not wish to risk mistakes, damages or fines when hiring or restructuring c-level executives, you can safely entrust the whole matter to ARROWS Law Firm—simply contact office@arws.cz and the lawyers will propose a tailored, practical way forward.

FAQ – Frequently asked legal questions about hiring c-level executives in the Czech Republic: Do you really need an executive agreement?

1. Is an agreement on performance of office always mandatory for directors of Czech companies?
In practice, yes. While the director’s office legally arises from the appointment resolution, without a written and duly approved performance-of-office agreement the director is presumed unpaid and many aspects of the relationship remain unclear, which is highly risky for both sides. ARROWS Law Firm can prepare or update them; for assistance, contact office@arws.cz.

2. Can my Czech subsidiary use the same executive contract as our US parent company?
Only after careful localisation. US-style at-will clauses, broad non-competes and some bonus or equity structures are not compatible with Czech mandatory labour and company law, and courts may refuse enforcement. ARROWS Lawyers regularly adapt foreign executive templates for use in the Czech Republic, ensuring compliance and preserving your commercial intent; if you need such localisation, write to office@arws.cz.

3. How much freedom do we have to agree severance and bonuses for c-level executives?
You have substantial contractual freedom, especially for statutory directors, but it is constrained by rules on corporate approval of remuneration, tax and social security treatment, and—where the executive is an employee—by Labour Code principles on wages and equal treatment.
Poorly structured packages can create unenforceable promises or unintended liabilities. ARROWS Law Firm advises daily on executive compensation and can help you design balanced severance and incentive schemes; if you are negotiating such terms, contact office@arws.cz.

4. Are non-compete clauses for executives enforceable in the Czech Republic?
They can be, but only if they respect statutory conditions. For employees, a non-compete must be in writing, limited to one year, and accompanied by compensation of at least 50% of average earnings.
For statutory directors, both statutory and contractual non-compete rules apply and must be proportionate. ARROWS Lawyers have extensive experience drafting enforceable non-competes and non-solicitation clauses for executives; if you need help in this area, email office@arws.cz.

5. What are the main risks if we do nothing and leave our c-level relationships undocumented?
The biggest risks include disputes over remuneration and bonuses, claims for statutory severance and notice where you did not expect them, and tax and social security reassessments.
There's also increased personal liability for directors if their duties and protections (including D&O insurance) are not clearly framed. ARROWS Law Firm can audit your current arrangements and propose practical remedial steps; if you suspect gaps in your documentation, contact office@arws.cz.

6. We are hiring a foreign CEO for our Czech company; what should we watch out for?
Beyond the usual contract issues, you must align immigration status, social security, tax residence, choice of law and corporate governance structures. Ensure that expectations shaped by the executive’s home jurisdiction are reconciled with Czech law.
ARROWS Law Firm, with its international reach from Prague, EU, handles such cross-border executive hires regularly and can coordinate legal and tax aspects with your global advisors; if you are planning such a hire, reach out to office@arws.cz.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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