Founder Employment Agreement Template for Germany

When you transition from being solely a company owner to also serving as an employee of your business, you need a Founder Employment Agreement. This specialized contract addresses the unique legal position you hold as both a shareholder and employee under German law, ensuring compliance with employment regulations while protecting your entrepreneurial interests and company assets.

When do you need this document?

You require a Founder Employment Agreement when your startup receives external investment and investors demand formal employment structures for accountability. The document becomes essential during corporate restructuring when you need to separate ownership rights from employment duties. It's also necessary when establishing clear compensation structures, particularly if you're drawing a regular salary rather than relying solely on dividend distributions. Additionally, banks and institutional lenders often require formal employment agreements before approving business loans or credit facilities.

Key legal considerations

Your agreement must carefully balance your dual role as shareholder and employee, clearly defining which actions you take in each capacity. Intellectual property clauses are crucial, typically assigning work-related inventions to the company while preserving your pre-existing rights. Confidentiality provisions must protect sensitive business information without restricting your ability to make shareholder decisions. Termination clauses require special attention, as your dismissal as an employee doesn't affect your ownership rights, potentially creating ongoing conflicts. Non-compete restrictions must be reasonable and may require compensation under German law. Stock option or equity participation schemes need careful structuring to avoid tax complications and ensure compliance with securities regulations.

Legal requirements in Germany

German employment law under the Civil Code (BGB) requires written employment contracts for positions lasting more than one month. Your agreement must comply with the German Working Hours Act, limiting working time to 8 hours daily and 48 hours weekly, though managing directors may have exemptions. The German Federal Vacation Act mandates minimum 20 working days annual leave, increasing to 24 days for six-day work weeks. If your company employs more than 10 people, the Protection Against Unfair Dismissal Act applies, requiring justified reasons for termination and specific notice periods. For GmbH managing directors, the agreement must align with the Limited Liability Companies Act, particularly regarding authority limitations and conflict of interest provisions. Works Council consultation may be required for certain employment terms if your company has employee representatives. Tax considerations include proper classification of benefits and equity compensation to avoid unexpected liabilities.