Remuneration of partners and administrators

Five keys you should know about the remuneration of partners and directors

Most of the companies that make up the business fabric in Spain are SMEs or family businesses, so there are many cases in which a person is a partner or director of a company and at the same time works in that company. /b> From this, numerous doubts arise regarding the remuneration of partners and administrators in a commercial company.

Next, we will present 5 keys to clarify the main doubts that arise in companies regarding the remuneration of partners and directors.

1-. The administrator position can be free or paid

Based on the provisions of article 217.1 of the Capital Companies Law “The position of director is free, unless the corporate bylaws establish otherwise, determining the remuneration system”< /b>. As a consequence of the above, at the time of drafting the Bylaws, it must be established whether the position of Administrator is going to be free or paid and, in the latter case, the way in which it will be remunerated.

2.- Types of administrator remuneration

The same article of the Capital Companies Law establishes the concepts that can be reimbursed to the director, which are the following:

• Fixed allocation.
• Assistance diets.
  • Profit sharing. The bylaws will determine the maximum participation percentage and the General Meeting will establish the applicable percentage within that maximum. In limited companies, the maximum percentage of participation may not be higher than 10% of the profits distributed among the partners. In public limited companies, participation may only be deducted from the liquid profits after the attention of the legal and statutory reserve has been covered. The shareholders have recognised a dividend of 4% of the nominal value of the shares or the highest rate that the statutes have established.</li >

• Variable remuneration with general reference indicators or parameters.
  • Remuneration in shares or linked to its evolution. In public limited companies, this type of remuneration must be regulated in the Bylaws and approved by the General Meeting.
  • Compensation for termination, as long as the termination was not motivated by non-compliance with the duties of the director.

• Savings or pension systems that are considered appropriate.

3-. Maximum amount of remuneration

The company’s General Meeting must establish the maximum amount of the directors’ remuneration, and that limit will apply until the Meeting approves its modification.

4-. Remuneration must be proportionate

The remuneration established for social administrators must consider the company’s importance, its economic situation, and the remunerations used by similar companies. In general, the remuneration established should aim to maintain the profitability and sustainability of the company.

5-. Remuneration to partners and declaration of remuneration

The remuneration of each partner will depend on their relationship with the company since they may be managing partners, working partners or capitalist partners, for example, and, in addition, other aspects such as its seniority, the tasks it performs, its participation in the capital, etc.

Therefore, the partner may have an employment (employment contract) or commercial relationship </ b> with the company for his/her remuneration.

About the declaration of remuneration, article 27.3 of the Personal Income Tax Law establishes that total income derived from economic activities is considered to be income obtained by the taxpayer as a result of participation in the capital of an entity, always that involves the performance of professional activities and that the taxpayer is included in the RETA or a social security mutual society.