Case Description

Company A wants to appoint Liu Mou, its sales director, to concurrently serve as a director of its wholly-owned subsidiary Company C. If Company A continues to serve as an employer, it should pay Liu Mou salary and social security accumulation fund, but does C need to pay remuneration or salary to its directors?

Lawyer Analysis

From the perspective of company law, Liu agreed to serve as a director of Company C and carry out entrusted matters according to law, and a contractual relationship of entrustment was formed between Company C and Liu. Chinese law does not require companies to pay remuneration to their directors. Article 37 of the Company Law stipulates: "The shareholders' meeting shall exercise the following functions and powers: (2) to elect and replace directors and supervisors not held by employee representatives, and to decide on matters related to the remuneration of directors and supervisors;". "If Company C does not pay remuneration to Mr. Liu, it is up to Company A, the shareholder of Company C, to make a decision. Of course, this decision requires the consent of Mr. Liu before it can have legal effect on Mr. Liu.".

It is worth noting that the entrustment contract relationship between Company C and Mr. Liu does not exclude the existence of a labor contract relationship, That is, the labor relationship between Company C and Mr. Liu is established in accordance with Article 1 of the "Notice on Matters Related to the Establishment of Labor Relations", which states that the employer has not entered into a written labor contract to recruit workers, but also meets the following conditions. (1) The employer and the worker meet the subject qualifications prescribed by laws and regulations; (2) The various labor rules and regulations formulated by the employer according to law are applicable to workers, who are subject to the labor management of the employer and engage in remunerative labor arranged by the employer; （3） "The labor provided by workers is an integral part of the employer's business." When the conditions for the establishment of a factual labor contract relationship are specified, Liu and Company C can also establish a labor contract relationship at the same time. If Company C pays Liu a salary, and Liu's work in Company C is not limited to attending the board of directors of Company C, but also participating in specific business operations, and Liu is required to comply with various labor rules and regulations of Company C and accept labor management from Company C, then the labor relationship and appointment relationship between Liu and Company C coexist. In such cases, the payment of remuneration by Company C to Mr. Liu must also comply with the provisions of relevant laws and regulations applicable to labor contract relations; If Company A fails to pay social security accumulation fund for Mr. Liu, Company C shall also pay social security accumulation fund for Mr. Liu according to law.

In the aforementioned event, both Company A and Company C are located in China, and Mr. Liu is a Chinese citizen. Therefore, Chinese laws apply. With the decision of Company A and the consent of Mr. Liu, Company C may not pay remuneration to Mr. Liu.
However, if Company A or Company C in this event belongs to an overseas company or Liu is not of Chinese nationality, considering the situation in some overseas countries/regions, there are provisions that Company C must pay remuneration to Liu. Therefore, in similar events, whether Company C needs to pay remuneration to Liu needs to be judged based on the specific circumstances of the case and the applicable laws and regulations of the country/region.