What is the general maximum term for a management contract?

The general maximum term for a management contract is typically set at five years. This duration is designed to provide a balance between allowing sufficient time for the management entity to implement its strategies and evaluate their effectiveness while also ensuring that the arrangement can be renegotiated or reassessed based on the performance and evolving needs of the business.

Contracts that exceed this period may require further justification or regulatory scrutiny, as longer terms might lock an entity into an agreement that does not remain aligned with business goals. This stipulation encourages periodic review and adaptability in management practices.

Other potential durations, like three, seven, or ten years, either fall short of providing enough time for adequate management oversight and evaluation or could lead to less flexibility for the parties involved. By establishing five years as the maximum term, the Revised Corporation Code aligns with best practices in corporate governance and management accountability.