Dismissal of statutory director
A statutory director of a company or corporation has a special position. Since 2021, the Management and Supervision of Legal Entities Act (Wbtr) applies to all legal entities. The statutory director of a BV or NV has both a company-law relationship and an employment-law relationship with the company. What does this mean for the dismissal of a statutory director? We summarise the main laws and regulations for dismissing a statutory director for you.
What is a statutory director?
A statutory director is a director of a business or company appointed by the shareholders or Supervisory Board of the company. A statutory director has both an employment-law relationship and a company-law relationship with the company. This means that different rules and legislation apply when dismissing a statutory director than when dismissing a regular employee. Is a director not officially appointed? If so, the position officially concerns the role of titular director.
An important difference from an ‘ordinary employee’ is that a statutory director can be dismissed at any time by the body within the company that is authorised to appoint a statutory director. We refer to this case as a company-law dismissal. The corporate dismissal is usually data by the Supervisory Board or through the General Meeting of Shareholders (AGM).
For a legally valid dismissal decision by the General Meeting of Shareholders for a statutory director, the applicable legislation and any statutory conditions must be met. These include issues such as the notice period for the shareholders’ meeting, the majority necessary to reach the resolution and whether it is possible to take the resolution outside the meeting.
Corporate dismissal can also include the director’s advisory or hearing rights in relation to the resolution for the director’s proposed dismissal. It is not possible to dismiss a statutory director during illness. At the time of illness, a notice prohibition applies. It is therefore important to summon the director to the General Meeting of Shareholders before he or she reports sick.
Labour law dismissal of statutory director
The end of the company-law relationship generally also means the employment-law dismissal of a statutory director. When dismissing a statutory director, it is not necessary to start dismissal proceedings through the UWV or the subdistrict court. After the dismissal decision of the competent body, the statutory director immediately loses all managerial authority.
Dismissal of statutory director with contract
Does the statutory director have an employment contract? If so, labour law applies when a statutory director is dismissed. Although the director is less protected by labour law than regular employees, a company must comply with the applicable laws and regulations in the event of a dismissal situation. For example, a director can go to court because, in the director’s eyes, dismissing the director with an employment contract involves the lack of a reasonable ground for dismissal. If the court rules in an appeal case that the reasonable ground for dismissal is lacking, it means that the dismissal is manifestly unreasonable. In this situation, the court may decide that the company must pay fair compensation to the director.
Dismissing director with management agreement
A statutory director may also work for a company on the basis of a management agreement. From a legal point of view, the management agreement is assessed as an assignment agreement. This contractual form offers a director fewer rights than an employment contract. For example, dismissing a director does not require a reasonable ground for dismissal. Also, the director is not entitled to transitional compensation. After deciding to dismiss, the company must terminate the management agreement. However, the company is obliged to honour contractual agreements, such as the notice period and other agreed provisions.
When is there an unreasonable dismissal?
The moment a director does not agree with his or her dismissal, the director can go to court to challenge the dismissal. Based on the circumstances, the court will determine whether there is a legally valid dismissal or an unreasonable dismissal. Examples of unreasonable dismissal include the lack of reasonable grounds for the dismissal or serious culpable behaviour by the company, but the court may also rule that the company did not take the director’s interests sufficiently into account. Is the director vindicated? In the event of an unreasonable dismissal of a statutory director, the court may rule that the director is entitled to severance pay.
Seriously culpable behaviour of company
We speak of seriously culpable behaviour of a company when dismissing a statutory director in dismissal cases where the dismissal is contrary to the regulations or provisions of the articles of association that apply to it. Negligence by the company can also be labelled seriously culpable by the court. If the employer is seriously culpable, for example by violating the reinstatement obligation, the statutory director may be eligible for equitable compensation. A company is, if the court so decides, to pay the fair compensation to the statutory director in addition to the transitional compensation.
Settlement agreement when dismissing director
Different dismissal routes exist for the dismissal of a statutory director. Companies and organisations usually try, similar in situations where the company wants to dismiss a regular employee, to end the partnership through a settlement agreement. By agreeing to a settlement agreement, both parties steer towards a mutual consent dismissal through mutual consultation. The content of the settlement agreement is largely determined by law.
Among other things, the settlement agreement should include the following agreements:
- The amount of the severance payment;
- The termination date of the employment contract;
- Agreements around relief from work until the end of the employment contract;
- Whether there is a competition clause, relation clause or confidentiality obligation;
- Compensation for legal advice or dismissal counselling;
- Unemployment benefit statutory director in case of dismissal.
Like regular employees, a director under the articles of association is entitled to WW benefit after dismissal. Again, the right to WW benefit lapses when the statutory director himself decides to resign. When there is a unilateral resignation of a statutory director – the director himself decides to resign from his or her position – the shareholders’ consent is not necessary. However, the statutory director must address the decision to resign in writing to the company’s board and shareholders. After receiving the resignation notice, the director’s resignation is official.
Check advice or settlement agreement
The resignation of a statutory director is usually a far-reaching decision. Moreover, as a company, it is important to be well aware of the applicable laws and regulations governing dismissal cases. The lawyers at Fruytier Lawyers in Business have extensive experience in administrative law and can provide you with targeted assistance. Would you like more advice around dismissing a director or checking a settlement agreement? Then contact one of our legal specialists. Our employment and dismissal lawyers will be happy to delve into your situation.« Back to employment law