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Dismissal of statutory director: Don’t forget the dismissal ground!

Publication date: 3 December 2019
A statutory director may be dismissed by a shareholder resolution. In that case, the employment contract ends too. However, regular dismissal law does apply to this dismissal. If this is not complied with, it may lead to a substantial compensation for the dismissed director under the articles of association.

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A statutory director may be dismissed by a shareholder resolution. In that case, the employment contract ends too, without the need for a permit from the UWV or the dissolution of the contract by a court. However, a statutory dismissal ground is required. If there is no statutory dismissal ground, this could lead to substantial compensation for the dismissed director under the articles of association. This can be seen from a recent decision of the Amsterdam District Court.

Nominal director or statutory director?

An international wholesaler in flowers and plants in Aalsmeer dismissed its director as a statutory director. The director contested this at court: he claimed to be only a nominal director. And indeed, there was no appointment decision to be found. However, this did not help the director. He was listed as a statutory director in the Commercial Register. And this title was also included in his last employment contract. The court thus found that he had indeed been dismissed as a statutory director and that therefore the employment contract had ended. Game, set and match for the company?

Culpable acts? No compensation?

No. The company claimed that the director had been dismissed because of culpable acts and that, as a consequence, no severance pay or transition compensation was payable. Also, the notice period would no longer apply. However, the court did not agree with this. The accusations were not serious enough.

No culpable acts = fair compensation

As a result, the wholesaler had terminated the employment contract without a good reason. Therefore, the employee is entitled to a fair compensation, in addition to other statutory and contractual compensation. The employer must pay a total of over € 550,000. This includes:

  • Fair compensation (€ 130,000)
  • Overdue bonuses for 2017, 2018 (€ 53,320) and 2019 (yet to be calculated)
  • Contractually agreed remuneration (€ 239,942)
  • Compensation for non-compliance with notice period (€ 126,358)

Added to this are the legal costs and statutory interest.

Our tips

  • In the event of a dismissal of a director under the articles of association who is also an employee, make sure to abide by the rules of dismissal law.
  • Ensure that there is a well-founded ground for dismissal, also in the dismissal decision.
  • You can immediately dismiss a director under the articles of association, but the contractual or statutory notice period does apply to the termination of the employment contract.
  • Do not just assume that you don’t have to pay a transition compensation and/or a compensation agreed upon in the contract.

More information

Do you have any questions about the dismissal of a statutory director? Have you been dismissed as a director and do you want to know what your rights are? Or do you, as a company, want to avoid additional costs in the event of a dismissal? Please contact our labour law specialists:

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