4 tips to prevent extra costs in the event of a dismissal of a director under the articles of association

Publication date: 14 May 2019
Exercise due care in the event of a dismissal of the director under the articles of association. A breach of any of the following may lead to the entitlement to a fair compensation. (1) There must be at least one reasonable ground for dismissal. (2) The obligation to reinstatement by the employer continues to apply and may even extend to foreign establishments. (3) The termination bans continue to exist.

ontslag statutair bestuurder - weblijst

A corporate dismissal of the director under the articles of association in principle also includes the termination of the employment contract. This means the rules for dismissal must be taken into account. If this is not the case, there is a risk that the employer might have to pay a fair compensation in addition to the transitional compensation.

When do you have to pay a fair compensation?

There are three situations in which the director under the articles of association can claim a fair compensation.

  1. There is no reasonable ground for dismissal
  2. Infringement of the obligation to reinstatement
  3. The dismissal is the consequence of seriously imputable acts or omissions of the employer.

Amount of fair compensation

When calculating the amount of compensation, the court takes into account, among other things, the income of the director and the damage he is likely to suffer. In principle, the latter will be based on the salary times the expected duration of unemployment. Here it is important that a director cannot claim reinstatement of employment.

How can you prevent having to pay extra compensation?

1. Ensure that there is a reasonable ground for dismissal

Also in the case of the dismissal of a director, one of the legal grounds for dismissal is required. Often the reason for dismissal will be a difference of opinion about the policy to be pursued. The court will rule that this is the case if:

  • The difference of opinion is substantiated by facts.
  • The director is confronted with the difference in vision.
  • There is a concrete indication of the required changes.
  • The difference of opinion continues to exist, for instance because the director refuses to change his approach.

It is advisable to include the reason for dismissal in the dismissal decision or letter of dismissal to prevent discussions about the reason for the dismissal.

2. Comply with the obligation to reinstatement

The dismissal of a director under the articles of association is also subject to an obligation to reinstatement. The employer has a best efforts obligation to investigate whether reinstatement within a reasonable period will be possible. In the event of directors under the articles of association, it is often difficult to find another suitable position within the organisation, in particular if it is a small organisation. If the company is part of a group, other business units must also be considered. In that case, the obligation to reinstatement can also extend to foreign establishments.

The obligation to reinstatement does not mean a job guarantee. There is only a best efforts obligation and an investigation obligation. The employer must prove however that he has complied with these.

3. Be aware of termination bans

Termination bans continue to apply in the event of a dismissal of the director under the articles of association. For example, a director who is ill cannot be dismissed. This termination ban does not apply if the director has called in sick after having received the invitation to the General Meeting of Shareholders (GM) where this item is on the agenda.

4. Observe the notice period

In the event of a dismissal of the director under the articles of association, the notice period that is included in the employment contract or collective agreement must be taken into account. If nothing was agreed in this regard, the statutory notice period will apply. This depends on the duration of the employment.

In the event the notice period is too short, the employer must pay the employee compensation. This is equal to the salary the employee should have received with due observance of the notice period.

More information?

Would you like to get more information about the dismissal of directors under the articles of association of other high-level employees? Do you have other employment law questions? Please contact us:

    Share on social media

    • Employment law and dismissal

    4 points to consider when dismissing a statutory director

    18 August 2020

    A statutory director can be both a director and an employee of a company. What are the consequences if a director under the articles of association is dismissed? What do the company and the director have to keep in mind?

    read on
    • Corporate law

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

    3 December 2019

    It is easy to dismiss a director under the articles of association. However, if he or she is also an employee, regular dismissal law does apply. What do you have to watch out for as an employer?

    read on
    • Corporate law

    Statutory director or nominal director?

    7 November 2017

    Job titles, such as managing director, CEO, director, and authorised director, are common. From a legal point of view there are just two different jobs. So what are the differences and who is authorised to do what?

    read on
    • Employment law and dismissal

    Equality in the workplace: Taking care of female employees

    21 October 2021

    What must employers keep in mind regarding a work culture where everyone feels comfortable? What are the legal rights of pregnant employees and employees with children? Our lawyers Eileen Pluijm and Priscilla de Leede answer these questions in their article in Lady Justice, the magazine of the Women Lawyers Section of Primerus.

    read on
    • Works Council
    • Employment law and dismissal

    Works council: COVID-19 measures and mandatory vaccinations

    19 October 2021

    What rights does the works council have in relation to measures against the coronavirus within the company? And what role does the works council play with regard to the (im)possibility of mandatory vaccination against the coronavirus?

    read on
    • IT and ICT
    • Employment law and dismissal

    Uber drivers are employees, not self-employed workers

    14 September 2021

    According to the Amsterdam District Court, Uber drivers are employees. Therefore, they are covered by the collective agreement of the taxi industry with all associated rights and obligations. How did the District Court reach this judgement? And what does it mean for other forms of platform work?

    read on
    • Retail
    • Employment law and dismissal

    Questions and challenges during COVID-19: Dutch employment law, tenancy law and contract law

    13 September 2021

    In this article, we will discuss several questions and challenges in the field of Dutch employment law, tenancy law and contract law during COVID-19.

    read on
    • Corporate law

    Is a management agreement an employment contract or a contract for services?

    26 August 2021

    Do the new rules of the Supreme Court for the assessment of employment contracts also have consequence for management agreements? Case law has not decided yet. This can be seen from the judgments of the Arnhem-Leeuwarden Court of Appeal and the District Court of Midden-Nederland about the management agreement of the CFO of Volksbank.

    read on