Hanneke advises entrepreneurs and employers
hanneke.verstegen@russell.nl +31 20 301 55 55Statutory directors enjoy less protection against dismissal, but there must still be reasonable grounds for the dismissal. Otherwise, the employer must pay fair compensation. This can be substantial, as a recent ruling has shown. Why was the employer required to pay this compensation?
A statutory director was unexpectedly dismissed after thirty years of service. The employer claimed that his position had been made redundant due to a reorganisation, but was unable to substantiate this. The Midden-Nederland District Court therefore ruled that there were no reasonable grounds for the dismissal and awarded substantial fair compensation.
The director had worked for the company for over thirty years, more than fifteen of which as a statutory director. At the end of February 2025, he suddenly received an invitation to a General Meeting of Shareholders (GMS) with his dismissal on the agenda. A few weeks later, a very brief explanation followed: the company was making a loss, and the director had failed to reverse that trend. The shareholder therefore wished to integrate the company more closely into the group and had no confidence in the director’s ability to lead that integration. There had been no consultation regarding the reorganisation plans, the director’s role in them, or possible alternatives.
During the GMS, the director was dismissed. He was immediately suspended and his employment contract was terminated with effect from 1 August 2025.
The director took the matter to court and sought fair compensation.
The employer cited commercial reasons before the court as grounds for the dismissal: the director’s position would be abolished due to the reorganisation. The court scrutinised this critically and reached a clear conclusion: the employer had failed to substantiate the necessity of the reorganisation. Consequently, there were no valid commercial reasons.
The main shortcomings:
During the proceedings, the employer argued that the dismissal had nothing to do with the employee’s performance. However, the explanatory notes to the dismissal decision specifically stated that the director was deemed incapable of leading the integration that could ensure the company would no longer be loss-making. The court found this explanation to be inherently contradictory. Furthermore, a director must know, prior to the meeting regarding the dismissal decision, the grounds against which he must defend himself. ‘Constructing’ a ground for dismissal retrospectively is therefore not permitted.
Furthermore, the employer had made no attempt whatsoever to redeploy the director. This was required, as there was no question of poor performance and his duties had not disappeared. They had been distributed among other employees of the group and a temporary director appointed in place of the dismissed director. According to the court, the director could therefore likely have fulfilled another role within the group. By failing to investigate this, the employer breached a key obligation in the context of redundancy due to reorganisation.
The court classified the employer’s conduct as seriously culpable. The director was taken completely by surprise by the notification of the intention to dismiss him, was given only a brief and subsequently amended reason for dismissal and was immediately suspended without necessity. Furthermore, the employer had not involved him in the reorganisation plans that directly affected him. Given his long service record, this carried particular weight. The director was therefore entitled to fair compensation, in addition to the transition payment.
In determining the amount of the fair compensation, the court considered the expected period during which the director would be out of work (a maximum of two years), the loss of income over that period, the loss of pension rights and the seriousness of the employer’s fault. Unemployment benefits were not deducted, as it was plausible that the director would have to accept a lower-paid position. All in all, this resulted in compensation of EUR 222,000.
This ruling demonstrates that the dismissal of a statutory director is not a mere formality. The following also applies to directors:
A poorly prepared dismissal can lead to substantial compensation payments.
Although directors have less protection against dismissal than regular employees, this does not mean they have no protection at all. This ruling confirms that:
Do you have any questions regarding this blog, or, as a statutory director, do you require advice or legal support in a dispute with your employer? Or are you the employer of a statutory director and wish to know what your options are in the event of a conflict with the director? We would be happy to assist you. Please contact us:
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