Publication date: 15 March 2018
There is no required form for the appointment of a director under the articles of association and it can thus be made orally. However, it is advisable to establish the decision in writing because in the event of a dismissal of the statutory director there could be confusion and, as a result, potentially costly legal proceedings might have to be conducted.
The general meeting of shareholders, supervisory board or any other body designated for that purpose in the articles of association appoints a statutory director. The law contains no further requirements as to how the appointment should be registered. Besides his position, the director under the articles of association often also has an employment contract with the enterprise. However, that is not a requirement. A statutory director can be dismissed by a decision of the general meeting of shareholders without intervention by the Employee Insurance Agency (UWV) or the subdistrict court. Therefore, it is crucial that a company can prove by means of an appointment decision that a director is a statutory director.
What might be the consequences if the appointment of the director was not documented? In a recently published case of The Hague District Court a director states to be merely a nominal director and would therefore be entitled to the employment protection of a “regular employee”. The employer claims that the employee was a director under the articles of association but cannot produce an appointment decision in writing.
The District Court complies with the law pursuant to which there is no required format for the decision of the general meeting of shareholders’ decision for the appointment of a statutory director and that it does not have to be taken or established in writing. Therefore, the employer is given the opportunity to prove by other means that the employee is indeed director under the articles of association. The employer’s evidence is successful:
The counterarguments of the employee were not successful in court. The fact that the employee only had a part time contract for a fixed term when he was appointed did not rule out appointment as a statutory director. After all, there is no direct connection between the nature and scope of the employment relationship of the (statutory) director and the appointment as a director under the articles of association. Besides, as already mentioned, a person may be the director of a legal entity even if there is no employment contract.
To prevent complicated legal proceedings, it is advisable to make sure that the actual situation and the desired situation will be established in writing. If the director acts like a director under the articles of association, he will have to be appointed as such. Not just the appointment decision has to be established in writing, but the statutory director also has to be registered with the Chamber of Commerce. That way, both the enterprise and the director can prevent unpleasant surprises concerning the dismissal of the director. If the appointment decision has not been established in writing, it might still be possible to prove that the director is a statutory director.
Do you need advice on the advantages and disadvantages of appointing a director as statutory director? Or do you have any questions about the position pertaining to employment law or company law of the director under the articles of association? Please contact us:
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