Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Which body of a Dutch limited company (BV or NV) is permitted to appoint or dismiss a director? What are the consequences of the dismissal decision?
The directors of a BV (private limited company) or NV (public limited company) can be appointed by different bodies. The main rule is that the directors are appointed by a decision of the general meeting of shareholders. The articles of association of the BV may prescribe however that directors are not just appointed by the general meeting but by a meeting of holders of shares of a certain kind or designation. According to the articles of association of the BV or NV another body or person (including “priority shareholders”) can submit a binding nomination regarding the board.
Is the BV or NV a two-tier board company or does it apply the two-tier regime voluntarily? In this case the directors are appointed by the supervisory board.
A director can be dismissed at all times by the body competent to appoint the director. In the event of a two-tier board company, the directors will be dismissed by the supervisory board after the general meeting of shareholders has been heard. The Works Council has the right to be consulted on both appointment and dismissal of a director.
The relation between a director and the company is actually described as a dual legal relationship. Firstly, there is a company law relationship between the director and the company. And secondly, in most cases there is also an employment relationship.
According to the established case law by the Supreme Court, as a consequence of a lawful decision of dismissal (the company dismissal) of a director the employment of the director will be terminated as well. There will only be an exceptions if the parties have agreed otherwise (for instance, if the director will perform other duties) or if a statutory prohibition of termination applies (for instance, the director is incapacitated for work due to sickness). The court cannot order to restore the employment contract. In this situation, the director can only claim compensation.
An employment contract may only be terminated with due observance of the statutory or contractual notice period. This also applies to directors. Even though a notice to terminate an employment contract is not necessary, it may be wise to give a director written confirmation of the end of the employment with due observance of the applicable notice period. This follows, inter alia, from a recent judgement by the Amsterdam Court of Appeal, that ruled that according to the (standard) termination clause in the employment contract of the director a separate notice of termination was needed.
The judgment shows that the Courts have different views on the dual legal relationship and the consequences of the dismissal decision. Therefore, it is highly advisable to seek legal advice to arrange the appointment, the employment contract and the dismissal of the director as carefully as possible.
Do you have any questions about the appointment or dismissal of directors or any other questions regarding corporate law? Please contact:
Before the Enterprise Chamber can grant a request for an inquiry, there must be well-founded reasons to doubt the correct policy or course of events within a company. When is this the case?
In an article in the April 2024 issue of Lady Justice, the magazine of the Women Lawyers Section of Primerus, Lisanne Meijerhof shares her passion and expertise in charity law. Why has she chosen to focus on the law of foundations and other philanthropic organizations? What legal issues should charities be aware of?
When tensions run high within a company, potentially putting the company at risk, this may be a reason to go to the Enterprise Chamber to start inquiry proceedings. Who can exercise the right to file an inquiry request?
On the departure of a statutory director/shareholder, any participation in the company must also be settled. Then a discussion may arise about the value of this participation, depending on whether the director counts as a good leaver or bad leaver. What should companies and directors pay attention to when interpreting a leaver arrangement?
Within a company, disputes regularly arise between shareholders and/or directors. This can create situations that endanger the company. To resolve such problems, inquiry proceedings were created in the Netherlands. What do these proceedings entail?
Expedited liquidation is a quick way to terminate a legal entity. However, the scheme was also abused, disadvantaging creditors. A new law should prevent this. What requirements does an expedited liquidation have to meet from now on? And what options do creditors have to collect their claims?
