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:
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