Reorganization or Excuse? Court Reprimands Shareholder
After more than thirty years with the company, sixteen of which as a statutory director, the director in this case was suddenly confronted with his dismissal. On 27 February 2025, he was invited to a shareholders’ meeting where his dismissal was already on the agenda. The shareholder argued that the company had been loss-making for years and that further integration within the group was necessary. Furthermore, they claimed there was insufficient confidence that the director could lead this process. The decision followed quickly: dismissal as director, immediate suspension, and termination of the employment contract.
The director did not accept this and went to court (ECLI:NL:RBMNE:2025:7137). He argued that there was no reasonable ground for dismissal and that the employer had acted in a seriously culpable manner.
The special position of a statutory director
A statutory director holds a unique position. Their dismissal must be assessed in the context of corporate law. The principle is that a legally valid dismissal from the corporate position automatically terminates the employment contract. This follows from the so-called 15 April judgments.
Unlike ordinary employees, the employment dismissal of a statutory director cannot be reversed. The reason for this is that the competent body (in this case, the general meeting of shareholders) must be able to dismiss the director at any time, and that it is not for the authorities or the courts to intervene in this.
Nevertheless, statutory directors do enjoy important employment protections. Under Article 7:682(3) of the Dutch Civil Code, an employment contract can only be terminated on the basis of a reasonable dismissal ground. If no such ground exists, the court can award a fair compensation.
No sufficient business reason for dismissal
To substantiate the alleged business-economic necessity, the company relied solely on a profit and loss statement up to August 2025. This statement showed a loss of just over €38,000, while a significant amount of €406,812 was recorded as administrative expenses, even though a much lower amount (€272,812) had been budgeted. The company explained that this difference could be attributed to the costs of the dismissal. This demonstrates that, up to August 2025, there was no loss-making situation even without the dismissal. Moreover, the company did not submit any financial forecast. The court therefore held that it had not been sufficiently substantiated that, at the time the dismissal decision was taken, the financial situation was so poor that the position had to be eliminated with immediate effect.
Inconsistent and varying reasons for dismissal
The dismissal reasons communicated on 11 March 2025 did not correspond with the explanations given later during the proceedings. During the proceedings, the dismissal was subsequently presented as purely business-economic. Even though earlier it had been stated that the director was insufficiently capable of leading the integration. A statutory director must know in advance the grounds for dismissal in order to exercise their right to be heard and to advise; dismissal reasons may not be amended or supplemented afterward. The court ruled that the dismissal was therefore not purely business-economic. The inconsistencies and the absence of a carefully prepared reorganization plan made clear that the dismissal had not been handled with due care. It was concluded that a business-economic reason had been constructed after the fact. This because the shareholder preferred someone else in the top position, and qualified this as seriously culpable conduct.
The manner in which the dismissal was carried out was also problematic. The director was not informed in advance of the shareholder’s changed vision or of the potential consequences for his position and was completely taken by surprise by the dismissal. Only very limited dismissal reasons were provided, without further explanation, and these reasons later changed. In addition, he was suddenly removed from the organization and immediately suspended, even though his duties had not ceased. This was unnecessarily damaging and disproportionate.
The financial aftermath
When determining the fair compensation, the court considered the director’s long service, age, and position in the labor market. It was deemed likely that the director would find other work within two years, but probably at a lower salary.
Income loss over this period, together with a limited pension loss, resulted in a gross compensation of €222,000. The employer was also ordered to pay part of the extrajudicial and court costs.
What does this statement teach?
This case demonstrates that careful handling is essential when dismissing a statutory director. A reorganization must be well thought out and substantiated in advance, dismissal reasons must be clear and consistent, and the director must be able to exercise their rights to be heard and to advise.
For directors, this case shows the value of critically reviewing a dismissal. Even though reinstatement of the employment contract is not possible, fair compensation can still address the way the dismissal was carried out.