Practice areas: Employment Law
A director appointed by the articles of association wears two hats: that of a director of the company and that of an employee under an employment contract. Upon dismissal, these two roles converge, which can sometimes make the situation complex. In this blog, we set out the legal framework: the main rule from the 15 April judgements, reasonable grounds, fair compensation and the steps required for the careful dismissal of a director.
The starting point for any dismissal of a director is the so-called 15 April judgements (Supreme Court 15 April 2005 (Bartelink) and Supreme Court 15 April 2005 (Unidek). In these judgments, the Supreme Court formulated a general rule: in principle, a decision to dismiss a director under company law also results in the termination of the employment relationship under labour law. The decision to dismiss therefore automatically implies the termination of the employment contract, even if this is not explicitly stated in the decision.
Unlike in the case of ordinary employees, a director of a BV or NV is not subject to a prior review of the dismissal by the UWV or the subdistrict court. This follows from Section 7:671(1)(e) of the Dutch Civil Code: the employer may terminate the employment contract without the employee’s written consent if the termination concerns a director of a legal person for whom reinstatement of the employment contract is not possible under Book 2 of the Dutch Civil Code. Section 2:244(3) of the Dutch Civil Code confirms this: the court cannot order the reinstatement of the employment contract between the company and the director. The director can therefore always be dismissed.
However, the fact that there is no preventive review does not mean that an employer does not need to have reasonable grounds.
Although the director does not enjoy any preventive protection, the employer must still have reasonable grounds for the dismissal within the meaning of Article 7:669(3) of the Dutch Civil Code. The Act lists the recognised grounds for dismissal: commercial reasons (ground a), poor performance (ground d), culpable conduct (ground e), a disrupted working relationship (ground g), the residual ground (ground h) and the cumulative ground (ground i).
The most common ground for directors is ground h: other circumstances such that the employer cannot reasonably be expected to allow the employment contract to continue. In practice, this is interpreted as a difference of opinion regarding the policy to be pursued. But what exactly must an employer demonstrate?
The circumstances must be of such gravity – for example, an irreconcilable difference of opinion – that the employer cannot reasonably be expected to allow the employment contract to continue (ECLI:NL:RBOBR:2026:864).
A director must have been addressed regarding the difference of opinion in advance. The employer is required to make it clear during a meeting that a difference of opinion is likely to arise and that, if it persists, this will have consequences for the employment relationship. Furthermore, the difference must actually relate to policy and not to the director’s performance. In the latter case, the ‘d’ ground applies, for which different and more stringent requirements apply.
The obligation to redeploy also applies in full to the director. In practice, it is often quickly assumed that redeployment is ‘not reasonable’, but this requires substantiation. Only in the event of culpable conduct on the part of the employee (ground ‘e’) is redeployment unequivocally not required.
If it subsequently transpires that the dismissal lacked reasonable grounds or that the employer acted with serious culpability, the director may claim fair compensation under Article 7:682(3) of the Dutch Civil Code. In a previous blog, we discussed a case in which the fair compensation amounted to €759,264 gross – on top of a transition payment of over €250,000.
In addition, the director – just like any other employee – is entitled to the statutory transition payment upon dismissal, unless he himself has acted in a seriously culpable manner.
The criteria set out in the ‘New Hairstyle’ judgment (Supreme Court 30 June 2017, ECLI:NL:HR:2017:1187) apply to the assessment of fair compensation. In that judgment, the Supreme Court ruled that, when assessing the compensation, the court may take into account the consequences of the dismissal, insofar as these are attributable to the employer’s fault.
Specifically, the court considers, amongst other things: how long would the employment contract have continued had the employer acted correctly? What is the loss of earnings over that period? Has the employee since found other work? And what is the transition payment that has already been paid?
The equitable compensation is expressly not punitive in nature – it is intended as compensation for the employer’s seriously culpable conduct.
Based on the legal requirements and established practice, the following steps can be taken to proceed with the dismissal of a statutory director:
1. Preparation: Determine the grounds for dismissal and the reasons for it. Prepare the dismissal decision, setting out all relevant facts and circumstances. Carry out a redeployment assessment and record the findings. Prepare a termination agreement, if applicable, as an alternative to unilateral dismissal.
2. Notification. Notify the director in writing of the intended dismissal and invite him to cast his advisory vote (right to be consulted pursuant to Section 2:227(7) of the Dutch Civil Code). Allow him a reasonable period in which to respond. In doing so, also observe the formal notice requirements for the shareholders’ meeting: notice must be given at least eight days before the meeting, unless the articles of association prescribe a longer period, and the reason for the proposed dismissal must be clearly stated as an agenda item. If the period is too short or the notice lacks a statement of reasons, the dismissal decision is voidable. This in turn means that the termination of the employment contract based on that decision is also invalid.
3. The meeting: Discuss the proposed decision in person with the director. Explain the grounds, discuss redeployment options and, where possible, make an offer for an amicable settlement. Bear in mind that a sick note submitted after this meeting may complicate further decision-making if no notice has yet been sent; by sending the notice before the meeting, the procedure will continue even if a sick note is submitted later.
4. Negotiation or decision: Allow the director scope to negotiate a severance package. If this proves unsuccessful, the shareholders’ meeting (or the competent body) will take the formal decision to dismiss the director.
5. Implementation: The directorship ends immediately upon the decision to dismiss. The employment contract continues until the end of the notice period. As a rule, the director assists with their own deregistration from the Chamber of Commerce (using DigiD), after which the company registers the successor director.
A common mistake is to draft the resolution to remove a director too briefly. Some courts refuse to accept new grounds for dismissal retrospectively if these were not included in the original resolution. Incidentally, this applies right from the notice of meeting: the reason for the proposed dismissal must be clearly stated in the notice of meeting itself, not just in the resolution. You should therefore always include the full factual basis and the specific grounds for dismissal, both in the notice of meeting and in the resolution itself.
The dismissal of a statutory director involves many points requiring attention. Should you have any questions on this matter, please do not hesitate to contact us.
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