The dismissal of the statutory director under Dutch law in a nut shell
By Paulien van der Grinten, TeekensKarstens advocaten notarissen
Employed statutory directors have a special dual legal status in The Netherlands. Unlike an ordinary employee, they have both a corporate and an employment engagement with the company. Both engagements make the dismissal of an employed statutory director a complex matter.
Pursuant to Dutch corporate law, the statutory director can be dismissed at any time by the body that is authorised to appoint him (i.e. the shareholders’ meeting or the supervisory board at larger companies).
A corporate dismissal decision in principle also results in a termination of the employment relationship as well. Contrary to an ordinary employee, the statutory director in principle is not protected by the statutory safeguards against dismissal.
However, since the Work and Security Act entered into force on 1 July 2015, a dismissed statutory director is legally entitled to transitional compensation in the event that he has been employed for a period equal to two years or longer. In addition, just as is the case with ordinary dismissed employees, the employer now has to substantiate that there is a reasonable ground for the dismissal of the statutory director (i.e. underperformance, business reorganisation, damaged working relationship).
Otherwise, the company is at risk that the statutory director successfully claims an additional fair compensation on top of the transition compensation. Nevertheless, in most cases parties reach a settlement and arrange a compensation package by mutual consent beforehand.
Paulien van der GrintenTeekensKarstens advocaten notarissen, Leiden, The Netherlands
T: +31 71 535 80 00
Paulien van der Grinten, attorney at law at TK and part of the international team Corporate Employment Law.
TeekensKarstens advocaten notarissen (TK) is a full service Dutch law firm with extensive experience in the field of international law. TK established specific international teams to provide international clients tailor-made services and information.
Published: October 2016 l Photo: Uwe Rieder