Director dismissal

The dismissal of a director of a legal entity is a special matter. This is because a director has a special position within a legal entity. A director of a company (NV or BV) is usually a statutory director and often also has an employment contract with the company. What is remarkable about this situation is that the dismissal of company directors is relatively easy, yet can be associated with high costs. 

Dismissing a BV director

Companies can move quickly to dismiss a director. Because company directors do not enjoy protection in the form of a dismissal permit from the UWV, this is a relatively simple process. Reasons for dismissing a director vary widely. Dissatisfaction with results or the choice of a new direction, for example, often lead to the dismissal of directors. But also when a company is acquired or merged or in the case of a shareholder dispute, directors can be fired. As a protective measure, a director's employment contract usually contains a high allowance. This is different from severance pay and is also known as the ‘golden handshake. 

Who may fire a director?

By law, only the General Meeting of Shareholders (AGM) or another body appointed for that purpose in the articles of association may appoint or dismiss directors. In practice, the authorized body is almost always the AGM or Supervisory Board (SB). In order to dismiss a director, the AGM or SB must pass a resolution to that effect. In larger companies, the works council must be asked for its advice prior to the decision. In addition, a director can also be dismissed by means of a survey process. Those proceedings may show that a director has acted negligently or seriously culpable. Then he can not only be dismissed, but also liable be held liable for damages suffered by the company as a result of the mismanagement. 

Compensation for fired director

The dismissal of a director is very drastic. For example, the director cannot claim to be reinstated. Thus, there are no reinstatement options. However, the dismissed director can damages claim in court if there is a manifestly unreasonable dismissal. This is the case, for example, if the prescribed dismissal procedure has not been followed. Even if there is no reasonable redundancy arrangement (dismissal scheme), there is quickly a case of manifestly unreasonable dismissal. All this, on the other hand, depends on the circumstances of the case and may differ from one situation to another. 

Lawyer dismissing director limited liability company

Although firing a director of a legal entity is easier than firing a ‘regular’ employee, there are many snags involved. High compensation and possible damages make it difficult for some companies to get rid of a poorly performing director. On the other hand, it is important for directors to know what they can do about their dismissal. The corporate law attorney at Lexys Lawyers can tell you more about dismissing a director of a legal entity.