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Director (according to Dutch law)?

10

January

2019

Often when dismissal is imminent for a Director [member of the Management Board], the director adopts the position that he is not a director. The argument used is that the member’s appointment (by the AGM) doesn’t exist or that there was an appointment, but that he never accepted the appointment.

Protection from dismissal [Employment protection]

The reason a director when faced with imminent dismissal takes the stance that he is not a director is self-evident. Should a director not be a director but only an employee, then he is entitled to employment protection. It’s important that a director has a ‘’duel’’ legal relationship with the company. On the one hand, there are company-law ties, on the other hand, there is an employment contract between the director and the company.  

When a director of a private limited liability company is lawfully dismissed by a designated authorized body (generally the AGM), then the relationship under employment law between the director and the private company is terminated, unless a prohibition of termination or another agreement applies. In this case, prior examination by the Employee Insurance Agency (UWV) or the subdistrict court is not required. If the director is not actually a director, but just an employee, then dismissal by the AGM is not possible and the company has to go to the subdistrict court or the Employment Insurance Agency.

Appointment decision

In order to decide whether a director really is a director, there are several aspects to consider. First, a legally valid appointment decision is necessary. One which has been laid down in writing [documented] and is attached to the director’s employment contract with the company. There is no prescribed form for an appointment decision. Unless the statutes provide otherwise, it doesn’t have to be in writing in order to be valid. However, in real life [in practice], things often work out differently than planned [then outlined above].

In the absence of a written decision, other means are required ‒ facts, circumstances and conduct ‒ to prove that an appointment decision has been taken. For instance, confirmation from the AGM of the directorship, correspondence stating the appointment, the advice of the works council (OR) on the grounds of the Dutch article 30 WOR, required when appointing a director, or (witness) depositions [testimonies, evidence] of the shareholder [of the shareholder involved] concerned. The facts, circumstances and conduct cannot replace the appointment decision. There is no directorship [board membership] without an oral or written application decision. You can’t become a director based solely on grounds such as facts, circumstances and conduct.

Accepting an appointment

Besides the acceptance decision, the director must accept the appointment. Appointing a director, with all its rights and duties, is not binding unless the director has agreed to this.   Acceptance of the appointment can be implicit or explicit, and without a prescribed form. The acceptance of the appointment by the director is just as the appointment decision and can be proven by facts, circumstances and the conduct of the director. Examples of relevant conduct by the director are:

- Signing the Chamber of Commerce form for the purpose [within the context of] of his appointment by the director concerned;

- Concluding a directors’ liability insurance contract;

- Signing the company’s financial statements;

- Representing the company in a way which can only be performed by a director.

Best practices

In order to avoid evidentiary problems, the appointment decision should be recorded in writing and attached to the director’s employment contract. In addition, the director should declare in writing that he has accepted the appointment and have this attached to his employment contract.

Should you have any questions about this blog post, please feel free to contact Hans de Haij or Dennis Oud.

Written by:
Hans de Haij
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