GMW: Dutch law on Statutory Director
2020-07-03 | By Godelijn Boonman
A statutory director holds a special position in Dutch law, unlike that of an ordinary (functional) director. Most directors are regular employees, but a statutory director is subject to both employment law and company law. This leads to key differences in how they can be appointed and dismissed, and means that there are special considerations that must be taken into account.
Appointment process for a statutory director
Unlike a regular employee who is hired when they accept an employment contract for that role, a statutory director can only be appointed to this position by a resolution of the general meeting of shareholders or supervisory board. Thereafter, the statutory director can be registered in the commercial register of the Netherlands Chamber of Commerce.
A statutory director may only conclude a maximum of three fixed-term contracts with an organisation, however no maximum total term applies to these contracts.
Dismissal process for a statutory director
To fire a regular employee during an active employment contract requires the prior permission of the UVW or courts. In contrast, all that is required to dismiss a statutory director is a resolution of the general meeting of shareholders or the supervisory board. Note that the shareholders are required to provide a ground for the dismissal.
However, because a statutory director has a dual relationship with the organisation (as both an employee and part of the legal person managing the company), they are subject to both employment law and company law. This means that they must be dismissed under both laws.
The company law dismissal in most cases also leads to the employment law dismissal – but not always. If there is a prohibition of termination of employment, such as during illness or pregnancy, the employment contract may be upheld until the prohibition expires.
A statutory director does not have the right to request recovery of the employment relationship after dismissal, nor do they have a reflection period of two weeks after concluding a termination agreement.
Statutory directors are entitled to a transitional allowance and any fair compensation, just like a regular employee.
Special considerations of a statutory director
As employees, statutory directors face many of the same challenges as other employees, such as personal disputes, workplace conflicts, disrupted employment relationships, discrimination, and unfair dismissal.
In addition, a statutory director can be held personally liable for the policy pursued at the company. They also risk liability if they are found guilty of mismanagement, during bankruptcy, or if a creditor holds them liable for damages.
Due to this extended liability, together with reduced protection from dismissal, it is therefore wise for the statutory director to agree a reimbursement for dismissal upfront; the so-called “golden parachute”. This requires negotiating an additional amount to be paid in the event of termination at the start of the employment, which may be combined with the legally required transition fee.
By reaching such an agreement, the statutory director can protect their interests while reducing the chance of a dispute at the end of their employment.
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About the author
Godelijn Boonman is an expert in international employment law at GMW lawyers and a contributor to Legal Expat Desk. Godelijn advises and litigates for individuals, companies and organisations, both local and international. A bilingual expat herself who grew up in Africa and England, Godelijn Boonman is considered an employment law specialist for the international community in the Netherlands and is a member of the advisory board of ACCESS.