Dismissal of a director under the articles of association

The general meeting of a company may dismiss a director under the articles of association. If that director has an employment contract, the Supreme Court has already ruled that the employment contract also ends, albeit with due observance of the statutory or contractual notice period. But what if this director has a management agreement instead of an employment contract?

Does the management contract end by the dismissal from the position of director under the articles of association? 

There is a lot to be said for the point of view that the management agreement also ends when the director is dismissed from his position of director under the articles of association by the general meeting. A management agreement that can no longer be executed is in fact an empty shell. No work is being done, because that is not possible when you have been dismissed as a director under the articles of association. A management agreement often states that there must be a certain availability or commitment, and that is missing. It would also be remarkable if the management agreement does not end automatically. Imagine, you will get the strange situation that a director with a management contract does not lose his job when he is dismissed from his position as director under the articles of association and a director with a contract of employment does. That while the law generally offers workers more protection against dismissal.

Notice period

In case of a managing director with an employment contract, according to the Supreme Court, the notice period that follows from the law or the employment contract must be observed. What about a director under the articles of association with a management contract? According to a recent ruling by the Limburg District Court, there is no notice period in this case. That is a remarkable statement. The management agreement is a contract of assignment. The law stipulates that a client (in this case the company) can terminate an assignment agreement at any time. That implies a notice period. Even if the agreement does not stipulate anything about it.

Good advice is expensive, good decision-making saves

Take care as a company / general meeting that the decision-making process with regard to a dismissal of a director under the articles of association is in good order. Take the right decisions with due observance of the correct deadlines and let decision making take place by the competent bodies. If mistakes are made, it will only cause a delay, be more expensive and will cost unnecessary energy. Energy that cannot be put into growing the business.

By Merel Rooijakkers and Evert-Karel Ditvoorst