Dismissing a Statutory Director? Avoid Costly Mistakes in This Dual Process

Dismissing a statutory director: two tracks, many pitfalls

As a shareholder, dismissing a statutory director often seems like a straightforward decision: a formality in the general meeting. However, this is a major risk. One wrong step can cost you, as an entrepreneur, hundreds of thousands of euros in fair compensation and wage claims. The crux is that a director is connected to your company through two parallel legal domains.

The dual legal relationship: corporate law and employment law

A statutory director holds a dual role: they are an organ of the company (art. 2:129 et seq. DCC) and usually also an employee based on an employment contract. Therefore, for a valid dismissal, you must act on two tracks. You must take the corporate dismissal decision carefully and terminate the employment contract correctly under employment law. A mistake in the corporate track immediately undermines your position in the employment law track.

Pitfall 1: changing reasons for dismissal (ECLI:NL:RBMNE:2025:7137)

Recently, the District Court of Midden-Nederland ruled on a director with 30 years of service. The shareholder called a meeting due to losses and a breach of trust. However, during the subsequent legal proceedings, the employer switched to an economic ground (position becoming redundant). The court assesses ex tunc: you cannot simply change the reason afterwards. Because there was no reorganization plan or minutes, the real reason turned out to be the desire to hire a new director. Result: the dismissal was unjustified, resulting in a fair compensation of € 222,000.

Why 'shopping' for a dismissal ground always ends badly

The court strictly assesses the situation at the time of the dismissal decision. A director must know exactly what they are defending against before the meeting; this is essential for their right to be heard and advise. When you, as a shareholder, invent a new reason on the spot or adjust your story, you violate due process. A constructed, after-the-fact justification without written evidence is fatal for your position in court.

Pitfall 2: violation of the right to be heard and advise (ECLI:NL:RBMNE:2025:6563)

In another recent case, it was agreed that the director would leave in 2026. When she suddenly accepted a top position elsewhere, the company suspended her immediately and called a meeting. The notification email stated that her position was "immediately untenable" and the contract would be terminated. The decision was already set before she could provide her mandatory advice.

The decision was already set: annulment and wage payment

The court ruled that this was a violation of the right to be heard and advise (art. 2:227 para 7 DCC). The dismissal decision was therefore annulled under art. 2:15 DCC. Because the corporate dismissal was annulled, the director remained formally in office and the employment contract remained in effect. The company was ordered to pay the full salary, despite the strained relationship.

Three tips to prevent costly mistakes

• Ensure a sound and consistent reason for dismissal: document everything from day one in minutes, reorganization plans, and correspondence; the reason in the notice must match the reason in the proceedings exactly.
• Always respect the right to be heard and advise: avoid terms like "immediately untenable" or "termination is certain"; give the director the opportunity to genuinely influence the decision-making.
• Keep both tracks in order simultaneously: a dismissal as an organ is not automatically a flawless dismissal as an employee; ensure that corporate decision-making perfectly supports the employment law termination.

What should you do now?

Never dismiss a statutory director without a legally prepared process. A well-documented file not only saves you trouble but, above all, prevents a costly and long-term procedure in court. Consult a specialist in time to secure both tracks legally.

Rulings

This blog post is based on ECLI:NL:RBMNE:2025:7137 and ECLI:NL:RBMNE:2025:6563.