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You dismiss a statutory director via a shareholders' resolution — which terminates the corporate legal relationship. This is followed by the settlement under employment law: termination of the employment contract or a settlement agreement. Unlike with a regular employee, no UWV route is required; the sub-district court is immediately available in the event of a dispute. Practically faster than a regular dismissal, but legally more complex.
The short answer
- Corporate law: a shareholders' resolution terminates the director's role.
- Employment law: separate settlement of the employment contract required.
- No UWV: statutory director falls outside UWV procedure.
- Right to be heard: the director must be able to respond before the decision is made.
- Transition payment: applicable in the event of dismissal at the initiative of the company.
The two tracks
A statutory director typically has two relationships with the company:
- In terms of corporate law: he is a director. Terminates by shareholders' resolution (Art. 2:244 BW).
- Employment law: he is an employee with an employment contract. Ends by notice, settlement agreement, or dissolution by the court.
Termination of one relationship does not automatically end the other. Do not forget the employment law settlement — otherwise, the director formally remains an employee with a wage claim.
The shareholders' resolution
Steps:
- Convening of the general meeting: at least 8 days in advance, with an agenda.
- Right to be heard: the director must be able to respond — invite to the meeting.
- Voting: usually a simple majority, the articles of association may stipulate otherwise.
- Minutes: signed by the Chairman.
- Chamber of Commerce notification: report change of director within 1 week.
Is the right to be heard lacking, or is the correct procedure being followed? The decision may be annulled by the sub-district court judge.
Settlement under employment law
Three routes:
- Settlement agreement: by mutual consent. Often the fastest route. See settlement agreement.
- Termination of employment contract: by the company, provided it is well-founded. In the event of a dispute, referral to the sub-district court (excluding the UWV).
- Dissolution by the court: in the event of a dispute regarding reasonableness.
The Supreme Court rules: the shareholders' resolution to dismiss also constitutes a termination of the employment contract (HR Hoffman/UNESCO). To be certain: record this explicitly nonetheless.
Transition payment and supplementary compensation
A statutory director is entitled to a transition payment upon dismissal at the initiative of the company, in accordance with Article 7:673 of the Dutch Civil Code. In addition, often supplementary compensation (e.g., one to two years' salary), because:
- No unemployment benefits (not an employee in the UWV sense as a director/major shareholder with > 5% shares).
- Long periods of service and large income disparities.
- Often a management agreement with notice periods.
Amounts are often agreed upon in a settlement agreement to prevent litigation.
Special position of director-major shareholder
A director-major shareholder (DGA, ≥ 5% of shares) holds a special position:
- Not an employee for unemployment benefits — no entitlement to unemployment benefits upon dismissal.
- Employee for other legislation (wage tax, sickness benefit).
- Shareholders' resolution by the director-major shareholder himself? No dispute.
- In the case of a majority shareholder dismissing a director-major shareholder: often contentious, both legally and emotionally.
Honest recommendation
Dismissing a statutory director is technically simpler than dismissing a regular employee (no UWV involvement), but the complexity lies in the additional compensation, the management agreement, and the shareholding. Engage a specialized employment lawyer or attorney. A settlement agreement almost always prevents lengthy legal proceedings.
For the broader context: dismissing an employee and changing a director.
Frequently Asked Questions
Via a shareholders' resolution terminating the corporate legal relationship (Art. 2:244 BW), followed by settlement under employment law — termination, settlement agreement, or dissolution by the sub-district court. Not via the UWV route.
A statutory director falls outside the UWV procedure. Disputes regarding dismissal go directly to the sub-district court. Additionally, a director-major shareholder (≥ 5% of shares) is not entitled to unemployment benefits. Often higher supplementary compensation upon dismissal.
Yes. For the shareholders' resolution, the director must be given the opportunity to present his point of view. The absence of the right to be heard makes the resolution challengeable before the sub-district court.
Yes, in accordance with Art. 7:673 of the Dutch Civil Code: one-third of a monthly salary per year of service. Often, an additional compensation is added on top of this due to the special position, long service periods, and the absence of unemployment benefits (for a director-major shareholder).
No, a DGA (director-major shareholder with ≥ 5% of shares) is not an employee for unemployment benefit purposes. Therefore, a higher severance payment is often agreed upon in the settlement agreement.
According to settled case law (HR Hoffman/UNESCO), a dismissal resolution by shareholders can simultaneously be considered a termination of the employment contract. To be certain, however, explicitly record this in the resolution and confirmation letter.
Legal assistance for the company €1,500 – €7,500. For the director, often reimbursed €1,000 – €5,000. Plus transition payment and additional termination payment (often 6–24 months' salary). Significantly higher in the event of a dispute before the sub-district court.
