How Do You Dismiss a Managing Director in the Netherlands?
A statutory managing director of a Dutch BV or NV can be dismissed at any time by the body that appointed them, usually the general meeting of shareholders, without prior permission from UWV or the court. If the director also has an employment contract, the dismissal resolution in principle ends that contract as well, unless a statutory prohibition of dismissal applies, such as illness. The court cannot reinstate the director. The protection lies in money: the notice period, the transition payment and, where the dismissal had no reasonable ground or followed seriously culpable conduct by the company, fair compensation.
Dismissing a managing director in the Netherlands at a glance
- Who decides: the body competent to appoint, normally the general meeting (Article 2:244 of the Dutch Civil Code for a BV, Article 2:134 for an NV).
- No preventive test: no UWV permit or court decision is needed to give notice (Article 7:671(1)(e) of the Dutch Civil Code).
- One decision, two relationships: the corporate dismissal in principle also ends the employment contract.
- Procedure: a properly convened meeting, the director's advisory vote, and the works council's advice where there is one.
- No reinstatement: the court cannot restore the employment contract (Article 2:244(3)).
- Money: notice period, transition payment and, if the dismissal was unjustified, fair compensation.
On this page
What Is the Difference Between a Statutory and a Non-Statutory Director?
A statutory director (statutair bestuurder) is appointed as a member of the management board under the articles of association and is registered as such in the Trade Register. A non-statutory director (titulair directeur) only carries the title, for example "managing director" or "director sales", and is legally an ordinary employee.
The difference decides which rules apply. For a non-statutory director the normal dismissal rules apply in full: the employer needs permission from UWV or a court decision, or the employee's agreement, and a reasonable ground. The special regime on this page applies only to the statutory director. For the normal rules, see termination of the employment contract.
| Question | Statutory director | Non-statutory director |
|---|---|---|
| Who dismisses? | The body that appoints, usually the general meeting | The employer, like any employee |
| UWV permit or court needed? | No | Yes, unless the employee agrees |
| Reinstatement possible? | No | Yes, in the cases the law allows |
| Transition payment | Yes, if employed | Yes |
What Is the Dual Relationship of a Managing Director?
A statutory director who works under an employment contract has two relationships with the company: a corporate one, as a member of the board, and an employment one, as an employee. Dutch law links the two: the dismissal resolution in principle ends both.
The Supreme Court decided this in its Unidek judgments of 15 April 2005 (ECLI:NL:HR:2005:AS2030, ground 3.4.3). A dismissal resolution in principle also ends the employment relationship. There are only two exceptions: a statutory prohibition of dismissal stands in the way, or the parties have agreed otherwise. The contract still has to be terminated with the correct notice period.
Not every director is an employee. Many directors work under a management agreement, often through their own holding company. Their contract ends under its own terms and the employment law protection described below does not apply; see the management agreement.
Does Dismissing a Statutory Director Require Specific Grounds?
Not for the dismissal itself. Every director can be suspended and dismissed at any time by the body that is competent to appoint (Article 2:244(1) of the Dutch Civil Code for a BV, Article 2:134(1) for an NV). A reason does matter for what the dismissal costs.
Because the employment contract can be terminated without UWV or the court (Article 7:671(1)(e) of the Dutch Civil Code), nobody tests the ground in advance. It is tested afterwards: if there was no reasonable ground for dismissal, or the dismissal was the result of seriously culpable conduct by the company, the court can award the director fair compensation (Article 7:682(3)). In practice, the company should therefore still be able to explain which reasonable ground, such as poor performance or a disturbed working relationship, lies behind the decision.
The articles of association may require a qualified majority for a dismissal resolution. For a BV, that requirement may not exceed two thirds of the votes cast, representing more than half of the issued capital (Article 2:244(2)).
What Procedure Applies to Dismissing a Statutory Director?
The dismissal is a resolution of a company body, so the rules on decision-making apply. A mistake can make the resolution voidable, and then the director is still in office.
- Competent body. Check the articles of association: usually the general meeting, sometimes also another body. In a BV under the full large-company regime the supervisory board appoints and dismisses the directors, and it may only dismiss after hearing the general meeting on the proposed dismissal (Article 2:272 of the Dutch Civil Code).
- Works council. Where the company has a works council, it must be given the opportunity to advise on a proposed dismissal of a director of the enterprise, early enough for the advice to influence the decision, and with the reasons (Article 30 of the Works Councils Act). See the works council's advisory rights.
- Convening. Convene the meeting with the proposed dismissal on the agenda and observe the notice terms in the articles, or take the resolution outside a meeting, which in a BV requires that everyone entitled to attend meetings agrees to that method, with votes cast in writing and the directors given the opportunity to advise first (Article 2:238 of the Dutch Civil Code).
- Advisory vote. The directors have an advisory vote in the general meeting (Article 2:227(7) of the Dutch Civil Code for a BV). The director concerned must therefore be given the opportunity to be heard on the proposed dismissal before the vote.
- Resolution and notice. Take the resolution, record it in minutes and give notice of termination of the employment contract with the correct notice period.
- Trade Register. File the change of the board with the Trade Register at the Chamber of Commerce.
A resolution that conflicts with statutory or articles-based rules on how resolutions are made is voidable (Article 2:15(1)(a) of the Dutch Civil Code). Skipping the advisory vote is the classic example. If the resolution is annulled, the corporate dismissal is undone; what that means for the employment contract then has to be assessed separately.
What if the Director Is Ill When Dismissed?
Then the corporate dismissal still takes effect, but the employment contract does not end. Statutory prohibitions of dismissal, such as the prohibition during the first two years of illness, apply to a director's employment contract as well.
The result is a split: the director is no longer a board member, but remains an employee with a right to wages. If the company gives notice in breach of a prohibition anyway, the court can annul the notice or award fair compensation at the director's request (Article 7:681(1)(b) of the Dutch Civil Code). A company that wants to dismiss a director who has reported sick should therefore take the prohibitions into account before the meeting. See prohibitions of dismissal and dismissal during sick leave.
What Notice and Compensation Apply When a Director Is Dismissed?
The same statutory payments as for other employees: notice, the transition payment, and fair compensation if the dismissal was unjustified. Only reinstatement is not available.
| Item | Rule | More information |
|---|---|---|
| Notice period | One to four months for the employer, depending on the length of employment, unless the contract validly provides otherwise | Notice periods |
| Notice not observed | Wages for the part of the notice period not observed (Article 7:672(11)) | Notice periods |
| Transition payment | Due when the employer terminates, as for any employee | Transition payment |
| Fair compensation | If there was no reasonable ground, or the dismissal resulted from seriously culpable conduct of the company (Article 7:682(3)) | Fair compensation |
Directors' contracts often contain their own arrangements, such as a contractual severance payment or a longer notice period. Those apply alongside the statutory rules.
Can a Director Challenge Their Dismissal in Court?
Yes, but only for money or, in limited cases, against the resolution itself. The court cannot order restoration of the employment contract between the company and the director (Article 2:244(3) of the Dutch Civil Code for a BV, Article 2:134(3) for an NV).
The director can ask the subdistrict court for fair compensation (Article 7:682(3)), for the annulment of a notice given in breach of a prohibition of dismissal (Article 7:681), and for the transition payment and any notice compensation. Separately, the director can ask the district court to annul the dismissal resolution if it was made in breach of the rules on decision-making (Article 2:15). For a claim against notice or for fair compensation, strict time limits apply; see challenging a dismissal.
Can a Director Leave by Agreement Instead?
Yes, and in practice most director exits are settled. A settlement agreement usually covers the resignation as a director, the end date of the employment contract, the payment, the non-compete clause and discharge.
Free toolSettlement agreement generatorA settlement agreement for termination by mutual consent, with the reflection period and WW-safe wording.Draft an agreementOne difference from ordinary employees: the 14-day reflection period for a settlement agreement does not apply to a director of a legal entity whose employment contract cannot be restored under Book 2 (Article 7:670b(5) of the Dutch Civil Code). The agreement is binding immediately. See the settlement agreement and the reflection period.
What Should a Company Check Before Dismissing a Managing Director?
- Is the director a statutory director, and do they have an employment contract or a management agreement?
- Which body is competent to dismiss, and what majority do the articles require?
- Is there a works council that must be asked for advice?
- Has the director been given the opportunity to be heard before the vote?
- Does a prohibition of dismissal apply, in particular illness?
- Is there a reasonable ground, documented, to limit the risk of fair compensation?
- Which notice period applies, and is the transition payment calculated?
- Has the change been filed with the Trade Register?
Which Legal Sources Govern the Dismissal of a Director?
- Article 2:244 of the Dutch Civil Code, dismissal of a BV director, no reinstatement
- Article 2:134 of the Dutch Civil Code, dismissal of an NV director, no reinstatement
- Article 2:227 of the Dutch Civil Code, advisory vote of directors in the general meeting
- Article 7:671 of the Dutch Civil Code, notice without UWV or court for directors
- Article 7:682 of the Dutch Civil Code, fair compensation
- Article 30 of the Works Councils Act, advice on dismissal of a director
- Supreme Court 15 April 2005, ECLI:NL:HR:2005:AS2030 (Unidek), dismissal resolution also ends the employment contract