Differences between the ordinary (functional) and the statutory director

Only the statutory director has a clearly different position in Dutch employment law.

When is someone a statutory director?

Someone is a statutory director if that person has been appointed by the general meeting of shareholders or the supervisory board. The decision to appoint does not have to be a written decision (unless the statutes say otherwise).

After being appointed, it follows that the person will be registered in the commercial register of the Netherlands Chamber of Commerce (Kamer van Koophandel).

However, being registered as a director in the Chamber of Commerce is only an indication that the person may be a statutory director; alone it is not definitive. Being a statutory director is contingent on the appointment decision.

What is the difference in the position of a statutory director?

• A statutory director may conclude a maximum of three temporary/fixed-term contracts, but there is no maximum on the total term of these contracts.
• The dismissal of a statutory director from a B.V. or N.V. does not require prior permission from the UWV or the courts. Dismissal is effected by a resolution of the general meeting of shareholders.
• Further, under the articles of association, a statutory director cannot request recovery of the employment relationship after dismissal.
• The statutory director has no reflection period of two weeks after the conclusion of a termination agreement.
• As a statutory director, this person can be held personally liable for the policy pursued.

What are the similarities between the position of a statutory director and an ordinary employee?

• In general, the company termination also leads to the employment law termination of the employment contract;
• Just like a normal employee, this director is entitled to a transition allowance and any fair compensation.

How is a statutory director dismissed?

All that is required to dismiss a statutory director is a resolution of the general meeting of shareholders. Note that the shareholders are required to provide the ground for dismissal.

Termination under company law and employment law

A statutory director is subject to both employment law and company law because they have a dual relationship with the organisation: they are (generally) employed by the organisation, and they are a part of the legal person managing the company.

When a statutory director is dismissed, they are therefore dismissed under both laws. Generally, but not always, the company law termination also leads to the employment law dismissal.

Under certain circumstances such as illness or pregnancy, where termination of employment is prohibited, the employment contract may be upheld until the prohibition expires.

Common challenges statutory directors face

As employees, statutory directors face many of the same challenges as other employees, such as workplace conflict, discrimination, personal disputes, disrupted employment relationships and unfair dismissal.

Due to their special position, they also face additional challenges, such as greater liability, fewer rights regarding dismissal and performance-related issues.

Top tip for statutory directors

It is advisable for statutory directors to agree a compensation upon departure at the start of the employment contract; the so-called “golden parachute”. After all, this type of director runs the extra risk of being held personally liable for the policy pursued and they can be fired much more easily. Such a parachute may be combined with the payment of the legally required transition fee.

Learn more about the special position of the statutory director or ask us a question about this topic.