In recent preliminary relief proceedings held at the Zwolle Subdistrict Court the judgement rendered on 8 September pronounced that the mere registration of the company director in the C ommercial Register of the Chamber of Commerce and the employee’s contention that the appointment decision had been agreed orally, formed insufficient evidence on which to rule that the employee should be classed as managing director under the articles of association (“managing director”).
This classification is crucial, given that in the event of termination of employment a managing director does not enjoy the same protection afforded to an ordinary employee. Dismissal of a managing director requires neither prior consent from the UWV [Employee Insurance Agency] nor a dissolution order from the subdistrict court. A director has both employment-law and corporate-law ties with the employer. If the corporate-law ties are severed properly by corporate decision then the employment relationship also automatically ends, unless there is a prohibition against termination or other specific provision agreed between the parties. Unless the articles of association dictate otherwise, the general meeting of shareholders usually has the power to appoint or dismiss a managing director. The articles of association also usually clearly define the formalities applicable for a legally valid dismissal. Unlike an ordinary employee, a managing director cannot claim reinstatement of the employment relationship.
The facts of the case
The proceedings in Zwolle involved, in brief, the following. On 1 June 2011 the employee took up a position with the title of director with Topicus B.V. (further: “Topicus”). He was also managing director of PBT Holding. At the start of 2014 the parties jointly prepared “an addendum to the employment contract”. This recorded, inter alia, that in addition to handling internal affairs for purposes of the shareholders and within the management of the group, the employee would be primarily involved with the successful development of Topicus B.V. within the government sector. The addendum also confirmed that the employee’s statutory role within PBT Holding B.V. would terminate effective 4 March 2014. The addendum to the employment contract was not signed by the parties.
A decision was subsequently taken at the shareholders meeting of 29 April 2016 to dismiss the employee as director of Topicus Overheid B.V. (further: “Topicus Overheid”).
On 23 June 2016 the employee was registered in the Commercial Register of the Chamber of Commerce as director of Topicus Overheid with effect from 17 June 2016.
In short, the employee asserts that he was solely director in title of Topicus Overheid, but always remained in the employ of Topicus B.V. and therefore was an ordinary employee. According to the employee there was never any formal appointment decision to show that he was a director appointed under the articles of association of Topicus Overheid. It is his view therefore that the employment contract is not terminated by virtue of the decision to dismiss, and consequently he remains entitled to the continued payment of his wages.
Topicus claims that there was certainly an appointment resolution and that the parties had the intention to appoint the employee as managing director of Topicus Overheid. The employee is registered in the Commercial Register as managing director of Topicus Overheid. The fact that there was no documented decision by the general meeting of shareholders of Topicus Overheid does not stand in the way of classifying the employee as managing director.
Subdistrict Court judgement
The subdistrict court found that in order to be classified as a director an appointment decision by the general meeting of shareholders is prerequisite (Section 2:242 Dutch Civil Code) and that the parties cannot rely merely on statements and conduct of the company. This is in line with Supreme Court case law (HR 15 December 2000, Dutch Law Reports 2001/109).
It has been established in the case to hand that there was no documented appointment decision. Topicus alleges that this decision was made verbally. It does not follow from Section 2:242 Dutch Civil Code that an appointment decision must satisfy certain procedural requirements, unless dictated otherwise by the articles of association. A verbal decision is therefore possible, but you must be able to prove it. The court found that Section 2:230 subsection 4 of the Dutch Civil Code prescribes that decisions adopted by the general meeting of shareholders must be recorded in the minutes. Whilst the absence of such a recording in the minutes, as is the case here, does not automatically imply that the decision is null and void, Topicus cannot provide evidence that the appointment decision was adopted. Consequently, the court is unable to verify whether, where, how and when the decision was made.
The court finds that the registration effected by the civil-law notary in the Commercial Register says nothing in itself about the existence of an appointment decision taken by the general meeting of shareholders. In the opinion of the court, the addendum to the employment agreement in conjunction with the minutes of the meeting of 4 March 2014 cannot be construed as an appointment decision. By the same token, the fact that the employee effectively conducted himself as managing director does not justify the conclusion that he did so on basis of an appointment decision of the general meeting of shareholders.
In the judgement of the subdistrict court there is no evidence of an appointment decision by the general meeting of shareholders of Topicus Overheid, as a consequence of which the employee was not a managing director of Topicus Overheid. The employment contract between Topicus and the employee therefore remains valid and the claim for back wages is granted.
Notwithstanding the necessity to provide evidence of an appointment decision, the question remains whether the employment contract would have ended simultaneously with the corporate law dismissal decision by Topicus Overheid. Two separate companies are involved here. The employee was employed by Topicus B.V. In the opinion of the court the addendum to the employment contract does not alter this fact. Even if the employee had at any time served as the legally appointed managing director of Topicus Overheid, it is highly unlikely that the corporate law dismissal would have led to termination of the employment contract with Topicus B.V., given that this is a separate entity.
In a case before the Rotterdam Subdistrict Court (JAR 2016/179) last July it was judged that confirmation of an appointment as General Manager in a memorandum together with a registration at the Chamber of Commerce was to be regarded as a legally valid appointment decision. The appointment was acknowledged by the court as a resolution outside a meeting (Section 2:238 Dutch Civil Code). A resolution outside a meeting, however, is also subject to prescribed form and must be documented. The Rotterdam court also attached significance to the actual role fulfilled by the employee, and that it could not be equated with that of an ordinary employee. In the proceedings in Zwolle the court appears to attach less importance to this aspect.
Moreover, in the Rotterdam case registration in the Commercial Register took place shortly after the alleged appointment. The subdistrict court also attached weight to the fact that the Chamber of Commerce registration form was signed by the director.
A particularly striking aspect of the case under review is that it was not until 23 June 2016, two years after the alleged appointment and even after the (alleged) dismissal (on 29 April 2016) that the director was registered in the Commercial Register by a civil-law notary, without any part played by the director himself. This was an apparent attempt by the employer to “glue together” some kind of evidence of the directorship.
This case serves to further emphasize that the appointment of a managing director must be properly, accurately and timely documented, with due observance of the articles of association, to avoid any possible subsequent dispute.