The appointment and dismissal of a director often appear to be straightforward decisions. In reality they are governed by strict rules of company law, the Companies and Associations Code and the company’s articles of association.
The correct procedure depends on the legal form, the type of directorship and what is specifically provided in the articles of association. A director in a BV, for example, is not necessarily in the same legal position as a director in an NV.
The decision alone is not enough
The general meeting is generally competent to appoint and dismiss directors. But that does not complete the file. The decision must be correctly recorded and, where the law so requires, published so that third parties can take note of the changed board situation. That is precisely where things often go wrong in practice: not necessarily with the decision itself, but with its preparation and follow-up.
Think, for example, of a director who has been formally dismissed, but whose dismissal has not yet been correctly published. Or of a new director who is already acting on behalf of the company while the internal decision-making or documentation has not been correctly completed. That can give rise to discussions about powers, representation and the enforceability of changes against third parties.
Not every director can be dismissed in the same way
An important point of attention is that you must always check how the director was appointed.
In a BV, directors can for example be appointed for a fixed or an indefinite term. When a director was appointed in the articles of association themselves, a change to that mandate may moreover require an amendment of the articles. The articles of association may also contain specific rules on appointment and dismissal.
In an NV, account must likewise be taken of the chosen governance structure and the statutory arrangements.
The first question is therefore not only: “Do we want to dismiss this director?”, but also: “Under which legal conditions is that possible in this particular company?”
What about a management agreement?
A directorship and a management agreement are not necessarily the same from a legal perspective.
Terminating the directorship therefore does not automatically mean that all other contractual relations with that person or their management company disappear. Where a separate agreement exists alongside the directorship, it must also be examined which notice periods, indemnities, powers or other contractual arrangements are included in it.
That can matter in practice. A company may dismiss a director correctly under company law, yet still have contractual obligations towards that person’s management company.
A board change often affects more than one document
In growing companies, decisions about the board often go hand in hand with broader choices, such as the shareholder structure, representation powers, proxies, managing directors or a transfer of the company’s registered office. That is why it is useful, at every change of directors, to look beyond the minutes of the general meeting alone.
Who may represent the company from now on? Do bank mandates need to be updated? Do internal approval processes need to be changed? Are there contracts in which a director’s name or function is mentioned expressly? Do data in registers or external databases need to be updated?
A small change in the board can thus have a far greater operational impact than is visible at first sight.
Mistakes can have legal consequences
An error in the appointment or dismissal of a director can be more than an administrative shortcoming. The decision must be taken in accordance with the Companies and Associations Code, the applicable rules for the legal form and the company’s articles of association.
The subsequent formalities are also important. The appointment and the termination of the mandate of persons who manage and represent the company must be filed and published in accordance with the statutory rules. As long as the required publication has not been carried out correctly, problems may arise among other things with enforceability against third parties.
How easily a director can be dismissed depends on the legal form and on the way in which he or she was appointed. Thus, in a BV the dismissal of a director appointed in the articles of association requires an amendment of the articles. A non-statutory director may in principle be dismissed at any time and without stating reasons, with immediate effect, unless the articles of association or the appointment decision provide otherwise.
Personal liability does not arise automatically merely because a formality goes wrong in a board change. Directors can, however, be held liable when the conditions of directors’ liability are met, for example in the event of faults in the performance of their duties or certain breaches of the WVV or the articles of association that cause damage.
That is why it is wise, before a board change, to look not only at the decision itself, but also at the legal form, the articles of association, the appointment decision, any management agreements, representation rules and the required publications. In that way you prevent a simple change in the board from later causing legal or practical problems.
Strong governance requires structured follow-up
That is why it is important to look beyond the decision alone. Matters such as corporate governance, compliance and entity management also determine how strong your legal position is as a company. Especially in businesses with several companies, directors or shareholders, that follow-up quickly becomes complex. A correctly maintained company file prevents different versions of the legal reality from starting to exist side by side.
A board change is therefore best not treated as one isolated decision. Check the articles of association and the mandate in advance, record the decision correctly, review any contractual consequences and ensure that all necessary publications and internal adjustments are carried out.
That is where Nonzerosum comes in. Professional legal advice or support via an external in-house counsel offers clear added value here. In that way you retain control over your structure, even when your company is in motion.
