A settlement agreement (VSO) is often used to terminate employment contracts. However, for a director or statutory board member, different rules apply than for ordinary employees. Dismissal in these positions is often more complex and the consequences are greater.
In this article, we explain the differences, what to look out for, and how you as a board member can negotiate the best terms.
Difference between an employee and a statutory board member
An ordinary employee can only be dismissed via a settlement agreement, UWV, or subdistrict court. For a statutory board member, the situation is different:
The dismissal decision is taken by the general meeting of shareholders (GMS) or the supervisory board.
This decision usually terminates both the board position and the employment contract immediately.
Additional provisions often apply in the articles of association or in the employment contract.
Consequences of dismissal for a board member
You lose your position as board member and your employment contract at the same time.
Dismissal prohibitions often do not apply (for example in the case of illness).
Your position is more vulnerable because shareholders or supervisory board members can intervene more quickly.
Settlement agreement for a director or board member: additional points of attention
Severance payment
In addition to the transition payment, you can often negotiate an additional departure package.
Consider extra monthly salaries, bonuses, or buyout of share options.
Notice period
Ensure that the statutory or contractual notice period is correctly applied to safeguard unemployment benefit rights.
Non-compete and non-solicitation clause
These clauses are often stricter for board members.
Have them limited or compensated.
Reputation and communication
Agree on a neutral reason for dismissal ("difference of opinion" or "by mutual agreement").
Record agreements on internal and external communication.
Shares and options
If you hold shares or options, the settlement agreement must specify what happens to them.
Legal costs reimbursement
For board members, the amounts involved are often higher; have your legal costs fully reimbursed.
Practical examples
Example 1: A statutory board member was dismissed due to a "difference of opinion". Thanks to negotiations, he received a departure package of 12 months' salary and a positive press release.
Example 2: A director lost not only his job but also his share options. After legal assistance, he received compensation for the loss of these options.
Example 3: A board member signed a settlement agreement without paying attention to the non-compete clause. As a result, he was unable to work in the same sector for a year and missed out on significant income.
Checklist: Settlement agreement for a director or board member
Check the reason for dismissal and record neutral communication.
Negotiate a departure package on top of the transition payment.
Pay attention to the notice period in connection with unemployment benefit rights.
Review clauses and share options.
Have the settlement agreement reviewed by a lawyer with experience in board member cases.
Frequently asked questions (FAQ)
1. Can a statutory board member always be dismissed just like that?
Yes, the GMS can dismiss a board member. However, a severance payment may be applicable.
2. Am I entitled to unemployment benefits after dismissal as a board member?
Yes, provided that the settlement agreement is correctly drafted and the notice period has been observed.
3. What about my shares or options?
This must be explicitly arranged in the settlement agreement.
4. Can I receive a higher severance payment than an ordinary employee?
Yes, precisely because board members are often more vulnerable, a higher departure package is justifiable.
5. Why is communication important?
A neutral reason for dismissal and agreements on communication protect your reputation.
Why Arslan Advocaten?
Specialised in employment law and corporate law
Experience in assisting directors and board members with dismissal
Negotiating generous departure packages and reputation protection
Ensuring that unemployment benefit and tax rights are safeguarded
Conclusion
For directors and statutory board members, special rules and risks apply in the case of a settlement agreement. Therefore, always seek legal guidance. With the right negotiations, you can not only secure a good financial arrangement but also safeguard your reputation and future.