When a person has been appointed as a director of a company under the articles of association, this has consequences for his position under employment law. A director under the articles of association enjoys less legal protection in the event of dismissal compared to a ‘regular’ employee.

If a ‘regular’ employee does not agree to termination of his employment by the employer, or if no agreement is reached on the termination, the employment agreement may be terminated only if the employer obtains permission from the UWV (the Employee Insurance Agency) to terminate, or if the employment agreement is dissolved by the court.

A director under the articles of association can usually be dismissed by a resolution of the General Meeting.  This is different if, for example, there is a prohibition against termination of employment, like during an employee’s illness.

This is why it makes sense to agree on additional or amended employment conditions in case of a transition from ‘regular’ employee to director under the articles of association. Like a longer notice period for the employer and a contractual severance payment (‘Golden Parachute’). If the employer is not willing to do this, as is sometimes the case with smaller companies, it is important to consider whether it is a good idea to accept the appointment as a director under the articles of association.

In the semi-public and public sector, the contractual freedom of the parties in respect of entering into, among other things, a contractual severance payment, is, incidentally, limited.

It is also possible to agree that the non-compete clause will cease to apply upon entering into the agreement, or to include the negotiations upon termination of the agreement between the director under the articles of association and the company. Often, a director is, due to his years of experience, bound to work in a certain industry, which makes compliance with a non-compete clause rather onerous.