Friday, February 23, 2018

Advisory vote of directors and commissioners in dismissal decisions

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Directors and commissioners in the general meeting of shareholders (AGM) as such have an advisory capacity. They should therefore be called to attend the AGM and get an opportunity to render their advice. If the directors do not get this opportunity, then a decision may be annulled. This is based upon previous rulings of the Supreme Court (Case Janssen Press, HR March 10, 1995, NJ 1995/595), where the decision was taken outside the AGM to dismiss a director. The director had not been able to render his advice, reason why the dismissal decision was annulled. In its ruling of December 22, 2009 (NJ 2010 / 16), the Supreme Court confirmed and further explained this rule.

Background of this ruling

The AGM of a private company, consisting of one shareholder, had agreed outside the meeting to dismiss one of the directors immediately. The director had not been given an opportunity to render his advice. After this, an AGM was convened whereby that director had been invited to state his advisory vote. Despite this invitation, the director does not show up at the AGM. The other directors are not invited to this AGM. During the AGM the decision was made (again) to dismiss the director. The director does not agree with the decision for his dismissal and takes the company to Court.

The Supreme Court confirmed in its ruling of December 22, 2009 that, outside an AGM, directors have an advisory vote with regards to the taking of decisions. In addition, the Supreme Court ruled that if, during an AGM a decision was to be made about the dismissal of a director, both this director as well as other directors should have the opportunity to be heard.

Always invite Directors

From the ruling of December 22, 2009, it follows that all directors have an advisory role and should be heard if a proposal is made to dismiss one of the directors. This does not only apply to dismissal decisions but also to other decisions of the AGM. All directors must therefore be invited to the AGM, so that they have an opportunity to state their voice. It is advisable to send the invitations to the AGM to the directors in writing and to explicitly indicate their right to their advisory vote.

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