The managing director of ACU was unlawfully dismissed in 2012. On 9 January 2015, the Supreme Court in the Netherlands ruled that the Common Court of Justice wrongly decided that the then managing director of the Curacao Cooperative Association ACU was not an employee but a director or board member. Contrary to the consideration of the Common Court of Justice, the Supreme Court was of the opinion that permission from the Director of the Department of Labor Affairs had been required for the dismissal: the managing director actually was an employee and not a director. So the dismissal was invalid. ACU has to continue to pay the salary. This is costly for ACU, and also a shame, for the Department of Labor Affairs itself, no less, had told ACU that permission for the dismissal was not required in this case. This decision is important to all legal entities and their directors. How exactly does this work?

Since the introduction of the new Book 2 of the Curacao Civil Code (CC) in 2004, according to article 8, paragraph 5, directors of legal entities cannot be considered to be employees anymore. Therefore, these officers have no employment protection. No permission is required from the Director of the Department of Labor Affairs to dismiss them. So to speak, these directors or board members can quite easily be thrown out. Then why not the ACU director?

Our language can be tricky. A managing director is not always a managing director (under the articles of incorporation). A director is not always a director (under the articles of incorporation). The rule in article 8, paragraph 5, of Book 2 CC only applies to directors under the articles of incorporation. These are directors who have been appointed as such pursuant to the rules in the articles of incorporation. If this is not the case, you can call this person a director, but he is not a director in the sense of article 8, paragraph 5, of Book 2 CC. In this case, article 8, paragraph 5 does not apply. The director most certainly does have employment protection in that case, and permission from the Director of the Department of Labor Affairs is required for his dismissal.

Have the ACU and the Department of Labor Affairs all been sleeping then? I don’t think so. The misunderstanding is understandable. It is a little technical, but can be explained. Legal entities such as a corporation or a foundation, and also a cooperative association such as ACU, can have a so-called one-tier board or a two-tier board. In a one-tier board, the executive directors and supervisory directors are members of the same body, or are one board so to speak. The same body under the articles of incorporation (the ’board’) includes persons with an executive responsibility and persons with a supervisory responsibility. In a two-tier board, the executive and supervisory responsibilities have been separated in different bodies. For instance, the larger corporations have a management board (executive directors) and a separate supervisory board (supervisory directors). ACU has a one-tier board. Consequently, people apparently believed that the managing director, recruited as general manager, was a member of this board because he was managing director. And that’s where it went wrong, according to the Supreme Court. The ACU constitution (articles of incorporation) stipulates that the day-to-day management at ACU is conducted by the chairman, the secretary, and the treasurer jointly. At ACU, those were other persons than this ’general manager’. So this general manager was not a board member. So he was not a director, but an ’ordinary’ employee. Consequently, permission for his dismissal had to be requested from the Director of the Department of Labor Affairs. This had not been done. Therefore, the dismissal is invalid. Costly. So pay attention.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next column!

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