THE BOTTOM LINE
- Employment Persists Without Proper Dismissal: A 50/50 shareholder-director cannot be informally fired by their co-founder following a personal breakup. Without a valid corporate resolution, the employment contract and its core obligations remain fully intact.
- Right to Salary Can Be Curtailed: While the director is entitled to their salary, a court may reduce this entitlement if they begin earning significant income from other activities. The company is not expected to fully fund a director who is no longer working for the business and has started a new venture.
- Reinstatement Isn’t Guaranteed: A court will not force an unworkable business situation. It denied reinstatement to the workplace (the ex-partner’s home) and to daily duties, acknowledging that a complete breakdown of trust makes collaboration in a two-person company impossible.
THE DETAILS
This case involved a company founded and run by two individuals who were both 50% shareholders, statutory directors, and partners in a long-term personal relationship. When their personal relationship ended, one director unilaterally attempted to terminate the other’s employment via email, stopping salary payments and demanding the return of the company car. The court swiftly confirmed that this was not a valid dismissal. Under Dutch corporate law, dismissing a statutory director requires a formal resolution by the general meeting of shareholders. In a 50/50 deadlock, such a resolution is impossible without mutual consent. Therefore, the court affirmed that the director’s employment contract never legally ended.
With the employment relationship still in effect, the court addressed the financial consequences. It ruled that the director was entitled to his back pay, as the reason he was not working was due to the relationship breakdown—a risk not solely his to bear. However, the court introduced a crucial, pragmatic limitation. Once it was established that the director had started working as a freelancer, the court halved his salary entitlement from that point forward. The reasoning was clear: it is unreasonable for the company to continue paying a full salary to a director who is now actively generating income elsewhere. The court did, however, uphold the director’s contractual perks, ordering the company to compensate him for the monthly costs of a replacement vehicle and for vehicle charging expenses he had incurred.
Despite confirming the director’s employment status, the court refused to order his reinstatement. It recognized the practical impossibilities of the situation. The primary workplace was now the ex-partner’s private residence, making a return to that location an invasion of privacy. More fundamentally, the court acknowledged that a complete breakdown of trust between the two founders had occurred. Forcing two co-directors with zero trust to work together would be destructive to the business. This decision underscores a key legal principle: while a right to employment may exist on paper, courts will not impose a remedy that is unworkable in practice, implicitly pushing the parties toward a more permanent solution like a buyout or dissolution.
SOURCE
Source: Rechtbank Zeeland-West-Brabant
