THE BOTTOM LINE
- Public attacks are grounds for removal: A director who publicly attacks their own organisation, its strategy, and fellow board members can be dismissed by a court for weighty reasons, even if an initial internal dismissal process was procedurally flawed.
- Competing activities are a red line: Actively founding a competing organisation, soliciting donations for it, and encouraging stakeholders to abandon the foundation is a clear breach of a director’s duties and a strong basis for removal.
- Dismissal carries severe consequences: In the Netherlands, a court-ordered dismissal of a foundation director automatically triggers a five-year ban from serving on the board of any foundation, a significant professional and reputational penalty.
THE DETAILS
This case involved a high-profile internal conflict at Sea Shepherd Global (SSG), a well-known environmental foundation. Following a dispute, the board split, with the four remaining directors voting to dismiss the movement’s founder and another director. In a parallel proceeding, that initial board decision was found to be procedurally void. However, anticipating this outcome, the remaining directors also petitioned the court to dismiss the two directors based on their conduct. The Amsterdam Court of Appeal has now upheld that court-ordered dismissal, providing crucial lessons on corporate governance and director responsibilities.
The court’s decision hinged on the principle of weighty reasons for dismissal under Dutch foundation law (Article 2:298 of the Dutch Civil Code). It found a complete and irreparable breakdown of trust between the two factions. The evidence showed that the dismissed directors, particularly the founder, had engaged in a sustained public campaign against SSG after their initial (but flawed) removal. This included creating competing organisations, publicly calling SSG a “sinking ship,” encouraging donors to support their new ventures instead, and making disparaging and threatening remarks about the remaining board members. The court ruled that this behaviour was fundamentally incompatible with the duties of a director and damaging to the foundation’s interests.
This ruling underscores a critical point for boards and CEOs: a director’s conduct after an internal dispute can itself create the legal grounds for their removal. While the initial dismissal by the board was procedurally incorrect, the subsequent hostile actions of the two directors created a new and independent justification for court intervention. The court systematically catalogued the public attacks and competing activities, concluding they made the directors’ continued presence on the board untenable. The confirmation of the automatic five-year directorship ban serves as a stark reminder of the serious legal consequences of failing to uphold the duty of loyalty to an organisation.
SOURCE
Source: Gerechtshof Amsterdam (Amsterdam Court of Appeal)
