With the introduction of the Management and Supervision of Legal Persons Act (WBTR), the legislature has taken important steps to improve the management and supervision of foundations. One of the most notable changes concerns the expansion of the grounds for dismissal for directors of foundations. In this article, we discuss the new statutory regulation, illustrate the regulation with a practical example, and explain the implications for directors and stakeholders.
The new statutory regulation (WBTR)
Given the old regulation, dismissing a foundation director was often difficult. According to the old legal text of Article 2:298 of the Civil Code, a director could only be dismissed in case of evidently wrongful acts or (financial) mismanagement. These strict requirements ensured that dismissal rarely occurred in practice.
With the amendment of the law, the possibilities for dismissal have been broadened. The new Article 2:298(1) of the Civil Code offers several grounds for dismissal. A director may be dismissed by the court in case of i) neglect of his duties, ii) other weighty reasons, iii) circumstances of which the continuation of the directorship cannot reasonably be tolerated, or iv) failure to comply or to comply properly with an order of the interim relief judge.
The request for dismissal must be made by an interested party or the Public Prosecutor’s Office. This regulation also applies to foundation commissioners.
A practical example
A recent ruling by the Arnhem-Leeuwarden Court of Appeal illustrates the expanded possibilities of the new law. Two nature lovers, simultaneously with their marriage, established a foundation together to support nature. Years later, without her husband’s knowledge, the wife decides to cut down some trees. The husband is furious. He decides to register the foundation in the Trade Register, with only himself as the sole and independently authorized director. This violates the articles of association, which stipulate that the husband and wife would be jointly authorized as directors.
The lawsuit
The wife, who could not register as a co-director with the Commercial Register without her husband’s cooperation, turned to the court and claimed her husband’s dismissal as a director of the foundation pursuant to Section 2:298 of the Civil Code. The court rules in her favor. The husband had neglected his duties by focusing on his own interests rather than the interests of the foundation. Moreover, he had acted in violation of the articles of association and the Trade Register Act, which required him to ensure that the information in the trade register was entered correctly and completely at all times.
As a result, the husband was dismissed and the wife, at her request, was appointed as a director. It is noteworthy that the foundation was not registered in the trade register until 20 years after its establishment, resulting in an economic offence under Article 1 WED, as directors are obliged to register the foundation within a week of its establishment under Article 20 of the Trade Register Act.
Implications for directors and stakeholders
This ruling shows that the WBTR can actually contribute to better governance of foundations. Indeed, the dismissal in the above ruling was granted on the basis of dereliction of duty, one of the new grounds for dismissal introduced by the WBTR. Directors must take their responsibilities seriously and ensure that they do not neglect their board duties. Interested parties now have greater opportunities to request the dismissal of a director through the courts.
Do you have questions about your role as a director, including the legal obligations under the WBTR and the Commercial Register Act? Or are you an interested party considering the dismissal of a foundation director? If so, please contact Furkan Alkilic or one of LVH Advocaten’s other specialists.
