In September, we are looking back at the “severance pay” for the director upon their removal from office, judgment case No. 27 Cdo 709/2025.
The director sued the company in which he served for severance pay. He was removed from office on the basis that the sole shareholder was of the opinion that the director had seriously and repeatedly breached his duties by charging certain expenses, which the shareholder considered to be personal, as the company’s expenses.
It was agreed in the service agreement that the director was not entitled to severance pay if he was dismissed for a particularly gross breach of his legal duties or for a serious or repeated breach of statutory and internal regulations.
The director disagreed, arguing that these were normal expenses in terms of the company operations, and that these expenses were also conducive to activities in which the director acquired new clients.
The appellant (claimant in the original proceedings) failed to define the appealable issue that would be capable of hearing, and therefore the Supreme Court dismissed the appeal. However, the court held that since the director did not challenge the sole shareholder’s decision to dismiss him within the three-month period in terms of its validity, the validity of the decision could no longer be considered as a preliminary issue in other proceedings. In the opinion of the Supreme Court, an action based on the claim that the condition subsequent to the entitlement to payment of severance pay under the service agreement was not fulfilled, could only be successful if the decision of the sole shareholder was null and void (since in such a case it would still be reviewable in terms of its validity).
Such a conclusion implies that care must be taken to ensure that the conditions for payment of severance pay are correctly worded in the service agreement so that the conditions for payment are clear and enforceable by both parties. And yet, let us take a more critical look at the judgment. In particular, whether the Supreme Court’s reference to the proceedings for the annulment of the sole shareholder’s decision to dismiss the director is appropriate. Indeed, the question is what the appellant would be able to achieve in such proceedings.
In the present case, it does not appear that the sole shareholder could not dismiss the director, whether for a cause or for convenience. It can thus be expected that the alleged grounds for removal of the director would not have been examined in the annulment proceedings anyway, and the director would probably not have been successful in the proceedings (at least from what the judgment tells us about the sole shareholder’s decision). Hence, a thought idea comes to mind whether the question presented by the appellant was more about the (in)validity of his dismissal rather than the interpretation of the contractual provision in question and an examination of whether the conditions for the application of the purely contractual arrangement in question without corporate overlap were met. The resolution of such thoughts, also in view of the fact that the appeal was dismissed, will of course remain unknown. By the same token, it must also be acknowledged that the reasoning in the decision is also brief, and we therefore suggest taking a rather reserved approach to the reasoning.
