Termination of employment of managing directors

In a June 21st, 2016 decision of the Court of First Instance of Aruba the court re-emphasized the particular position of managing directors when there is a conflict with the general meeting of shareholders a/o the supervisory board of directors.

The matter at hand revolved around a dispute that arose as a result of the fact that the general meeting of shareholders expressed a lack of confidence in the managing director and as a result of this exercised its corporate powers to dismiss the managing director. The managing director challenged the termination based on the argument that the dismissal was unjustified. In the decision the Court re-emphasized the fact that in these cases the Court can only apply a limited margin of appreciation when evaluating such claims and that a compensation in these cases is only applicable if: (i) the dismissal could not have been reasonably given based on the grounds given; or (ii) if the consequences of the dismissal for the company are minor compared to the consequences for the dismissed managing-director. The margin of appreciation applicable to regular employees is broader under Aruba law. The court disagreed with the

The court disagreed with the managing director on the argument that the grounds given for the dismissal were false. The court further considered that the interests of the company to have a managing director in which the shareholders have full confidence outweighed the interest of the former managing director to remain in the position of managing director. The court also considered that in this matter the former managing director was paid the company an amount equal to the contractual notice of termination period for a total of a little more than half a year. Another relevant fact was deemed that managing directors (generally) enjoy a higher compensation package compared to regular employees and that this higher pay accounts for the inherent risks of the position of managing director.

 This decision emphasizes the corporate powers of the general meeting of shareholders of Aruba companies to dismiss managing directors and the importance for parties to have clear contractual provisions on the consequences of termination of the managing-directorships.