A director can always be dismissed by the shareholder. However, the dismissal must meet certain substantive and formal requirements. Dismissal without reasonable grounds can be annulled. The court determines what constitutes a reasonable ground. This has not been established in the law. A director who has always functioned in a normal and good way has a strong legal position. Assume that a shareholder wants to change course. They dismiss the director. That is possible, but there is a price to pay. The corporation will be required to compensate the director for the damages incurred as a result of the early dismissal. The said damages consist, for example, of the income lost in respect of the agreed period of the appointment.
If there is question of structural unsatisfactory performance of the director then this must be demonstrated. This requires the compiling of a file. Compiling a file requires that you regularly discuss the conduct of the person concerned with them and improvement nonetheless fails to materialize. You must establish the content of those meetings in writing and include them in the file. If you fail to do this then the dismissal will be annulled and/or the price for it will be significantly higher.
If you search for these rules in the law then you will not find them. These rules have been developed in case law over the course of the years. The common foundation of these unwritten rules is the principles of reasonableness and fairness. The mind and the heart. There must be a comprehensible reason for the dismissal and it must be fair. This test is applied by the court. This is not about what the court deems to be fair, but what the court believes is deemed to be reasonable and fair by society. A normal person must be able to both understand and sense why the dismissal was given.
Furthermore, the dismissal must also meet a number of formal requirements. These formal requirements were, however, laid down in the law. In the case of the dismissal of a director, they are also included in the articles of incorporation. Time limits and formal requirements are applicable in this respect. If you do not observe these then things will also go wrong. The dismissal can then equally be annulled. If it takes months for the court to reach this decision then it becomes a costly affair for the corporation. In that case, the overdue remuneration must still be paid to the director and must continue to be paid until the dismissal has been effected on the correct grounds and in the correct manner.
This sometimes turns out to be a strange experience for a corporation. Assume that a project developer established in Curacao with a subsidiary in Aruba decides to dismiss one of its directors. The ground for dismissal is, briefly put, serious and structural unsatisfactory performance (repeatedly unjustified expenses, repeatedly failing to comply with clear arrangements). The shareholder carries on several meetings with the director. During the third meeting, after yet another incident, the intention to proceed with dismissal from the board position is also discussed. During the meeting the director is given ample opportunity to put forward a defense against the proposed dismissal. The shareholder nonetheless decides to proceed with the dismissal. The resolution is adopted by the GMS in an extraordinary meeting. This meeting is transacted in writing.
Substantively, this is perfectly fine. Formally, it is not. Even if the director was able to put forward a defense against the proposed dismissal, the actual dismissal is nevertheless null and void if the director was not given another, but this time formal, opportunity to be heard during the GMS. The director must be able to (again) put forward a defense during the GMS in which the dismissal is delivered. Moreover, by law, the director has a right to advise on any resolution adopted in the GMS. This formal rule is also unwavering. And so it can happen that you try to do the right thing as a shareholder but suffer defeat on formal grounds. Difficult.
