Corporate Law & Employment Relations
Unlike regular employees, company directors are subject to broader legal regulations beyond the Labor Code (LC), including the Law on Companies (LoC) and the Civil Code (CC). These laws define the director’s legal status, responsibilities, and employment termination grounds, emphasizing their duty to ensure smooth company operations, comply with regulations, and manage corporate strategy, finances, and external relations.
Recent court rulings highlight that directors must act diligently and professionally, ensuring legal compliance and company stability. Given that a director’s appointment depends on shareholder decisions, employers must carefully manage the termination process and consider available options, including voluntary resignation, mutual agreement, or dismissal by the employer.
Director’s Voluntary Resignation Under LoC Article 37
In most cases, a company director is appointed and dismissed by a governing body—this could be the general meeting of shareholders (GMS), the board, or the supervisory council.
The law allows directors to resign by submitting a written notice to the body that appointed them. The procedure depends on who made the appointment:
- If the board or supervisory council appointed the director, they must approve the resignation within 15 days.
- If the GMS appointed the director, they must convene a meeting to discuss both the resignation and the appointment of a new director.
If the responsible governing body fails to act, clear legal rules apply:
- If appointed by the board or supervisory council, the employment contract automatically ends on the 16th day after the resignation notice.
- If appointed by the GMS, the employment contract ends the day after a reconvened meeting, if the initial meeting does not take place.
Additionally, the appointment, dismissal, or resignation of a company director must be reported to the Business Register within 5 days. If the governing body fails to act, the director can personally submit the required documents to the register to formally terminate their position.
Ensuring a Smooth Resignation Process
To avoid legal and operational risks, companies must handle director resignations promptly and in full compliance with legal requirements. Delays or procedural errors can harm business stability and create legal uncertainties. Ensuring that all decisions are executed on time and properly recorded enhances legal clarity and operational continuity.
A company director plays a strategic and essential role in corporate management. Therefore, terminating their employment is a highly sensitive process that requires careful legal handling. To mitigate risks and prevent disputes, businesses should ensure that all legal procedures are strictly followed when ending employment relations with a director.
