And why the prosecution will use this tool even more often

Few will have failed to notice that S. (Sywert) Van Lienden and two others were dismissed this week as directors of the Aids Alliance Foundation. The court took the decision at the request of the public prosecutor and a number of employees of the foundation, who felt cheated by the board. 

The court went along with the accusation that that the directors had seriously disadvantaged the Foundation by setting up a competing BV about the same time as the Foundation. A BV that profited from the name and goodwill of the Foundation, and from the efforts of many volunteers who thought they were working for a non-profit organisation. In fact, it was acting in violation of the Foundation's articles of association. 

Why is the public prosecutor (OM) allowed to make this claim?

On 1 July 2021, the Management and Supervision of Legal Entities Act (WBTR) came into force with broadened grounds for dismissal of directors under company law. A director can now also be dismissed by the court at the request of the public prosecutor "for neglect of his duties, for other serious reasons, for a drastic change of circumstances on the basis of which the continuation of his directorship cannot reasonably be tolerated, or for failure to comply or to comply properly with an order issued by the interim relief judge of the court pursuant to article 297 order given."

The rationale behind this is that it provides external supervision of foundations, for example by the Public Prosecution Service. Indeed, foundations are more prone to abuse than, say, associations. Indeed, there is a lack of internal a supervisory body, if only because a foundation - unlike an association - does not have a members' meeting that has to discharge the board annually for its policies and can dismiss directors. If the OM gets signals of abuse of the foundation, it can take action against the directors more quickly.  

Governance ban

Van Lienden and his fellow directors were not only dismissed by the court, they were also banned from becoming directors or supervisory directors of a foundation for five years. Although this is the rule after a dismissal, it can be deviated from if the director cannot be blamed seriously. It was neither stated nor apparent in the proceedings against van Lienden cs that this 'ground for refusal' arose. 

A trend visible?

The public prosecutor has long been listed in Book 2 of the Civil Code as a public order regulator in relation to all legal entities. In recent years, it is increasingly seen that the public prosecutor tries (with varying degrees of success) through en company law to thwart suspected abusers. This has already led to lawsuits against associations whose activity violates public order, such as certain motorbike clubs. This is obviously at odds with constitutional freedom of association and/or expression. 

As in criminal cases, the prosecution will have to tread cautiously when dealing with suspected wrongdoing. The mere fact that the public prosecutor's office nominates foundation directors for dismissal is extremely stigmatising. The potentially irreparable damage to those involved must not be lost sight of by the public prosecutor's office despite any profiling zeal.