Towards a lifelong sentence of exercising a director’s mandate?

In a judgment of 27 June 2014, published in December 2014, the Supreme Court specified the extent to which the mandate of a director should be pursued even after his termination.

It is generally admitted that the director whose functions have ended must pursue his mandate to a certain extent. Indeed, the director should pursue the exercise of his mandate even after his termination if the number of directors is below the legal or statutory minimum.

However, this continuation of mandate by the director should not last longer than the period of time that is reasonably necessary for the general meeting to appoint a new director.

The case which led to the Supreme Court’s ruling concerned a director appointed in 1989 for a period of six years and whose mandate terminated in 1995. Acting for the company, this director had filed an opposition application in 2008 within a judiciary process and an appeal in 2010. The Court of Appeal of Brussels had declared that the appeal was not admissible because the director was not legally entitled to represent the company due to the termination of his mandate 15 years earlier. In the Court’s view, the reasonable and necessary time period for the general assembly to replace the director had been exceeded.

The Supreme Court overruled this judgment by affirming: “It is not deduced from those provisions that the functions of a director whose mandate terminated should ONLY be pursued during the reasonable and necessary time period for the general assembly to ensure his replacement.”

This clearly means that a director can pursue his functions as long as the corporate interest requires it, even if his mandate has been terminated.

The corporate interest overrules the private interests of the director. Even though the powers of the director whose mandate has been terminated are limited to urgent and necessary matters, his liability is still at stake as long as he continues to exercise those director’s functions. Moreover, the director will still be considered as self-employed and will be registered as such by the tax administration.

Therefore, extreme care should be taken in this event. The director must make sure that the general assembly appoint his replacement shortly after the termination of his mandate, or that the board of directors on their own initiative replace him with another person.