CMS Expert Guide to employment termination law and legislation

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1. Dismissal of employees

1.1 Reasons for dismissal

The employer must establish a real and serious reason to dismiss an employee.

It may be:

  • a personal reason, notably a fault (disciplinary ground), poor performance, disablement of the employee when the employer is unable to relocate / redeploy him to another position or make reasonable adjustments to his post; or
  • an economic reason, such as economic difficulties, technological changes or the absolute necessity of restructuring to safeguard competitiveness. The economic reason is analysed at the level of the group’s companies established in France operating in the same business sector. The redeployment obligation for economic dismissal is limited to jobs available “in French territory in the company or in other companies of the group, the organisation, activities, and operating location of which allows mobility of some or all of the personnel“;
  • the refusal to amend the employment contract following a collective performance agreement

A claim for unfair dismissal can be made if the reason for dismissal was not one of a number of ‘fair reasons’ (e.g. conduct, capability, "some other substantial reason", statutory ban or redundancy).

Most employees need a particular length of service to bring a claim for unfair dismissal. At present this is two years’ service. However, all employees can bring a claim for unfair dismissal if the reason for dismissal is deemed to make the dismissal automatically unfair (e.g. for whistleblowing or for family reasons such as dismissals for reasons connected to pregnancy, parental leave, or requests for flexible working).

Even if the dismissal is deemed to be for a fair reason, to avoid a successful claim for unfair dismissal the employer must still follow a fair procedure and act reasonably in dismissing the employee.

If the reason for the dismissal involves discrimination against the employee (because of a protected characteristic such as sex, race, age or disability), employees may make a discrimination claim irrespective of their length of service.

Employees with two years of service have the right to request a written statement of reasons for dismissal. Employers must provide the statement within 14 days of the request.

Irrespective of length of service, employees dismissed during pregnancy or statutory maternity or adoption leave are automatically entitled to a written statement of reasons for dismissal without having to request it.

An employee may be dismissed:

  1. with just cause: when the employment relationship cannot be continued, even temporarily, either because of a material breach of contract or another reason causing a deterioration of the relationship between the parties; or
  2. for a justified subjective reason: in case of a material breach of the employment contract (less serious than the case of justified cause); or
  3. for a justified objective reason: where the company is either closing, is being restructured, or there is no longer a need for the individual’s position or division. Notice served at the end of a disciplinary procedure (a ‘disciplinary dismissal’) is classified either as a dismissal with just cause or for a justified subjective reason.

1.2 Form

The stages in the individual dismissal procedure are as follows:

  • The employee is formally invited to a preliminary meeting.
  • At least five business days after the formal invitation, a preliminary meeting is held during which the employer explains the reasons for the contemplated dismissal and listens to the employee’s explanation.
  • The employee may be assisted by a third party (an employee of the company or an adviser of the employee mentioned on an official list prepared by the Prefect, depending on the existence of employee representative bodies in the company).
  • The dismissal letter must be sent to the employee at least two (or seven for a dismissal due to economic reasons) business days after the meeting (and within a month for a disciplinary dismissal).

The dismissal letter must be a registered letter whose receipt must be acknowledged by the employee, signed by either a legal representative of the firm or a person duly empowered by a legal representative, and who must belong to the company.

Applicable collective bargaining agreements can provide for a more favourable timeframe and / or procedure.

The letter must explicitly mention the grounds for dismissal. There are other mandatory provisions such as the possibility of choosing to benefit temporarily the supplementary health care scheme in force in the company, etc.

The grounds set out in the dismissal letter may be specified by the employer or at the employee’s request after the letter has been sent. If the employee does not make such a request, the letter’s lack of an adequate explanation will not in itself support a finding that the dismissal lacks real and serious cause, but will merely entitle the employee to compensation of no more than one month’s salary.

A special procedure (possible involvement of the works council, see below,
meeting and notification of the dismissal) applies in the case of a dismissal for economic reasons or when the dismissal concerns a ‘protected employee’ (e.g. members of the social and economic council, and trade union delegates notably).

A specific procedure prior to the dismissal exists for employees who have been recognised as physically incapable of performing their work by a labour doctor (redeployment obligation, possible involvement of the social and economic council, etc.).

For a dismissal based on a disciplinary reason, the employer should move rapidly as the procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovery of the facts.

Employees may be dismissed orally or in writing. In misconduct and capability dismissals the ACAS Code of Practice states that the employee should be invited to attend a meeting to explain their version of events. A letter should then be sent to confirm the reason for the dismissal and the date of dismissal in writing to avoid any dispute over the effective date of termination. A right of appeal should be offered. Failure by the employer to follow the Code of Practice does not give an employee a remedy for breach. However in the event that an unfair dismissal claim is successful and there has been non-compliance with the Code the tribunal has the power to increase the award of compensation by up to 25%.

Must be in written form (with the exception of domestic help and employees subject to a probationary period), and signed by the employer’s legal representative. Notice may be served by telegram.

1.3 Notice period

The notice period is set by the applicable collective bargaining agreement and the Labour Code, and generally lasts between one and three months. The contract may be terminated without notice in the event of gross misconduct or intentional misconduct.

There is a statutory minimum notice period of between one and 12 weeks, dependent on length of service.

The contract of employment can provide for a longer notice period. Failure by the employer to comply with the contractual notice period can result in a claim for ‘wrongful dismissal’.

Other than in fixed term contracts, the length of the notice period is set by national collective contracts and varies according to the length of service and the employee’s qualifications. No notice period is needed for dismissal with just cause. In dismissals for a justified objective reason and / or a justified subjective reason, the employer may renounce the notice period and pay the employee compensation in lieu of notice. Notice is not required for dismissals during fixed-term contracts or during probationary periods.

1.4 Involvement of works council

The social and economic council must be informed and consulted (with an advisory but formal vote of its members) when a mass redundancy is planned, or for the planned dismissal of a protected employee or physically disabled employee.

No general legal requirement for involvement, but staff forums may be involved in the case of collective redundancies (see below).

Works council members may not be dismissed within a year of the termination of their appointment. The union need not be notified prior to the dismissal of an employee. The employer must notify the works council (‘Rappresentanze Sindacali Unitarie’ and ‘Rappresentanze Sindacali Aziendali’) of any intention to make collective redundancies.

1.5 Involvement of a union

When a company employs more than 50 workers, trade unions may be involved in a mass redundancy procedure to negotiate an ‘employment saving plan’.

No involvement normally other than in the case of collective redundancies (see below) or if the employee exercises their right to be accompanied by an appropriate trade union representative to a disciplinary meeting.

If there is no relevant works council, the employer must notify the most representative unions of its intention to make collective redundancies.

1.6 Approval of state authorities necessary

This is required when dismissing ‘protected employees’ and now the validation or homologation of the employment saving plan is also required for mass redundancy procedures.

Not necessary.

Not required.

1.7 Collective redundancies

Different procedures apply according to the company’s workforce and the number of employees concerned (the procedures are ‘lighter’ in small companies that dismiss fewer than ten employees).

The main principles are the same:

  • The employer has a duty to inform and consult the staff representative bodies;
  • All documentation related to the collective redundancy must be sent to the state authorities

In case of mass redundancies (more than ten employees in a company employing at least 50 employees):

  • The employer has a duty to inform and consult the social and economic council, involving at least two meetings (the social and economic council may be assisted by an accountant in some cases). Please note that, with the new law, the duration of the consultation has been regulated.
  • An ‘employment saving plan’ (a social plan providing real alternatives and social measures accompanying the redundancy, such as redeployment, redeployment leave, training, etc.) should be drafted. There are two options for drafting it: either through a collective agreement negotiated with trade unions or unilaterally by the employer (only in the absence of trade unions in the company or if no agreement is found and then only after consultation with the social and economic council).
  • This employment saving plan should then be sent to the state authorities that will either validate it (if agreed with trade unions) or homologate it (if unilaterally drafted by the employer). If the state authorities do not agree with the plan, the employer may present another draft after consulting the social and economic council.

If 20 or more employees are proposed to be made redundant at one "establishment" within a period of 90 days or less, consultation with employee representatives (who may be trade union representatives) must begin at least 30 days (or 45 days if 100 or more employees are to be made redundant) before the first dismissal takes effect.

Additionally, employers are obliged to notify the Secretary of State (for Business Innovation and Skills) where they are proposing to dismiss as redundant 20 or more employees within a 90-day period.

The Secretary of State must receive notification at least 30 days (or 45 days if 100 or more employees are to be made redundant) before the first dismissal takes effect.

A copy of the notification must also be provided for the employee representatives.

Collective redundancy is the dismissal by an employer employing more than 15 workers of five or more employees in the same establishment, or at different establishments located in the same province within a period of 120 days. The employer must notify the works council and the Employment Office of its intention to make collective redundancies. Unions may ask for a joint examination in order to reach an agreement; failing this, the employer may notify the affected employees of their dismissal one by one with notice. To initiate redundancy, the employer must inform the employee representatives and the appropriate industry union in writing of its intention. Where there are no local representatives, the company must notify the full-time officials in the relevant union(s). The company must also notify the labour authorities. Within seven days of union representatives being informed, the parties must conduct a joint examination of the reason for the surplus labour and the proposed dismissal, of the possibility of redeployment, and of the use of solidarity contracts or the introduction of flexible working time to forestall dismissals. Should the union not ask for a joint examination, the employer must notify the competent local job office to continue the procedure.

The consequences of unlawful dismissal are different for employee hired before 7 March 2015 and those hired after.

For employees hired before 7 March 2015, the consequence of unlawful collective dismissal when there is a violation of the criteria for the selection of employees to be dismissed is the reinstatement of the employee and the payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary).

For other cases of unlawful dismissal, the only consequence is the payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 24 months’ salary). The dismissal is then effective.

For employee hired after 7 March 2015, reinstatement and payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary) can only be ordered following an oral dismissal or a discriminatory dismissal.

In other cases of unlawful dismissal, the employer only has to pay a ‘reinstatement indemnification’ (between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.

1.8 Summary dismissals

The term ‘summary dismissals’ has no real meaning in France. Dismissal without a notice period is only possible where there has been a serious breach, but even in that case, the form described above for dismissal procedure, including the preliminary meeting and registered letter, must still be applied. In case of dismissal without notice, the employee has no dismissal indemnity or notice period indemnity, because there is no notice period. Such dismissed employees are still entitled to unemployment insurance benefits, however. The dismissal procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovering of the facts.

Summary dismissal (dismissal without notice) is only lawful where the employee has committed a breach of contract that is sufficiently serious to entitle the employer to treat the employment contract as terminated with immediate effect. A typical example is where the employee has committed gross misconduct.

Only for just cause.

1.9 Consequences if requirements are not met

The amount of damages depends on the actual loss suffered by the employee. For dismissals notified on or after 24 September 2017, the ordonnance n° 2017-1387 provides that the damages have a preset minimum and a maximum amount depending on the employee’s length of service. The ordonnance also stipulates specific lower minimum amounts for companies that usually employ fewer than 11 employees, but the maximum remains identical.

In some circumstances, the dismissal will be void, allowing the employee to request reinstatement. (These circumstances may include collective redundancies without a social plan, dismissal after an occupational injury or in discriminatory dismissals, or dismissal of a protected employee without state authority authorisation). In such a case, the compensation cannot be less than six months’ salary.

The employee may have various claims, such as an unfair dismissal claim where the primary remedy is financial compensation. However, there is also scope for the claimant to request reinstatement or re-engagement, and in very limited circumstances (e.g whistleblowing) the claimant can request interim relief, and if the tribunal grants this, then an employer must continue paying the claimant's wages until the date of the substantive hearing. Most employment-related claims in the UK are made in employment tribunals.

Employers with more than 15 employees

The reform implemented by Law 92 / 2012 and Legislative Decree 23 / 2015 amended by Law 96 / 2018 have introduced different systems for the protection of workers, which are applicable dependent upon the type of dismissal imposed and the reason for its unlawfulness:

Disciplinary dismissal

  • Unlawful because the act does not exist or is one of the acts for which the national collective bargaining agreement or disciplinary codes provide a conservative sanction:
    • reinstatement of the employee and payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary). For employees hired after 7 March 2015 such sanctions are applicable only if the material fact behind the dismissal does not exist.
  • Unlawful in all other cases:
    • no reinstatement, but only payment of a ‘reinstatement indemnification’ (set at between a minimum of 12 and a maximum of 24 months’ salary). The dismissal is then effective. For employees hired after 7 March 2015, there is no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.
  • Unlawful because of the lack of required motivation or failure of the disciplinary procedure:
    • no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective. For employees hired after 7 March 2015, there is no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of two and a maximum of 12 months’ salary, depending on the length of service with the employer). The dismissal is then effective.

Dismissal for a justified objective reason

  • Unlawful (i) because of a lack of justification consisting of the physical or mental unfitness of the employee; or (ii) because it is ascertained that the dismissal was ordered before the retention period of the job had passed; or (iii) because the productive or organisational fact used as the basis for the dismissal does not exist:
    • reinstatement of the employee and payment of ‘reinstatement indemnification’ (a maximum of 12 months’ salary).
  • Unlawful for any other reason: no reinstatement, only payment of a ‘reinstatement indemnification’ (set at between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective.
  • Unlawful because the dismissal has actually been ordered for discriminatory or disciplinary reasons:
    • reinstatement of the employee (also if a manager) and payment of a ‘reinstatement indemnification’ (of at least five months’ salary). Alternatively, the employee may opt to receive an indemnification equal to 15 months’ salary (‘alternative indemnification’).
  • Unlawful because of a lack of the required justification or, if dictated by economic reasons, without having first complied with the required conciliation procedure:
    • no reinstatement, merely payment of a ‘reinstatement indemnification’ (set at between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective.

Employees hired after 7 March 2015 are not reinstated, but instead paid a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.

Employers with 15 or fewer employees

Re-employment of the employee or payment of an indemnification of between two-and-a-half and six months’ salary (indemnification can be increased to up to 12 months’ salary in the case of an employee with long service).

For employees hired after 7 March 2015, re-employment or payment of an indemnification between one and six months’ salary, depending on the length of service with the employer, the lack of reasons grounding the dismissal, and the damages suffered by the employee.

Regardless of the number of employees, in case of a discriminatory dismissal or oral dismissal

Reinstatement of the employee (including a manager) and payment of a ‘reinstatement indemnification’ (of at least five months’ salary).

Alternatively, the employee may opt to receive an indemnification equal to 15 months’ salary (‘alternative indemnification’).

1.10 Severance pay

Dismissal indemnity is payable unless the dismissal is due to gross misconduct or intentional misconduct. The amount payable is mainly set by the collective bargaining agreement but must not be less than 1 / 4 of the monthly salary per year of service for the first ten years of service, plus 1 / 3 of the monthly salary for each year of service after ten years. Indemnity is also payable for unused accrued holiday entitlement and for the notice period if the employer chooses to release the employee from performing it.

The employment contract may provide for the employer to make a payment in lieu of notice, for example, equal to the salary that the employee would have earned during the notice period. If this is not provided for in the contract, the parties can agree for such a payment to be made, for example, as ‘damages’ for breach of contract.

If an employee with two years’ continuous service has been made redundant, they will be entitled to a statutory redundancy payment. The amount is calculated according to a statutory formula based on the employee’s age, length of service and weekly pay (capped at GBP 538 as at April 2020), up to a maximum of GBP 16,140 (as at April 2020). The employment contract may provide for an enhanced redundancy payment.

If the employee has been unfairly dismissed, and brings a successful claim in an employment tribunal they may be able to claim a ‘basic award’ calculated according to the same formula as the statutory redundancy payment (but employees cannot usually recover both a statutory redundancy payment and a basic award), and a ‘compensatory award’ which is capped at the lower of one year’s salary and GBP 88,519(as at April 2020). If an order for reinstatement or re-engagement is made there is scope for this cap to be lifted.

Employees who argue that they were dismissed for making a protected disclosure (whistleblowing) are not restricted by the statutory cap referred to above.

Similarly, the statutory cap does not apply where the dismissal was related to a prohibited ground under the Equality Act 2010. In these scenarios the potential awards can be significant.

In any termination of an employment contract, the employee is entitled to a severance payment (‘trattamento di fine rapporto’). This is a deferred salary payment calculated as a percentage of the annual salary (including any amounts paid by the employer as fringe benefits and other special indemnifications).

The amount of the severance payment therefore increases yearly: when the employment terminates (whether on a voluntarily or due to dismissal), the employee has the right to receive the total relevant amount.

The employee is also entitled to an indemnity for unused holiday time, compensation in lieu of notice, and other accrued and pro rata payments.

1.11 Non-competition clauses

A non-competition clause is only valid if provided in the work contract, and if:

  • The employer demonstrates that this clause is necessary to safeguard his interests and proportionate (e.g. the lower is the position the less the clause is justified);
  • Its scope is limited to a reasonable area, a reasonable period of time, and precise activities; and
  • The employee receives a monthly indemnity during the term of the clause (the indemnity amount is set by the work contract or collective bargaining agreement, but is generally between 20% and 50% of the employee’s monthly salary).

This clause can be waived by the employer in the letter of dismissal or according to the provision of the applicable collective bargaining agreement and / or employment contract.

The examination of the terms of the applicable collective bargaining agreement is key on this matter.

Restrictive covenants will be void for unlawful restraint of trade and so are unenforceable unless they protect the legitimate business interests of the employer and go no further than is necessary to provide that protection, in terms of activity, duration and geographical area. However they are widely used in senior level contracts. It is always recommended to take advice on tailoring such a clause for each individual employee and to ensure that when employees are promoted or their role changes that the restrictions are suitably updated.

A post-contractual non-competition clause is valid if it has been agreed between the parties and:

  1. it is in writing; and
  2. the restriction imposed on the employee refers to a specific object, within a specific area and for a limited period (maximum of three years); and
  3. an indemnity is paid to the employee while the clause is in force. The indemnity may be paid during, at the end of, or after termination of the employment contract.

1.12 Miscellaneous

Specific and restrictive rules and procedures apply in the case of pregnant women, women on and returning from maternity leave, young fathers, and employees recovering after a work-related accident or suffering from a work-related illness. Women on maternity leave cannot be dismissed during this period.

Since 2008, a new means of termination has been introduced, namely “by mutual agreement”. This new possibility is called ‘rupture conventionnelle’ (mutual termination of the employment contract). The termination is agreed by both employer and employee and there is no cause or reason to demonstrate.

The employee is entitled to unemployment insurance benefits and dismissal indemnity provided by law or the applicable collective bargaining agreement (or more if agreed).

A strict procedure including preliminary meetings and consideration periods should be followed (both parties have the benefit of 15 calendar days to retract, from the date on which the form is signed); a specific form must be filled in and signed by both parties.

The specific form must be sent to the state authorities for agreement. The state authorities have a 15-open day period to review the form. Within these 15 days, the state authorities can agree to the termination, disagree or stay silent (silence amounts to agreement). However, the state authorities must expressly agree for protected employees. Otherwise the termination is void.

Since September 2017 it has been possible for the employer to negotiate a collective agreement through a ‘rupture conventionnelle collective’ (mass mutual termination of the employment contract) with trade unions. Such an agreement can only implement voluntary departures and thus excludes any dismissals designed to eliminate jobs. This new method of terminating contracts is entirely excluded from the rules governing economic dismissals. The labour administration is informed as soon as negotiations to conclude such an agreement start and reviews the agreement’s contents before validating it.

Employers may wish to avoid a potential dispute over a termination of employment by obtaining a waiver of rights from an employee in consideration for a termination payment. In the UK this agreement is referred to as a settlement agreement and there are a number of statutory formalities to include before such an agreement is enforceable in respect of statutory rights, including the requirement that the individual takes independent advice on the terms of the agreement. There are also risks attached to making an offer to an employee to enter into a settlement agreement and therefore legal advice should be taken before doing so. In addition, in 2019 the UK Government announced legislation on the use of non-disclosure agreements in discrimination cases which was expected to come into force in 2020, however given the pandemic, this has been delayed and no new time frame has been given. The UK statutory equality body, the Equality and Human Rights Commission issued guidance on this subject in October 2019 setting out good practice for employers to consider. 

Due to the Covid–19 medical emergency, employers in Italy are currently prohibited from dismissing an employee for economic reasons, unless the appropriate social safety programmes have been completely exhausted by the employer.

It is prohibited to dismiss certain categories of employees considered particularly vulnerable. note that the ban on dismissal remains in place for up to one year after an employee's marriage, pregnancy, sickness, injury, military service, trade union appointment, public appointment, participation in a strike, etc.

Dismissal for an economic reason – conciliation procedure

To dismiss an employee for an economic reason, an employer with more than 15 employees must first make a statement to the local labour inspectorate (ITL) responsible for the area where the employee works. The statement must also be forwarded to the worker.

Within seven days of receiving the statement, the ITL will summon the employer and employee before the provincial commission of conciliation. The procedure must be completed within 20 days following the hearing, unless both parties declare their intention to extend it. If the mandatory conciliation attempt is unsuccessful or the labour inspectorate does not call the parties within the Seven-day deadline mentioned above, the employer may communicate the dismissal to the employee, but always observing the period of notice.

2. Dismissal of managing directors

In the United Kingdom (UK), the rights and obligations of a ‘director’ are the same whether they are for a ‘managing director’ or any other type of director. However, not all directors are employees. ‘Managing directors’, for example, are employees of the company, but ‘non-executive directors’ are not employees. Normal practice is for a managing director to have a service agreement supplementing their statutory and common law obligations as a director. Often a managing director's employment contract will require them to resign any directorships when their employment terminates, so that their directorship and employment terminate simultaneously. It Is therefore often simpler (and preferable) to remove a managing director by dismissing them from their employment, and then requiring them to resign their directorship. Please see the section "Employees: United Kingdom" for information on the relevant issues when taking that approach, as well as the "Miscellaneous" section below.

This table only covers removal of the director from office as a director and does not cover termination of any contract of employment or other employment issues.

2.1 Reasons for dismissal

The company may generally revoke the appointment of the managing director without cause, unless stated otherwise in the by-laws of the company or the resolution of appointment. However, a fair reason is legally required in certain forms of companies (e. g. the civil form or commercial forms such as certain limited companies (‘SA’) or limited liability companies (‘SARL’)).

The company may remove the director for any reason, unless the articles of association of the company or any other agreement between the director and the company provide otherwise. There is however a statutory procedure that the shareholders of any UK company can use to remove a director (see below). This procedure will apply regardless of any agreement between the company and the director, or any provision of the company's articles.

At a limited liability company by shares (i.e. ‘Società per azioni’), or a limited liability company by quotas (i.e. ‘Società a responsabilità limitata’) where a managing director is appointed for a fixed period, a shareholders’ meeting may revoke the appointment of a managing director where there is just cause.

According to case law, this is generally the case where there has been a breach of legal or statutory obligations, or where the managing director has breached duties of loyalty, fairness, diligence and honesty. At a limited liability company by quotas where a managing director is appointed for an open-ended period, a quota holders’ meeting may revoke the appointment of the managing director without just cause at any time, even though the managing director will then be entitled to damages unless proper notice is given.

2.2 Form

A resolution taken by the shareholders or board of directors, depending on the form of the company and the internal organisation of the management. The managing director must be notified in writing of the revocation, and the change of managing director must be published in a public Corporate Register.

The Companies Act 2006 gives shareholders a mandatory right to remove a director by ‘ordinary resolution’ (i.e. a simple majority of the shareholders attending and voting) at a meeting notwithstanding any other agreement between the director and the company. The resolution will be of no effect if passed in writing instead of at a meeting. At least one of the shareholders must give at least 28 clear days’ notice in writing before the meeting of an intention to move the resolution at the meeting. On receiving that notice, the company must forward the notice of the resolution to the director concerned and call a general meeting of the company to vote on the resolution. The director has the right to be heard at the meeting and to make written representations. 

The company's articles of association or shareholders' agreement may contain provisions that make it difficult in practice to remove a director or provide that they can be reinstated. The company's articles of association and shareholders' agreements should therefore be checked before considering taking this route. 

A company's articles of association may set out additional (and usually less complex or time-consuming) bases on which a director can be removed. For example, the 'Model Articles' under the Companies Act 2006 set out circumstances that trigger the automatic removal of a director, including that they are prohibited from being a director by law or a bankruptcy order is made against them. Some companies' articles of association also allow the directors to remove another director by majority vote, for example. The articles of a company should be reviewed for any such procedures if removal of a director is contemplated.

In the case of a liability company by shares, where the managing director does not have an employment contract, the managing director's appointment may be revoked by resolution at an ordinary shareholders’ meeting. The resolution must be signed by the chairman and secretary, and any required notice must be given.

2.3 Notice period

There is no notice period, except where one is provided by the by-laws of the company or in the resolution of appointment of the managing director.

Removal as a director is immediate unless otherwise specified in the articles of association of the company.

According to the Italian Civil Code, the company must give the managing director adequate notice of the revocation. If the annulment is with just cause, no notice is required. At a limited liability company by quotas where a managing director has been appointed for an open-ended period, the company may revoke his appointment at any time without just cause, but the company must give proper notice.

2.4 Involvement of works council

No.

No involvement.

No involvement.

2.5 Involvement of a union

Not applicable.

No involvement.

No involvement.

2.6 Approval of state authorities necessary

No.

Not necessary.

Not required.

2.7 Collective redundancies

Not applicable.

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

No special rules apply.

Not applicable.

2.9 Consequences if requirements are not met

Damages may mainly be claimed:

  • for lack of fair reason in companies where such a reason is legally required to revoke a representative; or
  • if the revocation is notified under hurtful circumstances (e.g. is very sudden and unexpected, or is publicly announced before the director is informed), or if the managing director has not been granted a reasonable opportunity to make his point before the decision to revoke him is made (absence of due process).

The removal of the director is void.

If the appointment of the managing director is revoked without just cause, the revocation is valid, but the managing director is entitled to damages.

A decision to revoke the appointment of the managing director is invalid if it is made for a fraudulent purpose.

2.10 Severance pay

There is no mandatory severance pay for the capacity as director, unless stated otherwise in the by-laws of the company or in the resolution of appointment of the managing director.

The director may be entitled to a payment under the terms of any service contract (for example a payment in lieu of notice), or as an employee under statute (for example a statutory redundancy payment). Sections 215 to 222 of the Companies Act 2006 contains special rules relating to compensation given to a director for their loss of office. Such compensation requires shareholder approval, except for certain payments that are made in good faith such as payments made in discharge of a legal obligation, or to settle a claim arising from loss of office or termination of employment.

The managing director is only entitled to receive payment for the activities he has carried out, and reimbursement for any expenses incurred in relation to his office prior to revocation of his appointment as managing director.

2.11 Non-competition clauses

The terms of any non-competition clause must be agreed between the parties. If the scope of the clause is too wide (according to its geographic area, its length, or the activities it concerns), its validity may be challenged.

Restrictive covenants may be included in any service agreement. However, they will be void for unlawful restraint of trade and therefore unenforceable unless they protect the legitimate business interests of the employer and go no further than necessary to provide that protection in terms of the activities covered, duration and geographical area.

The director may also be subject to post-termination restrictions contained in other agreements such as a shareholder agreement, or (depending on the reward structure) share plans such as LTIPs (Long Term Incentive Plans).

A post-contractual non-competition clause is valid on the conditions that:

  1. it is set out in writing with the consent of both parties; and
  2. the restriction imposed refers to a specific object, within a specific area, and for a limited period (maximum five years); and an indemnity is paid by the company while the clause is enforced.

2.12 Miscellaneous

The director may also be an employee. In this case, a proper dismissal process will have to be implemented in addition to the revocation process and corresponding dismissal indemnities paid.

Regulated and listed companies should also be mindful of any obligations they may have under their regulatory rules and/or the rules applicable to their market listing. These rules are likely to limit the terms on which such companies can reimburse a director in connection with their removal from office or employment and can also subject a company to reporting obligations.

According to the Italian Civil Code, if there is well-founded suspicion that the managing director has committed serious irregularities in the course of his management causing damage to the company, the court may annul the appointment of the managing director:

  1. in case of a limited liability company by shares, upon request of shareholders representing one-fifth of the company capital;
  2. in case of a limited liability company by quotas, upon request of every quota holder.