8.3.3 Autonomy of the board of directors

In the last part of this third chapter, the author considers the autonomy of the board of directors by discussing the authority of other bodies of the company to issue binding or non-binding instructions to the directors of the company. Since 2012, the articles of association of a private limited company may provide that the board is obliged to follow instructions from the corporate body or bodies referred to in such a provision, unless complying with this instruction would be contrary to the interests of the company and its business (section 2:239 paragraph 4 DCC). This authorisation to issue instructions must be distinguished from the de facto power of instruction arising from the power to suspend and dismiss directors of the company. In the legal doctrine, the statutory power of instruction has developed from the perspective of group companies. From this perspective the requirement of central management of a group already implies that the autonomy of directors of subordinated companies is limited. However, over the years a more nuanced view was adopted in case law in which judges considered the balancing of interests, including the interests of subsidiaries in relation to the interest of the group as a whole. At present, the power of instruction in a private limited company is designed in such a way that each instruction is assessed in relation to the company’s and its business’ interests. As a result, the board is required to check each instruction to these interests and, depending on the outcome of such a check, may refuse to comply with an instruction. The author argues that another body of the company cannot give binding instructions to directors. The scope of the power of instruction is then discussed. In addition to a list of the bodies to which this authority can be granted, the author notes the general limitations of the authority to issue instructions. For example, in the articles of association of the company, the power of instruction may be limited by referring to specific subjects, while the company’s interests may also indirectly lead to a limitation of the power of instruction. Finally, the standards for assessing both instructions and refusals to comply are discussed. At the end of this chapter, the author argues that judges must substantively exameninstructions to directors and their refusal to comply.