As a director of a Dutch B.V. you are in principle not liable for the company’s debts. You become personally liable only if a serious personal reproach (ernstig verwijt) can be made against you, if you are found to have manifestly mismanaged the company before its bankruptcy, or if the B.V. fails to pay payroll tax or VAT and you did not report its inability to pay to the Dutch Tax Administration (Belastingdienst) on time.
This article explains the routes to personal liability, the standards the courts apply and the steps that reduce your risk. For the basics of the B.V. itself, see our article on the Dutch B.V. with limited liability.
Table of contents
Where does the limited liability of a B.V. stop?
A B.V. is a separate legal person, and its creditors can in principle only claim from the company. Directors’ liability is an exception and requires more than a bad decision or a failed business.
There are four main routes. The company itself can claim for improper performance of duties (Article 2:9 of the Dutch Civil Code, BW). A creditor can claim in tort (Article 6:162 BW). The bankruptcy trustee (curator) can claim the shortfall in the estate for manifestly improper management (Article 2:248 BW). And the tax collector can hold you liable for unpaid payroll tax, VAT and some other levies (Article 36 of the Tax Collection Act 1990, Invorderingswet 1990).
When are you liable towards the company?
Under Article 2:9 BW, every director owes the company a proper performance of his duties. You are liable only if a serious reproach can be made against you, as the Supreme Court held in Staleman/Van de Ven of 10 January 1997 (ECLI:NL:HR:1997:ZC2243).
The court weighs all circumstances, including the nature of the business and its usual risks, the division of tasks within the board, any applicable guidelines, the information you had or should have had and the insight and care expected of a capable and conscientious director. Each director is jointly and severally liable, unless he shows that the matter was not his responsibility and that he was not negligent in taking measures to prevent the consequences.
A director with a direct or indirect personal interest that conflicts with the company’s interest must not take part in the deliberation and decision-making (Article 2:239(6) BW). Taking part anyway makes the resolution voidable and makes a serious reproach more likely. Courts give room for business judgement: a decision that turns out badly is not in itself a ground for liability.
In practice, the company usually claims after a change of control or through the trustee after bankruptcy. Discharge (decharge) by the general meeting covers only what was apparent from the annual accounts or otherwise disclosed to the meeting.
When are you liable towards creditors?
A creditor can hold you liable in tort (Article 6:162 BW) if a serious personal reproach can be made against you. The Supreme Court distinguishes two situations in Ontvanger/Roelofsen of 8 December 2006 (ECLI:NL:HR:2006:AZ0758).
- Entering into obligations on behalf of the B.V. while you knew or should reasonably have understood that the company could not pay and would offer no recourse (the Beklamel standard).
- Frustrating payment, for example by letting the company pay other creditors selectively or moving assets out, while you knew or should have understood that this would leave the creditor unpaid.
Typical cases are ordering goods on credit when bankruptcy is imminent and paying yourself or group companies first while trade creditors are left unpaid.
What is your risk if the B.V. goes bankrupt?
In a bankruptcy, the trustee can hold each director jointly and severally liable for the shortfall in the estate if the board manifestly performed its duties improperly (kennelijk onbehoorlijk bestuur) and this is likely to be an important cause of the bankruptcy (Article 2:248(1) BW). Only conduct in the three years before the bankruptcy order counts (Article 2:248(6) BW).
Manifestly improper management means conduct that no reasonably acting director would have engaged in under the same circumstances. The bookkeeping and filing duties are decisive:
- If the B.V. did not keep proper accounts (Article 2:10 BW) or did not publish its annual accounts on time (Article 2:394 BW), improper management is established by law, and it is presumed to be an important cause of the bankruptcy (Article 2:248(2) BW).
- You can rebut that presumption only by making plausible that other facts caused the bankruptcy, such as the loss of a major customer or market conditions.
- An unimportant failure to meet the filing deadline does not trigger the presumption.
The annual accounts must be published with the Chamber of Commerce (KVK) no later than twelve months after the end of the financial year. Missing that deadline, even by a few weeks, is one of the most common reasons trustees succeed. For the wider procedure, see our guide to bankruptcy for entrepreneurs and creditors.
When are you liable for unpaid taxes?
Under Article 36 of the Tax Collection Act 1990, directors are liable for unpaid payroll taxes (loonheffingen), VAT and certain other levies of the B.V. Pension fund contributions follow a similar regime. Corporate income tax is not covered.
If the B.V. cannot pay, the board must report its inability to pay (melding betalingsonmacht) to the tax collector no later than two weeks after the day on which the tax should have been paid. With a timely notification, you are liable only if the tax collector proves that the non-payment results from manifestly improper management in the three years before the notification.
Without a timely notification, the law presumes that the non-payment is your fault. You can rebut that only if you show that the late notification is not your fault, which rarely succeeds. One notification covers later periods as long as the inability to pay continues; if the company catches up and falls behind again, a new notification is needed.
What should you check as a director?
- Is the bookkeeping up to date, and are the annual accounts published with the KVK within twelve months after year-end?
- Does the board check the liquidity forecast before entering into large obligations?
- Has an inability to pay payroll tax or VAT been reported within two weeks?
- Are board decisions, the information used and any conflicts of interest recorded in minutes?
- Are payments to yourself, shareholders or group companies avoided when the B.V. is in financial difficulty?
- Do you have directors’ and officers’ (D&O) insurance, and what does it exclude?
What should you check as a creditor?
- When did the director know or should he have understood that the B.V. could not pay?
- Were other creditors, shareholders or group companies paid while your invoice stayed open?
- Were assets moved out of the B.V. shortly before it stopped paying?
- Has the B.V. published its annual accounts on time? This matters if the trustee claims after a bankruptcy.
- Is the director able to pay a judgment, or is there insurance?
What can we do for you with directors’ liability?
Our corporate lawyers advise directors, shareholders, creditors and trustees; see also our general article on liability of directors.
- We assess a liability claim from a trustee, creditor or the tax collector and draft your response.
- We check whether your B.V. meets its bookkeeping and filing duties and what risks remain.
- We prepare and file a notification of inability to pay with the tax collector within the two-week period.
- We review board decisions in a financial crisis, including payments to shareholders and group companies.
- We bring liability claims against directors on behalf of creditors or the company.
Summary
- A B.V. director is personally liable only if a serious reproach can be made against him.
- Towards creditors, the main risks are entering obligations the B.V. cannot meet and frustrating payment.
- In bankruptcy, late annual accounts or poor bookkeeping establish improper management and shift the burden of proof to you.
- Report an inability to pay payroll tax or VAT within two weeks after the due date.
- Minutes, up-to-date accounts and timely filings are your best protection.
Frequently asked questions
When is a Dutch B.V. director personally liable for company debts?
Only in specific situations: a serious reproach towards the company (Article 2:9 BW) or a creditor (Article 6:162 BW), manifestly improper management before a bankruptcy (Article 2:248 BW), or unpaid payroll tax or VAT under Article 36 of the Tax Collection Act 1990.
Does the Dutch Corporate Governance Code apply to a B.V. director?
No, the Code applies to listed companies. A court can still use generally accepted governance standards as a reference when it assesses whether a B.V. director acted with the care expected of him.
What happens to my liability if the B.V. goes bankrupt?
The trustee investigates the three years before the bankruptcy. If the bookkeeping was poor or the annual accounts were filed late, improper management is established by law and presumed to be an important cause of the bankruptcy. You must then rebut that presumption.
Does D&O insurance protect me?
Often in part. A directors’ and officers’ insurance policy usually covers defence costs and certain claims, but commonly excludes intent, fines and some tax claims. Check the policy terms and notify claims on time.
