Liability of directors of a company in The Netherlands is always a much-discussed topic. Much less is said about the liability of shareholders. Nevertheless, it happens that shareholders can be liable for their actions within a company according to Dutch law. When a shareholder can be held liable for his actions, this concerns personal liability, which can have major consequences for the personal life of a shareholder. Therefore, it is important to be aware of the risks with regard to liability of shareholders. The different situations in which liability of shareholders in The Netherlands can arise will be discussed in this article.
1. Obligations of shareholders
A shareholder holds the shares of a legal entity. According to the Dutch Civil Code, a legal entity equals a natural person when it comes to property rights. This means that a legal entity can have the same rights and obligations as a natural person and can therefore perform legal actions, such as obtaining property, entering into a contract or filing a lawsuit. Since a legal entity only exists on paper, the legal entity has to be represented by a natural person, the director(s). While the legal entity is in principle liable for any damages deriving from its actions, the directors can in some cases also be held liable based on directors’ liability. However, this gives rise to the question whether or not a shareholder can be held liable for his actions with regard to the legal entity. In order to determine the liability of shareholders, the obligations of shareholders need to be established. We can distinguish three kinds of specific obligations for shareholders: legal obligations, obligations that derive from the articles of incorporation and obligations that derive from the shareholders’ agreement.
1.1 Obligations of shareholders deriving from the law
According to the Dutch Civil Code, shareholders have one important obligation: the obligation to pay the company for the shares they acquire. This obligation derives from article 2:191 Dutch Civil Code and is the only explicit obligation for shareholders that derives from the law. However, according to article 2:191 Dutch Civil Code it is possible to stipulate in the articles of incorporation that the shares do not have to be fully paid immediately:
On subscription for a share, the nominal amount thereof must be paid to the company. It is possible to stipulate that the nominal amount, or a proportion of the nominal amount, has to be paid only after a certain amount of time or after the company calls for payment.
However, if such a stipulation is incorporated in the articles of incorporation, there is a provision that protects third parties in the event of bankruptcy. If the company goes bankrupt and the shares are not fully paid by the shareholders, either because of a stipulation in the articles of incorporation of coincidentally, the appointed curator is obliged to require full payment of all the shares from the shareholders. This derives from article 2:193 Dutch Civil Code:
The curator of a company is empowered to call up and collect all due mandatory payments not yet made with regard to the shares. This power exists irrespective of what is specified in this regard in articles of incorporation or is stipulated according to article 2:191 Dutch Civil Code.
The legal obligations for shareholders to fully pay for the shares they require implicates that shareholders are in principle only liable for the amount of the shares they have taken. They cannot be held liable for actions of the company. This also derives from article 2:64 Dutch Civil Code and article 2:175 Dutch Civil Code:
A shareholder is not personally liable for what is performed in the name of the company and he is not obligated to contribute to the losses of the company for more than what he has paid up or still has to pay up on his shares.
1.2 Obligations of shareholders deriving from the articles of incorporation
As is explained above, shareholders only have one explicit legal obligation: to pay for their shares. However, in addition to this legal obligation, obligations for shareholders can also be stipulated in the articles of incorporation. This is according to article 2:192, paragraph 1 Dutch Civil Code:
The articles of incorporation may, with regard to all shares or to shares of a certain type:
- specify that certain obligations, to be performed towards the company, towards third parties or between shareholders mutually, are attached to the shareholdership;
- attach requirements to the shareholdership;
- determine that a shareholder, in situations specified in the articles of incorporation, is obligated to transfer his shares or a part thereof or to make an offer for such a transfer of shares.
According to this article, the articles of incorporation can stipulate that a shareholder can be personally held liable for the debts of the company. Also, conditions for the financing of the company can be stipulated. Such provisions extend the liability of shareholders. However, provisions like this cannot be stipulated against the will of the shareholders. They can only be stipulated when the shareholders agree with the provisions. This derives from article 2:192, paragraph 1 Dutch Civil Code:
An obligation or requirement as referred to in the previous sentence under (a), (b) or (c) cannot be imposed on the shareholder against his will, not even under a condition or time stipulation.
In order to stipulate additional obligations for shareholders in the articles of incorporation, a shareholder’s resolution has to be taken by the General Meeting of Shareholders. If a shareholder votes against stipulating additional obligations or requirements for shareholders in the articles of incorporation, he cannot be held liable with regard to these obligations or requirements.
1.3 Obligations of shareholders deriving from the shareholders’ agreement
Shareholders have the possibility to draw up a shareholders’ agreement. A shareholders’ agreement is concluded between shareholders and contains additional rights and obligations for shareholders. The shareholders’ agreement only applies to the shareholders, it does not affect third parties. If a shareholder does not comply with the shareholders’ agreement, he can be held liable for damages deriving from this failure to comply. This liability will be based on failure to comply with an agreement, which derives from article 6:74 Dutch Civil Code. However, if there is a sole shareholder who holds all the shares of a company, it is of course not necessary to draw up a shareholders’ agreement.
2. Liability for unlawful actions
Next to these specific obligations for shareholders, liability with regard to unlawful actions also has to be taken into account when determining the liability of shareholders. Everyone is obligated to act according to the law. When a person acts unlawfully, he can be held liable based on article 6:162 Dutch Civil Code. A shareholder has the obligation to act lawfully towards creditors, investors, suppliers and other third parties. If a shareholder acts unlawful, he can be held liable for this action. When a shareholder acts in such a way that a grave accusation can be made against him, unlawful acting can get accepted. An example of an unlawful action by a shareholder can be the disbursing of profit while it is apparent that the company can no longer pay the creditors after this payment.
Furthermore, unlawful acting by shareholders can sometimes derive from selling shares to third parties. It is expected that a shareholder will, to a certain extent, start an investigation on the person or company he wants to sell his shares to. If such an investigation reveals that the company of which the shareholder holds the shares will probably not be able to fulfil its obligations after the transfer of shares, the shareholder is expected to take the interests of the creditors into account. This implicates that a shareholder can under certain circumstances be held personally liable when he transfers his shares to a third party and this transfer results in the company not being able to pay its creditors.
3. Liability of policy-makers
Lastly, liability of shareholders can arise when a shareholder acts as a policy-maker. In principle, the directors have the task to conduct the normal course of events within the company. This is not a task of the shareholders. However, shareholders do have the possibility to give the directors instructions. This possibility has to be included in the articles of incorporation. According to article 2:239, paragraph 4 Dutch Civil Code, directors have to follow the instructions of the shareholders, unless these instructions are contrary to the interests of the company:
The articles of incorporation may provide that the board of directors has to act according to the instructions of another body of the corporation. The board of directors is compelled to follow the instructions unless these are in conflict with the interests of the corporation or of the enterprise connected with it.
However, it is very important that shareholders only give general instructions. Shareholders cannot give instructions about specific subjects or actions. For example, a shareholder cannot give a director the instruction to fire an employee. Shareholders may not assume the role of director. If shareholders do act as directors, and are conducting the normal course of events of the company, they are classed as policy-makers and will be treated like directors. This means that they can be held liable for damages deriving from the conducted policy. Therefore, they may be held liable based on directors’ liability if the company goes bankrupt. This derives from article 2:138, paragraph 7 Dutch Civil Code and article 2:248, paragraph 7 Dutch Civil Code:
For the purpose of the present article, a person who has actually determined or co-determined the policy of the corporation as if he were a director, is equated with a director.
Article 2:216, paragraph 4 Dutch Civil Code also states that a person who has determined or co-determined the policy of the company is equated with a director, and can therefore be held liable based on directors’ liability.
In principle, a company is liable for damages deriving from its actions. Under certain circumstances, the directors can also be held liable. However, it is important to keep in mind that the shareholders of a company can also be held liable for damages in certain situations. A shareholder cannot carry out all sorts of actions without impunity. While this may sound logical, in practise little attention is paid to the liability of shareholders. Shareholders have obligations that derive from the law, the articles of incorporation and the shareholders’ agreement. When shareholders fail to comply with these obligations, they may be held liable for the resulting damages.
Furthermore, shareholders, just like every other person, have to act according to the law. Unlawful acting may result in liability of the shareholder. Lastly, a shareholder should act as a shareholder and not as a director. When a shareholder starts conducting the normal course of events within the company, he will be equated with a director. In this case, directors’ liability can also apply to shareholders. It would be wise for shareholders to keep these risks in mind, to avoid liability of shareholders.
If you have questions or comments after reading this article, please feel free to contact mr. Maxim Hodak, lawyer at Law & More via [email protected], or mr. Tom Meevis, lawyer at Law & More via [email protected], or call +31 (0)40-3690680.
 ECLI:NL:HR:1955:AG2033 (Forumbank).
 ECLI:NL:HR:2015:522 (Hollandse Glascentrale Beheer B.V.).