Corporate and group liability in the Netherlands

Group liability Netherlands is the shorthand for two separate routes by which a parent company or a sister company can be made to pay for another group company’s debts. The first is the 403 declaration of article 2:403 of the Dutch Civil Code (Burgerlijk Wetboek, BW), a voluntary written statement in which a parent accepts joint and several liability for debts of a subsidiary arising from that subsidiary’s legal acts. The second is group liability under article 6:166 BW, which makes every company that made a relevant contribution to unlawful conduct within a group liable for the whole of the resulting damage. Neither route makes a parent liable simply because it owns shares.

That distinction decides most disputes. A creditor left empty-handed when a subsidiary collapses does not automatically reach the parent; it has to point to a declaration filed with the trade register, to unlawful conduct in which the parent took part, or to a breach of a duty of care that the parent owed to the subsidiary’s creditors. A parent that wants to keep its distance has to be able to show, with documents rather than assertions, that it did not run the subsidiary’s damaging conduct.

This guide sets out both routes, the case law that defines their limits, the defences available to an individual group company, the rules on withdrawing a 403 declaration, and the limitation traps that end more claims than any substantive defence does.

What corporate and group liability mean in Dutch law

Dutch company law starts from the separateness of each legal entity. A besloten vennootschap owes its own debts, and its shareholder, whether a natural person or a holding company, is in principle liable only for what it undertook to pay on the shares. That is the point of the form, and it is explained further in our guide to the BV and limited liability. Group liability is the set of exceptions that keeps this separateness from becoming a shield for conduct that harms creditors.

Two definitions matter before the exceptions do. Article 2:24a BW defines a subsidiary (dochtermaatschappij) essentially by voting control or by the power to appoint and dismiss the majority of the board. Article 2:24b BW defines a group (groep) as an economic unit in which legal persons and companies are organisationally connected; group companies are the legal persons connected in that unit. Whether a company belongs to a group is therefore a question of actual organisation, not of a label in an annual report.

Against that background, corporate liability in the narrow sense is what a parent takes on voluntarily through a 403 declaration. Group liability in the sense of article 6:166 BW is imposed by law on companies that acted together unlawfully. A third category sits between them: the parent’s own tort under article 6:162 BW, which is where the duty of care towards a subsidiary’s creditors lives. All three can be pleaded in the same set of proceedings, and in practice they usually are.

Route one: the 403 declaration under article 2:403 BW

A 403 declaration is a written statement, filed at the trade register of the Chamber of Commerce, in which a parent company declares itself jointly and severally liable for the debts arising from the legal acts of a named group company. It is not a favour to creditors; it is the price of an exemption. A group company covered by a valid declaration does not have to prepare and publish its own annual accounts in accordance with Title 9 of Book 2 BW, provided the further conditions of article 2:403 BW are met: its figures are consolidated in accounts that the parent draws up and publishes, the shareholders have consented in writing to the exemption for the financial year, and both the consent and the declaration are on file at the trade register.

For a creditor this is the most comfortable route there is. There is nothing to prove about influence, involvement or fault. The creditor shows the debt, shows the declaration, and sues the parent for the full amount. The liability is joint and several, which under article 6:7 BW means the creditor may claim the whole sum from either debtor and that payment by one discharges the other towards the creditor.

Two limits are worth knowing. The declaration covers debts arising from legal acts of the group company, so contractual debts and their consequences; it is not a general guarantee for every liability the subsidiary might incur, and claims in tort or in penalty are outside its ordinary scope. And it covers only the entities named in it. In a group of fifteen companies, a declaration may exist for three of them. Checking which is a matter of consulting the trade register file and the subsidiary’s published accounts, where the exemption and the declaration are normally disclosed.

Withdrawing the declaration and ending the remaining liability

A parent may withdraw a 403 declaration at any time by filing a statement to that effect at the trade register, under article 2:404 lid 1 BW. Withdrawal works only for the future. Article 2:404 lid 2 BW keeps the parent liable for debts arising from legal acts performed before the withdrawal could be invoked against the creditor. That remaining liability (overblijvende aansprakelijkheid) is what a supplier with a long-running contract actually cares about.

Ending that remaining liability is a separate and much heavier exercise. Article 2:404 lid 3 BW allows it only if four conditions are all satisfied: the group company no longer belongs to the group; a notice of the intention to terminate has been available for inspection at the trade register for at least two months; that intention has been announced in a nationally distributed newspaper; and the creditor either did not oppose in time or withdrew its opposition, or its opposition was finally dismissed.

The creditor’s weapon here is opposition (verzet). Article 2:404 lid 5 BW gives a creditor whose claim is still covered two months from the announcement to file a petition with the court opposing the termination. Article 2:404 lid 4 BW allows the creditor to demand security or another safeguard, unless its financial position gives it sufficient assurance of payment anyway. The practical consequence is simple: a creditor who spots a newspaper announcement or a trade register filing and does nothing for two months may find its recourse against the parent gone, while a creditor that reacts usually ends up with security.

Route two: group liability under article 6:166 BW

Article 6:166 BW makes each member of a group that acts unlawfully jointly and severally liable for the whole of the damage, if the chance of causing damage should have restrained them from that conduct and the conduct can be attributed to them. It was not written for company groups; it applies to any group acting in concert. But it fits a corporate group well, because the point of the provision is precisely that the individual causal contribution of each participant does not have to be established.

The claimant therefore does not need to show which company did the decisive act. Take a group in which one company takes the decision to dispose of waste unlawfully, a second arranges the transport and a third supplies the drums. Under ordinary tort rules each of them would argue about its own share of the causation. Under article 6:166 BW they answer for the entire damage together, and the argument about shares moves to the internal settlement between them.

What the claimant does have to establish is threefold: that there was conduct in group formation rather than a series of unconnected acts; that the risk of damage was such that it ought to have deterred the participants; and that the conduct can be attributed to the defendant in question. The third element is the one that keeps the provision within bounds. Membership of a group, a shareholding, a shared brand or a consolidated balance sheet are not conduct. Something the company itself did, or consciously allowed, has to be pointed to.

Defences for an individual group company

The central defence is the absence of a relevant contribution to the conduct that caused the damage. A company that neither decided, nor executed, nor knowingly facilitated is outside the reach of article 6:166 BW, however closely it is tied to the group in corporate terms. Receiving an ordinary dividend, sharing an accountant, sitting in the same building or benefiting indirectly from a profitable but unlawful activity is not by itself participation.

The second defence goes to foreseeability. Liability requires that the prospect of damage should have restrained the participants. A company that supplied goods to a sister company on ordinary commercial terms, without knowing or having reason to suspect what they would be used for, has an argument that the risk could not have deterred it because it was not visible to it.

Both defences are evidential, and this is where cases are won and lost. The claimant must first plead facts from which participation in group conduct can be inferred; a defendant that limits itself to a denial will rarely be believed once those facts are on the table. What works is documentary: board minutes showing the defendant was not consulted, correspondence showing it was not informed, an organisational chart showing where the decision-making authority sat, management agreements that allocated the activity elsewhere. Contemporaneous documents are worth far more than a witness statement drafted after the claim arrives.

When a parent is liable without a 403 declaration

A parent can be liable to its subsidiary’s creditors on the general law of tort, article 6:162 BW, even where there is no declaration and no joint unlawful conduct. The Supreme Court accepted this in Comsys (HR 11 September 2009, ECLI:NL:HR:2009:BH4033). In that case the group’s costs were charged to a loss-making service company while the parent, sole shareholder and director of the group companies, financed the losses through a current account and continued to let creditors contract with an entity that could not pay them. The Supreme Court held that in such circumstances the parent owes a duty of care towards the creditors of the subsidiary, and that breaching it is the parent’s own unlawful act.

The recurring elements in this line of case law are close administrative and financial integration, a subsidiary that is financially dependent on the parent, and knowledge on the parent’s side that the group’s financial policy is causing creditors to be left unpaid. Intensive involvement in the subsidiary’s policy, allowing risks to run while knowing that creditors will bear them, and creating a misleading impression of the subsidiary’s solvency are the situations in which the duty bites.

What the case law does not do is impose a general duty to rescue. A parent is not obliged to fund a subsidiary in difficulty, nor to warn every counterparty that the subsidiary is loss-making. The duty arises from the parent’s own involvement. Where the parent has kept its distance, has not intervened in the subsidiary’s commercial decisions and has not held out any assurance, the ordinary rule applies and the creditor’s recourse ends with the subsidiary’s estate. The related question of when the individuals on the board can be addressed personally is dealt with in our article on director’s liability of a Dutch BV director.

European competition law follows a different logic and should not be confused with the civil rules above. For the purposes of fining a cartel, the Court of Justice treats a parent and a wholly owned subsidiary as one undertaking and applies a rebuttable presumption that the parent exercised decisive influence over its subsidiary’s conduct, established in Akzo Nobel and applied consistently since. The parent may rebut it, but must do so with concrete evidence of genuine commercial autonomy: separate management, independent decision-making, its own market strategy and no interference from the parent. Outside competition law that presumption does not exist, and a claimant cannot borrow it to make a civil claim easier.

Which route should a creditor take?

A creditor is not required to choose. The routes rest on different legal bases and can be pleaded together, in the alternative, or one after the other, subject to the ordinary rules on res judicata and on abuse of process. The only hard ceiling is that the creditor cannot recover more than its actual loss: once one of the jointly and severally liable debtors has paid, article 6:7 BW discharges the others towards the creditor, and the argument moves to the internal recourse between them.

In practice the sensible order is dictated by the burden of proof. If a valid 403 declaration exists, that is the primary claim, because it requires nothing beyond the declaration and the debt. Group liability under article 6:166 BW comes next, because it reaches a wider circle of defendants but demands evidence of joint conduct and foreseeability. A tort claim against the parent for breach of its duty of care, or against the individual directors, is the third layer. Pleading all three in one writ of summons costs little extra and keeps every option open if the first fails.

Before anything is filed, the group should be mapped. Order the trade register files of the subsidiary and of every entity above it, retrieve the last published accounts, and establish for each company whether it decided, executed, financed or merely received. That mapping determines who is named in the summons and what has to be pleaded against each of them. Where the subsidiary is already insolvent, the trustee’s position and the creditor’s own position have to be distinguished carefully; our article on an insolvent counterparty in court proceedings sets out that interaction.

If the group company is already bankrupt

Bankruptcy of the group company changes who may sue for what. The trustee (curator) administers the estate and brings the claims that belong to the company itself, including the claim against its own directors for improper management. Alongside that, the Supreme Court has long recognised that a trustee may also bring a claim on behalf of the joint creditors against a third party whose unlawful conduct harmed them collectively, the claim known after the Peeters v Gatzen judgment. Where the trustee pursues that route, the proceeds fall into the estate and are distributed according to the statutory ranking.

An individual creditor keeps its own claim where the damage it suffered is its own and not merely a reflection of the loss suffered by all creditors together. A supplier that was induced to keep delivering after the parent knew the subsidiary could no longer pay has a personal claim; a creditor complaining only that the estate is empty does not. Distinguishing the two at the outset avoids a claim being dismissed for want of standing, and it also determines whether it is worth approaching the trustee to coordinate rather than litigate in parallel.

A 403 claim is unaffected by the subsidiary’s bankruptcy. The parent’s liability is its own, it exists alongside the subsidiary’s debt, and the creditor may sue the parent while filing its claim in the bankruptcy. What it may not do is collect twice: whatever it receives from the estate reduces what it can still recover from the parent.

Limitation, interruption and forfeiture

More group liability claims fail on limitation than on the merits, and the reason is that the two routes do not share a clock. A claim for damages, which is what a claim under article 6:166 BW is, is time-barred five years after the day on which the injured party became aware of both the damage and the person liable for it, and in any event twenty years after the event that caused it, under article 3:310 BW. A claim under a 403 declaration is a claim for performance of a debt, and it follows the limitation period of the underlying obligation, which for a contractual claim to pay a sum of money is the five-year period of article 3:307 BW running from the day after the claim became due.

The clocks also run separately for each debtor. Interrupting limitation against the parent does nothing for the claim against a sister company, and interrupting the 403 claim does nothing for the tort claim. A creditor facing a group therefore has to keep a matrix rather than a date: one row per debtor, one column per basis.

Interruption itself is straightforward. Under article 3:317 BW a claim for performance is interrupted by a written warning in which the creditor unambiguously reserves its right to performance. The notice should identify the debtor, describe the claim and its factual basis, name the amount or make clear that it is not yet quantified, refer to each legal basis relied on, and reserve all rights expressly. Send it separately to every entity, keep proof of dispatch and receipt, and repeat it within each new limitation period until proceedings are issued. Issuing a writ of summons interrupts limitation as well, provided the proceedings are pursued.

Forfeiture of right (rechtsverwerking) is a separate risk and a narrow one. Dutch law is settled that the mere passage of time is not enough. There must be additional circumstances, either because the debtor has acquired a justified expectation that the creditor will no longer enforce, or because the debtor’s position has been unreasonably prejudiced by the delay, for instance because evidence has been lost. Writing to a group company that it will not be held liable, or negotiating for years while allowing the other side to reorganise on the assumption that the matter is closed, can amount to forfeiture. Waiting quietly, or negotiating while reserving rights in writing, does not.

Recourse inside the group: who ultimately pays

Joint and several liability settles who the creditor may sue; it does not settle who bears the loss. For group liability, article 6:166 lid 2 BW provides that the participants must contribute in equal shares among themselves, unless the equity of the case requires a different apportionment. That default of equal shares is easily displaced. Courts look at who took the decision, who carried it out, who had the means to prevent it and who profited, and they redistribute accordingly. A company that only executed instructions and gained nothing will usually end up carrying a small fraction; the company that designed the operation carries most of it.

Where the liability rests on a 403 declaration the internal position is different again. A parent that pays a subsidiary’s debt under the declaration has a claim against that subsidiary for what it paid, which in the usual case where the subsidiary is insolvent is worth very little. That is the risk the parent accepted in exchange for the reporting exemption, and it is the reason the exemption should be a deliberate decision rather than a routine one taken by the accountant.

Groups can and should regulate the internal allocation in advance. A written intra-group agreement dealing with indemnities, insurance and the allocation of liabilities per activity is enforceable between the parties, provided it is clear and does not produce a result contrary to reasonableness and fairness. What such an agreement cannot do is bind the creditor: towards the outside world each liable company still answers for the whole. Recording the arrangements in shareholders’ agreements, management service agreements and group policy documents is worth doing before a claim arrives, not after. Our overview of financial security within corporate law deals with the instruments available for this.

What parent companies, subsidiaries and creditors should do now

For a parent company, the exposure is manageable if it is deliberate. Treat the issuing of a 403 declaration as a financing decision, not an administrative one, and review annually whether the reporting exemption is still worth the joint and several liability that pays for it. Keep the decision-making of each subsidiary demonstrably its own, minute what the parent did and did not decide, and be careful about statements to the subsidiary’s counterparties, because an assurance about solvency is the classic route into a duty of care. Where a subsidiary is in difficulty, take advice early: both intervening and abstaining carry legal consequences, and the choice is easier to defend if it was made consciously and recorded.

For a subsidiary or sister company, the priority is a paper trail of its own role. Document who instructed what, register objections to risky group activities in writing at the time, keep board resolutions that show independent consideration, and make sure intra-group agreements reflect what actually happens. A company that can show, from contemporaneous documents, that it neither decided nor knowingly contributed has the strongest defence article 6:166 BW allows.

For a creditor, speed matters more than anything else. Check the trade register for a 403 declaration before the relationship goes wrong, not after. When a debtor within a group stops paying, map the group, send an interrupting notice to every candidate defendant on every basis, and watch the trade register and the newspapers for a notice of intention to terminate a remaining liability, because that two-month window in article 2:404 lid 5 BW does not reopen. Where the counterparty is heading for insolvency, the practical options are set out in our article on the consequences of your contract partner’s bankruptcy, and the overlap with information security incidents is covered in liability after a data breach.

Frequently asked questions

Advice on corporate and group liability

Corporate and group liability turns on facts that are usually already fixed by the time a dispute starts: what was filed, what was decided, what was documented and what was said to the creditor. The law is settled enough to predict outcomes, but only once those facts are established.

Law and More advises parent companies, group companies and creditors on liability within corporate structures: assessing and drafting 403 declarations and their withdrawal, defending group liability claims, bringing recourse actions against a parent or a group, and conducting proceedings before the civil courts and the Enterprise Chamber (Ondernemingskamer). We act for Dutch and international clients and work in English. Please contact one of our corporate litigation lawyers if you would like your position assessed. Further reading is available in our corporate law guides.