Article 2:248 of the Dutch Civil Code (Burgerlijk Wetboek) governs director liability in bankruptcy for a private limited company (BV). Each director is jointly and severally liable to the bankrupt estate for the deficit if the board performed its duties in a manifestly improper way (kennelijk onbehoorlijk) and this is plausibly an important cause of the bankruptcy. The same rule applies to the NV under Article 2:138.
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What is manifestly improper management?
Conduct that no reasonably acting director would have engaged in under the same circumstances. Examples include taking money out of the company without justification, continuing to incur debts that clearly cannot be paid, or selling assets to related parties far below value. An unfortunate business decision is not enough.
When is improper management presumed?
If the board did not comply with its duty to keep proper accounts (Article 2:10) or to file the annual accounts on time (Article 2:394), it has by law performed its duties improperly. It is then presumed that this was an important cause of the bankruptcy. The director can rebut that presumption by showing that other factors caused the bankruptcy. An unimportant failure, such as a few days’ delay in filing, is disregarded.
Who can bring the claim and for which period?
Only the bankruptcy trustee (curator), on behalf of all creditors. The claim covers the part of the debts that cannot be paid from the liquidation of the other assets. Liability only concerns improper management in the 3 years before the bankruptcy. Former directors, supervisory directors (Article 2:259) and de facto policymakers (feitelijk beleidsbepalers) can also be held liable. The court can reduce the amount if it is disproportionate to the improper conduct.
How can a director escape liability?
By proving that the improper management cannot be attributed to him and that he was not negligent in taking measures to prevent its consequences. In a board with several members, that is a heavy burden: a division of tasks does not automatically exonerate a director who could have intervened.
Frequently asked questions
Does resigning protect me?
No. Leaving the company does not end liability for conduct during your term in the 3 years before the bankruptcy.
Can a management BV shield me?
No. Under Article 2:11 Dutch Civil Code, liability passes through to the directors of a corporate director.
Related terms
- Directors’ liability
- Article 2:10 Dutch Civil Code (duty to keep accounts)
- Article 2:11 Dutch Civil Code (liability of corporate directors)
- Article 68 Dutch Bankruptcy Act (the bankruptcy trustee’s task)
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