Article 2:9 of the Dutch Civil Code (Burgerlijk Wetboek) obliges every director to perform his duties properly (behoorlijke taakvervulling) towards the legal entity. It applies to all legal entities. The board is collectively responsible for the general course of affairs, and each director is liable for improper management unless he proves it cannot be attributed to him and he was not negligent.
Table of contents
What is improper management?
Not every mistake. Case law of the Supreme Court requires a sufficiently serious reproach (voldoende ernstig verwijt). The court takes into account all circumstances, such as the nature of the business, the risks involved, the division of tasks and the information available to the director at the time. Examples are acting outside the company’s objects, ignoring internal approval rules or entering into obviously irresponsible transactions.
Who can hold a director liable?
The legal entity itself. Article 2:9 concerns internal liability: the company claims the damage it suffered from its own director. This often happens after a change of control, in a shareholder dispute or after an acquisition, when new management reviews past decisions. In bankruptcy, the trustee can bring the claim on behalf of the company. Creditors and other third parties must rely on tort instead.
Does a division of tasks protect a director?
Only partly. Duties not assigned to specific directors by law or the articles belong to all directors. A division of tasks is taken into account, but each director remains responsible for the general course of affairs. A director must show that he was not negligent in taking measures to prevent the consequences of improper management, for example by raising concerns or intervening.
How can directors limit their risk?
Document decisions and the information on which they were based, obtain expert advice for major steps and report conflicts of interest. A discharge (decharge) granted by the general meeting only covers what is apparent from the annual accounts or was otherwise disclosed.
Frequently asked questions
Can a director-shareholder be held liable by his own company?
Yes. Being a shareholder does not exclude liability to the company, which matters when other shareholders or a trustee are involved.
Is there a limitation period?
Yes. A claim for damages generally lapses 5 years after the company became aware of the damage and the liable person.
Related terms
- Directors’ liability
- Article 2:239 Dutch Civil Code (management duty of the board)
- Article 2:11 Dutch Civil Code (liability of corporate directors)
- Conflict of interest of directors
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