Directors’ liability is the personal liability of a company director for damage suffered by the company, by its creditors or, in bankruptcy, by the estate. The starting point of Dutch law is that the company carries its own obligations; a director becomes personally liable only where a serious personal reproach can be made.
Three routes
Internal liability towards the company rests on Article 2:9 of the Dutch Civil Code, which requires improper performance of the directors’ duties amounting to a serious reproach. Mismanagement in hindsight is not enough; the test is what a reasonably competent director would have done at the time, with the information then available.
Liability in bankruptcy rests on Article 2:248. If the board has manifestly performed its duties improperly and that is a significant cause of the bankruptcy, each director is jointly liable for the deficit in the estate. Failure to keep proper accounts under Article 2:10, or to publish the annual accounts on time under Article 2:394, counts as irrefutable proof of improper management and creates a presumption that it was an important cause of the bankruptcy. Only a director who rebuts that presumption escapes. The trustee may look back three years.
Liability towards individual creditors rests on tort under Article 6:162. The classic case is the director who enters into an obligation while knowing, or being bound to understand, that the company will not be able to perform and will offer no recourse.
Where it goes wrong
The publication deadline is the trap that catches most directors. Filing the annual accounts a few days late is by itself enough to shift the burden of proof in a later bankruptcy, and by then the omission cannot be repaired. The second recurring problem is the director who resigns but is not deregistered from the trade register, and the third is the informal director who does not hold the title but in fact runs the company, and can be treated as a director for these purposes.
Related terms
See also conflict of interest, private limited company and dissolution and liquidation.
Our corporate lawyers in the Netherlands advise directors and act in liability proceedings.
