Directors' Liability
Written by:
Hein Kernkamp
Director's and Officer's liability in the Netherlands
Directors' liability is the liability of directors for actions they have performed as a director of a legal entity. The main rule, however, is that only the legal entity is responsible and not the director. Directors' liability is therefore an exception, but that does not mean that the director who does not comply with the rules cannot easily incur liability. Below is a brief overview for shareholders of Netherlands corporations and their company directors.
Internal directors' liability
Article 2: 9 of the Dutch Civil Code regulates the internal directors' liability of the board vis-à-vis the legal person. Each director is obliged vis-à-vis the legal person to properly perform his duties and bears responsibility for the general course of affairs. A director is liable for improper management, unless, partly in view of the duties assigned to others, he cannot be seriously blamed and he has not been negligent in taking measures to avert the consequences of improper administration. Read more on this topic in our article that covers internal directors' liability.
Legal person as director
Article 2:11 of the Dutch Civil Code stipulates that the liability of a director who is a legal person also rests jointly and severally on anyone who is a director at the time the liability of the legal person arises. This article was introduced in 1986 on the basis of the Third Abuse Act. Unlike in other countries, legal persons can also act as directors in the Netherlands. The purpose of this article is to prevent someone from escaping personal liability through the intermediary of legal persons.
Liability in the event of bankruptcy
Article 2:138 of the Dutch Civil Code for the Netherlands limited liability company and 2:248 of the Dutch Civil code for the Netherlands private limited liability company stipulate that if in the event of bankruptcy there is evidence of improper management, and if this proves to be an important cause of the bankruptcy, the management is jointly and severally liable for the deficit in bankruptcy. The bankruptcy trustee is helped enormously with regard to evidence if the board has not complied with its accounting obligation or has not published the annual accounts in a timely manner. Then it is certain that the board has performed its duties improperly and, barring proof to the contrary, it is suspected that improper performance of duties is an important cause of the bankruptcy. It is then up to the board to provide proof to the contrary, for example by indicating to the bankruptcy trustee or judge that there is another cause of the bankruptcy. This topic is further discussed in our article on directors' liability in case of bankruptcy.
Directors' liability based on tort
Unpaid creditors of insolvent Netherlands companies can also sue directors on the basis of the general provision of Article 6: 162 of the Dutch Civil Code (tort). Similar to the situation in the case of liability on the grounds of Article 2:11 of the Dutch Civil Code, it is needed that a serious personal reproach can be made to the director. Examples of this are the director who entered into obligations for the company at a time when he knew or should have known that the company could no longer meet its obligations. Also payment unwillingness or insufficient financing of a legal person can also lead to directors' liability. Read more on the subject in our article on external directors' liability.
Consult us
Our lawyers regularly advise and litigate on directors 'and officers' liability. Our clients include both supervisory directors and directors, as well as injured counterparties. For questions you can of course contact us.
More information?
Hein Kernkamp will gladly help you further.
