As director of a company, you may enter into agreements with suppliers and customers. The basic principle here is that the company is liable for the consequences of its actions. In principle, therefore, as a director you are not liable for actions on behalf of the company. However, facts and circumstances may arise that make it possible for you, as a director, to be held liable by the company itself or – in addition to the company – by third parties. Our Dutch law firm in the Netherlands has a team of experienced Dutch company attorneys in the Netherlands who can assist regarding director’s liability under Dutch law.
Internal directors’ liability in the Netherlands
According to Article 2:9 of the Dutch Civil Code, in order to be held liable for internal managerial negligence, there must be improper performance of duties by a manager /director towards the company itself. For this to be the case, the director must be seriously culpable. Whether the director has performed his or her duties improperly will depend on the facts and circumstances of the case. If it is assumed that this is the case, the director can be held liable by the company for damages suffered as a result of this improper performance of duties. If the board consists of several directors, then collective liability applies. This means that all directors are jointly liable for the improper performance of their duties.
External directors’ liability under Dutch law
In the case of external directors’ liability, the director must have acted negligently towards third parties such as creditors, suppliers and shareholders. As with internal directors’ liability, the director must be seriously blamed before liability towards these third parties can be assumed (in Dutch: ‘ernstig verwijt’). If it is assumed that the director acted unlawfully towards third parties, the director can – in addition to the company – be held liable for the damage they suffer as a result. Unlike internal directors’ liability, the principle of collective liability does not apply here. Only the director who has acted in a seriously culpable manner can be held liable by third parties. External directors’ liability is assumed, for example, if the director enters into agreements on behalf of the company with third parties of which the director knows or should have known that the company will not be able to meet its obligations and will not be able to provide redress.
Director’s liability in bankruptcy
In the event of bankruptcy, each director may be liable for the debts of the company. This applies to improper performance of duties by the director which is a major cause of the bankruptcy. If the board consists of several directors, the principle of collective liability also applies here. The board will be deemed to have improperly performed its duties if it has not met its obligation to keep proper books and records and to file the annual accounts in a timely manner. In that case, the improper performance of duties is presumed to be a major cause of the bankruptcy.
Discharge of directors’ liability
It is possible for individual directors to escape liability. In order to do so, the director must prove that he or she is not at fault and that he or she has taken the necessary measures to avert the negative consequences. A high threshold applies for this dispensation of liability for directors. It is therefore important that you, as a director, seek assistance from a Dutch attorney if you are faced with liability.
Dutch attorneys in the Netherlands specialized in directors’ liability
As a director it is advisable to seek advice from time to time about your personal liability risks. Our law firm in Amsterdam has Dutch attorneys in the Netherlands specialized in director’s liability. Further to this, MAAK Advocaten has experienced attorneys in the field of company law and contract and liability law. These attorneys are specialists who can advise you as a director on how to prevent or limit liability risks and, if necessary, assist you in legal proceedings.