Liability of company directors

As a company director, you bear significant responsibility. You need to take a wide range of matters into account, from day-to-day operations to long-term strategy. Directors’ liability can therefore play an important role in the performance of these duties. Directors’ liability means that you, as a director, may be held personally liable for claims against the company. It is particularly relevant to legal entities such as a BV, NV, foundation or association.

Directors’ duties and responsibilities

As a director, you are responsible for managing the company. This encompasses a wide range of duties, from taking operational decisions to developing and implementing the company’s strategic vision. It is important to understand that, as a director, you bear collective responsibility together with your fellow directors.

Under Dutch law, you and your fellow directors are jointly responsible for the general course of affairs within the company. This means that, in principle, you may be held liable for mistakes that have been made, even if they cannot be attributed directly to you.

Internal directors’ liability

Internal directors’ liability concerns your liability as a director towards the company itself. If you fail to perform your management duties properly, the company may hold you liable. This may be the case, for example, if you fail to comply with the company’s articles of association or take irresponsible financial risks that cause loss.

Tort and manifestly improper management

External directors’ liability

In addition to internal liability, you may also face external liability as a director. This means that you may be held liable by third parties, such as creditors, for conduct that qualifies as a tort.

This may be the case, for example, if you enter into obligations on behalf of the company while knowing that the company will be unable to fulfil them. The threshold for this form of external liability is relatively high. There must be serious personal blame on the part of the director, which can often be difficult to establish.

External liability may also arise in the event of manifestly improper management that contributed to the company’s bankruptcy. In that situation, the bankruptcy trustee must establish that you, as a director, manifestly failed to perform your duties properly. The trustee must make it plausible that no reasonably acting director would have acted in the same way in the same circumstances. The trustee must also show that this conduct was an important cause of the bankruptcy.

The importance of proper accounting records

Directors’ liability in bankruptcy

As a company director, you are legally required to maintain adequate accounting records. Those records must provide a clear and accurate picture of the company’s:

rights,
obligations,
assets and liabilities,
results.

Proper accounting records enable you and the other board members to make well-informed decisions and monitor the company’s financial health.

In addition, timely filing of the annual accounts with the Dutch Chamber of Commerce is a statutory obligation.

Failure to maintain proper accounting records or to file the annual accounts on time can have serious consequences. In the event of bankruptcy, this may result in directors’ liability. It is therefore crucial for directors to recognise and safeguard the importance of proper accounting records and the responsibilities arising from them.

Why instruct our insolvency lawyers?

We can help you navigate the complex area of directors’ liability, so that you understand your rights and obligations and know how to act correctly. Our insolvency and corporate lawyers have extensive experience in directors’ liability and can provide expert advice.

Whether you have questions about your role as a director or are facing a potential liability claim, we are ready to guide and support you. Our aim is to ensure that, as a director, you are well informed and prepared, so that you can focus on successfully managing your company.