Rob Lemmens
Partner
Deeply Rooted in Director’s Liability
Entrepreneurs who engage in commercial activities through a Dutch legal entity — such as a private limited company (BV), public limited company (NV), association, cooperative, or foundation — benefit from a high level of legal protection. The law assumes that these entities are solely responsible for their obligations. As a result, directors are not personally liable for the obligations of these legal entities. Dutch case law supports this principle, reasoning that it would not serve the interests of the company if directors were overly influenced by defensive considerations in their decision-making.
A Selection of Our Focus Areas within this Expertise
Joint and Several Liability
The principle that a director is not personally liable has its limits when the director breaches a duty of care or fails to perform their duties properly. In such cases, holding the director liable becomes relevant. This includes director liability towards a third party (external liability), towards the legal entity itself (internal liability), or towards a bankruptcy trustee in the event of insolvency (director liability in bankruptcy).
External Liability
A director can commit an unlawful act towards a third party by acting “contrary to what is socially acceptable.” A director may be held liable for careless or negligent conduct in their role. For example, a director could be held accountable for entering into a commitment they knew (or should have known) the legal entity could not fulfill, or for failing to meet obligations out of unwillingness (rather than inability). Additionally, if a director breaches a statutory, contractual, or specific duty of care owed to a third party, such as a counterparty or the tax authorities, this can lead to liability.
Internal Liability
A director is required to properly fulfill the duties assigned to them by the legal entity. According to established case law, for internal director liability, the director must be personally at fault in a significant way. To determine whether a serious personal fault is indeed involved, all circumstances must be considered. This includes the nature of the activities conducted by the legal entity, the risks arising from those activities, the division of responsibilities within the board, and the guidelines applicable within the board. Additionally, the courts assess the information available to the director (or that they should have had access to) at the time of the decisions or actions being criticized, as well as the level of insight and care that can reasonably be expected from a director.
Director’s Liability in Bankruptcy
In the event of the bankruptcy of a legal entity, each director can be held jointly and severally liable if the board has clearly failed to perform its duties properly in the three years leading up to the bankruptcy, and it is likely that this failure was a significant cause of the bankruptcy.
Director’s Liability Insurance
A director can mitigate their liability risk by taking out director’s liability insurance (D&O). This insurance typically covers not only the damages the director may be required to pay, but also the costs of legal assistance provided by an attorney.
International Matters
In our border region, questions related to private international law frequently arise. For instance, how is the liability of a Belgian director in relation to a Dutch BV assessed, and what are the implications for statutes of limitations? For these types of international legal issues, you can also rely on Thuis Partners for expert advice and assistance.
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