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A foundation has its own legal personality, so in principle the foundation itself is liable for its obligations and not the director personally. However, a director can be held personally liable in certain cases, and a foundation must also comply with consumer law and privacy regulations. Below you can read about the legal risks a foundation faces and how to limit them.
Foundations often have noble goals and assume the best in people, but they must not be blind to the risks. A board member may overstep their boundaries, a customer may hold the foundation liable, and the Dutch Data Protection Authority may impose fines. We list the most important points to consider.
Is a foundation liable itself?
Yes. A foundation has its own legal personality. Directors can legally bind the foundation by entering into agreements on its behalf, but are in principle not personally liable for this: the obligations rest on the foundation itself. That is also the intention, so that directors who dedicate themselves with good intentions are not personally ruined by the foundation's creditors.
When is a director personally liable?
There are situations in which a director may still be personally liable:
- Foundation not registered in the Commercial Register — as long as registration is missing, a director may remain personally liable for actions taken on behalf of the foundation.
- Overstepping one's bounds — for example, a director entering into obligations on behalf of the foundation that the foundation can clearly never fulfill.
- Improper management — a director may be held liable for seriously culpable conduct or omission.
The articles of association play an important role in this regard. They may specify the extent to which a director may bind the foundation and the rules governing the authorization of third parties. With well-drafted articles of association, a foundation can therefore protect itself against directors who do not act with due care.
Why good conditions are important
A foundation enters into obligations with third parties and would therefore do well to consider its terms and conditions. General terms and conditions of supply are also useful for a foundation. These can include exemption clauses that limit the foundation's liability. Conversely, a foundation can use purchasing terms and conditions to strengthen its position as a buyer.
Such terms and conditions regulate more than just liability: consider provisions regarding applicable law, confidentiality, and penalty clauses.
A foundation must also comply with consumer and privacy law
No matter how noble the goals may be, a foundation must comply with the rules just like other businesses. If the foundation operates a business and sells to consumers, consumer law applies and sanctions may follow in the event of a violation. If the foundation processes personal data, privacy rules (GDPR) and the Dutch Data Protection Authority can impose heavy fines. Whether the foundation is small or large makes no difference in this regard.
Frequently Asked Questions
Are directors of a foundation personally liable?
In principle, no: the foundation itself is liable. However, in the case of an unregistered foundation, acting outside the authority, or improper management, a director can indeed be held personally liable.
Does a foundation have to comply with the GDPR?
Yes. As soon as a foundation processes personal data, the privacy rules apply in full, regardless of the size of the foundation.
Does a foundation need general terms and conditions?
That is highly recommended. Good terms and conditions of delivery or purchase limit liability and regulate matters such as confidentiality, penalties, and applicable law.
Legal assistance for your foundation
Good intentions do not rule out fines and liability claims, especially if a foundation also employs staff. With sound articles of association, terms and conditions, and privacy documents, you limit the risks. The legal experts at MKB Juristen help foundations with this. View our expertise in corporate law or schedule a free telephone consultation .
