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The private limited company offers limited liability, but directors cannot always hide behind this. In the event of improper management or negligent conduct, they can be held personally liable — towards the company, in bankruptcy, and sometimes directly towards creditors.
Liability towards the company (internal)
A director must perform his duties properly (Article 2:9 of the Dutch Civil Code). If he fails to do so and is seriously at fault, he may be held liable by the company for the resulting damage. Examples include taking irresponsible risks or disregarding the articles of association.
Liability in bankruptcy
If the private limited company goes bankrupt, the bankruptcy trustee can hold the directors liable for manifestly improper management (Article 2:248 of the Dutch Civil Code). For example, if the board has not kept the records in order or has not filed the annual accounts on time, there is a statutory presumption that improper management is a significant cause of the bankruptcy.
Liability towards third parties
A director can also be held personally liable towards creditors, for example if he enters into obligations on behalf of the BV while knowing or ought to know that the company cannot fulfill them and offers no recourse. In that case, he acts unlawfully and may be held personally culpable.
How do you limit the risk?
Govern with due care: keep the records in order, file on time, do not take irresponsible risks, document decisions, and intervene in the event of financial problems. Directors' and officers' liability insurance can offer additional protection.
Frequently Asked Questions
Does the BV fully protect me against liability?
No. In the event of improper management or negligent conduct, you may be held personally liable as a director.
When am I liable in bankruptcy?
In the case of manifestly improper administration (Article 2:248 of the Dutch Civil Code). Records that are not in order or late filing lead to a statutory presumption.
Can a creditor approach me directly?
Sometimes yes, for example if you enter into obligations knowing that the BV cannot fulfill them and offers no recourse.
Questions about directors' liability?
Our legal experts and lawyers advise directors and formalize agreements, for example in a shareholders' agreement. View our corporate lawteam or schedule a free consultation.
