Directors' liability

What we do

It is becoming increasingly common for directors, supervisors, and commissioners to be held personally liable. Consequently, most directors take out directors' liability insurance. However, it is possible that no directors' liability insurance has been taken out or that the dispute in question is excluded in the policy conditions. Directors' liability can extend to the entire private estate. Such liability is often established when a director acts in a manner that is seriously reprehensible. Furthermore, late payment of tax debts can result in directors' liability. Finally, directors face an increased risk just before or during bankruptcy.

With regard to directors' liability, a distinction can be made between two forms. Firstly, a director can be held internally liable. This means that the director is held liable by their own company, institution, or by the bankruptcy trustee. The second form is external directors' liability. This occurs when a director is held liable by a third party. In many cases, this third party will be a creditor.

Our practice group provides legal support regarding the liability of a director. We represent directors in liability proceedings, among others. Additionally, we assist organizations and individuals who wish to hold a director liable. Within the litigation practice group, we have the expertise to provide sound legal representation in directors' liability cases.

We have the knowledge and expertise to assume diverse roles: from advice to dispute resolution. We have an experienced team of lawyers and legal experts in the field of directors' liability. Contact us to discuss the possibilities.

Directors' liability within Litigation / Disputes

Holding a director liable almost always results in a dispute: a creditor, the company itself, or a bankruptcy trustee takes the position that the director must personally bear the costs of damages or a deficit. Therefore, within our Litigation / Disputes , we approach directors' liability primarily as a procedural issue: who bears the burden of proof, which standard applies, and how does the procedure unfold in court? Our mixed teams of lawyers and in-house counsel assist both international corporations and the baker around the corner – as the plaintiff seeking to sue a director, and as the defense of the director being sued.

The legal foundations: which articles of the Civil Code apply?

Directors' liability has various legal bases, each entailing its own standard and burden of proof:

• Article 2:9 of the Dutch Civil Code (BW) – internal liability towards one's own legal entity due to improper performance of duties. Serious misconduct is required; in principle, the liability is collective for the entire board.
• Article 6:162 of the Dutch Civil Code – external liability arising from unlawful acts towards a third party, for example a creditor who suffers damage due to the actions of the director.
• Article 2:248 of the Dutch Civil Code (for private limited companies) and Article 2:138 of the Dutch Civil Code (for public limited companies) – liability in bankruptcy due to manifestly improper performance of duties.
• Article 36 of the Collection Act 1990 – directors' liability for unpaid tax and premium debts, with a reporting obligation in the event of inability to pay.

The applicable legal basis determines the entire procedural structure. We therefore always first assess which route the liability claim is based on and where the evidence carries the most weight.

The Beklamel standard: incurring obligations without coverage

A common basis for external liability is the so-called Beklamel standard. This applies when a director enters into obligations on behalf of the company while knowing, or reasonably ought to have understood, that the company would not be able to fulfill them and would also offer no recourse. A related category is selective payment: the deliberate satisfaction of certain (often affiliated) creditors while other creditors remain unpaid. In both cases, the dispute revolves around the knowledge and intent of the director at the time of the action – pre-eminently a matter of proof upon which proceedings stand or fall.

The trustee and the presumption of evidence in bankruptcy

Following a bankruptcy, the trustee can hold the director liable pursuant to Article 2:248 of the Dutch Civil Code. The trustee must then demonstrate that the board of directors manifestly performed its duties improperly and that this was a significant cause of the bankruptcy. The burden of proof is eased on two points: if the board has violated the record-keeping obligation under Article 2:10 of the Dutch Civil Code or the publication obligation under Article 2:394 of the Dutch Civil Code , improper management is established, and a rebuttable presumption applies that this was a significant cause of the bankruptcy. The director can rebut this presumption by demonstrating that other facts and circumstances—an external cause beyond their control—caused the bankruptcy. Vague defenses lacking numerical substantiation generally fail in case law; a well-documented defense is crucial.

Joint and several liability, exoneration and mitigation

In principle, directors are jointly and severally liable: a creditor or bankruptcy trustee can hold any director liable for the full amount. An individual director can escape liability through exoneration, by proving that the improper performance of duties is not attributable to him and that he was not negligent in taking measures to avert the consequences. Additionally, the court may reduce the amount of liability, for example, if the liability is excessive given the nature and severity of the improper management. Moreover, a previously granted discharge does not protect against every claim – in bankruptcy and against third parties, discharge often has no effect. We raise these defenses early on because they strongly influence the outcome and the amount of any potential judgment.

This is how a procedure regarding directors' liability works

A dispute regarding directors' liability typically involves the following phases:

• Assessment and strategy – we test the liability claim against the correct basis, map out the evidentiary position, and determine whether a defense or a claim is likely to succeed.
• Investigation and evidence – records, annual accounts, minutes, and correspondence are secured and analyzed; this is often decisive for the presumptions of evidence.
• Demand and negotiation – where possible, we resolve the dispute out of court, for example through a settlement with the bankruptcy trustee or the opposing party.
• Court proceedings – should legal proceedings arise, our lawyers will handle the case, possibly preceded by a provisional attachment to secure recovery.

Please note that claims are subject to a statute of limitations; acting in a timely manner is therefore important, both for the party holding the party liable and for the director seeking certainty.

Connection with other disputes

Directors' liability rarely stands alone. The liability claim is often linked to insolvency and the settlement of security interests, to an underlying shareholder dispute or inquiry proceedings, or to a claim in the realm of professional liability. We assess the interplay between these processes to ensure that defense and strategy align.

Frequently asked questions about directors' liability

When am I personally liable as a director?
In principle, only the legal entity is liable. Only in the event of serious personal misconduct – such as entering into obligations without coverage, selective payment, or serious neglect of the administration – can you be held personally liable, up to and including your private assets.

Does my directors' and officers' liability insurance protect me fully?
Not always. Disputes may be excluded in the policy conditions, or no insurance has been taken out. We assess whether the policy provides coverage and involve the insurer in the process at an early stage.

Can the trustee simply hold me liable after bankruptcy?
The trustee must apparently demonstrate improper management and the causal link with the bankruptcy. In the event of a violation of the record-keeping or publication obligation, the burden of proof is partially reversed, but you can rebut this presumption with a documented defense.

Does this also apply to the small business owner?
Yes. Directors' liability is relevant from international corporations to the baker on the corner. We assist both large organizations and individual directors, with lawyers and in-house counsel.

What can you do for me?
We represent directors who are being sued as well as parties seeking to hold a director liable – from initial advice and a formal demand to full court proceedings.