Directors' liability

Directors' liability

As a director of a legal entity (BV, NV, Association, Foundation), there is in principle no personal liability in the event of bankruptcy. However, the legislature has included a number of exceptions in the law, under which the director of a legal entity is jointly and severally liable. If the director is held jointly and severally liable, this means that the director is liable for the satisfaction of the debt with their entire private assets.

As director(s) of a legal entity, liability may be established for all outstanding debts in bankruptcy. If the trustee is of the opinion that the board has performed its duties 'manifestly improperly' and it is plausible that this 'improper performance of duties' is the cause of the bankruptcy, the trustee may institute the claim against the board. Improper performance of duties may, for example, occur if the company's administration is deficient. It is advisable to seek legal advice immediately in the event of a liability claim. Our lawyers and legal experts will then investigate the possibilities.

Questions regarding directors' liability? Contact us.

Directors' liability in bankruptcy: Article 2:248 of the Dutch Civil Code

The most important basis for liability in bankruptcy is Article 2:248 of the Dutch Civil Code (for the BV) and the corresponding Article 2:138 of the Civil Code (for the NV). If the management manifestly performed its duties improperly and it is plausible that this is a major cause of the bankruptcy, the directors are jointly and severally liable for the entire deficit in the bankruptcy estate – the amount of debts that cannot be satisfied from the bankrupt estate. The bankruptcy trustee can only take into account manifestly improper management that took place in the three years preceding the bankruptcy. The fact that the threshold is high does not mean that liability claims rarely occur: pursuant to Article 68 of the Bankruptcy Act, the trustee is obliged to investigate the causes and possible directors' liability in every bankruptcy.

The presumption of proof: accounting obligation and filing obligation

In practice, proceedings under Article 2:248 of the Dutch Civil Code often revolve around two statutory obligations. If the board has failed to comply with the bookkeeping obligation of Article 2:10 of the Dutch Civil Code, or has not filed the annual accounts with the Chamber of Commerce in a timely manner (within twelve months after the end of the financial year) pursuant to Article 2:394 of the Dutch Civil Code, it is legally established that the board has improperly performed its duties. Moreover, it is then presumed that this improper performance of duties is a significant cause of the bankruptcy. Consequently, the burden of proof shifts to the director: they must demonstrate that the bankruptcy was caused by other, external factors (for example, the loss of a major client or an economic crisis). Based on case law, a violation of merely insignificant importance is disregarded. It is precisely on this point that there is much to gain or lose for the director; our lawyers and in-house counsel rigorously assess whether the administration and filing are compliant.

Beklamel standard: liability towards individual creditors

In addition to the collective claim of the bankruptcy trustee, a director can also be held liable by an individual creditor on the grounds of unlawful act (Article 6:162 of the Dutch Civil Code). The best-known standard is the Beklamel standard (Supreme Court, Beklamel judgment): a director acts unlawfully if he enters into obligations on behalf of the company while knowing or reasonably ought to understand that the company will not be able to fulfill them and will offer no recourse. A second category is frustrating recourse, for example through selective payment – ​​paying friendly or affiliated creditors while other creditors remain unpaid. In both cases, the high threshold of serious personal blame: not every wrong decision leads to liability, but conduct for which the director can be seriously blamed does.

Internal liability and joint and several liability

Apart from bankruptcy, Article 2:9 of the Dutch Civil Code applies within the company: every director is obliged towards the legal entity to properly perform his duties. Directors' liability is generally a collective, joint and several liability: in principle, all directors are liable, even for the domain of a fellow director. An individual director can exonerate himself from this liability if he proves that the improper performance of duties is not attributable to him and that he was not negligent in taking measures to avert the consequences. In addition, the court has the power to reduce. A well-substantiated defense of exoneration or reduction can make all the difference for an individual director; we map out these possibilities early on.

Fiscal directors' liability and notification of inability to pay

A common pitfall in the run-up to bankruptcy is the fiscal director liability under Article 36 of the Collection Act 1990. For, among other things, payroll tax, VAT, and pension contributions, the board is required to report to the Tax and Customs Administration in a timely manner and in writing, as a rule within two weeks after the tax should have been paid. If this notification is not made, is not made on time, or is made incorrectly, a virtually irrefutable presumption arises that the non-payment is attributable to the director, and he or she is personally liable. A timely notification of inability to pay is therefore one of the simplest and most effective ways to avoid personal liability. We advise entrepreneurs – from international corporations to the baker on the corner – on this matter consciously and in a timely manner.

Defense against a liability claim by the bankruptcy trustee

If you receive a liability notice from the bankruptcy trustee or the Tax and Customs Administration, do not respond without legal advice. Many claims are contestable: the trustee must demonstrate not only improper management but also the causal link to the bankruptcy and the amount of the deficit. Our lawyers and in-house counsel review the liability notice on all counts, mount a defense where necessary (including exoneration and mitigation), and negotiate a settlement where it is in your best interest. Directors' liability often plays a role in conjunction with a broader restructuring; therefore, please also view our pages on bankruptcy applications, suspension of payments , and business restarts.

Our approach for executives

MKB Juristen works with mixed teams of lawyers and in-house counsel. As a result, we combine litigation skills in court with practical, business-economic advice. Whether you wish to proactively assess your director risks, are facing financial difficulties, or have already been held liable: we assist with both legal defense and the continuity of the business. This expertise is part of our broader Restructuring and Insolvency.

Frequently asked questions about directors' liability

Am I automatically liable as a director in the event of bankruptcy? No. The basic principle is that a legal entity is liable itself; the director is only liable in exceptional cases, such as manifestly improper management (Article 2:248 of the Dutch Civil Code) or serious personal misconduct (Beklamel standard).

What constitutes manifestly improper management? Management in which no reasonable director would have acted under the same circumstances. Late filing of the annual accounts or defective records already constitutes a statutory presumption of improper management.

Can I avoid liability? To a large extent, yes: ensure orderly records, file the annual accounts on time, and report inability to pay taxes and premiums promptly. Early legal advice in the event of impending bankruptcy significantly limits your risk.