Personal Liabilities of Board members
If you are - or will become - a director at an N.V. or B.V., your thoughts are generally about how you want to fulfill the position. You will not immediately consider your personal liability. In principle, the company is liable for the debts that are incurred. However, it may happen that a director in addition to (or instead of) the company is held liable. Such personal liability will have to do with not properly fulfilling the duties of the director.
The liability of directors is laid down in Article 2:9 of the Dutch Civil Code. It obliges the directors to conduct "good governance" over the legal person. It is not possible to provide a comprehensive definition of good governance. This term is in fact filled in by case law, literature and current developments (think of the Tabaksblat code!).
Examples of (apparently) improper management are:
Insufficient information for supervisory directors, which may hinder their supervisory duties.
Failure to check the creditworthiness of contract partners. This allows your own company to be dragged into the financial downturn of another company.
Failure to protect your company against foreseeable risks, for example by including adequate provisions.
Irresponsible investment, where there is a clear violation of the normal business risk.
Filing and publication of the Financial Report
Failure to publish the financial statements in time can have consequences.
First of all, it is an economic offense (Article 1 under 4 of the Economic Offenses Act). The offense description states that within 12 months after the end of the financial year the financial statements of the legal entity must be made public in accordance with article 2: 394 paragraph 1 of the Dutch Civil Code.
Failure to comply with this requirement can result in a substantial fine.
Failure to deposit annual accounts up to 3 years prior to the bankruptcy will be regarded as the improper performance of duties by the board in the event of bankruptcy (Section 2: 248 of the Dutch Civil Code). A few days late is considered an unimportant absence, but 17 days is really late.
In this case, there is a legal presumption that improper performance of duties can be a major cause of this bankruptcy. This suspicion is refutable but can be difficult to combat.
In the event of improper management, directors are jointly and severally liable vis-à-vis the estate for all debts of the BV.
The publication of financial statements is the obligation of the board. If the board instructs the accountant to take care of this, the board member remains liable. In that case, however, he may possibly be able to recover from the negligent accountant.
Directors, make sure to give the required attention to the filing requirements!
YOUR BUSINESS TOOLKIT
FREE ACCESS TO ALL THE THINGS YOU NEED TO KNOW
Our experts have combined their knowledge and strengths to create a tool we call the Business Toolkit.
The Business Toolkit will help you and entrepreneurs from around the globe to truly understand the Dutch market, regulations and laws. And will enable you to take a deep-dive the many business-related topics.
Make sure to check out our handy checklists, explainer video's and extensively written Whitepapers too!