Directors of companies in the Netherlands can be held liable both in civil law and criminal law. Dutch law does not have the concept of disqualification.
Civil liability pf Director Dutch Company
Each director has a duty towards the company to properly perform the duties assigned to him (section 2:9 Civil Code). That’s the general rule. There is only a failure if it can be established that the director has failed in the performance which could be reasonably expected under the specific circumstances. Failure of a director does not automatically lead to liability. Liability is only incurred in the case of serious culpability (ernstige verwijtbaarheid). Whether serious culpability is involved has to be determined on a case by case basis whereby all relevant circumstances have to be taken into account.
Joint Liability under Dutch Law
All directors are, in principle, jointly and severally liable for inlawful acts. An individual director may be discharged if he can prove that (i) he cannot be held responsible for the failure and (ii) he has not been – actively – negligent in preventing the consequences thereof.
Tort action againt board of Dutch Company
A director may be held liable in tort (onrechtmatige daad – section 6:162 Civil Code)) by a creditor on the grounds that he entered into a transaction on behalf of the legal entity, while at a time he knew or should have reasonably known that the company would not beable to meet the obligations, and would not have sufficient assets from which the debt could be recovered.
Exculpation of Dutch managing Director
It is not sufficient that there was a more than negligible risk that the legal entity would not be able to meet its obligations. The director should have anticipated that the risk would actually materialize. If the managing director has not taken an irresponsible risk when he entered into the transaction, the managing director cannot be held liable if in retrospect it appears that the company nevertheless does not fulfill its obligations and it was foreseeable from the start that the legal entity would not provide for recourse.
A managing director can also be held liable in tort if he has allowed or effectuated that the legal entity does not meet its obligations under an earlier commitment and consequently causes damage to the other party.
Director’s Liability in bankrupcy
Such claim in tort can also be brought by the receiver in bankruptcy, on behalf of the creditors of the company (even though the bankrupt company would not have had a claim against the director).
If the legal entity does not provide sufficient resources to pay all creditors in the case of bankruptcy of the legal entity, the directors shall be jointly and severally liable for the deficit in the bankruptcy if (a) it is apparent that the management has not discharged its duties properly and (b) it is likely that the bankruptcy was caused by the mismanagement of the board. This is referred to as manifestly improper performance of duties (kennelijk onbehoorlijke taakvervulling) (section 2:138/248 Civil Code).
Mismanagement in Dutch Company
Only manifestly improper performance of duties during the three years preceding the bankruptcy is taken into account. Manifestly improper performance of duties means that no reasonably acting entrepreneur would have acted – in equivalent circumstances and with the knowledge the director had (or should have had) at the time – similarly.
If improper performance of duties by the board is established, all managing directors are, in principle, jointly and severally liable. If mismanagement is established, the directors are jointly and severally liable for the entire deficit of the bankrupt estate (although the court can mitigate damages).
Faults in bookkeeping
If the management has failed to keep its books properly (section 2:10 Civil Code) or has failed to publish the annual accounts with the Chamber of Commerce (section 2:394 Civil Code), improper performance is (irrefutably) deemed to have occurred and improper performance is (refutably) presumed to have been an important cause of the bankruptcy. An individual director can exculpate himself if he can prove that other factors were an important cause of the bankruptcy. However, the burden of proof lies with the director.
Similar liability rules apply for supervising directors and factual directors.
Criminal liability of Netherlands Comapny
Under particular circumstances, (factual) directors can be prosecuted (section 51 Dutch Criminal Code). For example, section 1 of the Economic Offences Act lists a number of obligations under Corporate Law, the non-compliance of which constitutes a criminal offence.
Dutch law topics 