Directors’ and officers’ liability after a company is wound up in the Netherlands
The winding up of a company generally means the discontinuation of the legal entity. Although this is a nuisance for the unpaid creditors of the wound-up company, it does not necessarily mean that their claims will not be settled in the Netherlands. The question to be answered in this Dutch case was whether after a company had been wound up, its directors could still be held liable by a third party under Section 162 of Book 6 of the Dutch Civil Code. Corporate Law Lawyer Mariëlle de Wild explains the judgement.
Company wound up, invoices unpaid
In the previous four years, directors X and Y had set up multiple private limited companies and commercial partnerships in the Netherlands and wound them up again after some 3.7 months. During these companies’ months of existence, their directors entered into agreements with NS for NS Business Cards and related services. NS invoiced the companies monthly for using the NS Business Cards. All the invoices remained unpaid.
Director’s liability in the Netherlands
In the Netherlands, a director can be held liable towards third parties because of an unlawful act. The requirement is that the director can be personally blamed for breaching the standard referred to in Section 162 of Book 6 of the Dutch Civil Code (Unlawful Act) towards the claimant. This is in principle the case when the director knew or should have known at the time he entered into the commitment that the company would not be able to meet its obligations and that it would provide no opportunity for recovery for the resulting loss.
Failure to fulfil agreements
The Dutch court ruled that in view of the fact that many companies were set up and wound up again within just a few months, there was no indication that these companies were intended to be active for an extended period. Therefore, the court ruled that the directors knew that the agreements concluded with NS would not be fulfilled.
Serious personal blame
The Dutch court also ruled that the directors could be blamed for the non-payment of NS’s claims and, therefore, that they are liable for the losses suffered by NS. The ruling was based on the fact that the directors did not contest that they had concluded contracts with NS and that they knew that the NS Business Cards had been ordered because they had been delivered to the address used by the companies.
Directors’ and officers’ liability for claims
In the Netherlands, even when a company has been wound up, its directors may be held liable for any claims that remain unpaid. However, a condition is that serious blame for this must be attributable to the director.
Dutch lawyer in matters of directors’ and officers’ liability
The lawyers of AMS Advocaten have extensive experience in the area of directors’ and officers’ liability. They can assess as to what extent a director is (personally) liable and whether a case against a wound-up company will have any chance of succeeding.