Is the director of a company liable if shares are not paid up in full? 

Is the director of a company liable if shares are not paid up in full? 

Before the introduction of the Flex-BV in 2012, the director of a Dutch private limited company (BV) was obliged to pay-up a minimal capital of €18,000 in full. This requirement no longer applies. This means that the special stipulation for liability of directors in case of noncompliance with this payment requirement has also been abolished. But for companies incorporated prior to 2012 this requirement still applies, as is shown in a recent court ruling.  Dutch corporate lawyer Hidde Reitsma explains.

 

Trustee: directors liable for negative balance in bankruptcy 

In this case a private company went bankrupt in 2012. The trustee found that the directors (who were also the incorporators) had not complied with the requirement to pay up the shares capital in full. He started proceedings in which he held the directors liable for the negative balance in the bankruptcy pursuant to article 2:180 of the Civil Code (former). Based on this article (which no longer applies) the failure to pay up in full had the consequence that the directors, apart from the company, are jointly and severally liable for legal acts dissolving the company which took place before the payment obligation had been complied with.

Court: trustee does not have an independent claim right

However, the court completely dismissed the trustee’s claim. The court stated, first of all, that the joint and several liability of the director pursuant to article 2:180 of the Civil Code (former) is a liability towards individual creditors, i.e. those creditors with whom the bankrupt company conducted legal acts. The claim cannot be instituted by the company itself, and therefore also not by the trustee. Although the trustee does represent the interests of the creditors, this does not mean that he has a claim right.

Consequences non-payment of shares 

The trustee therefore does not succeed in his claim. And now that the required payment on shares has been abolished, in future such a claim will not often be instituted (only for those cases to which the former law applies). Are there then no consequences at all any more for failure to pay in full on shares? Yes and no. In a bankruptcy the trustee is still entitled to collect all unpaid required payments on shares.

Liability director for non-payment

Also, legal liability still applies if a share that is not paid up in full is transferred or allocated. In that case each of the previous shareholders remains jointly and severally liable for the amount still to be paid on the share towards the company. Non-payment on shares can also have negative tax consequences.

Corporate lawyer advises in incorporation private company

In short, since the introduction of the Flex-BV, it has become much simpler to incorporate a private company and this can be done with a starting capital of only €1.-. But there can be negative consequences. So you should be well informed about the consequences of non-payment on shares. The AMS lawyers have a great deal of experience in corporate law and can advise you accordingly.

Hidde Reitsma - Advocatenkantoor AMS Advocaten
Hidde Reitsma Hidde has a varied consultancy and litigation practice, focusing on corporate law and insolvency law. He frequently acts in proceedings before the Enterprise Chamber of the Court of Appeal in Amsterdam and in cases on directors’ liability. Hidde also advises on drawing up and negotiating contracts, mergers and acquisitions and joint ventures. Follow Hidde also on Google or LinkedIn. Hidde is available via e-mail and +31 (0)20-3080315.
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