Directors’ liability under Dutch corporate law

When a company enters into contracts with other parties, the company is responsible and liable for performance of the contract. Only in special circumstances you can also hold the managing director liable for default of the company. Dutch lawyer Marco Guit, specialized in corporate law, discusses recent case law in The Netherlands on this matter.

Directors’ liability when serious personal blame

For directors’ liability it must be possible to attribute serious blame to the director. This is the case, for example, when a director enters into an agreement with a third party knowingly or when he should have known that his company will not be able to perform (default) nor be able to provide sufficient opportunity for recovery. Liability can also derive from a wrongful act committed by the director personally.

Time of contract starting point for liability

In recent litigation the claimant, a law firm, summoned the directors of a limited because of outstanding invoices regarding legal services. The law firm argues that the directors knew -or at least should have known- that the company was not able to pay the invoices. The court decides that now the claimant has not made clear when the agreement regarding the legal services with the company was actually concluded, the court cannot determine whether or not the directors had knowledge of the assumed existing incapability of the company to pay. Assessing when parties entered into the agreement is needed before a court can determine a directors’ liability.

Naive business or intentionally diverting funds?

Proofing that the director knew in advance that the limited could not pay its debts or provide funds for recovery can be tricky. But in some cases facts don’t: the directors who agreed to transfer all assets The assets of a Dutch company reflect the value of all that the company possesses
» Meer over assets
assets
of one company to a sister company leaving a large creditor of the first company without any possibility to recover its debts, were held liable by the court without much discussion.

Dutch lawyer directors’ liability

Law firm AMS is based in Amsterdam, The Netherlands. Our corporate lawyers have gained a broad experience in advising and litigating for (international) companies and individuals. The attorneys are highly involved with their client’s interests and offer a sharp and transparent fee structure.

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