Liability of board members

As a general rule, the association as a legal entity with its own rights and obligations is liable for its obligations, not the board. Only in exceptional circumstances can board members also be held liable. As of 1 July 2021, the rules on board liability for associations have been tightened with the introduction of the Dutch Act on Management and Supervision of Legal Entities (WBTR).

Internal liability

Each board member is required to properly perform their managerial duties with respect to the association. If a board member fails to do so, this may, in exceptional cases, result in liability of the board to the association for any damage suffered by the association as a result of the board member’s conduct.

This means that not only the individual board member in question but also the other board members may be held liable. Examples include acting in breach of the articles of association, pursuing conflicting interests, committing fraud or failing to maintain proper accounts.

Liability towards third parties

A board member can also be held liable by third parties under certain circumstances, for example by contracting parties of the association. In addition to joint and several liability for obligations incurred by a board member with third parties during a period in which the association is not registered in the Commercial Register, a board member may also be held liable on the basis of tort.

Case law often concerns instances involving selective payments (where the board pays only one creditor and leaves the others unpaid) and the incurrence of financial obligations which the board knows the association will not be able to meet.

Liability in bankruptcy

Finally, the rules governing directors of legal entities in the event of bankruptcy also apply to board members of associations. In the event of bankruptcy, the liquidator may hold a board member liable for the deficit in the bankruptcy if the board has grossly mismanaged the association and it is likely that such mismanagement was an important cause of the bankruptcy. This includes failure to comply with record-keeping obligations.