Liability of foundation board members

Internal liability

The liability of foundation board members is largely similar to that of directors of public limited companies (NVs) and private limited companies (BVs) as regards the grounds for liability. Both foundation board members and NV/BV directors can be held liable for mismanagement towards the legal entity (Article 2:9 BW). Mismanagement of or pertaining to a foundation can only be established if the board member can be seriously blamed.

Whether a board member can be seriously blamed must be assessed in light of the circumstances of the case. These include the nature of the activities carried out by the foundation, the information available to the board member (or that ought to have been available) at the time of the actions in question, the insight and diligence to be expected from a board member in performing those activities and the associated risks. Foundations usually have an idealistic or social objective and are not primarily aimed at making a profit, which reduces the margin within which the board may take risks.

Liability towards third parties

In addition to internal liability, a board member may also be liable towards a third party (Article 6:162 BW). In such cases, the board member must have acted unlawfully towards the third party. For example, a board member acts unlawfully if, on behalf of the foundation, they enter into an agreement while knowing or having reasonable cause to foresee that the foundation will be unable to fulfil the obligations arising from the agreement and will also be unable to provide recourse for the damage suffered by the counterparty.

A board member may also be liable to aggrieved third parties if the board member has caused or permitted the foundation to fail to perform its contractual obligations, provided that they can be personally and seriously blamed. This would be the case, for example, if the board member deliberately ensured that certain creditors were paid while leaving others unpaid. Board members who hastily and recklessly decide to dissolve and liquidate the foundation without giving creditors transparency regarding the disposal of assets may also potentially be seriously blamed.

Liability in bankruptcy

As with BVs (private limited companies) and NVs (public limited companies), board members of foundations are jointly and severally liable to the insolvent estate in the event of bankruptcy if the board has manifestly improperly performed its duties and it is plausible that this was an important cause of the bankruptcy (Article 2:248 BW). This liability applies for the amount of the insolvency deficit insofar as it cannot be covered by liquidation of the remaining assets.

As of 1 July 2021, board members and supervisory board members of informal and non-commercial foundations can also be held liable if they have improperly performed their duties. If, in the event of bankruptcy, it emerges that a board member has failed to comply with obligations regarding proper record-keeping or the timely publication of the annual accounts, it will be presumed that the board member has improperly performed their duties and that such improper performance was an important cause of the bankruptcy.

For more detail on liability in bankruptcy, see our pages on insolvency law.