Directors' liability

In Dutch corporate law, in principle, the legal entity such as the BV, NV, association or foundation is itself liable for acts performed by its directors. Directors' liability is an exception to this. However, even if the legal entity acts wrongly, the director is not simply liable. In addition, a director is also not simply liable in private for the debts of the legal entity.

Internal director liability

The law and the bylaws state what rules the board must follow. If the board fails to do so, he may be liable to the legal entity. This is only different if he cannot be blamed seriously and personally and he has not been negligent in taking measures to avert the consequences of the improper management. The company can sue directors internally for the damage they caused. To still be able to get out of this, directors must be able to prove that they did everything possible to counteract the improper management. 

This liability only works internally. So if the director enters into an agreement with a third party, but was not allowed to do so under the internal rules, that agreement is still valid. The third party can hold the legal entity to it and demand compliance. Under circumstances, the company can sue the director. In principle, however, the third party cannot.

Bankruptcy and directors' liability

In case of bankruptcy the trustee also always examines whether the management has acted properly and whether there is director liability. If there has been manifestly improper management and it is plausible that this mismanagement caused the bankruptcy, the trustee can sue the board to make up the deficit in the bankruptcy estate.

Outside director liability

A director may also be personally liable externally - that is, to a third party. This is the case if the director has personally acted unlawfully towards that third party. This is the case, for example, if the director enters into an agreement on behalf of the legal entity, while the director knew or should have understood that the legal entity would not be able to fulfill the obligations arising therefrom and that there would be no recourse for damages. This is the so-called Beklamel standard. If this standard is violated, the director is personally liable to the contracting party, unless the director would have warned that contracting party in advance.

A director may also be appointed by a third party pursuant to wrongful act be held personally liable for his damages. In such a case, a director would have to have independently committed a tort against that third party.