If you have done business with a company that is being dissolved, it might seem like a logical next step to address the person behind the company. In some cases, this can be quite straightforward — for example, if you have dealt with a sole proprietorship. The owner then remains personally liable for the company’s debts with their private assets, regardless of whether the business is still active or not. In cases where your debtor has ‘legal personality’ ?, things are a bit more complicated. If your debtor is a legal entity, it means the company is considered an independent entity, comparable to a natural person ?. This means that, in principle, only the company itself is responsible for fulfilling agreements, and you cannot easily hold the (former) director personally liable. But it’s not entirely impossible. In this blog, we discuss directors’ liability in a private limited company (B.V.), as this is the most common business form with legal personality ?.

Internal or external: an important distinction

When determining whether a director can be held liable, it’s important to distinguish between two forms of liability:

• • Internal directors’ liability: this refers to liability of the director towards the legal entity based on ‘improper performance of duties’. Such a claim can only be filed by the legal entity itself or by the trustee (in the event of bankruptcy) ?;
  • External directors’ liability: this refers to liability of the director towards the creditor(s) based on a ‘tort’.

Because as a creditor you can only invoke external directors’ liability, the focus of this blog is on that ?.

Reasonable or reckless?

The legislator has linked an important advantage to companies with legal personality: the advantage of limited liability for directors. The idea is that normal business risks must be able to be taken without directors fearing personal liability. However, it would go too far if directors were completely immune. If a director truly goes too far, they can be held personally liable by a creditor on the basis of a ‘tort’. For this, it must be established that the director can be personally blamed for serious misconduct. In other words: a reasonably acting director would have acted differently under the same circumstances ?.

Whether a director can be personally blamed depends on the circumstances of the case. In two situations, this is at least the case:

• • If agreements have been made on behalf of the legal entity where the director (at the time of making the agreement) knew or should have known that the legal entity could not fulfil the agreement ?.
  • The director deliberately caused the legal entity to fail to meet its obligations or actively ensured that creditors could no longer recover anything. Think, for example, of a situation where only a friendly creditor or a sister company is paid ?.

Not every risky move is serious misconduct

Where directors’ liability cases often falter is the burden of proof. This generally lies with the creditor, who must provide concrete evidence showing that the director can be personally blamed for serious misconduct. If we take the example of ‘knowing in advance that an agreement cannot be fulfilled’, you can immediately see how difficult this is to prove in practice. You cannot look into someone’s mind, and a director is allowed to take a certain level of risk. An overly optimistic estimate does not yet amount to serious misconduct ?. So, in practice, only the “extreme” cases will actually lead to directors’ liability. Think of a startup with minimal capital that immediately enters into an agreement worth €1,000,000 (and then cannot meet it) ?.

Are you unsure whether you can hold the (former) director personally liable, and how to proceed? Or are you being held liable as a director? Feel free to contact us — we’re happy to assist.