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Directors’ liability in the Netherlands

Directors’ liability is a concept that refers to the legal responsibility of * directors (in Dutch: statutair directeur) for the actions and decisions they make on behalf of their company. In the Netherlands, there are several principles that govern directors liability, which are designed to ensure that directors act in the best interests of their company and its stakeholders.

 

Duty of Care:
The first principle of directors’ liability in the Netherlands is the duty of care. This principle requires directors to act with the care and skill that can reasonably be expected of them in their position. This means that directors must have a thorough understanding of their company’s business and financial affairs and must make decisions based on that knowledge.

 

If a director fails to meet their duty of care, they may be held liable for any losses suffered by the company or its stakeholders as a result of their actions. For example, if a director makes a decision that leads to the company’s insolvency, they may be held liable for any losses suffered by the company’s creditors.

 

Duty of Loyalty:
The second principle of directors’ liability in the Netherlands is the duty of loyalty. This principle requires directors to act in the best interests of the company, rather than their own personal interests. This means that directors must avoid conflicts of interest and must not use their position to benefit themselves at the expense of the company.

 

If a director breaches their duty of loyalty, they may be held liable for any losses suffered by the company or its stakeholders as a result of their actions. For example, if a director uses company funds to finance a personal project, they may be held liable for any losses suffered by the company as a result of that decision.

 

Duty of Disclosure:
The third principle of directors’ liability in the Netherlands is the duty of disclosure. This principle requires directors to provide accurate and timely information to shareholders and other stakeholders about the company’s financial position, operations and prospects.

 

If directors breach their duty of disclosure, they may be held liable for any losses suffered by shareholders or other stakeholders of the company as a result of their actions. For example, if a director fails to disclose material information about the company’s financial position, shareholders who purchase shares in the company based on inaccurate or incomplete information may be able to hold the director liable for any losses they suffer as a result.

 

Enforcement of Directors’ Liability:
In the Netherlands, directors’ liability is enforced through civil actions brought by shareholders, creditors, or other stakeholders who have suffered losses as a result of a director’s actions or decisions. Directors may also face criminal liability if they engage in fraud, embezzlement or other criminal activity.

 

To avoid liability, directors should ensure that they act with care and skill, act in the best interests of the company and provide accurate and timely information to shareholders and other stakeholders. Directors should also ensure that they avoid conflicts of interest and seek legal advice if they are uncertain about the legality or implications of a particular decision or action.

 

Our experience
It is our experience that often, when Dutch companies have a foreign shareholder, local management is formally appointed as statutory board. In practice they then don’t fulfill the role of proper statutory board members, but merely follow the instructions of the foreign shareholder, not realizing the risk this entails for them personally.

 

Conclusion:
Directors’ liability is an important concept in the Netherlands, designed to ensure that directors act in the best interests of their company and its stakeholders. Directors must meet their duty of care, duty of loyalty, and duty of disclosure, and may face civil or criminal liability if they breach these principles. By acting with care and skill, avoiding conflicts of interest, and providing accurate information to stakeholders, directors can minimize their risk of personal liability and help to ensure the long-term success of their company.

 

Please note that the above is just a general and brief outline on the concept of directors’ liability. This concept is far more complex and nuanced.

 

We therefore advice (future and current) statutory directors, especially those with foreign shareholding, to get a solid idea of what exactly this (new) role entails in the Dutch jurisdiction and, if necessary, to get appropriate legal guidance.

 

If you have any further questions/comments after reading the above. Then please contact us. We’re happy to assist you.

 

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