Liability of a director or committee member

Usually not personal

Are you a director in a Dutch private limited company (bv) or public limited company (nv)? Or are you a committee member for a foundation (stichting) or an association (vereniging)? Then you are usually not personally liable for the organisation’s operations. The legal entity itself is liable. There are a few exceptions to this rule.

Mismanagement

If you fail to perform your duties as a director correctly, the legal entity can hold you responsible for any damages. This is called ‘internal directorial liability’, and it can be invoked in cases of ‘serious reproach’. For instance, if you jeopardise your association or company by:

• seriously neglecting the administration of the legal entity
• taking out a loan for the legal entity at an exorbitant interest rate
• committing fraud

Does a legal entity go bankrupt as a result of your incompetent directorship? In that case, you can be held personally responsible, i.e. with your private assets, for the debts.

External directorial liability

You may also be personally liable towards third parties. These include, for example, the creditors of the legal entity. This is called 'external directorial liability'. For example, if you entered into a contract when you could have known that the legal entity could not fulfil this contract. The creditor can then hold you personally liable.

Liability for payments to the Tax Administration and UWV

Are you a director for a legal entity that pays corporate tax (vennootschapsbelasting in Dutch), and are you unable to pay the instalments to the Tax Administration or the Employee Insurance Agency UWV on time? Notify the Tax Administration of your inability to pay (form ‘betalingsonmacht’, in Dutch) as soon as possible (within 2 weeks). A failure to do so may result in your being held personally liable.

Does the legal entity owe the Tax Authority or the UWV money? If the debts result from your mismanagement, you will have to pay for them out of your private assets.

Not registered at KVK (Netherlands Chamber of Commerce)

As long as the legal entity has not been registered with KVK after its foundation with a civil law notary, you as a director can be held liable for any transactions performed on behalf of the legal entity.

Informal association

Are you a director in an association that has not been established by a notarial deed? In that case, the association and its committee are equally liable for its financial obligations.

Unlawful act

Jurisprudence rules that you can be held personally liable by a person or organisation who suffers a loss if you have committed an unlawful act. For example, if you buy something which you know the legal entity cannot pay for. The seller can then hold you personally liable for the outstanding debt.

Director’s liability insurance

Director’s liability insurance insures you against the risk of personal liability in some cases.