Taking a seat on the board of a European company is not a ceremonial act. A director assumes duties owed to the company and, in defined circumstances, personal liability that reaches beyond the company’s assets to their own. For an individual asked to sit on the board of a Dutch or other European entity, often as part of providing substance to a structure, understanding what the role actually carries is not optional, because the exposure is real and the defence to it is behaving properly, which cannot be arranged retrospectively.
The core duties
A director must act in the interests of the company, with due care, and within the powers the company has given them. In most European systems this means putting the company’s interest ahead of the shareholder who appointed them, exercising independent judgement, avoiding conflicts, and informing themselves before deciding. A director who signs whatever is put in front of them, on the instruction of a shareholder, has not discharged the duty of care, and the fact that they were merely doing as told is not the protection they imagine it to be.
Dutch law states the standard in a few sentences that reward being read literally. Article 2:9 of the Dutch Civil Code makes every director owe the legal person a proper performance of their task, and makes each director responsible for the general conduct of affairs. Article 2:239(5) then tells the directors of a BV to be guided, in performing their task, by the interest of the company and the enterprise connected with it, which is not the same thing as the wishes of the shareholder who appointed them.
Where personal liability arises
Directors generally act behind the shield of the company’s separate legal personality, but the shield has holes. Personal liability commonly arises where a director continues to incur obligations when the company is or should be known to be unable to pay them, where they act improperly in the approach to insolvency, where taxes or social contributions go unpaid, or where they act in serious breach of duty. The specifics differ by country, and in the Netherlands they are set out in our note on directors liability in a Dutch BV, but the pattern is common across Europe.
The company’s separate personality protects a director who behaves properly. It does not protect one who does not, and the difference is decided by conduct that cannot be improved after the event.
In the Netherlands several routes run side by side, each with its own conditions, and four specific statutory ones are set out below. Article 2:9 governs liability for improper management: each director is liable for the whole unless, having regard also to the tasks assigned to others, no serious reproach can be made against them and they were not negligent in taking measures to avert the consequences. Article 2:248 governs liability towards the estate in bankruptcy, article 2:216(3) the liability for distributions that leave the company unable to pay its debts, and article 36 of the Invorderingswet 1990 the liability for certain unpaid taxes. They overlap: article 2:248(8) expressly leaves the bankruptcy trustee free to bring a claim under article 2:9 as well, so the same conduct can be tested under more than one of them. Outside them, the general tort provision in article 6:162 of the Civil Code applies to anyone, directors included, who commits an unlawful act against another that can be attributed to them, so a creditor harmed by a director’s own conduct may have a direct claim that does not depend on any of the four.
The insolvency zone is the danger area
The moment a company approaches financial difficulty, a director’s duties shift, and the interests of creditors begin to matter alongside those of shareholders. Continuing to trade, incur debt or make payments when the company cannot meet its obligations is where personal liability most often crystallizes. A director who suspects the company is in difficulty should take advice immediately rather than hope, because the decisions taken in that period are the ones later examined most closely.
For a Dutch BV, the bankruptcy consequence is set out in article 2:248. In bankruptcy, each director is jointly and severally liable to the estate for the debts that the other assets cannot cover, if the board manifestly performed its task improperly and this is plausibly an important cause of the bankruptcy. Where the board failed to meet its bookkeeping obligations under article 2:10 or its duty to publish the annual accounts under article 2:394, the statute treats the task as improperly performed and presumes that this was an important cause of the bankruptcy, with a parallel rule where the company is a fully liable partner in a general or limited partnership and the administration obligations under article 3:15i of the Civil Code were not met, and an unimportant omission is disregarded. The claim can only be based on improper performance in the three years before the bankruptcy, a discharge granted to the director does not prevent it, and the court may reduce the amount where it considers it excessive, having regard among other things to the other causes of the bankruptcy. A director is not liable if they prove that the improper performance is not attributable to them and that they were not negligent in taking measures to avert its consequences.
Distributions are a second trap in this period. Article 2:216 gives a resolution to distribute no effect until the board has approved it, and ties the board’s refusal to one test: whether it knows or should reasonably foresee that, after the distribution, the company will be unable to continue paying its debts as they fall due. Subject to the exclusions in article 2:216(11), if the company then cannot continue paying, the directors who knew or should reasonably have foreseen it at the time of the distribution are jointly and severally liable to the company for the shortfall the distribution caused, with statutory interest from the day it was made. A director who proves that the distribution is not attributable to them and that they were not negligent in taking measures to avert its consequences is not liable.
Unpaid taxes and the notice of inability to pay
Tax liability does not wait for a bankruptcy. Under article 36 of the Invorderingswet 1990, the Dutch tax collection act, each director of a legal entity with full legal capacity that is subject to corporate income tax is jointly and severally liable, on the terms the article sets out, for certain taxes the entity owes, including wage tax and VAT; the full list of taxes is in the first paragraph, read with the seventh, which limits it to tax the entity owes as withholding agent or as entrepreneur. The mechanism turns on a notice. Without delay once it has become clear that the entity cannot pay those taxes, it must notify the tax collector in writing, and any director may make that notice on its behalf.
The timing is set by regulation. Article 7 of the Uitvoeringsbesluit Invorderingswet 1990 requires the notice, as a general rule, no later than two weeks after the day on which the tax should have been paid. If the notice is made properly, a director is liable if it is plausible that the non-payment results from manifestly improper management attributable to them in the three years before the notice. If it is not made, or not made properly, the non-payment is presumed to be attributable to the director, the three-year period is deemed to begin when the entity is in default, and the presumption can be rebutted only by a director who makes it plausible that the failure to notify was not attributable to them, a restriction that does not apply to a former director.
Conflicts and the substance director
Individuals who serve on boards to provide substance to a structure face a particular tension: they are appointed by a group but owe their duty to the specific company. If that company’s interest diverges from the group’s, the director must act for the company. This is not a technicality; a substance director who simply implements group decisions without independent consideration undermines the very substance the structure needs, as we set out in our note on Dutch substance requirements. Genuine substance requires genuine directors.
The group behind a substance director does not stand outside the liability rules. For bankruptcy liability under article 2:248, for distributions under article 2:216(3) and for tax under article 36 of the Invorderingswet 1990, a person who determined or co-determined the company’s policy as if a director is treated as a director, court-appointed administrators aside, and article 2:248 also bars the claim against a director the Enterprise Chamber appointed under article 2:356(c). And where the director is itself a legal entity, as when a corporate services provider fills the seat, article 2:11 places the liability of that legal entity jointly and severally on each person who was its director when the liability arose, and, for tax, article 36(5)(c) of the Invorderingswet 1990 counts each director of that entity as a director. Neither side of the arrangement can assume that the exposure sits with the other.
What actually protects a director
The real protections are behaving properly, documenting decisions so that the care taken is evidenced, avoiding and disclosing conflicts, and monitoring the company’s solvency. Beyond conduct, directors’ and officers’ insurance provides a financial backstop, and an indemnity from the company or its group can help, though neither covers deliberate wrongdoing. The best protection remains the boring one: attend, inform yourself, decide in the company’s interest, and keep a record that shows you did.
The statutory defences reward exactly that conduct. Article 2:9 excuses a director against whom, having regard also to the tasks assigned to others, no serious reproach can be made and who was not negligent in taking measures to avert the consequences. Articles 2:216(3) and 2:248(3) excuse a director who proves that the distribution or the improper performance is not attributable to them and that they were not negligent in taking such measures. Each of these defences has two limbs, and the second is about what the director did once the problem was visible, which is why a recorded objection followed by action can carry weight that silent disagreement does not.
Two things that feel like protection are not. A discharge granted to the director does not prevent a claim under article 2:248, which says so expressly. And resignation does not end the tax exposure, because article 36 of the Invorderingswet 1990 treats a former director as a director for tax debts that arose during their tenure.
Before accepting the seat
Anyone asked to join a European board should understand what the company does, whether it is solvent, who else is on the board, what decisions will be expected of them, and what protection is in place. Accepting a directorship as a favour or a formality, without that understanding, is accepting an exposure without measuring it. The governance framework that supports a well-run board is described in our note on governance design in Dutch holding companies.
Two features of the Dutch rules make that understanding more than prudence. The bankruptcy claim looks at the board’s performance in the three years before the bankruptcy, and the court may reduce an individual director’s liability having regard to the time they were in office during the period of improper performance, so what happened before and after a director’s arrival both matter. And a company whose administration does not meet article 2:10, or whose annual accounts were not published as article 2:394 requires, hands a future bankruptcy trustee the statutory presumption in article 2:248(2), which is why keeping a Dutch BV in good standing is part of a director’s own protection rather than an administrative detail.
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This article is informational and does not constitute legal advice. The law differs by jurisdiction and the treatment of any matter depends on its facts. Each engagement is subject to scope and applicable regulation.