When does a director bear the estate deficit?
A building contractor goes bankrupt with a deficit of four hundred thousand euros. The trustee finds an administration that consists of boxes of receipts, sees that the annual accounts for the year before last were never filed, and holds the director liable for the whole deficit. The director counters that his largest client collapsed and that there was nothing he could do about it. Which of the two prevails depends on a series of questions that the statute puts in a fixed order, and that order almost always decides the outcome. This article walks through it: the standard, the reference period, the evidentiary presumption and the ways out from under it.
The standard: no reasonably thinking director
Under Section 2:248(1) of the Dutch Civil Code every director is jointly and severally liable to the estate for the deficit where the board has manifestly performed its duties improperly and it is plausible that this was an important cause of the bankruptcy. Improper management in that sense exists only where no reasonably thinking director would have acted in the same way in the same circumstances. The Supreme Court confirmed that standard in the Panmo judgment (Supreme Court 8 June 2001, ECLI:NL:HR:2001:AB2053). The court of appeal in that case had held at the outset that the provision does not cover unintentional blunders or policy errors belonging to the normal risks of doing business, and that the word “manifestly” means the director gets the benefit of any doubt. The Supreme Court held that the court of appeal had not thereby misapplied the standard. Running a business badly is therefore insufficient, and so is a choice that turned out badly with hindsight.
The timeline matters just as much. The claim can only be based on improper performance in the three years preceding the bankruptcy, the reference period. Whatever went wrong before that does not count, even where it sowed the seeds of the later collapse. For a business that had been struggling for years that is a real defence: if the company was already in serious difficulty at the start of the reference period, it is hard to maintain that the management of those final three years was the important cause of the bankruptcy.
The evidentiary presumption of subsection 2
The hinge of the whole provision is the evidentiary presumption. Where the board has not complied with the record-keeping duty of Section 2:10 DCC or the filing duty of Section 2:394 DCC, improper performance is established, and it is presumed that this improper performance was an important cause of the bankruptcy. That changes the character of the proceedings: the trustee no longer has to prove that the board failed, but only has to point to an omission that can be established objectively from the commercial register or from the records found. In the decisions analysed, that omission is by far the most common starting point of a successful claim, and it is at the same time the omission that would have been easiest to avoid.
The statute makes one exception to that strict consequence: a minor failing is disregarded. That exception is construed narrowly. Whether a failing is minor depends on the circumstances, but a director who has not filed for several financial years will not escape through it.
The two duties are often confused in practice. Section 2:10 DCC concerns the day-to-day administration, from which the rights and obligations of the company must be apparent: debtors, creditors, liquidity. It does not concern the content of the annual accounts. Annual accounts that give a misleading picture may found a claim under Section 2:249 DCC, but they do not activate the presumption of Section 2:248(2) DCC. What does activate it is filing late or not at all, whatever the accounts say.
Rebutting the presumption
Once the presumption operates, the burden shifts to the director. He does not have to prove that he managed well, but has to make it plausible that facts or circumstances other than his improper performance were an important cause of the bankruptcy. Where he relies on an external cause and the trustee reproaches him for failing to prevent that cause from materialising, he must in addition make it plausible that this failure does not itself amount to improper performance. Only once he clears that second hurdle does the ball return to the trustee, who must then make it plausible that the improper management was nonetheless also an important cause (Supreme Court 30 November 2007, ECLI:NL:HR:2007:BA6773, Blue Tomato, where the director pointed to a fire for which the insurer refused to pay).
That other cause may equally come from within. Acts or omissions of one or more directors that do not in themselves amount to improper performance can rebut the presumption as well; the court of appeal that refused the directors any reliance on the conduct of directors applied the wrong test (Supreme Court 9 July 2021, ECLI:NL:HR:2021:1099). That opens a defence for the director who can point to a co-director whose defensible decision proved fatal to the company.
What proves decisive in the decisions analysed is specificity. Courts accept a concrete event: the loss of the largest client, a fire, fraud by an employee, the withdrawal of a licence. A general reference to economic conditions or to the pandemic, without figures showing what fell away and when, is almost always rejected. The difference lies not in the nature of the cause but in how it is substantiated.
Causation remains a separate hurdle
Even where it is established that the board acted improperly, the case is not over. The improper management must have been an important cause of the bankruptcy, and that is a test in its own right which the trustee cannot skip. Outside the presumption he bears the burden of it, and that is a considerably heavier task than pointing to a filing failure. In the decisions analysed a proportion of claims founders precisely here: the management was poor, but the bankruptcy had another cause. For the director this is therefore often the most promising front, and it pays to run it separately from the defence against the finding of improper management itself.
Exculpation and mitigation
The statute offers two routes of its own. The first is the exculpation of subsection 3: a director is not liable where he proves that the board's improper performance is not attributable to him and that he was not negligent in taking measures to avert its consequences. Those are two cumulative requirements, and the second defeats most attempts. In the decisions analysed two types succeed above all: the director who demonstrably intervened, with documents showing that he put co-directors on notice or pressed for measures, and the director who never in fact managed at all. What structurally does not work is reliance on the internal division of tasks. The argument that someone was not responsible for the finances is almost always rejected, because finances and administration belong to the core of the management task. Blind reliance on a bookkeeper or a co-director does not help either.
The second route is the mitigation of subsection 4. The court may reduce the amount where it appears excessive, but only on the grounds the statute names: the nature and seriousness of the improper performance, the other causes of the bankruptcy, and the manner in which the bankruptcy was wound up. That list is exhaustive, as appears from both the text and the parliamentary history (Supreme Court 13 May 2022, ECLI:NL:HR:2022:691). What that means was shown a year later: a reduction to ten per cent of the estate deficit that rested in part on the modest remuneration of the directors did not stand, because that ground falls outside subsection 4 (Supreme Court 21 April 2023, ECLI:NL:HR:2023:635). An individual director may in addition point to the time he was in office.
Who else can be held liable
The circle reaches beyond those in the commercial register. Subsection 7 treats as a director any person who determined or co-determined the company's policy as if he were a director. The Supreme Court has widened that concept: the phrase in the parliamentary history that the formal board must have been set aside does not mean that the de facto director must have managed to the exclusion of the board. It is enough that he appropriated at least part of the management authority, even where the formal directors continued to perform their duties (Supreme Court 24 March 2023, ECLI:NL:HR:2023:445). Courts look at actual conduct rather than at the organisation chart.
Liability also runs upwards. Where the board seat is held by a holding company, the liability of that corporate director rests under Section 2:11 DCC jointly and severally on everyone who was a director of it. That carry-through arises frequently in these proceedings, and for the trustee it is often the difference between a claim against an empty holding company and a claim against a natural person with assets. The second-tier director can resist it by alleging and, if necessary, proving that no serious personal blame attaches to him (Supreme Court 17 February 2017, ECLI:NL:HR:2017:275).
Beyond Section 2:248 DCC: the Peeters/Gatzen claim
The trustee does not only have the estate claim of Section 2:248 DCC. He can also act for the interests of the general body of creditors with a claim in tort, the Peeters/Gatzen claim. That claim belongs to the creditors and does not fall into the estate; its proceeds do. Whether such a claim is at issue depends on what the trustee actually puts forward and not on the way he frames his claim: a claim brought on paper for the company may in substance concern the collective interest of the creditors (Supreme Court 23 June 2023, ECLI:NL:HR:2023:967 and ECLI:NL:HR:2023:968). That matters to the director addressed, because both claims can be brought alongside each other and a defence to one does not automatically answer the other.
What determines the outcome
Back to the contractor from the opening. His case will not be decided by whether he was a good entrepreneur, but by three factual points: were the annual accounts filed on time, was the administration kept so that the rights and obligations are apparent from it, and can he substantiate the loss of his client concretely enough for it to stand as an important cause. That is the heart of this doctrine: the standard is strictly worded but is rarely decisive on its own, whereas the presumptions and the allocation of the burden of proof almost always are. A director who wants to improve his position does so not afterwards with an argument about entrepreneurial risk, but beforehand with a filing and a sound set of books.
Frequently asked questions
When is a director liable for the bankruptcy deficit?
Where the board has manifestly performed its duties improperly and it is plausible that this was an important cause of the bankruptcy. The standard is strict: only where no reasonably thinking director would have acted in the same way in the same circumstances. Policy errors and entrepreneurial risk fall outside it, and in case of doubt the director gets the benefit of the doubt.
What happens if the annual accounts were not filed?
Improper performance of duties is then established, and it is presumed that this was an important cause of the bankruptcy. The director must then rebut that presumption by making another important cause plausible. A minor failing, such as a filing that is a few days late, is disregarded.
Does it help that a director was not responsible for the finances?
Barely. Reliance on the internal division of tasks is almost always rejected, because finances and administration belong to the core of the management task and cannot be delegated away. Exculpation under subsection 3 moreover requires that the director also intervened, and that must be capable of being substantiated with documents.
Cited case law
Supreme Court: ECLI:NL:HR:2001:AB2053 (Panmo, the standard) · ECLI:NL:HR:2007:BA6773 (Blue Tomato, rebuttal) · ECLI:NL:HR:2017:275 (Section 2:11 DCC) · ECLI:NL:HR:2021:1099 (rebuttal with internal conduct) · ECLI:NL:HR:2022:691 (mitigation exhaustive) · ECLI:NL:HR:2023:445 (de facto director) · ECLI:NL:HR:2023:635 (mitigation applied) · ECLI:NL:HR:2023:967 and ECLI:NL:HR:2023:968 (Peeters/Gatzen)