Dutch Supreme Court clarifies the concept of de facto director

The Dutch Supreme Court ruled that "setting aside" or replacing the board is not a requirement to qualify as a de facto director. De facto directors are not required to manage the company instead of, and to the exclusion of, the formal directors.

Background 

Under Dutch law, as a matter of principle, only the company (ie a Dutch B.V. or N.V.) is liable for its debts. The directors of the company are in principle not liable. 

If the company becomes insolvent, the bankruptcy trustee can hold the board of directors liable for the bankruptcy estate deficit, if it is established that the board has not performed its duties properly. In the event of bankruptcy, the person who determined or jointly determined the company’s policy may also be held liable for the deficit in the bankruptcy estate.

What qualifies a person as a de facto director has been debated for a long time. The legislator had previously stated that a person qualifies as a de facto director if they have determined the company's policy after “setting aside” or replacing the management board.  

Decision

The Supreme Court of the Netherlands ruled that:

• to qualify as such, the de facto director must have assumed at least some of the management authority and must have determined or co-determined policy as if they were a director

• de facto management may also exist where one or more formal directors, in addition to the de facto director, continue to perform their duties as directors.

Key takeaway

Persons who may qualify as de facto directors cannot avoid liability merely by claiming that they have not set aside the management of the company.

Find out more

Take a look at our updated European Restructuring & Insolvency online tool to find out more about director liability in the Netherlands and compare it with 22 other European jurisdictions.

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.

ECLI:NL:HR:2023:445