23 February 2026
Directors’ liability sounds threatening. In practice, however, a claim brought by a bankruptcy trustee is difficult to win. The threshold for directors’ liability is high. It therefore pays to take a critical look at such liability claims and to provide a solid defence.
A recent judgment of the District Court of Limburg concerned directors’ liability in bankruptcy. The trustee believed he had claims against the directors of the bankrupt companies due to the alleged withdrawal of assets and mismanagement. The court dismissed these claims because the directors put forward a well-substantiated defence, to which the trustee was unable to provide a convincing rebuttal.
Under Dutch law, the starting point is that a company is independently liable for its own obligations. Directors and shareholders are therefore not liable for the company’s obligations and debts. This principle is essential: without it, directors would be seriously constrained in their entrepreneurial decision-making.
The fact that a company goes bankrupt does not automatically mean that directors’ liability arises. On the contrary, directors are in principle not liable. A director is allowed to make incorrect assessments, take risks and make mistakes. Not every incorrect decision leads to a justified accusation of improper management.
Personal liability for improper management only arises if the director can be seriously blamed personally. In other words, if no reasonably acting director would have acted this way under the same circumstances. The director should be seriously reprimanded for acting irresponsibly, knowing that creditors would be disadvantaged by such actions.
In the case before the District Court of Limburg, the trustee argued that the directors had, among other things:
i) taken unnecessary financial risks;
ii) maintained a deficient administration by irresponsibly shifting funds between the (now bankrupt) companies;
iii) charged costs and expenses to the company that did not belong there, while there was no income; and
iv) withdrawn funds from the (now bankrupt) companies for personal purposes.
The directors extensively disputed the circumstances put forward by the trustee. As a result, the court held that the trustee had insufficiently demonstrated that there had been improper performance of duties. It was not established that the directors had taken actions that no reasonably thinking director would have taken, nor that such actions had led to the bankruptcy. According to the directors, the trustee was (in part) guilty of “hindsight bias”.
“Hindsight bias” refers to assessing directors’ conduct retrospectively on the basis of facts and circumstances that only became known later. There is then a tendency to judge past decisions with the benefit of current knowledge, even though that knowledge was not available at the time the decisions were made.
Directors’ liability remains a heavy legal instrument that cannot be applied lightly. The judgment of the District Court of Limburg underlines that bankruptcy in itself does not constitute proof of improper management, and that retrospective judgment with the benefit of hindsight is insufficient. Anyone seeking to hold a director personally liable must demonstrate clearly and convincingly that there has been improper management.
Our lawyers, specialised in insolvency and corporate law, advise directors on their legal position. We also assist directors who are confronted with claims by bankruptcy trustees or creditors, for example on the basis of directors’ liability.
Would you like clarity about your legal position as a director, or do you have other questions? Please feel free to contact us to discuss the available options.
