A legal entity (a limited liability company, a public limited company, a foundation, an association etc.) may not perform acts itself but does so through the director. But what if that director has done something that he or she knew would damage the company or third parties? GMW lawyers advises and litigates in disputes about directors’ liability.
Improper performance of duties
Legal entities have rights and obligations. They also have their own separate assets. Now that a legal entity cannot perform any (actual) deeds itself, a board is appointed. These directors have to perform the delegated tasks properly. If this does not happen, then this constitutes a negligent performance of duties. The legal entity can hold the director liable for this.
Gross personal negligence
In order to constitute improper performance of duties by a director there must be gross personal negligence on the part of that director. If that is the case depends on the circumstances. The nature of the activities, the resulting risks, the applicable guidelines and the information available to the director are relevant. Examples of improper performance of duties in case law are:
the director does not comply with legal requirements and / or the articles of association
the director sets his or her own interests above those of the legal entity
the director takes unnecessary financial risks
the director does not take out the necessary insurance
the director withdraws (financial) resources from the company
liability in case of bankruptcy due to withdrawal of assets, not timely filing of annual accounts or failure to keep proper accounting records.
Why choose us
Directors’ liability remains a difficult part of conducting business. Improper performance of duties can have major (financial and sometimes criminal) consequences for the director and the company often resulting in court proceedings. It is therefore important to be properly prepared and ask timely expert advice. We provide insight into your legal position as director. We also advise on how to deal prudently with your responsibilities. If necessary, we can of course assist you during proceedings.
Do you have questions about directors’ liability or would you like to discuss a case? Please contact us – we’ll be glad to help.
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