THE BOTTOM LINE
- Poor bookkeeping isn’t a blank check for curators. While failing to keep proper accounts can lead to personal liability, directors will not automatically be held responsible for the entire bankruptcy deficit if a more significant external factor is the true cause of the company’s failure.
- Diverting funds is serious misconduct. Funnelling company revenue into private accounts is a breach of duty, and directors will be liable for that specific amount unless they can rigorously prove it was offset by legitimate, documented business expenses they paid personally.
- External shocks can be a valid defense. This case shows that a single, large, and aggressively pursued creditor claim, combined with other pressures like tax debts, can be successfully argued as the primary cause of bankruptcy, shielding directors from the most severe form of liability.
THE DETAILS
This ruling from the Netherlands provides a crucial lesson in director liability. A bankruptcy trustee (curator) sued the former directors of a construction company, seeking to hold them personally liable for the entire bankruptcy deficit, estimated to be over €500,000. The curator’s case seemed strong: the directors had diverted over €124,000 in company revenue directly to their private bank accounts, failed to maintain a cash book, and had an outdated administration. Under Dutch law (Art. 2:248 BW), such failures create a powerful legal presumption that this “manifestly improper management” was a major cause of the bankruptcy. However, the court rejected this primary claim, siding with the directors’ argument that their actions, while improper, were not the fatal blow.
The court’s decision hinged on the issue of causation. It acknowledged that the directors’ “shadow accounting” was a clear breach of their duties. However, it found that the directors successfully rebutted the presumption by proving that other, more significant factors led to the company’s collapse. The true causes, the court determined, were a combination of a massive €255,000 claim from a disgruntled client, crippling tax arrears of €233,000, and poor legal advice that resulted in a default judgment. The court reasoned that even if the improperly diverted €124,000 had remained in the company, this sum would have been insufficient to save the business from the overwhelming weight of its other liabilities.
While the directors escaped liability for the full deficit, they were not entirely off the hook. The court then examined the secondary claim based on general mismanagement (Art. 2:9 BW), which focuses on direct damage to the company rather than the entire bankruptcy shortfall. It ruled that diverting company funds constitutes a “serious reproach,” making the directors directly liable for the €124,681 they siphoned off. The directors argued they had offset this amount by paying for business expenses from their personal funds. The court has now placed the burden of proof squarely on the directors to substantiate these offsetting claims with concrete evidence. The case highlights a critical distinction: while messy books might not make you liable for the whole shipwreck, you can still be forced to pay back every cent you personally mishandled.
SOURCE
Source: Rechtbank Oost-Brabant
