The Bottom Line
- Personal liability is real: Directors can be held personally liable for a company’s entire bankruptcy shortfall if its failure was caused by “manifestly improper management,” such as systemic fraud.
- Actions, not titles: Liability extends beyond registered directors. Individuals acting as “de facto” or “shadow” directors by making key decisions can be held equally responsible for the financial fallout.
- No passing the buck: Attempting to blame external accountants or consultants for facilitating fraudulent schemes is not a viable defense. Courts will not allow directors to shield themselves from the consequences of their own misconduct.
The Details
In a case with significant implications for corporate governance, the District Court of Zeeland-West-Brabant has held the directors of a bankrupt home care company, Het Zorgpunt B.V., personally liable for its debts. The court found that the company had engaged in systemic healthcare fraud by billing for more care than it actually provided. This conduct was deemed “manifestly improper management” under Dutch law—a high bar defined as actions no reasonable director would have taken. The court pointed to glaring financial red flags, such as profit margins of over 30% in an industry where 3% is the norm, as compelling evidence that supported the findings of investigations by both the SZW Inspectorate and the company’s main insurer, VGZ.
The ruling is a stark reminder of how director liability is applied. The court established a direct causal link between the fraudulent management and the company’s collapse. The fraud triggered a criminal investigation, which led to the seizure of the company’s bank accounts. It also prompted the insurer, VGZ, to refuse a new contract, cutting off the company’s primary revenue stream. These two events, both direct consequences of the misconduct, were the immediate cause of the bankruptcy. The court held that without the fraud, the company would have remained solvent.
Crucially, the court cast a wide net in assigning liability. Responsibility was not limited to the formally registered director. Her husband, who had previously been the director and remained as “financial director,” was also held fully liable as a “de facto director” (feitelijk beleidsbepaler). The court determined that because he approved declarations and acted as the primary point of contact for external parties, he effectively co-determined the company’s policy “as if he were a director.” The directors’ attempt to shift blame to their accountant and a declaration specialist was firmly rejected, with the court establishing that the duty of care of external advisors does not extend to protecting directors from the consequences of their own fraudulent behavior. The court is still considering a request to impose a five-year management ban on the individuals involved.
Source
Rechtbank Zeeland-West-Brabant
