The Bottom Line
- The seizure of company records by authorities does not automatically excuse a company from its legal obligation to file annual accounts on time.
- Companies facing such difficulties are expected to proactively apply for an official exemption from their filing duties. Failure to do so can nullify a “force majeure” (unforeseeesable circumstances) defense.
- This ruling underscores that boards must actively manage compliance, even in a crisis. Ignoring available legal remedies can lead to a criminal conviction, fines, and court-ordered compliance.
The Details
A Dutch company found itself in a seemingly impossible situation. Prosecuted for failing to file its 2020 annual accounts on time, its defense was that compliance was impossible. The entirety of its financial administration had been seized by the FIOD (the Dutch fiscal crime investigation agency) in 2018 and was not returned until 2022, long after the filing deadline had passed. A lower court initially sympathized, accepting the company’s argument of “force majeure” and dismissing the case. However, the Amsterdam Court of Appeal has now overturned that decision, providing a crucial lesson for all corporate leaders.
The Court of Appeal’s reasoning hinged not on the impossibility of filing, but on the company’s inaction in the face of a foreseeable problem. The court pointed out that Dutch law allows companies to request a formal exemption from their filing obligations due to special circumstances—a government seizure of records being a prime example. Since the company’s administration was seized years before the 2020 deadline, management had ample time to anticipate the issue and apply for this exemption. By failing to take this reasonable and available step, the company could not later claim it was powerless to avoid the violation.
This judgment sends a clear message to boardrooms and legal departments. A defense of “force majeure” requires more than just proving an obstacle existed; it requires showing there was no reasonable alternative to avoid breaking the law. Here, the alternative was clear: apply for an exemption. The court confirmed that had the exemption been granted, the legal duty to file would have been suspended, and no offense would have been committed. The ruling serves as a stark reminder that a passive approach to compliance during a crisis is a significant risk. Directors have a continuous duty to explore all legal avenues to either meet their obligations or formally excuse their inability to do so.
Source
Gerechtshof Amsterdam
