Liability in establishment phase
The managing directors are each, in addition to the BV, joint and several liable for any juridical act performed during their directorship through which the BV has been committed (bound) in the period prior to the moment on which the application for the initial registration in the Trade Register was lodged.
It is possible to perform juridical acts in the name of the BV which still has to be formed (incorporated), e.g. enter into lease agreements. From such juridical acts, however, can only arise rights and obligations for the BV when it has ratified these juridical acts after its incorporation. The incorporators, i.e. the persons who have performed a juridical act in the name of a still to be formed BV, are jointly and severally liable for that act until the BV has ratified it after its incorporation.
Rights and risks shareholders
The shareholders are free to act as they wish. However, shareholders with more influence on the course of business are bound by more standards as to their behavior and responsibilities. A shareholder who effectively operates as policymaker of the BV, as in direct involvement and factual replacement of management, may face liability in case of bankruptcy ‘as if he were director’, provided that the policy was manifestly improper.
The general meeting of shareholders is authorised to determine the profit allocation and distribution of dividend. Equity capital must however exceed legal and statutory reserves, otherwise no distributions is allowed. The shareholders’ resolution to make a distribution requires prior approval of the management board. Without the board’s approval, the resolution does not sort effect. The management board can (and may only) refuse its approval if it knows or should reasonably foresee that, after making the distribution, the BV will be unable to continue to pay its due and payable debts.
If, after making a distribution, the BV is unable to pay its due and payable debts, the directors who at the time of the distribution knew or should reasonably have foreseen that this would happen, are jointly and severally liable towards the BV for compensation of the shortfall resulting from the distribution.
A party who receives a distribution, e.g. the foreign shareholder, while he knows or should foresee that the BV will be unable to pay its due and payable debts after making the distribution is liable towards the BV for compensation of the shortfall resulting from the distribution.
Each director is responsible towards the BV for a proper performance of the tasks assigned to him. The director is responsible for the general conduct of affairs. He is liable for the full consequences of an improper performance of duties, unless, also in regard of the tasks assigned to the other directors, he is not gravely to blame for it and he neither has been negligent in taking measures to avert the consequences of that improper performance of duties.
Prejudice to the creditors of the BV leads to the director’s personal liability is when the managing director enters into obligations on behalf of the BV knowing, or having reason to know, that the BV would not (within a reasonable time) be able to fulfil its obligations and would not have assets against which the creditor could take recourse.
In the event of a bankruptcy of the BV, each managing director is jointly and severally liable for the amount of the deficit in the bankruptcy, if the management board has performed its duties clearly improperly and it is likely that this is a major cause of the bankruptcy. The burden of proof lies on the managing directors in case the BV did not file its annual accounts within eleven months of the end of the financial year, or the financial records of the BV have not been kept properly.