3.2.2 Internal directors’ liability – article 2:9 DCC

The directors’ liability pursued by (non)bankrupt companies is generally based on art. 2:9 DCC. Each director is required to offer the company proper performance of management duties, and is jointly and severally liable should he or she be deemed subject to ‘serious reproach’. ‘Serious reproach’, hence liability, is presumed if a director violates internal norms intended to protect the company. The focus of the liability analysis on violations of internal norms can be best understood by considering their significance when specifying director’ duties or formalising how these duties should be performed. In Staleman v. Van de Ven,1 the company instigated new activities of financial leasing of automobiles. The directors were instructed to only provide customers lease of second-hand automobiles which were in stock. As the new activities were intended as a pilot, an aggressive strategy was not preferred. Contrary to this policy objective, the directors pursued a policy resulting in high volumes of newly acquired second-hand models, causing the company financial problems. In Schwandt v. Berghuizer Papierfabriek,2 provisions in the articles of association limited the director’s discretion with regard to certain business decisions. A director knowingly granted an option to purchase the shares in Xeikon and the sale of those shares to ISTD below market price and without the required approval of the supervisory board. It was later discovered in a criminal proceeding that the director had acted fraudulently by concealing his involvement with ISTD and unjustly obtained personal benefits as a result.

The degree to which ‘serious reproach’ can be established depends on the severity of the norms that have been violated. In the examples discussed above, the purpose of the internal norms was to protect the interests of the company. In Staleman v. Van de Ven, the norms, in the given context, were meant to protect the company from exposure to excessive risks. In Schwandt v. Berghuizer Papierfabriek, the circumstances of the case revealed that the norms were supposed to protect the company from the director’s self-dealing.

In the same line of reasoning, it can be argued that when internal norms have the limited purpose of protecting the company’s interests, the violation of that norm may not amount to a ‘serious reproach’. Directors are thus given the opportunity to indicate circumstances that refute the presumption of liability. In Broekmans Beheer v. BRR Participaties,3 the director violated internal norms by performing several legal acts without the approval of the general shareholders’ meeting. The director successfully demonstrated that decisionmaking within the formal framework of the general meeting of shareholders had been lacking for years and that BRR had simply allowed things to run their course. Under these circumstances, the director’s action could not be the subject of a ‘serious reproach’.4