8.5.2 The indirect form of piercing the corporate veil

This doctrine has particularly developed in the case law on liability of parent companies. The author describes this development and observes that the (casuistic) case law on carelessness of parent companies is moving towards the acceptance of a duty of care on the part of the parent company towards creditors of its subsidiaries on the basis of the circumstances of the matter. In this respect, the factors (i) intensive involvement or control, (ii) insight into the subsidiary and (iii) the foreseeability of damages are particularly important.

After this description, the author provides a general explanation of duties of care under Dutch law in order to be able to approach the aforementioned criteria from this general framework. The liability for breach of a duty of care implies that there has been a failure to comply with that duty. In group relationships, the liability of a parent company for breach of its duty of care is essentially based on the accusation that it has failed to act where action – in view of its insight into the subsidiary – was necessary and – in view of its control over the subsidiary – was possible. In the remainder of this paragraph, the author discusses the meaning of the duty of a parent company to exercise supervision over its subsidiaries (‘group management duty’) on the one hand and the intensive involvement of the parent company on the other hand in assessing its liability.

In short, the group management duty means that (the management of) a parent company is obliged to perform its duties properly towards the entire group. The author argues that as a parent company’s involvement in its subsidiary increases, as a rule its insight into the subsidiary will also increase, so that it will have to be guided to a greater extent by the interests of the subsidiary in question. Only when the parent company expresses this involvement by interfering with its subsidiary on the basis of its (de facto) control, will it also have to bear a certain degree of responsibility. This is due to the fact that in that case the parent company must be deemed to be aware of the interests of its subsidiary’s creditors and at the same time has the opportunity to respect those interests. However, it is in particular the requirement of intensive involvement or control that deserves attention in the assessment of liability. Such a degree of involvement leads to insight into and control over the subsidiary on the basis of which a duty of care on the part of the parent company can be present. At the same time, the degree of involvement determines whether and to what extent the parent company was able to intervene in the affairs of its subsidiary. The author advocates that if such a possibility to intervene is lacking, the parent company should not be liable to creditors of its subsidiary.

This chapter ends with a study into the possibilities of addressing a parent company as a (co-)policymaker within the meaning of section 2:248 paragraph 7 DCC. To this end, the author first raises the qualification question: when can a parent company be considered a (co-)policymaker of its subsidiary? The de facto (corporate) powers used to control subsidiaries and to (co-)determine their policies are relevant for answering this question. Neither the single fact that the parent company is a (majority) shareholder nor the existence of a group management duty is sufficient to addres the parent company as a (co-)policymaker pursuant to section 2:248 paragraph 7 DCC. The requirement that the parent company must have acted as if it were a director of its subsidiary implies that the parent company can only be regarded as a (co-)policymaker if it has stepped outside its role as ‘central manager’ of the group and the subsidiary’s directors tolerate this or are set aside by the parent company. In addition, the parent company must have been managing the day-to-day affairs of the subsidiary directly by means of its de facto powers. Finally, the liability as (co-)policymaker is compared to the liability of parent companies on the basis of section 6:162 DCC (indirect form of piercing the veil). The author concludes that both forms of liability differ from each other, since in the case of (co-)policymaking it is particularly relevant in what way the parent company has interfered in the management of the subsidiary, whereas the indirect form of piercing the corporate veil requires a determination of the interference of the parent company with the policy of the subsidiary. After establishing this interference, an assessment must be made to what extent the parent company’s insight into and (de facto) control over the subsidiary have been acquired as a result of such interference.