Not necessary to show complete control to be liable as a de facto director according to the Dutch Supreme Court

In its judgment of 23 March 2023 (ECLI:NL:HR:2023:445), the Dutch Supreme Court confirmed that to be liable as a de facto director it is not necessary for a person to be controlling the company in lieu of the management board, but instead it is sufficient for that person to have assumed some part of the company’s managerial powers, even while the management are exercising their duties.

For certain stakeholders trying to resolve a company’s financial difficulties, the question of whether a person is acting as a de facto director can be an area of concern given the potential exposure to liability in a subsequent bankruptcy.

The Dutch Civil Code provides that, in the event the managing board has performed its duties manifestly improperly (kennelijk onbehoorlijke taakvervulling) and it is likely that this has been an important cause of the company’s bankruptcy, each managing board member (bestuurder) is jointly and severally liable towards the bankrupt estate for the estate’s “deficit”. The deficit of the bankrupt estate is the amount of debt that cannot be repaid out of the proceeds of the liquidation of the assets available. Managing board members have a formal position within the company and are therefore also referred to as statutory directors (statutair bestuurders).

Under Dutch law, those persons that determine or co-determine the policy of the company – the so-called de facto directors or actual policymakers (feitelijk beleidsbepalers) – can be liable as if they were managing board members, even though they do not have a formal position as a director within the company.

In the explanatory memorandum to the relevant sections of the Dutch Civil Code, the Dutch legislature explained that in order for someone to be found to be a de facto director or actual policymaker, they would need to be acting in lieu of the managing board (i.e. as per the explanatory memorandum, the managing board would need to be factually set aside).

However, the Dutch Supreme Court has confirmed that the wording in the explanatory memorandum was not intended to require that the de facto director or actual policymaker should have managed the company in lieu of and to the exclusion of the managing board. Instead, in order to be deemed a de facto director or actual policymaker, it suffices for that person to at least have assumed a certain part of the managerial powers and by doing so determined or co-determined the policy of the company as if that person was a managing board member. This will be sufficient notwithstanding that the managing board members continued to exercise their formal duties as managing board members. 

This judgment shows that those persons that are heavily involved in the day-to-day management of a company must be alive to the risks their involvement brings along – even if such involvement is not based on a formal appointment as a managing board member or where they act in cooperation with the managing board.