Directors’ Liability in Belgium
Article by Jannick Everaerdt
1. Are directors liable for management decisions?
1. Article 262-527 Belgian Company Code (“BCC”): internal liability
• = directors and daily managers are according to common law liable for the fulfilment of mandates they have been empowered with and for the shortcomings in their management
• Common law = article 1382 Belgian civil code
• Individual liability
• Claim by the company not a third party
· Signing a contract for the company with adverse conditions
· Delegation of powers to incapable persons
· Lack of bookkeeping or VAT and social security declarations
· Lack of having a fire insurance
2. Article 263-528 BCC
• Violation of the BCC or the by laws
• Directors are held liable jointly – only escape when i- no blame to the error, ii- no participation and iii- notified at the first shareholder’s meeting
· Late deposit of the annual accounts
· Rules regarding the bookkeeping
· Lack of publicity regarding the dismissal and appointment of directors
• Claim by the company or third parties
3. Article 1382 Belgian Civil Code
• Error-damage – causal link needs to be proven
• Claim by any third party
§ running obvious deficit activities
2. What is the general criteria for being liable?
1. Violation of the law or the reasonable care principle
2. Exception: manifestly gross error which has contributed to the bankruptcy of the company (article 265 -530 BCC)
3. Can directors be directly liable for company debts towards companies?
1. Principally NOT because:
• Relation creditor – company is contractual => non perfomance of the contract is liability of the company
• Director only liable insofar the error differs from the non-execution (or not good execution) of the contract and the damage differs from those following to the non execution of the contract
• Requires almost criminal act
• Hard burden of proof
2. Exception: manifestly gross error which has contributed to the bankruptcy of the company (article 265 -530 BCC): directors are held liable personally for all or a part of the debts of the company
4. Can directors be liable in case of insolvency of the company?
• Article 263-528 BCC
• Article 265-530 BCC (see previous slide)
• Article 1382 BCC (running obvious deficit activities, late deposit of bankruptcy, …)
• Mostly introduced insofar creditors are not paid
• Introduced by creditor or liquidator
• Requires already quite serious errors – limit with criminal act
5. Are directors liable in the case of closing business without filing for?
1. Possible insofar for example (not limited to):
• Rules regarding the dissolution and liquidation
• Equality between the creditors and order of priority of the creditors
are not respected
6. Do you have a specific action to sue a director?
• no specific procedure
• In the event the company can hold the director liable (internal) : prior decision of the shareholders’meeting is required
• Hard burden of proof
• Practice: mostly in case of insolvency insofar creditors are not paid – difficult to proove that the damages are the consequence of the error of the director rather then the financial situation of the company
7. Can other persons than directors / board members are liable?
• Daily manager / members of the management committee
• Actual director (hereto not formally appointed) (article 265-530 BCC)
8. Estimated expected time for obtaining a judgment?
1. Depends on the jurisdiction + 1st instance / appeal
f.ex: Brussels: 1st instance: +/- 2 years – appeal : 2-4 years
9. Is it convenient to include in the by-laws an arbitration clause ?
1. Not common in practice
2. Rather in management agreement
3. Timing: +/- 6 months – 1 year depending on the arbitral institution
10. Expected fees and costs
1. Difficult to estimate
2. Depends on several factors: number of written statements, court hearings, behaviour counter party, appointment of an expert, …
11. System for estimating the fees
1. Hourly rate since an estimation of the number of services is quiete hardSometimes with success fee