International Law

INTERNAL LIABILITY OF MANAGING DIRECTORS UNDER DUTCH CARIBBEAN LAW

By Karel.Frielink

Review without the benefit of hindsight

The basic rule regarding the duty of a managing director is set forth in article 2:14 Netherlands Antilles Civil Code, which provides that each managing director has an obligation towards the company to perform properly the duties assigned to him. It follows from case law and legal doctrine that a managing director can only be held liable if serious negligence in the performance of his duties is attributable to him. Although a director could contractually limit his liability under article 2:14 of the Civil Code, it should be noted that the conduct not covered by the exoneration, i.e. gross negligence and willful misconduct, is approximately the same as the conduct required by article 2:14 Civil Code to create director’s liability.

A finding of serious negligence on the part of a managing director depends on both the scope of a director’s responsibilities and the circumstances of the case. The individual facts are crucial. Actions that conflict with specific statutory provisions or the articles of association may constitute improper management rising to a level of serious negligence.

However, improper management can only be said to have occurred if no reasonable managing director would have made or take the given decision, action or omission to act. The Court therefore must examine the procedures, preparations and reasons behind such decisions, actions or omissions to act. These must be reviewed in light of circumstances at the time they were made or taken, without the benefit of hindsight. On the basis of case law, internal liability is also influenced and determined by the contractual principal of “good faith”.

Karel Frielink
Attorney (Lawyer) / Partner

Full post as published by Karel's Legal Blog on March 17, 2008 (boomark / email).