Summary

This dissertation is concerned with directors’ duties to creditors in the vicinity of insolvency. When a company encounters financial trouble and heads towards insolvency, creditors’ interests intrude. On the basis of article 162 of Book 6 Burgerlijk Wetboek, which concerns the tort of negligence, directors can be held to a duty to take into account creditors’ interests in the event of imminent insolvency. The question arises as to when and what specific duties directors are subject to. This dissertation adresses this question from the perspective of both civil and criminal law.

Following introductory remarks and a discussion of the research question, chapter 2 deals with the structure of directors’ liability in civil law. Article 162 of Book 6 Burgerlijk Wetboek is the basis for liability. Since the director acts on behalf of the company and thus represents the company in his dealings, the establishing of liability on the basis of the tort of negligence has raised difficulties. The Hoge Raad uses this factor alongside with the public interest that directors should have room to take business risks to justify an additional condition for liability. For liability of directors on the basis of article 162 of Book 6 Burgerlijk Wetboek the court needs to establish that directors’ acts qualify as ‘serious reproach’. In this chapter, the concept of ‘serious reproach’ is scrutinized. It is submitted that the regular conditions of the tort of negligence are capable of safeguarding that directors will not be liable too easily. In the submitted framework, liability depends on two questions. Firstly, whether the duty that is breached concerns the director in person and secondly, whether this is a personal reproach for the director. In order to answer the first question, the court needs to establish either that the director breached a statute that is directed to him, or that he violated a subjective right or that his acts qualify as negligence. Within the framework of the tort of negligence, the second question pertains to the attribution of the negligent act to the tortfeasor and concerns the personal reproach.

In chapter 3, the focus is on the structure of criminal liability. Attention is paid to various foundations of liability in criminal law. The general concepts of principal liability and complicity within the meaning of article 44 Wetboek van Strafrecht are discussed at length. Directors are principally liable if they breach a criminal provision that is adressed to their person as well. However, directors can also incur criminal liability if they qualify as accessories. On the basis of general concepts of complicity, directors can commit an offense if they are somehow involved in the commissioning of a criminal offense by other (legal) persons. In article 51 section 2 Wetboek van Strafrecht a specific form of liability applies if the director instructed the company to commit an offense or acted as an actual executive with the commissioning of the crime by the company.

Chapters 4 and 5 deal with the first category of cases in which directors are generally confronted with a duty to creditors. The first category pertains to the incurring of (contractual) liability for the company. In other words, it is concerned with the situation in which the director concludes contracts on behalf of the company. It is established case law that the director is liable if he incurs contractual liability while he knows or ought to know that the company will not (be able to) meet the contractual obligation(s) and will not (be able to) offer recourse for the unpaid debt. In this chapter, this so-called Beklamel-jurisprudence is analyzed. The provisions in the Wetboek van Strafrecht on fraudulent representation – ‘oplichting’, article 326 Wetboek van Strafrecht and ‘flessentrekkerij’, article 326a Wetboek van Strafrecht – are discussed and put in the perspective of the aforementioned civil case law. The double standard for liability in case law – know or ought to know that obligations will not be met and that no (sufficient) recourse will be offered – is called into question. In addition, this chapter pays attention to the nature of damages that creditors are allowed to recover under the Beklamel-rule.

Chapter 5 builds on the findings of the previous chapter and discusses situations in which directors owe a duty to creditors outside the framework of the criminal provisions. In this chapter, the focus is on liability as a result of deceitful or negligent misstatements and the failure to disclose information. In various circumstances the question arises as to whether the directors incur personal liability if they provide information about the company to creditors that appears to be false or incomplete. In the same vein questions arise about duties to creditors to disclose information about, for instance, the financial position of the company. This chapter explores these duties and their reach. It does so by discussing the law on the delictual liability of professional service providers to non contractual parties.

Chapter 6 examines grounds for jusitification and disculpation of directors’ conduct. Business rescue and preservation of employment are considered as public interests that under circumstances might justify negligent behavior towards a creditor. Several questions that in this regard raise, are adressed. In particular, attention is paid to the issue that the director has reasonable belief in the rescue of the company. How should this reasonable expectation translate in legal duties and an assesment of the conduct with a view to establish liability? It is argued that this is best carried out by applying predominantly formal criteria for the establishment of liability. The disculpation grounds that are discussed in this chapter relate to the situation in which the director acts on the basis of false or incomplete information. In other words, if the director makes a mistake. On the basis of concepts pertaining to mistake in criminal law this chapter explores its application and reach for the position of the director.

Chapter 7, 8 and 9 concern the second category of cases that this dissertation examines. This category contains directors’ conduct that frustrates debt recovery by the creditor(s). This category is divided into a part concerning preferences and a part concerning the frustration of proprietary security rights. Chapter 7 discusses the law on fraudulent preferences. In this chapter the focus is on article 343 section 3 Wetboek van Strafrecht regarding the criminal liability of directors in the event of preferences. Pursuant to this provision directors are liable when they make an unlawful preference to a creditor while knowing that this will prejudice the other creditors. In order to understand the reach of the criminal liability of the director for preferences, different elements of this provision are examined and analyzed. In this regard, attention is paid to the provisions in the Faillissementswet regarding preferences. It is argued that these provisions are not binding for the scope of the criminal offense in the sense that criminal liability should not follow in the event the preference cannot be challenged under the Faillissementswet. The provisions regarding transaction avoidance in the Faillissementswet by their nature reckon with interests of third parties while the criminal offense is solely concerned with the behavior of the director.

Chapter 8 follows up on the findings in the previous chapter and explores the liability of the director for preferences outside the framework of the criminal offense. In order to grasp the scope of the civil liability of the director, different rationales for preference law are examined. Subsequently, case law on the liability of the director is discussed. There is limited case law of the Hoge Raad on this issue, but case law of the lower courts more or less provides a framework for the assessment of liability. This framework is criticized against the backdrop of the normative starting points in this dissertation, being on the one hand the interests of the creditors and on the other hand the public interests of business rescue and job preservation. Instead, this chapter puts forward an alternative approach for the assessment of liability. In this approach, the main legal issue is whether the director by making a preference posed an unacceptable risk to the interests of the creditors. In order to answer this question, the nature of the preference and its consequences and other circumstances should be taken into consideration.

The topic concerning the frustration of debt recovery by creditors is central to chapter 9. In this chapter, attention is paid to cases in which as a result of directors’ acts secured creditors are unable to execute their security rights. Since the retention of title and the pledge are frequently used types of security rights in practice, these rights serve as starting points in the legal analysis. With regard to the frustration of security rights differences between the civil law and the criminal law framework emerge. In civil law, liability seems to merely ensue if the director knew or ought to know at the time of the disputed behavior that the security rights as a result would be violated and that the company would offer no recourse for the damages that would emerge. In criminal law, however, liability arises when the director commits the crime of conversion (article 323 Wetboek van Strafrecht) or the criminal offense concerning the undermining of a pledge (article 348 Wetboek van Strafrecht). According to these provisions, no requirement exists as to knowing that the damages will not be recovered as well. In this chapter, the differences in the civil law and the criminal law on this issue are criticized.

Finally, chapter 10 discusses the dissertation’s conclusions. In this chapter, the author reflects upon the findings of the research. By means of three themes that are related to the research the author refers back to the research question. The first theme concerns the interaction between the civil law and the criminal law with regard to creditors’ interests in insolvency. The second theme focuses on the nature of the assessment of directors’ conduct in civil law and criminal law. This relates to the concept of ‘serious reproach’ that is applied in civil law. With regard to the third theme, attention is paid to the assessment of liability in the event directors’ behavior poses risks to the interests of the creditors. This especially applies in the case rescue attempts are made.