Addressing the driver
The main rule in our legal system is that a director of a legal entity is not liable in private for the debts of that legal entity. This is called"the shield of legal personality. There are conceivable circumstances in which this shield is breached. As a result, a director is liable in private.
With regard to this form of directors' liability, case law has elaborated that a director's wrongful act only exists if the director can be blamed for a personal serious reproach.
Personal serious reproach generally exists if:
- The director enters into an agreement on behalf of the legal entity, where the director knows that the legal entity cannot fulfill its obligations under the agreement and has no recourse;
- The director causes or permits the legal entity to fail to perform a contract already entered into and not provide recourse.
In addition to the aforementioned situations, there are other conceivable situations in which there may be a personal serious reproach. For example, consider a director who pledges the proceeds of a legal entity to you as a creditor and then fails to do so. This can also constitute a personal serious reproach.
About directors' liability, fellow firm members Reinier Pijls, Erik Jansen and Paula Röttjers have written previously. The articles can be found below:
Liability of parent company
Sometimes it is also possible to sue the parent company when the subsidiary goes bankrupt. This situation is described in more detail in the Comsys judgment (ECLI:NL:HR:2009:BH4033).
Comsys Holding was the sole shareholder in and director of both Comsys and Services. The structure was set up by Comsys Holding so that all revenues came to Comsys, while the costs were borne by Services. The costs incurred by Services were then not passed on in full to Comsys and Comsys Holding. As a result, Services was loss-making from the outset and could only stay afloat through (additional) financing by Comsys Holding. In addition, all Services' assets were pledged to Rabobank and Comsys Holding, as parent of the group, had never informed the creditors of the risks involved in this construction. Things went well until 2001, but in that year large losses were incurred. Instead of shutting down Services, Comsys Holding decided to let Services continue "going concern" and not make up the losses. Some time later, when Services went bankrupt and the bank had sold off all its securities, various creditors were left with unpaid claims on Services.
The Supreme Court considered that under the circumstances outlined above, Comsys Holding had a special duty of care to creditors. This is because the modus operandi chosen by Comsys Holding was very risky and Comsys Holding knew that the choice to let Services continue "going concern" would greatly disadvantage Services' creditors from the point that Comsys Holding stopped financing. Comsys Holding should have been concerned with the interests of creditors and did not do so at any point.
The trustee of Services successfully held Comsys Holding, as the parent company, liable for creditors' damages. The court deemed the entire deficit in the bankruptcy to be the damages suffered by the creditors due to the wrongful acts of Comsys Holding.
The conclusion of the Comsys ruling?
This shows that even the parent company of a bankrupt debtor can under circumstances be liable for the damage you suffer as a creditor when your claim is not paid. The mere fact that the companies form a group and that there is interconnection is not sufficient for this. The circumstances must justify a special duty of care that is subsequently breached. An example of this is the very risky group structure in Comsys outlined above. Recent case law has confirmed that an important factor here is that the production company (in this case Services) has no independent right to exist, because the costs are not passed on "at arms length" to the sales company - in this case Comsys. As a result, the production company is dependent on additional financing. In our opinion, in that situation not only the receiver, as in Comsys, but also an individual creditor should be able to successfully sue the parent company.
Abuse of identity difference and identification
In addition to the Comsys situation, abuse of identity difference and identification can be invoked under circumstances. Although very similar at first glance, it is important to keep these bases well apart. Both bases stem from Supreme Court case law.
Abuse of identity difference occurs in the situation where a director has full control over company A as well as company B. If he subsequently terminates the business activities of company A and has company B continue them "with no other intention than to disadvantage A's creditor by making it impossible for the creditor to have recourse to the assets of company A", this is an abuse of difference of identity. Case law has highlighted a few situations where this may be the case, but it is a high standard that is not easily met. When there is an abuse of identity difference, the aggrieved creditor can bring an action for tort damages against both the director of the companies and the companies themselves.
With identification , one legal entity is directly liable for a debt of another legal entity. This is only possible when the difference in identity between two legal entities can be completely eliminated. This occurs only in exceptional situations. The ground for liability is then not a tort; company B is in fact directly liable in that situation by virtue of the contract entered into between company A and the creditor.
Circumstances that may play a role in assuming an abuse of identity difference or identification are, for example: the fact that both companies have the same director(s) and shareholder(s), having the same statutory purpose, the (discontinuation and subsequent) performance of the same activities in the other company, employing - or taking on - the same staff, using the same address, logo and trade names, renumbering of invoices from the old company in the new company, and so on.
Group Liability
It has been explained above when a director, a parent company and another company within a group may be liable for the debts of a (bankrupt) company. A final possibility to sue - in addition to the bankrupt company - another company is the so-called group liability of Article 6:166 BW.
This, already very old, provision originally looked at the situation where within a group of people one person throws a stone through the window of a car. In that case, there is damage with multiple potential perpetrators. To avoid the problem surrounding who threw the stone, everyone in the group can be held liable for the damages to the extent that they did not knowingly distance themselves from the conduct and did not attempt to stop the conduct. Recent case law has declared this idea to apply mutatis mutandis to a group of legal entities that together pursued a policy of causing harm.
For group liability within the meaning of Section 6:166 of the Dutch Civil Code, it is not necessary to be a 'group' within the meaning of a concern pursuant to Section 2:24b of the Dutch Civil Code, it is only required that the parties involved formed a group within the meaning of Section 6:166 of the Dutch Civil Code at the time of the conduct. For this purpose, it is assessed whether there was strong mutual coordination of conduct, which conduct caused damage. If a certain policy is pursued by several persons involved, this is quickly satisfied. Furthermore, it must be established that the group members addressed were aware that there was a risk of damage by pursuing the policy, and that they should have refrained from doing so from that moment on. A reference date for this must be established.
Corporations and directors who jointly pursue a damaging policy and, with reasonable knowledge of that damage, do not waive it, may therefore be jointly and severally liable for the damage by creditors. This is an additional potential opportunity for creditors to obtain payment for their debt. This possibility has not yet been much tried in practice, but it is an option that may be worth trying under certain circumstances.
Multiple possibilities to recover your damages, even if your debtor is bankrupt
So, all in all, there are several options that can make it possible to still get your debt paid when the person who has to pay you can no longer do so. For example, directors who (knowingly) caused your damage and parent companies who neglect their duty of care can be sued. Other companies can also be sued, if there is an abuse of identity difference, or if the difference in that identity can be completely thought away. Finally, even all of the above parties may be jointly and severally liable under group liability if they acted jointly and did not waive the harmful acts. In short: these options are worth trying!
