IMPACT OF THE LIABILITY TO THE DIRECTOR OF THE DIRECTOR (II)

2nd degree director as director of a foreign corporate director

It appears from the 2011 ruling referred to by the Supreme Court that Section 2:11 of the Dutch Civil Code is applicable to the joint and several liability of a director of a Dutch legal entity being a director of another Dutch legal entity. The Supreme Court confirmed this doctrine again in clear wording in its decision of 21 June 2013.

The conclusion is as follows:

  • a director (legal entity or natural person) can only be liable under Section 2:11 of the Dutch Civil Code for the debts of another legal entity if he himself or it itself is the direct director of a Dutch legal entity, and
  • Section 2:11 of the Dutch Civil Code is not applicable in the event of an indirect director (2nd degree director) if this indirect director is the director of a foreign corporate director.

This ruling of the Supreme Court confirms the opinion adhered to in Dutch literature that the Dutch law of legal persons cannot ‘break through’ to a legal relationship governed by foreign law by means of Section 2:11 of the Civil Code, namely the legal relationship between the foreign legal entity (being a director of a Dutch legal entity) and its own director. After all, the legal relationship between a foreign legal entity and its director is governed by foreign law.

The considerations of the Supreme Court are also of importance for Curaçao law because the Curaçao legislation does not substantially differ from the Dutch legislation on this point. It should be assumed that what has been considered by the Supreme Court also applies to the law of Curaçao. So if a natural person is a director of a foreign legal entity which is itself a director of a Curaçao legal entity, that foreign legal entity can indeed be liable under Curaçao law on account of director’s liability (as the direct director), but under Section 2:17 subsection 1 of the Curaçao Civil Code the natural person cannot be held liable. The ruling shows that in this area the Supreme Court is reluctant to apply the rules of Dutch law to foreign legal relationships. This applies likewise to the law of Curaçao.

Karel Frielink
Attorney (Lawyer) / Partner

(6 September 2013)
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