LIABILITY OF SUPERVISORY DIRECTORS IN THE NETHERLANDS ANTILLES
Ordinary negligence does not constitute liability
Shareholders of a Netherlands Antilles public limited liability company (‘NV’) or private limited liability company (‘BV’) may choose between the English/American one-board (or one-tier) system and the traditional continental European two-tier system.
In the one-tier system there is just one corporate body consisting of both executive and non-executive members. In the two-tier system there are two separate bodies: a management board (consisting of executives) and a supervisory board (consisting of non-executives). The rules of liability for supervisory directors and non-executive directors are the same.
It is the supervisory board’s duty to supervise the policy of the management board and the general course of affairs of the corporation (including its enterprise). The supervisory board also may advise the management board. The articles of association may provide that certain resolutions of the management board are subject to the approval of the supervisory board.
According to the Netherlands Antilles Corporate Code a distinction should be made between the liability towards the corporation (Section 14) and the liability towards third parties (Section 16 of this Code and Section 6:162 of the Civil Code).
The liability towards the corporation is called internal liability, which means that a supervisory director can be held liable by the company itself in the case of improper performance of his duties. Improper performance means seriously neglecting his duties, not just a shortcoming or ordinary negligence.
The liability towards third parties is based on tort. Often, third party liability is an issue in the event the corporation has been declared bankrupt. If found liable, the supervisory director will be liable to the bankruptcy estate for the deficit. The trustee in bankruptcy has to prove that the supervisory directors manifestly performed their duties improperly and that this improper performance was an important cause of the bankruptcy. If the corporation (i.e. the management board) did not comply with its duty to keep a record of its financial condition, or if the annual financial statements were not prepared in time, there shall be a presumption of manifestly improper performance (lack of supervision) and that such performance is one of the main reasons for the bankruptcy.
The liability rules for managing directors are to a large extent similar for supervisory directors. However, given the nature of a supervisory director’s task, his exposure to liability is smaller. In principle, the supervisory directors are jointly and severally liable. An individual supervisory director has the possibility of individual avoidance of liability: he may prove that he is not responsible for the improper performance and that he has not breached his duty of care to do whatever he could do to prevent such performance.
Karel Frielink
Attorney (Lawyer) / Partner
