LIABILITY FOR FRAUDULENT ACCOUNTS UNDER THE LAWS OF THE NETHERLANDS ANTILLES
Liability of directors could be an issue
Can directors of a company be held liable for inappropriate or fraudulent bookkeeping without being involved in this themselves and without having any knowledge about this? The reasoning would then be, that such directors have committed a tort towards those who have incurred damages by relying upon the company’s (consolidated) accounts, in that they ignored e.g. indications that the companies were being used for fraudulent purposes. Tort would thus be based on the lack of care, to prevent to become instrumental in a fraudulent scheme.
Netherlands and Netherlands Antilles case law as it currently stands does not provide any clear precedent of liability along these lines. However, criminal liability has been accepted along comparable lines. Although the reasoning may at first sight seem somewhat far-fetched, I feel that it is not entirely without merit.
As a generally accepted principle under any law system that I know of, tort would only result in liability if a sufficiently direct relationship with damages incurred can be established. Strictly, an individual investor would only be able to demonstrate such relationship if he can show that he made his investment decision on the basis of a company’s (consolidated) accounts and that he would have acted otherwise, if these accounts would have been correct. There is however a trend to accept that information made public by a company is deemed to be absorbed by the market immediately, and that an individual investor is not required to show how he actually arrived at his decision.
Finally, it cannot be excluded that a foreign court will deem itself competent to judge such a case, and that it will apply its own laws to it. This will depend on the international private law of such country. It can therefore not be excluded that such cases will be evaluated according to laws under which liability along these lines is accepted.
Karel Frielink
Attorney (lawyer) / Partner
