Article 2:9 of the Dutch Civil Code · Article 2:248 DCC · duty to file
Compare directors' and officers' liability insurance
Directors' and officers' liability is rarely about large-scale fraud. It is usually about annual accounts filed late, and about what the law then attaches to that.
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In brief
Directors' and officers' liability insurance covers the personal liability of directors, supervisory board members and supervisors. Internally that liability runs through Article 2:9 of the Dutch Civil Code: every director is bound towards the legal entity to perform his duties properly.
In a bankruptcy, Article 2:248 of the Dutch Civil Code comes into play. The insolvency administrator can hold the board liable for the deficit in the estate where it performed its duties manifestly improperly and it is plausible that this was an important cause of the bankruptcy. The bar for that is high: there must be conduct that no reasonably minded director would have engaged in in the same circumstances, and it must have occurred in the three years before the bankruptcy.
But there is a route that largely spares the insolvency administrator that evidence, and it affects above all directors who did nothing else wrong.
What does directors' and officers' liability insurance cover?
The structure of the cover in three parts, with an overview per situation below.
Article 2:9 of the Dutch Civil Code
Internal liability
The legal entity itself holds the director liable for improper performance of duties.
An irresponsible investment
Inadequate supervision
Conflict of interest
Article 2:248 of the Dutch Civil Code
Bankruptcy
The insolvency administrator claims the deficit in the estate in cases of manifestly improper management.
Deficit in the estate
Evidential presumptions
Looking back three years
Often the largest part
Defence costs
The cost of legal defence, including against an unfounded claim.
Lawyers and experts
Investigation costs
Inquiry proceedings
What is covered
Situation
Covered
A claim for improper management
Yes
Defence costs for an unfounded claim
Yes
Liability of a volunteer director
Yes
A deficit in the estate after bankruptcy
Yes
Intentional conduct or fraudulent withdrawals
No
Fines that are punitive in nature
No
This overview is general in nature and is not personal advice. What is actually covered, including exclusions, limits and the excess, is set out in the policy conditions and the insurance card (verzekeringskaart) of the insurer; you receive both before you take out cover. Taking out cover without advice? Then read what execution only means for you.
Where things go wrong in practice
Four points that make the difference between a policy that pays out and one that does not.
The duty to file is the trap
If the board fails to comply with the bookkeeping obligation in Article 2:10 of the Dutch Civil Code or the publication obligation in Article 2:394 DCC, it is established that it performed its duties improperly, and this is presumed to have been an important cause of the bankruptcy. The annual accounts must be published no later than twelve months after the end of the financial year. If your financial year runs with the calendar year, that means 31 December of the following year.
You can rebut that presumption, but you have to be there to do so
The Hoge Raad (the Dutch Supreme Court) has improved the position of directors. To rebut the presumption it is enough for the director held liable to make it plausible that facts or circumstances other than his improper performance of duties were an important cause of the bankruptcy. In its judgment of 9 July 2021 the Court held that acts or omissions of a fellow director may also be pointed to for this purpose, provided these do not in themselves amount to improper performance of duties. Running that defence does cost a lawyer — and those costs are precisely what the policy covers.
Serving unpaid does not protect you
The standard of proper performance of duties makes no distinction between a paid director of a BV and a volunteer who is treasurer of an association or a VvE (Dutch owners' association). The liability is moreover in principle joint and several: if one director performs his duties manifestly improperly, there is in principle improper management by the board as a whole.
Curing a publication defect only takes effect after three years
If the annual accounts were filed late, the evidential presumption remains in play for as long as three years have not yet passed since all publication defects were cured. That is a reason not to let matters like this drift, and to check that everything is in order before you take office when a board changes.
What does your premium depend on?
Legal form and size — BV, foundation, association or cooperative
Balance sheet total and equity — the main basis for calculation
Number of directors and supervisory board members
Sum insured — often € 250,000 to € 5,000,000
Financial position — annual figures and going concern
Retroactive period
Insurers weigh these details differently. That is why comparing pays off.
How we arrange it
You request a quoteWe take stock of your situation, your risk and your wishes.
We compareseveral insurers, on premium as well as conditions.
You receive a proposalWith an explanation of the differences and the exclusions.
We arrange the switchIncluding cancellation, so there is no gap in cover.
Customers rate our service on four aspects: personal service, service delivery, availability and the outcome. The reviews are collected and published by NH1816 and come from customers who have actually taken out a policy with Finass Advies B.V. or reported a claim.
Internally under Article 2:9 of the Dutch Civil Code, for improper performance of duties. In a bankruptcy under Article 2:248 DCC, where the board performed its duties manifestly improperly and that is plausibly an important cause of the bankruptcy. The test: no reasonably minded director would have acted in that way in the same circumstances.
What happens if the annual accounts are filed late?
It is then established that the board performed its duties improperly, and this is presumed to have been an important cause of the bankruptcy. The insolvency administrator no longer has to prove it; you have to rebut it. The publication deadline is no later than twelve months after the end of the financial year.
Can I still rebut that presumption?
Yes. You must make it plausible that facts or circumstances other than your improper performance of duties were an important cause of the bankruptcy. Since the judgment of 9 July 2021, acts or omissions of a fellow director may also be pointed to for this purpose, as long as these do not in themselves amount to improper performance of duties.
Am I liable as a volunteer director too?
Yes. The statutory standard makes no distinction between paid and unpaid board service. Directors of a foundation, association or VvE run the same risk, and recovery is against their private assets.
What about fellow directors?
Liability is in principle joint and several and in principle concerns the board as a whole. You can exonerate yourself, but that requires you to show that the improper management is not attributable to you and that you were not negligent in taking measures.
Does the insurance cover fines as well?
Administrative fines with a punitive character are not insurable. The costs of defence in such proceedings often are, and with cases of this kind they usually make up the largest part of the bill.
Finass Verzekert is a trading name of Finass Advies B.V. We advise on and arrange non-life insurance on the basis of an objective analysis of several insurers, and receive commission for this from the insurer, which is included in the premium. You pay no separate advice fee. Before you take out cover, we establish your wishes and needs.
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