Director liability in bankruptcy: more ways to rebut the presumption under Article 2:248(2) of the Dutch Civil Code

Director liability in bankruptcy: more ways to rebut the presumption under Article 2:248(2) of the Dutch Civil Code

When a company goes bankrupt and its administration was found to be inadequate, its directors quickly face a daunting challenge: the law automatically presumes that the mismanagement was an important cause of the bankruptcy. This legal presumption under Article 2:248(2) of the Dutch Civil Code is heavy — but not insurmountable. The Dutch Supreme Court clarified on 9 July 2021 (ECLI:NL:HR:2021:1099) that directors have more means to rebut this presumption than was previously assumed.

The facts: an internet company, internal conflict, and bankruptcy

Five (indirect) directors founded a company in 2005 specialising in laying fast internet connections. Day-to-day management rested with one director ('betrokkene 1'), while the others were responsible for field operations and administration.

In 2009, internal disputes arose. Two directors wanted to exit, one resigned. During this period:

• an amount of € 32,733.13 was transferred by betrokkene 1 from the company's bank account to his own company
• two other directors each acquired a 15% stake in a competitor (TWS Infra B.V.), a subsidiary of the company's largest client
• TWS took over vans with tools, inventory, and lease contracts from the failing company

In 2011, the company was declared bankrupt. The trustee argued that the administration after June 2010 failed to meet Article 2:10 of the Dutch Civil Code (the bookkeeping obligation) — and claimed joint and several liability of all directors for the full bankruptcy deficit under Article 2:248.

The legal framework: Article 2:248 and the presumption

Article 2:248(1) provides that in the event of bankruptcy, each director is jointly and severally liable to the estate for the deficit if the board has manifestly improperly performed its duties and it is plausible that this was an important cause of the bankruptcy.

Article 2:248(2) adds a sharp statutory presumption: if the board failed to meet the bookkeeping or publication obligation (Articles 2:10 or 2:394), it is established that manifestly improper management occurred — and it is presumed that this was an important cause of the bankruptcy.

That presumption can be rebutted. But how?

The key question: what counts as rebutting the presumption?

The Arnhem-Leeuwarden Court of Appeal had held that the directors had failed to rebut the presumption: they had pointed to the misappropriation by betrokkene 1 and the competing activities of two co-directors, but those acts — said the court — did not in themselves constitute manifestly improper management. And therefore they did not count.

The Supreme Court rejected that reasoning and gave a fundamental clarification:

To rebut the presumption of Article 2:248(2), it is not required that the alleged conduct itself constitutes manifestly improper management. It is sufficient to make plausible that that conduct was an important cause of the bankruptcy.

In other words: conduct that falls short of the threshold of 'manifestly improper management' — but that nonetheless contributed significantly to the bankruptcy — can rebut the presumption.

Two nuances to the presumption

The Supreme Court structured the rebuttal options as follows:

Nuance 1 (already known): proper management in other respects

From the legislative history it follows that the presumption can be rebutted by making plausible that the board otherwise performed its duties properly. Breaching the bookkeeping obligation is serious, but a director who can show that the rest of their performance was adequate may rebut the presumption.

Nuance 2 (new): co-director's conduct as a cause

New and significant is the second nuance: a director can also rebut the presumption by pointing to acts of a co-director (or of themselves) that:

• do not in themselves constitute manifestly improper management, but
• were nonetheless an important cause of the bankruptcy

If the director succeeds in this, the burden of proof shifts: the trustee must then demonstrate under Article 2:248(1) that the improper management (the bookkeeping breach) was nevertheless also an important cause.

What does this mean in practice?

1. Point to co-directors' conduct — even if it falls short of the threshold

Directors facing claims from a trustee do not need to prove that their co-director also engaged in manifestly improper management. It suffices to make plausible that the co-director's conduct — however serious — contributed significantly to the bankruptcy.

Examples: withdrawing working capital, taking a competing position, diverting assignments or staff to another entity.

2. Document internal objections and supervision

If you raised objections at an early stage against certain decisions or acts by a co-director — document it. Emails, meeting minutes, and written warnings can be crucial evidence in subsequent liability proceedings.

3. Always maintain sound administration

The ruling provides more rebuttal options, but the best protection remains: comply with the bookkeeping and publication obligations. Anyone who does not starts from a seriously disadvantaged position. The presumption can be rebutted, but it is always an uphill battle.

4. Mind the burden of proof after successful rebuttal

If a director successfully rebuts the presumption, the proceedings are not over: the trustee can still attempt under paragraph 1 to show that the bookkeeping breach was also an important cause. Ensure a well-substantiated defence.

5. Personal liability is assessed director by director

The Supreme Court emphasises that directors can individually show that certain circumstances — including their own conduct — were an important cause. The phrase 'one or more directors' allows each director to point to their own actions as part of their defence.

Conclusion

The Supreme Court's judgment of 9 July 2021 (ECLI:NL:HR:2021:1099) gives directors of bankrupt companies greater legal scope to defend against the presumption of Article 2:248(2). Acts of a co-director — even if they fall short of the threshold of manifestly improper management — can rebut the presumption if they plausibly were an important cause of the bankruptcy. This is a significant clarification that can in practice make the difference between personal liability for the entire bankruptcy deficit and a successful defence.

Ruling

This blog post is based on ECLI:NL:HR:2021:1099, judgment of the Dutch Supreme Court of 9 July 2021.