Directors’ liability in the event of an incorrect forecast

On 4 February 2015, the District Court of Rotterdam rendered a judgment (ECLI:NL:RBROT:2015:879) on, among other things, the question of whether the director of a selling legal entity was liable. The director had sold the assets of the company operated by the legal entity and had given a forecast of the turnover to be achieved, including on the basis of a turnover estimate, a continuous workflow and a list of prospects. It was also agreed that cooperation would be continued with the selling party, whereby the buyer could continue to use the house style, etc., among other things.

The predicted results do not come close to what has been achieved. The selling legal entity goes bankrupt. As a result, the agreed cooperation did not become what was agreed.

First, it was claimed that the (indirect) director is jointly and severally liable for the shortcomings of the (bankrupt) legal entity pursuant to Section 2:11 of the Dutch Civil Code. Insofar as the purchaser achieves a continuation of the contractual liability of the legal person with this assertion, it fails according to the court. The court rightly ruled that it is generally assumed that Article 2:11 of the Dutch Civil Code only refers to liability arising from the law and therefore not to contractual liability. This has also been confirmed in a passage in the memorandum of reply (Parliamentary Papers I, 16 631, no. 27b, p. 22).

The court states that, in order for the driver to act unlawfully, it must be established that the driver deliberately informed the other party incorrectly, orally or in writing. The court does not explain that, as follows from settled case law, the assessment criterion is in principle that there must be a (personal) serious blame. This relatively high threshold for liability of a director is justified by the circumstance that the actions of the BV are primarily involved and by the social interest in preventing directors from letting their actions be determined to an undesirable extent by defensive considerations. See HR 5 September 2014, ECLI:NL:HR:2014:2628.

The court also finds, partly on the basis of a witness statement from the (former) manager of the company sold, that the director must have known at the time of the sale in question that the forecast was not feasible. The court ruled that the driver deliberately acted unlawfully here.

Now that the court assumes awareness of the incorrect statements during the sale, this also falls under the above-mentioned standard of serious (personal) culpability. This may explain why the court’s justification for the standard for directors’ liability is limited.

The deliberate presentation of an incorrect forecast when assets are sold may result in liability on the part of the director of that legal entity. Although the present issue does not explicitly relate to a franchise relationship, the present issue is also important for that purpose, now that the situations described could very well arise in franchising as well.

 

Mr AW Dolphijn – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl

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