In an earlier article I discussed the internal and external directors’ liability in Germany. This already demonstrated a number of differences between Germany and the Netherlands. A number of striking differences can be identified when it comes to the interpretation of the notion of directors’ liability concerning bankruptcies.

In Germany, the emphasis is on the liability of the Geschäftsführer in causing the bankruptcy of a business in connection with the company’s financing. In the Dutch legal system, the emphasis is on the manifestly improper performance of one’s duties by the board if it is plausible that this was an important cause of the bankruptcy.

In Germany the law requires that the bankruptcy be reported immediately. If the Geschäftsführer fails to do this, he is personally liable to third parties and creditors. This is also a point of attention if the GmbH is managed from the Netherlands. In that case too the director must report the bankruptcy in cases that arise.
This report must be made within maximum three weeks of the company’s becoming unable to pay.
If it is clear that reorganisation of the GmbH is no longer possible, bankruptcy must be immediately applied for. It is not permitted to wait another three weeks before doing so.
In practice, directors regularly assume that they have a period of three weeks in which to file for bankruptcy. This is not the case. This period can only be used if there is a reasonable possibility of reorganising the GmbH. If a Geschäftsführer files for bankruptcy too late, he is personally liable for the loss that arises between the material insolvency (inability to pay or ‘Überschuldnung’) and the formal filing. There is a case of ‘Überschuldnung’ if the debtor’s shareholders’ equity no longer covers the existing debts. A Dutch director can also be criminally prosecuted for filing for bankruptcy too late and he can be liable for the costs of the bankruptcy proceedings if these cannot be paid from the liquidation assets.

Under Dutch law, a director can be held liable if he has failed to report to the tax and customs administration on time that the taxes and contributions could not be paid. This notification must be received within two weeks after the payment deadline has expired. If the director has made a legally valid notification, he is only liable if the tax and customs administration demonstrates that the failure to pay is the result of manifestly improper performance that is attributable to the director.

In the Netherlands the criterion therefore is proper performance of one’s duties, in Germany it is more the causing of the bankruptcy and the timely filing for bankruptcy.