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By Reinier W.L. Russell, LL.M.
Russell Advocaten B.V.
Amsterdam, Netherlands

Employees can be liable for the debts of the company when they were too much involved in the policy making of the company. When will they be in the “danger zone”?

Directors of a company can be jointly and severally liable for the debts of the company in the event of bankruptcy. For this, there must be maladministration and it must be plausible that this is an essential cause for the bankruptcy. Employees who interfere too much with the company’s policy can be considered as actual policymakers. In this case, they can be held liable. In what circumstances can an employee be considered an actual policymaker?

The Employee as Actual Policymaker

It is not easy to determine when an employer can be considered as an actual policymaker. For the assessment, the court will consider, among other things, the following:

  • To what extent the employee acts as a director and goes beyond his authority. A finance director (who was not a director under the articles of association) was not just engaged in the financial administration but also acted as external contact of the company. He also participated in board meetings where he was engaged in typical management matters. Therefore, the court considered the director to be liable for the negative balance.

  • The relation between the employee and director(s). An executive of a call centre gave payment instructions and other tasks to the director under the articles of associations and received considerable bonuses that were not mentioned in the contract of employment. As he did not have a subordinate role with regard to the director under the articles of association, he was considered to be an actual policymaker.

  • The way an employee presents himself externally. A head of sales acted externally as an executive: he answered correspondence of the tax authorities that was directed to the director under the articles of association, contracted on behalf of the company and took the initiative for a name change of the company. Surely, contact with the tax authorities was no sales matter and therefore the employer was considered to be an actual policymaker.

  • To what extent the employee is involved in the management. According to the court, a manager could not be considered as actual policymaker. According to the trustee in bankruptcy, he was actively engaged in the accountancy and human resources. However, the judge did consider there was no (sufficient) evidence for this. The employee was indeed managing the business operations but it was the director who controlled them and eventually took the important decisions.

Conclusion

An employee acting within the scope of his authority and not engaging in executive tasks cannot be held liable easily. However, if the employee goes beyond the scope of his authority, he or she will be in the “danger zone”.

What Can We Do for You?

Are you or your employees being held liable? Would you like to know what to do and how to prevent this? Or would you like to make claims on a bankrupt company, its directors, or employees? Please contact us.

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The general information contained herein is intended for informational purposes only.  It is not intended to be, and should not be construed as, legal advice or legal opinion on any specific facts or circumstances.