Directors’ liability: The new Belgian Company Code will lead to more flexibility
The new Belgian Company Code (BCC) contains a number of corrections to the general principle of directors’ liability.
A positive obligation
The new BCC now states explicitly that directors must exercise their general duties with reasonable care, skill and diligence.
The articles on directors’ liabilities will also apply to all factual directors.
Joint and several liability
The new BCC now declares that directors will be held jointly and severally liable for any breach of directors’ responsibilities. This is currently not the case under the company code (an individual liability). In the new BCC a presumption of joint and several liability will apply when the board of directors are a collegiate-organ.
Under the company code, a breach of law or the company’s constitution was already sanctioned with a joint and several liability, but the new BCC provides for a less rigid possibility of exoneration. In order to avoid liability, the director must prove not to have taken part in any breach of responsibility, and he/she must have duly informed the board of directors (no longer the general assembly).
The liability of directors will be capped to a specific amount between EUR 125,000 and EUR 12 million depending on the size of the company.
The cap is applicable for any breach of directors’ duties and responsibilities with regard to the company itself and third parties. There are different exceptions for which the cap does not apply, such as, slight negligence which occurs on a customary basis, gross negligence and fraudulent intent.
The following additional exceptions also apply:
(i) the full payment of the registered capital;
(ii) a specific liability for tax- and social security debt and;
(iii) tax fraud.
Deficient activities and Wrongful trading
The Belgian Code of Economic Law (BCEL) also provides for the possibility to sanction directors when continuing a deficient activity (article XX 26) when bankruptcy is inevitable (article XX 27).