When a Belgian company director is personally liable

A company with legal personality, such as a BV / SRL or an NV / SA, is liable for its own debts. That is the point of it. But the people who run it are not untouchable. The Code of Companies and Associations (Wetboek van vennootschappen en verenigingen, WVV / Code des sociétés et des associations, CSA) and a few other laws set out when a director has to pay out of their own pocket. The rules apply to directors and also to anyone who in fact runs the company without the title.

Management errors

A director is liable to the company for errors made in carrying out the mandate (article 2:56 WVV / CSA). Towards third parties — creditors, customers, suppliers — liability for a management error is in principle limited to faults outside any contract.

The test is generous to honest judgment. A director is only liable for decisions that fall outside the range within which normally prudent and careful directors, in the same circumstances, could reasonably disagree. A business decision that turns out badly is not, by itself, a fault. Where a board acts as a body, its members are in principle jointly liable for its decisions.

The liability caps

A feature of the 2019 Code is that liability for management errors is capped (article 2:57). The cap depends on the size of the company, measured by its average turnover and balance sheet total over the last three financial years. It starts at 125,000 euros for the smallest companies and rises through several bands to 12 million euros for the largest and for public interest entities. The cap applies per fact or set of facts, for all liable persons together, towards the company and third parties alike.

The cap does not protect everyone in every case. It does not apply to:

• a minor fault that occurs habitually rather than by accident, a serious fault, or fraudulent intent;
• certain specific statutory duties, such as some of the rules on distributions and net assets;
• the joint liability for certain unpaid taxes under the income tax code;
• the specific liability for unpaid social security contributions after a bankruptcy.

The company cannot exonerate or indemnify its directors in advance against this liability (article 2:58). Directors' liability insurance is a separate matter.

Close to insolvency: wrongful trading

Most personal liability claims arise once a company has gone bankrupt and the trustee (curator / curateur) looks back. The Code of Economic Law adds specific grounds for that moment.

A director can be ordered to contribute to the debts, up to the shortfall, if a manifestly serious fault contributed to the bankruptcy. Separately, under the wrongful trading rule, a director who knew or should have known that there was no reasonable prospect of saving the company and avoiding bankruptcy, and who carried on anyway, can be held liable. Only the trustee can bring that wrongful trading claim. The practical lesson is that when the figures turn, the directors' decisions and the reasons for them should be written down, and advice taken early.

Tax and social security debts

Unpaid withholding tax on salaries is a recurring source of personal liability. The income tax code makes directors jointly liable where the non-payment results from their fault, and repeated non-payment is presumed to be such a fault unless the director proves otherwise. A comparable rule exists for VAT. These are claims by the tax authorities directly, and the liability cap does not shield them.

For social security contributions, the Code of Economic Law allows directors to be held jointly liable in a bankruptcy where, in the five years before, they were involved in at least two other bankruptcies or liquidations that left social security debts unpaid.

What to do if a claim arrives

A letter from a trustee, the tax authority or a creditor that names you personally deserves a careful answer, not a quick one. Gather the board minutes, the annual accounts, and the correspondence from the period in question, and have a lawyer who handles company and insolvency matters read them. The Code itself is available on the official Justel database.

This page is general information about how these matters usually work in Belgium. It is not legal advice about your own case, and only a lawyer who has read your documents can give you that.