In this last blog in our series about the role and position of the director of a BV, some special cases of director’s liability are central: the liability prior to the establishment of the BV, liability risks with regard to tax debts and pension contributions and
liability aspects in the context of a turbo liquidation. Would you like to know how you
can prevent personal liability in such cases? Then read on quickly.
Read more: Shlomo Rechnitz – The Jerusalem Post
BV in formation
Prior to the establishment of your BV, you can already act on behalf of the ‘BV in formation’ (BV io). But beware: as long as the BV incorporate, you as a future director are liable for these action. This is therefore a big difference with the establish BV, where the asset of the BV are separate from your private asset.
Once the BV incorporate, it is important that the obligation already enter into by you are ratify by the BV. This can be expressly or tacitly. If this ratification has taken place, the normal rules of directors’ and officers’ liability apply in principle.
But does reinforcement fail? In that case, you will in principle remain liable for the obligations already entered into. We therefore advise you to be careful when entering into obligations for the BV in formation and to always seek advice from a lawyer.
Tax debts and pension contributions
Once the BV has been established , you as a director have many tasks and responsibilities . For example, you must immediately report to the tax authorities if the BV can no longer meet its tax obligations.
Are you waiting too long? In that case, it is presumed that there has been manifestly improper management within the meaning of Article 36 of the Collection Act. If you want to prevent directors’ liability in that case, you must demonstrate that:
- you cannot be blamed for the fact that the notification was made too late;
- there has been no mismanagement in the past three years.
This burden of proof is heavy and in practice often leads to liability on the part of the director. But what is ‘ directly’? In most cases, a notification period of two weeks applies after the assessment or tax return should have been paid. Did you report the inability to pay within this period? Then you can only be held liable in the event of manifestly improper management . This is the case, for example, if you have deliberately submitted incorrect declarations.
The same obligation applies if your BV participates in an industry-wide pension fund. If the BV can no longer pay the pension premiums, you must report this to the pension fund within two weeks. Don’t you? In that case, you are in principle liable under Article 23 of the Compulsory Participation of the Sectoral Pension Fund Act. Is your BV in dire straits? Then stay in control and limit the risk of personal liability by reporting your inability to pay in a timely manner.
If you want to dissolve your BV because you want to change course, the assets of the BV must be liquidated and divided among the creditors. If the BV no longer has any assets, you can proceed to dissolution without liquidation. This is also known as a turbo liquidation. In that case, no financial settlement is required, even if your BV still has debts. Please note: a turbo liquidation cannot be abused to avoid and disadvantage creditors. If, at the time of dissolution, income is still present in the BV, or until recently were or can still be expected, there may be a serious personal fault if you nevertheless proceed to turbo liquidation.
This form of business closure can easily be abused. Due to the COVID-19 pandemic, the government also expects that a large number of entrepreneurs will want to make use of this form of liquidation. Therefore, in June 2021, the Temporary Transparency Turbo Liquidation Act was entered into consultation. This proposes new obligations for directors, such as filing a final balance sheet, a distribution list and an explanation for the lack of income and the failure to pay creditors. Creditors must also be informed about the filing of these documents. It appears that non-compliance with these new obligations regarding turbo liquidation will even be made a punishable offence.
Does your BV have debts and are you considering a business closure? Then proceed carefully. We recommend that you seek advice on the various options and associated obligations.
If you would like more information about special cases of directors’ liability, or if you have been held personally liable on that basis, please do not hesitate to contact us. We specialize in directors’ and officers’ liability proceedings and are happy to help you.