If you fail to manage properly as a director, you may be held liable by the legal entity of which you are a director. The same applies to a supervisory director or other supervisor who fails to properly supervise.
In any case, you are not managing well if you do wrong things as a director. This could be that you enter into obligations when you know they cannot be met. But also if, in the case of a private limited company or public limited company, you fail to file the annual figures with the trade register on time and the company goes bankrupt. But even if you remain aloof and fellow directors do wrong things as directors that you should have prevented, you may be liable for damages.
There are insurances that can cover this risk for you to a certain extent. These insurances do assume that you behave properly, and do not cover every liability.
Sometimes the choice is made to have one legal entity be a director of the other legal entity. However, this does not prevent directors' liability of the ultimate natural person.
To limit the consequences of any director liability, it is important to have a good cohabitation agreement or good prenuptial agreement. The most important thing, of course, is good governance. But sometimes liability cannot be avoided even if you have done nothing wrong.
For more information on directors' liability and how to avoid it, please contact us. We will be happy to help you.
