Global menu

Our global pages

Close

Coronavirus - Director's liability during COVID-19 – Belgium

  • Belgium
  • Coronavirus
  • Coronavirus - Country overview
  • Restructuring and insolvency

24-04-2020

Belgian company law is characterized by an internal and external liability of directors. Internal liability means that directors are liable to the company for any errors committed in the performance of their duties. External liability, on the other hand, entails that they are also liable to third parties in so far as the fault committed is a non-contractual fault. The third party will then have to prove the existence of a fault, damages, and a causal link between the two.

Directors shall only be liable for decisions, acts or conduct which are manifestly beyond the margin within which normally prudent and careful directors, placed in the same circumstances, may reasonably disagree.

If the administrative body forms a college, their liability for the decision or omissions of this college shall be joint and several. Even if the administrative body does not form a college, its members shall be jointly and severally liable towards both the company and third parties for all damage resulting from violations of the provisions of the Belgian Code of Companies and Associations (BCCA) and/or the articles of association.

For example, the BCCA states that when important and concordant facts could jeopardize the continuity of the company (the COVID-19 crisis could be such a fact), the administrative body must deliberate on the measures to be taken to safeguard the continuity of the economic activity for a minimum period of twelve months.

Limitations in directors’ liability in Belgium

Only in limited cases will a director be released from his or her liability.

Their liability is, however, limited to certain amounts, in accordance with the turnover and balance sheet total of the company. Belgium is one of the few countries that provides for such a cap on director’s liability.

This limitation of liability does not apply to (1) a minor fault that is more common than accidental, (2) gross negligence, (3) fraudulent intent, (4) intent to damage, (5) for errors against obligations concerning, among other things, the valid subscription of shares, the payment of the capital and the capital increase, (6) joint and several liability for tax debts (subject to certain conditions) and (7) joint and several liability for social security contributions (subject to certain conditions)

In addition to the above general rules on director’s liability, their also some specific grounds of liability.

Alarm bell procedure

For public limited companies (NV/SA), the old rules continue to apply. If, as a result of a loss incurred, the net assets have fallen to less than half of the capital, the administrative body must convene the general meeting (unless stricter provisions are laid down in the articles of association) to be held within two months after the loss has been ascertained or should have been ascertained by virtue of legal or statutory provisions in order to decide on the dissolution of the company or on measures announced in the agenda to safeguard the continuity of the company.

If the general meeting is not convened in accordance with this article, the damage suffered by third parties shall, subject to evidence to the contrary, be deemed to result from the absence of the convening notice.

In view of the disappearance of the concept of capital, new rules have been laid down for private limited companies (BV/SRL). If the net assets are in danger of becoming or have become negative, the administrative body must convene the general meeting (subject to stricter provisions in the articles of association) within two months of the date on which this situation was ascertained or should have been ascertained by virtue of legal or statutory provisions in order to decide on the dissolution of the company or on measures announced in the agenda to safeguard the continuity of the company.

The same applies when the administrative body establishes that it is no longer certain that the company will be able to pay its debts as and when they fall due, according to reasonably foreseeable developments, for at least the next twelve months.

If the general meeting is not convened in accordance with this article, the damage suffered by third parties shall, subject to evidence to the contrary, be deemed to result from the absence of a convening notice.

These rules are stricter because the administrative body must also take action if the net assets are at risk of becoming negative, or if it is expected that the company will not be able to pay its debts as they fall due for at least the next twelve months.

The administrative body will thus have to be proactive in this regard.

After the administrative body has complied with the above-mentioned obligations, it is no longer obliged to re-convene the general meeting for the same reason during the twelve months following the initial convocation.

Insolvency law in Belgium

In addition to the BCCA, Belgian Insolvency Law also contains specific grounds of liability in the event of bankruptcy.

If, in the event of bankruptcy of a company, its debts exceed its assets, the current or former directors, managers, day-to-day managers, members of a board of directors or of a supervisory board, as well as all other persons who have actually had the power to manage the company's affairs, may be declared personally liable, whether or not jointly and severally, for all or part of the company's debts up to the amount of the deficit, if it is established that (1) a manifestly grave error on their part contributed to the bankruptcy, or (2) at any time prior to the bankruptcy, the person concerned knew or ought to have known that there was manifestly no reasonable prospect of keeping the company or its activities and avoiding bankruptcy (wrongful trading).

Scope of the BCCA in Belgian law

Important to mention is difference between the scope of the BCCA, containing the general rules on director’s liability (and the alarm bell procedure), and the scope of Insolvency Law, containing the specific grounds for director’s liability.

The BCCA applies the statutory seat theory. As a result, it applies to all companies that have their registered office in Belgium. Insolvency law, on the other hand, applies the COMI principle. This means that it applies to all companies that have their Centre of Main Interest in Belgium.

It is thus perfectly possible that a foreign company (with a registered office outside Belgium) is subject to Belgian Insolvency Law when their Centre of Main Interest is in Belgium.

Contact and insolvency lawyer in Belgium today

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings