The good news is that the chance to be held personally liable as a supervisory director is extremely small. The bad news is that this chance is much higher in our country than in other countries.
Mistake or stupid mistake?
The good news is related to the fact that the legal system and the case law of the Supreme Court have been organized in such a way that normal mistakes do not lead to liability for a director or a supervisory director. It is allowed to make mistakes. Every director makes mistakes. If you do not make mistakes, effective governance is not possible. Stupid mistakes are not allowed. According to the law and case law, stupid mistakes could lead to liability. Some stupid mistakes almost certainly lead to liability. Unfortunately, stupid mistakes are made by directors and supervisory directors in our country too often. In the Netherlands, it took about ten years before stupid mistakes were brought to justice. Now this happens by default. I predict that it will take us another two to five years and then that is the end of stupid mistakes.
What are stupid mistakes?
You do not have to be a professor to know that. Acting contrary to the articles of incorporation is a stupid mistake. After all, you can read the articles of incorporation, can you not? It is not wise for a supervisory director not to do that. The articles of incorporation contain, for instance, the objects clause of the company. If the management board and the supervisory directors act beyond the objects clause, this may lead to personal liability. If the accounting system of the company is not in order, this can lead to personal liability in a bankruptcy situation. Ditto for the timely preparation (each year within eight months) of the financial statements. If the company assumes obligations regarding which it is clear beforehand that they cannot be fulfilled, this can lead to personal liability.
No rocket science. Who spends money that he does not have? Who throws his bills in a shoebox and hopes they will disappear? Who does not occasionally count how much money is left in his wallet? Good governance is not so difficult. Stupid directors and stupid supervisory directors will be dealt with by our legislation and case law in the near future.
Do you have a question about corporate governance yourself? Please e-mail it to firstname.lastname@example.org and perhaps your question will be discussed in the next column!