Piercing the Corporate Veil in Pays Bas

General Rule and Exceptional Nature of Piercing the Corporate Veil

Under Dutch law, the fundamental principle is that a legal entity (rechtspersoon) is solely responsible for its own obligations. This principle, codified in Article 2:5 of the Dutch Civil Code (DCC, in Dutch: Burgerlijk Wetboek), establishes the legal entity as a separate subject of rights and obligations, distinct from its shareholders, directors, or other affiliated persons. Piercing the corporate veil, or in Dutch "doorbraak van aansprakelijkheid", constitutes an exceptional deviation from this core rule and is only recognized in extraordinary circumstances.

Director's Liability: Internal and External

Although shareholders are, in principle, shielded from liability, directors can, under specific circumstances, be held personally liable for corporate actions. Dutch law distinguishes between two primary forms of director’s liability:

Internal liability (Article 2:9 DCC) – This applies in cases where a director has seriously mismanaged the company. To establish internal liability, there must be "serious culpability" (in Dutch: ernstig verwijtbaar handelen), meaning the director has grossly neglected its duties. If the director is found liable, he/she is accountable to the company itself.

External liability (Article 6:162 DCC and Article 2:138/248 DCC) – External liability arises when a director has acted unlawfully towards third parties, particularly creditors. Two main scenarios justify external liability:

• Tortious conduct (Article 6:162 DCC) – A director can be held personally liable if he/she has committed a wrongful act (in Dutch: onrechtmatige daad) towards creditors, such as knowingly entering into obligations the company could not meet.
• Liability in bankruptcy (Article 2:138/248 DCC) – If a company goes bankrupt due to mismanagement, directors can be held personally liable for the deficit in the bankruptcy estate if they have manifestly improperly managed the company (kennelijk onbehoorlijk bestuur) in the three years prior to insolvency.

Piercing the Veil in Bankruptcy: Powers of the Curator

When a company is declared bankrupt, the curator (bankruptcy trustee) is granted extensive powers to investigate and hold directors accountable. Article 2:138 DCC (for public limited companies) and Article 2:248 DCC (for private limited companies) provide the legal basis for imposing liability on directors in case of manifestly improper management that substantially contributed to the bankruptcy.

Key aspects of the curator’s powers include:

• Presumption of improper management – If directors fail to comply with administrative obligations (Article 2:10 DCC) or neglect to file annual accounts in a timely manner (Article 2:394 DCC), improper management is presumed, shifting the burden of proof to the directors.
• Liability for the entire bankruptcy deficit – If manifestly improper management is established, directors may be held jointly and severally liable for the full shortfall in the bankruptcy estate.
• Fraudulent conveyance (Actio Pauliana, Article 42 Dutch Bankruptcy Act) – If assets were wrongfully transferred to avoid creditors taking recourse, the curator can challenge and reverse such transactions.

Conclusion

Piercing the corporate veil is highly exceptional in the Dutch legal system. Liability of shareholders is rare, whereas directors may be held accountable under strict conditions, particularly in cases of serious mismanagement or fraudulent conduct. The legal framework provides the curator with robust mechanisms to hold directors personally liable when corporate mismanagement leads to insolvency.

The legal consequences of non-compliance with formal and disclosure requirements in the incorporation of companies under Dutch Law are the following.

Formal Requirements and Their Legal Nature

Under Dutch law, the incorporation of a private limited liability company, a B.V. (in Dutch: besloten vennootschap met beperkte aansprakelijkheid) is subject to strict formal and disclosure requirements. These requirements are not merely conditions of regularity but are essential for the legal existence and external effectiveness of the company. The B.V. only comes into legal existence once the notarial deed of incorporation has been executed and the company has been registered with the Dutch Trade Register at the Chamber of Commerce, in accordance with Article 2:175(2) and 2:180 DCC.

Failure to comply with these requirements affects the legal personality of the entity, which means that the company cannot act as an independent legal entity until the incorporation process is completed.

Pre-Incorporation Transactions: Liability of Directors

Before incorporation is finalized, a company in formation, a BV i.o., can enter into contractual obligations. However, under Article 2:203 DCC, these obligations are not initially binding on the yet-to-be-incorporated company itself. Instead, the individuals acting on behalf of the BV i.o. (usually its directors or founders) are jointly and severally liable for these commitments.

The liability of these representatives continues until the company, after its incorporation, explicitly ratifies the pre-incorporation transactions. If the company does not ratify these legal acts, the persons who acted on its behalf remain fully liable towards third parties.

Legal Consequences of Non-Compliance with Formalities

If the formalities surrounding incorporation are not met, the following legal consequences may arise:

1. No Separate Legal Personality (Article 2:175 DCC) – If a BV is not properly incorporated, it lacks legal personality and does not exist as an independent legal entity. As a result, the persons acting in its name bear full personal liability.
2. Personal Liability of Directors (Article 2:203 DCC) – As long as the BV has not ratified its pre-incorporation commitments, the directors or founders remain personally liable for any obligations entered into.
3. Potential Invalidity of Transactions – If a BV fails to comply with mandatory registration and disclosure requirements (e.g., publishing financial statements under Article 2:394 DCC), this may not only lead to administrative penalties but also provide creditors with additional grounds to challenge the company's legal standing in contractual disputes.
4. Bankruptcy and Director’s Liability (Article 2:248 DCC) – If a BV is improperly incorporated and subsequently is declared bankrupt, the curator may invoke director’s liability on the grounds of manifestly improper management, particularly if the directors failed to meet legal obligations regarding corporate formalities and transparency. Please also see the answer to question 1.

Conclusion

Under Dutch law, compliance with formal and disclosure requirements is not just a formality, but a prerequisite for the existence and external effectiveness of a company. A BV in formation can enter into legal transactions, but the directors remain personally liable until the company expressly ratifies these obligations after incorporation. Non-compliance with incorporation requirements can lead to personal liability of directors, unenforceability of contracts, and in severe cases, liability in bankruptcy proceedings.

General Principle: The Separate Legal Personality of a Company

As set out under question 1, under Dutch law, legal entities such as private limited liability companies (in Dutch: besloten vennootschappen, BVs) enjoy separate legal personality, as established in Article 2:5 DCC. This means that a company has its own rights and obligations, distinct from its shareholders, directors, and other affiliated persons.

However, in exceptional cases, the abuse of legal personality may lead to personal liability for individuals acting behind the corporate entity. Dutch law does not generally allow piercing the corporate veil in the way common law systems do. Instead, liability for misuse of corporate personality is addressed through director’s liability (Article 6:162 DCC) and, in rare cases, the doctrine of identification (in Dutch: vereenzelviging).

The Beklamel Norm: Director’s Personal Liability for Corporate Acts

The primary mechanism for addressing abuse of legal personality is director’s liability for tortious acts, as developed in HR 21 January 1955, NJ 1959, 43 (Beklamel case). According to this standard:

• A director can be held personally liable if they enter into contractual obligations on behalf of the company while knowing, or reasonably should have known, that the company would not be able to fulfill those obligations.
• A director is also liable if they fail to take adequate measures to protect the counterparty against foreseeable damages.

This so-called Beklamel Norm has been widely applied in Dutch case law. It particularly applies in cases where directors recklessly engage in transactions that harm creditors, such as continuing operations despite knowing that the company is insolvent.

The doctrine of identification and the Rainbow Case

A more radical, but rarely successful, legal approach to addressing abuse of legal personality is identification (in Dutch: vereenzelviging). This doctrine was introduced by the Hoge Raad in HR 13 October 1989, NJ 1990, 286 (Rainbow case).

In the Rainbow case, the Supreme Court considered whether the separate legal personality of a company could be disregarded in circumstances where the company was entirely controlled by an individual and used purely as an instrument to evade legal obligations. The court ruled that, in extreme cases, a company’s legal personality may be disregarded if:

• The company is entirely indistinguishable from the controlling individual or another legal entity, and
• The company is used as a sham to commit fraud or evade existing liabilities.

However, the Supreme Court did not establish a general rule for corporate veil-piercing. Instead, Dutch courts remain highly reluctant to apply identification. Even in cases of corporate abuse, courts generally prefer to impose director’s liability (Beklamel Norm) rather than disregard corporate personality altogether.

Conclusion

While Dutch law recognizes the potential for abuse of legal personality, it does not provide a general doctrine of piercing the corporate veil. Instead:

1. Directors may be held personally liable for corporate acts based on the Beklamel Norm (Article 6:162 BW), particularly in cases of reckless or fraudulent management.
2. The doctrine of identification, as developed in the Rainbow case, allows courts to disregard corporate personality, but only in extreme cases of fraud or sham structures.
3. In practice, vereenzelviging is applied with great reluctance, and most cases involving abuse of legal personality are resolved through director’s liability rather than by disregarding the company’s separate existence.

General Principle: The Corporate Shield under Dutch Law

As set out under question 1, under Dutch law, the corporate shield is a fundamental principle that ensures the separate legal personality of a company. Pursuant to Article 2:5 DCC, a legal entity has its own rights and obligations, and neither shareholders nor directors are personally liable for its debts. This corporate shield provides for a strong legal barrier between the company and its stakeholders, limiting their financial risk to their capital contribution.

However, this protection is not absolute. Dutch law recognises several exceptions where shareholders or directors can be held personally liable in cases of misconduct, fraud, or mismanagement. These exceptions are developed through statutory provisions, case law, and legal doctrines such as:

1. Director’s liability  under Articles 2:9, 6:162, and 2:138/248 DCC
2. Shareholder liability in exceptional cases
3. The doctrine of identification  in rare circumstances

Director’s Liability: Internal and External Exceptions to the Corporate Shield

Directors are generally not liable for corporate debts, but they may lose the protection of the corporate shield in specific cases:

Internal liability (Article 2:9 DCC) – A director may be held personally liable towards the company itself if they have committed serious mismanagement (in Dutch: ernstig verwijtbaar handelen). To establish liability, there must be a clear breach of duty that no reasonable director would have committed.

External liability (Articles 6:162 DCC and 2:138/248 DCC) – Directors can also be held personally liable towards third parties if:

• They knowingly entered into obligations on behalf of the company that the company could not fulfill (Beklamel Norm, HR 21 January 1955, NJ 1959, 43).
• They engaged in fraudulent or wrongful acts that caused damage to creditors (Article 6:162 DCC – tort law).
• The company goes bankrupt due to manifestly improper management within the three years preceding insolvency (Articles 2:138/248 DCC). If liability is established, directors can be held jointly and severally liable for the entire deficit in the bankruptcy estate.

Shareholder Liability: Rare Exceptions to the Corporate Shield

Unlike directors, shareholders are generally shielded from personal liability under Dutch law. However, in exceptional circumstances, they may be held personally liable, particularly if they abuse their influence over the company:

• Tortious conduct (Article 6:162 DCC) – A shareholder may be held liable if they actively direct the company in a way that causes harm to creditors. This is especially relevant when shareholders instruct directors to enter into reckless or fraudulent transactions.
• Undercapitalisation and Asset Stripping – Although Dutch law does not impose a formal capital maintenance requirement, courts may hold a shareholder liable if they systematically strip assets from the company, rendering it unable to meet its obligations.

The Doctrine of Identification (in Dutch: vereenzelviging) and the Rainbow Case

In extraordinary cases, the Dutch Supreme Court has considered disregarding the corporate shield entirely through the doctrine of identification. This doctrine, as developed in HR 13 October 1989, NJ 1990, 286 (Rainbow case), allows courts to treat a company and its controlling individual or entity as one and the same if the company is purely a sham to evade legal obligations. However, identification is applied with extreme caution and is very rarely successful in practice.

Conclusion

While the corporate shield is a fundamental principle in Dutch law, it is not without exception. The protection is lost in cases of director’s liability (serious mismanagement, tortious conduct, bankruptcy misconduct), shareholder abuse, or extreme misuse of corporate personality. However, Dutch courts apply these exceptions with restraint, ensuring that the separate legal personality of a company remains the default rule.

General Principle: The Corporate Shield for Shareholders

Under Dutch law, shareholders of a besloten vennootschap (BV) or naamloze vennootschap (NV) generally benefit from limited liability, meaning they are not personally responsible for the company’s debts beyond their capital contribution (Article 2:175 DCC for BVs and Article 2:64 DCC for NVs). This corporate shield serves as a fundamental protection, allowing entrepreneurs and investors to engage in business activities without risking their personal assets.

However, this protection is not absolute. If a shareholder misuses the corporate structure purely to evade personal liabilities, Dutch law provides mechanisms to hold them personally accountable.

Exceptions: Shareholder Liability in Case of Abuse

Although limited liability is the default rule, Dutch courts recognize that shareholders should not be allowed to use the corporate form as a mere instrument to shield themselves from personal debts. There are three main legal avenues through which shareholders can be held liable in cases of abuse:

1. Liability based on tort (Article 6:162 DCC)

A shareholder may be held personally liable if they use the company as a vehicle to frustrate creditors or evade personal obligations. This applies when:

• The shareholder transfers personal assets to a company with the sole purpose of shielding them from personal creditors (fraudulent conveyance).
• The shareholder actively instructs the company’s directors to engage in wrongful conduct, such as refusing to pay debts while extracting company assets for personal benefit.
• The shareholder has such a degree of control over the company that they effectively treat the company’s assets as their own, without respecting its separate legal existence.

These principles were reaffirmed in HR 13 October 1989, NJ 1990, 286 (Rainbow case), in which the Dutch Supreme Court held that, in extreme cases, a company may be disregarded if it serves no independent economic purpose but is merely used as a tool to evade obligations.

2. Piercing the corporate veil in Cases of undercapitalisation or asset stripping

Although Dutch law does not have a general capital maintenance requirement, courts may hold shareholders liable if they:

• Deliberately undercapitalise the company, ensuring that it lacks the resources to meet its obligations from the outset.
• Strip assets from the company while leaving debts unpaid, particularly if this is done shortly before insolvency.

If a shareholder extracts all value from a company while knowingly leaving creditors unpaid, this can be considered a tortious act (Article 6:162 BW), leading to personal liability.

3. Liability in bankruptcy: the role of the curator

In the event of bankruptcy, the curator (bankruptcy trustee) has extensive powers under the Faillissementswet (Dutch Bankruptcy Act) to challenge fraudulent transactions and hold responsible parties liable. Key mechanisms include:

• Actio Pauliana (Article 42 Dutch Bankruptcy Act) – If a shareholder has transferred personal assets to a company to evade creditors, the curator can reverse these transactions.
• Liability for manifestly improper management (Article 2:138/248 DCC) – Although this primarily applies to directors, if a shareholder effectively acts as a de facto director, they may also face liability for bankruptcy deficits.

The limited role of identification doctrine

As discussed in previous answers, the Dutch Supreme Court has recognised the doctrine of identification/assimilation in the Rainbow case. This doctrine allows courts to disregard corporate personality in extreme cases, where a company is merely a facade to shield personal assets. However:

• Identification is applied with extreme caution and remains an exception rather than the rule.
• Courts prefer to hold shareholders liable through tort law (Article 6:162 DCC) rather than by directly disregarding corporate personality.

Conclusion

While Dutch law generally upholds the corporate shield for shareholders, it does not allow them to abuse limited liability as a means to evade personal debts. In cases of fraud, asset stripping, undercapitalisation, or wrongful conduct, courts can hold shareholders personally liable based on tort law (Article 6:162 DCC), bankruptcy law, and, in extreme cases, the Rainbow doctrine. However, Dutch courts apply these exceptions restrictively, ensuring that limited liability remains the default rule unless there is clear abuse.

General Principle: the duty to respect the company’s separate interests

Under Dutch law, a controlling shareholder is expected to respect the separate legal personality of the company (Article 2:5 DCC). Even if a shareholder holds a majority stake or has decisive control, they may not use the company solely as an instrument for personal gain at the expense of the company, its creditors, or minority shareholders.

When a controlling shareholder abuses their influence, Dutch law provides various legal mechanisms to impose liability or sanctions, primarily through:

1. Tortious liability (Article 6:162 BW) for wrongful conduct
2. Corporate law mechanisms to protect the company and other stakeholders
3. Bankruptcy-related liability in cases of asset stripping or fraudulent conduct

1. Tortious liability (Article 6:162 DCC)

A controlling shareholder may be held personally liable if it abuses its influence over the company in a manner that causes harm to third parties. According to Dutch Supreme Court case law, a shareholder can be personally liable if it uses its control to engage in wrongful conduct, such as:

• Extracting value from the company for personal benefit while leaving the company unable to meet its obligations.
• Instructing the company to enter into transactions that are knowingly detrimental to creditors or minority shareholders.
• Using the company as a mere extension of their personal interests, rather than pursuing its legitimate business objectives.

A leading case in this regard is HR 13 October 1989, NJ 1990, 286 (Rainbow case), in which the Supreme Court ruled that a company’s legal personality may be disregarded in exceptional cases where it is purely a façade for personal dealings. However, Dutch courts apply this doctrine restrictively, preferring instead to hold shareholders liable through tort law (Article 6:162 DCC) rather than by disregarding corporate personality.

2. Corporate law mechanisms: internal checks on shareholder conduct

Dutch corporate law includes various mechanisms to prevent and sanction self-dealing by controlling shareholders:

• Duty of Reasonableness and Fairness (Article 2:8 BW) – Shareholders must act in accordance with principles of reasonableness and fairness towards the company and other stakeholders. Abusing control for personal gain may constitute a breach of this duty.
• Right of Inquiry (Article 2:344-359 DCC) – Minority shareholders or creditors can request an investigation (in Dutch: enquêteprocedure) by the Enterprise Chamber (in Dutch: Ondernemingskamer) if they suspect that the company is being mismanaged. If mismanagement is found, the court may impose sanctions, including removing directors, annulling decisions, or appointing independent administrators.
• Shareholder Liability for Undercapitalisation or Asset Stripping – While Dutch law does not impose a minimum capital requirement, courts may hold shareholders liable if they deliberately leave the company undercapitalised or strip its assets to avoid obligations.

3. Liability in bankruptcy: fraudulent conduct by controlling shareholders

When a company is driven into bankruptcy due to abuse by a controlling shareholder, the curator (bankruptcy trustee) has extensive powers to reverse fraudulent transactions and hold responsible parties liable under the Faillissementswet (Dutch Bankruptcy Act).

Key provisions include:

• Actio Pauliana (Article 42 Dutch Bankruptcy Act) – If a controlling shareholder diverts assets from the company to avoid creditors, the curator can challenge and reverse these transactions.
• Liability for manifestly improper management (Article 2:138/248 DCC) – If a controlling shareholder effectively acts as a de facto director, they may be held liable for the company’s bankruptcy deficit.
• Criminal Sanctions for Fraud (Articles 340-343 Sr) – If a shareholder engages in fraudulent activities, such as falsifying records or misappropriating company funds, they may also face criminal prosecution under the Dutch Penal Code.

Conclusion

Dutch law does not tolerate controlling shareholders using a company as a mere tool for personal interests at the expense of others. Such conduct can lead to personal liability under Article 6:162 DCC, intervention by the Enterprise Chamber and bankruptcy-related liability or criminal sanctions in severe cases. However, courts apply these measures cautiously, ensuring that corporate personality is only set aside in clear cases of abuse.

General principle: limited liability with exceptions

Under Dutch law, shareholders of a private limited company (BV) or public limited company (NV) are generally protected by the principle of limited liability, as established in article 2:5 DCC. This means they are not personally responsible for the company’s debts. However, when shareholders engage in negligent or reckless conduct that harms creditors, exceptions to this principle may apply.

Dutch law does not provide for a general mechanism to pierce the corporate veil. Instead, liability for shareholders is assessed through:

1. tortious liability under article 6:162 DCC
2. bankruptcy-related liability for wrongful acts
3. corporate law mechanisms to address mismanagement and asset stripping

Tortious liability under article 6:162 DCC

A shareholder can be held personally liable under article 6:162 DCC (tort law) if their actions amount to wrongful conduct that directly harms creditors. The Supreme Court (Hoge Raad) has ruled that liability may arise when a shareholder:

• deliberately frustrates creditor claims by stripping the company of assets or siphoning funds for personal benefit
• directs the company to take on obligations that they know or should know cannot be fulfilled (Beklamel norm, HR 21 January 1955, NJ 1959, 43)
• uses the company as a vehicle to evade personal liabilities while leaving creditors without recourse

Liability under article 6:162 DCC is assessed on a case-by-case basis, considering the shareholder’s level of influence and whether the conduct was knowingly harmful.

Bankruptcy-related liability

When negligent shareholder actions contribute to a company’s insolvency, the curator (bankruptcy trustee) has broad powers under the Dutch Bankruptcy Act (Faillissementswet) to investigate and challenge transactions. Key provisions include:

• actio pauliana (article 42 Dutch Bankruptcy Act) – The curator can void transactions that unfairly disadvantage creditors, such as fraudulent asset transfers to affiliated companies or individuals.
• liability for manifestly improper management (article 2:138/248 DCC) – Although typically applied to directors, a shareholder who effectively controls the company’s management may also be held liable for the company’s bankruptcy deficit if they engaged in manifestly improper conduct.

The Supreme Court has ruled that liability can extend to shareholders when they act as de facto directors, meaning they have exercised actual control over the company’s affairs (HR 17 February 2017, ECLI:NL:HR:2017:275).

Corporate law mechanisms to protect creditors

Dutch corporate law provides further tools to prevent and address shareholder misconduct:

• duty of reasonableness and fairness (article 2:8 DCC) – Shareholders must act in accordance with principles of reasonableness and fairness towards the company, its creditors, and other stakeholders. Courts may annul shareholder decisions that conflict with this duty.
• enterprise chamber proceedings (article 2:344-359 DCC) – Creditors and minority shareholders may request an investigation by the Enterprise Chamber if they suspect shareholder misconduct. If mismanagement is found, the court may impose measures such as suspending shareholder rights or appointing an independent administrator.

Conclusion

While Dutch law upholds the principle of limited shareholder liability, it does not shield shareholders from liability if they engage in negligent or reckless conduct that harms creditors. Personal liability may arise under tort law (article 6:162 DCC), bankruptcy provisions, or corporate law mechanisms. However, courts apply these exceptions restrictively, ensuring that liability is imposed only in cases of clear misconduct.

General principle: liability beyond formal titles

Under Dutch law, liability in corporate governance is not limited to formally appointed directors. Individuals who act as de facto administrators (feitelijk bestuurders) or hidden partners (verborgen vennoten) can, under certain circumstances, be held personally liable, particularly in insolvency situations. The rationale is that liability should not depend solely on official registration but on the actual control exercised over the company.

The legal framework addressing these situations includes:

1. liability for de facto administrators under article 2:138/248 DCC
2. liability for hidden partners under article 6:162 DCC (tort law)
3. the bankruptcy trustee’s powers to recover assets and reverse fraudulent transactions

Liability of de facto administrators in insolvency

A de facto administrator is someone who, without being formally appointed, exerts decisive control over the company’s management. Dutch courts determine whether a person qualifies as a de facto administrator based on the actual influence they exercise over corporate decisions.

In the event of bankruptcy, a de facto administrator can be held liable under article 2:138 DCC (for NVs) and article 2:248 DCC (for BVs) if:

• they were responsible for manifestly improper management (kennelijk onbehoorlijk bestuur) in the three years preceding insolvency, and
• this improper management was a significant cause of the company’s bankruptcy.

A key ruling in this context is HR 17 February 2017, ECLI:NL:HR:2017:275, where the Supreme Court confirmed that a person who effectively directs a company without formal appointment can be subject to the same liability standards as registered directors.

Moreover, if the company has failed to comply with its bookkeeping obligations (article 2:10 DCC) or annual account filing requirements (article 2:394 DCC), there is a legal presumption that improper management contributed to the bankruptcy. This shifts the burden of proof to the de facto administrator.

Liability of hidden partners under tort law

A hidden partner is someone who controls or benefits from a company’s activities without being officially registered as a shareholder or director. Dutch law does not automatically impose liability on hidden partners, but they can be held responsible under article 6:162 DCC (tort law) if they:

• directly or indirectly control corporate decisions that harm creditors,
• engage in fraudulent transactions, such as asset stripping before insolvency, or
• use the corporate structure to evade personal liabilities.

Liability for hidden partners is assessed on a case-by-case basis, focusing on whether they had actual control and knowledge of the harmful conduct.

Role of the bankruptcy trustee in recovering assets

In insolvency cases, the curator (bankruptcy trustee) has various tools under the Dutch Bankruptcy Act (Faillissementswet) to reverse fraudulent transactions and hold non-registered decision-makers accountable:

• actio pauliana (article 42 Dutch Bankruptcy Act) – The trustee can challenge and nullify transactions that unfairly disadvantage creditors, particularly when assets have been transferred to a hidden partner or related entity.
• equitable subordination – Although Dutch law does not have a general doctrine of equitable subordination, courts may in certain cases refuse to recognise claims from hidden partners if they were responsible for financial mismanagement leading to insolvency.

Conclusion

Dutch law does not allow individuals to escape liability simply by avoiding formal registration as directors or shareholders. De facto administrators can be personally liable for bankruptcy deficits under articles 2:138/248 DCC, while hidden partners can face tort liability under article 6:162 DCC if their actions harm creditors. The bankruptcy trustee has broad powers to recover assets and reverse fraudulent transactions, ensuring that those who truly control a company cannot use its legal structure as a shield.

General principle: corporate group members as separate legal entities

Under Dutch law, each legal entity within a corporate group is separately liable for its own debts and obligations (article 2:5 DCC). The mere fact that a company is part of a group does not automatically create liability for its parent company or affiliated entities. Dutch courts do not recognize a general doctrine of piercing the corporate veil in group structures. Instead, parent company liability is assessed based on:

1. tort liability for wrongful conduct under article 6:162 DCC
2. liability for improper financial management leading to insolvency
3. limited cases where the doctrine of identification may apply

Tort liability of parent companies under article 6:162 DCC

A parent company may be held directly liable under article 6:162 DCC (tort law) if it exercises control over a subsidiary in a way that harms creditors or other stakeholders. The Dutch Supreme Court has ruled that a parent company can be liable if:

• it interferes with the subsidiary’s management to such an extent that the subsidiary lacks autonomy,
• it creates a false appearance of solvency, leading third parties to wrongly assume financial security,
• it deliberately engages in asset stripping, transferring valuable assets to the parent while leaving debts behind in the subsidiary.

A key case illustrating this principle is HR 8 December 2006, NJ 2006, 659 (Comsys case), where the Supreme Court held that a parent company can be liable if it actively prevents its subsidiary from fulfilling its obligations while benefiting from its financial resources.

Liability in insolvency: parent company responsibility for subsidiary failure

When a subsidiary enters insolvency, Dutch law provides mechanisms to hold parent companies accountable if they have contributed to financial mismanagement. Liability may arise under:

• article 2:138/248 DCC (manifestly improper management) if the parent company acted as a de facto director of the subsidiary,
• article 42 Dutch Bankruptcy Act (actio pauliana) if the parent engaged in fraudulent transactions to shield assets from creditors,
• doctrine of selective payment, where a parent company ensures that its own claims are satisfied while leaving third-party creditors unpaid.

In HR 21 February 2014, NJ 2015, 22 (Coral/Stalt case), the Supreme Court ruled that a parent company can be held liable when it has exercised decisive control over financial policies that led to the subsidiary’s insolvency.

limited application of the doctrine of identification

In extreme cases, Dutch courts have considered disregarding the legal separation between parent and subsidiary under the doctrine of identification. The Rainbow case (HR 13 October 1989, NJ 1990, 286) is often cited as the leading example, but courts apply this doctrine very restrictively.

For identification to succeed, the subsidiary must be a mere shell (lege huls) with no independent function, wholly controlled by the parent for abusive purposes. However, Dutch courts strongly prefer to impose liability via tort law (article 6:162 DCC) or bankruptcy provisions rather than by disregarding corporate personality entirely.

Conclusion

Although Dutch law does not generally allow piercing the corporate veil within corporate groups, parent companies can be held liable under tort law, insolvency provisions, or in rare cases, the doctrine of identification. Courts assess liability case by case, focusing on whether the parent company wrongfully interfered with the subsidiary’s financial affairs, misled creditors, or engaged in fraudulent asset transfers. However, corporate separation remains the default rule, and liability exceptions are applied cautiously.