Recently, our Cassation Practice Group (Bart Zandbergen and Jeroen van Weerden) achieved a significant victory before the Supreme Court (ECLI:NL:HR:2026:912).
Our client was a director of the parent company, the subsidiary, and the sub-subsidiary. The parent company owed a debt to a Belgian bank, and the sub-subsidiary company owed a debt to another foreign party. The sub-subsidiary’s debt arose from the fact that it was liable for the debt of yet another third party. Since this liability of the sub-subsidiary resulted from advice provided by a well-known law firm, it had a corresponding claim against that law firm. By acting on that advice (which later turned out to be incorrect), the director of the sub-subsidiary also became personally liable.
In 2015, it was decided to liquidate the parent company. The sub-subsidiary was, however, maintained as a going concern due to a potential receivable from the law firm that had yet to be collected. The parent company has not made any further payments since then. The director of the parent company and entities affiliated with him waived approximately EUR 900,000 in claims against that parent company and, in addition, paid off several small debts of the parent company.
After years of defending against the foreign party’s claims, the sub-subsidiary settled, with the proceeds from the sub-subsidiary’s claim against the law firm to be distributed between that foreign party and the sub-subsidiary according to an agreed-upon allocation formula. Subsequently, legal proceedings were brought against the law firm, and the case was settled following an unpublished judgment against the firm. A company affiliated with the sub-subsidiary’s director had advanced all those legal costs to the sub-subsidiary for years (with interest). The settlement amount was subsequently insufficient to satisfy both the foreign party’s original claim and the debt for legal costs owed (indirectly) to the director of the sub-subsidiary.
According to the court of appeals, the director was liable to the bank.
Due to these events at the sub-subsidiary, the court of appeals held that the director of the parent company had caused or permitted the failure to fulfill the obligations toward the bank. The court of appeal based this primarily on its finding that the bank had not been informed about these proceedings at the sub-subsidiary, while the director of the sub-subsidiary had made every effort to avoid his own liability.
This ruling was overturned on appeal. The Supreme Court held that the court of appeals had failed to sufficiently justify why, among other things, the bank’s exclusion was sufficient to meet the threshold of serious culpability, as required for external director liability. Moreover, the parent company itself had not made any payments (which would have complicated recovery), and the debt waivers granted to it (and thus not by it) do not (of course) give rise to director liability. Furthermore, through the settlements, the sub-subsidiary settled its own obligations (including the amounts advanced by the company affiliated with the director), and it is not clear why this would constitute serious culpability.
Nor did the Supreme Court agree with the Court of Appeal’s ruling that there was a lack of “balanced representation of interests.” It is unclear to the Supreme Court which legal principle would underlie such an obligation. The Supreme Court clarifies that a distinction must indeed be made between the various group companies. Therefore, there can be no question of creditors at a common group level (rather than at the company level).
In our view, this is also self-evident. Since the sub-subsidiary did not guarantee the parent company’s debts, the sub-subsidiary was required to use its proceeds first and foremost to satisfy its own creditors. Only if anything remained after that (which was not the case here) could the sub-subsidiary distribute that remainder to (ultimately) the parent company, and the parent company could then use it to help repay its own bank debt. Debtors of different group companies may therefore not be considered debtors of the same company.