Can a director be held liable for evading creditors through a restructuring?
If a director or owner of several companies carries out a restructuring with the aim of evading the enforceability of debts, they may be held personally liable. It makes no difference whether they carry out the restructuring directly themselves or have it carried out via their other companies. In both cases, they may be liable for the creditor’s loss. A recent ruling by the court of appeal (ECLI:NL:GHARL:2025:6145) illustrates how the court deals with such a case.
The case in brief
This case centred on the purchase of a dressage horse for €300.000. Shortly after delivery, it emerged that the horse had a condition that rendered it unsuitable for the sport. The buyer wished to rescind the contract and demanded a refund of the purchase price. When the seller of the horse, the company Purioso, heard that the buyer wanted the money back, something striking happened: immediately afterwards, the owner of Purioso carried out a restructuring. Purioso’s assets were transferred to a sister company. The proceeds from this were distributed as dividends to Purioso’s parent company. Purioso was thus stripped of its assets, and the buyer could no longer seek recourse against the original seller.
What did the Court of Appeal rule in this case?
The court of appeal found that this restructuring had presumably been carried out for precisely that purpose: to deprive the creditor of the money. And the court of appeal was correct. It later emerged from the accountant’s email correspondence that the aim was indeed to ‘keep the value of the horses out of the risk zone’ and to ensure that Purioso remained ‘virtually empty at all times’. The court also found that Purioso and other appellants had withheld relevant information and omitted incriminating passages from emails in order to present a biased picture.
Abuse of the distinction between ownership and management
This case is based on an important legal principle within the field of directors’ liability: abuse of separate legal personalities. In cases of abuse of separate legal personalities, the owner/director of a company uses their position to transfer assets from one company to another within the wider group of companies, thereby frustrating creditors’ rights of recourse. Where this occurs, liability rests not only with the director personally, but also with the companies involved in the restructuring. They may all be held jointly and severally liable; in other words, the creditor may seek recourse against any of the companies.
Conclusion for practice
In the present case, it was reasonably evident from the evidence presented that the Court of Appeal had found that the restructuring constituted an unlawful act vis-à-vis the purchaser. This does not, of course, mean that a restructuring is always regarded as unlawful in such a case. For directors and owners of groups of companies, it is important that a restructuring is commercially sound, well-documented, transparent and not designed with the aim of fobbing off creditors. Creditors have more options than you might think to hold those involved liable, not only the company and the businesses involved in the restructuring, but also the director(s) personally.
Our Litigation team will be pleased to advise you on any questions you may have regarding directors’ liability.
See also our blog: Directors’ liability in the event of refusal to pay: when is a director personally liable?
