Registration in Trade Register not decisive for directors' and officers' liability
According to the Supreme Court, the tax collector has to prove that a person can be considered to be a managing director. Such a conclusion requires more than the mere registration in the Trade Register as a managing director of a legal entity.
22 February 2017
Directors' and officers' liability
The Collection of State Taxes Act specific situations in which directors are jointly and severally liable for (among other things) a legal entity’s unpaid payroll taxes and VAT. At least, to the extent it is subject to corporate income tax. Managing directors of legal entities may have legal personality themselves, too. If so, the underlying directors will likewise be subject to the directors' and officers' liability. Except when manifestly improper management is involved, managing directors can prevent such liability by timely reporting an inability to pay.
Before tax collectors can even start to hold any party liable at all, they will first have to provide reasonable arguments for the persons they are targeting to indeed hold the position of managing director of the non-paying legal entity. Recently, the Supreme Court has judged that such a conclusion requires more than the mere registration in the Trade Register as a managing director of a legal entity.
Registration in Trade Register
The case referred to involved A BV, which had failed to pay VAT liabilities over the period from October 2011 through December 31, 2013. D BV was the sole shareholder and managing director of this company. The interested party had been registered in the Trade Register as a managing director of D BV in the period of December 1, 2013 through March 1, 2014. On May 9, 2014 the tax collector designated him to be liable for all unpaid additional tax assessments and related amounts to be collected (interest, costs, etc.). Having filed an objection, the managing director’s liability had been limited to the period December 1, 2013 - December 31, 2013.
The interested party filed a complaint with the court, about him being registered in the Trade Register as a managing director of D BV under false pretenses. Such registration would not produce conclusive proof as regards his duties and responsibilities within D BV. Still, both the Gelderland and Arnhem-Leeuwarden Courts of Appeal rejected this defense. They judged that the interested party had failed to provide reasonable arguments for the registration having been reversed with retroactive force or relating to a different period than shown in the Trade Register.
Burden of proof
The Supreme Court did lend the interested party a willing ear, however. Our highest court first and foremost notes that the tax collector has to prove that someone can be considered to be a managing director. It states that the fact that someone is registered in the Trade Register as a managing director of a legal entity does not produce conclusive proof.
The case has now been referred to the Den Bosch Court of Appeal to assess once again whether the interested party had indeed been the managing director of D BV. After this has been established, it will need to be examined when the inability to pay for the period of December 1, 2013 - December 31, 2013 should have been reported. Finally, if the interested party no longer was a managing director at that time, it will have to be established whether he can be considered to be a former managing director during whose administration the tax liability arose that was not paid. In that case, too, the interested party still falls within the scope of the directors' and officers' liability regulation.
Source: Supreme Court February 17, 2017, 16/03178, ECLI:NL:HR:2017:248