This information outlines the situation regarding liability for RIPE NCC Executive Board members. The RIPE NCC is a membership association in the Netherlands and is therefore subject to Dutch law regarding liability for board members. The information below deals with general Dutch law for company directors as well as the specific case for RIPE NCC Executive Board members under the RIPE NCC Articles of Association (AoA).
Under Dutch law, board members of legal entities are in principle protected against liability because their actions are attributed to the legal entity. The limitation of liability is justified by a separation of powers and is intended to stimulate the entrepreneurial climate. Acting as a board member is therefore only threatened with liability in order to prevent abuse of a legal entity.
The basic duties of a director (Read: Executive Board member) are outlined in Book 2 of the Dutch Civil Code, specifically under Article 2:9 which provides that each board member “is responsible towards the legal person for a proper performance of the tasks assigned.”
Executive Board Members are in general protected against liability so long as they adhere to certain broad standards of care towards the RIPE NCC as internal stakeholders, and towards external parties as the representative body of the RIPE NCC.
Therefore, if an Executive Board member carries out their assigned tasks with the proper care, in line with the RIPE NCC’s Articles of Association (AoA), there is limited risk of being found liable for damages by internal or external stakeholders.
The AoA outlines the general tasks and functions that are assigned to the Executive Board. Subject to certain restrictions in the AoA, the Executive Board is ultimately responsible for the management of the RIPE NCC. The AoA further outlines under what conditions the Executive Board can represent the RIPE NCC and in what circumstances. Given that the Executive Board occupies the highest position of power in the RIPE NCC, as provided for in the AoA, there comes with this a certain standard of care towards internal stakeholders (employees, members, the RIPE NCC itself) and external stakeholders (creditors, the RIPE community) which are enshrined within Dutch law.
An examination of what proper performance equates to with regards to a board member’s liability vis-à-vis internal and external stakeholders is provided below.
As noted above, Dutch law provides that an Executive Board member must ensure proper performance in the fulfillment of their assigned tasks. The easiest way to discern what “proper performance” means is to consider how Dutch Law interprets the inverse: improper performance.
Improper performance of duties can consist of acting (or a lack of action) in violation of statutory provisions, the AoA or, acting in a way that is considered clearly unreasonable/improper. In principle, an Executive Board member can only successfully be held liable if they have acted in a way that no other reasonable person under the same circumstances would have acted.
By observing the responsibilities as outlined in the RIPE NCC Executive Board - Functions and Expectations document, Executive Board members can be assured that they are carrying out their role in a manner that far exceeds the Dutch law standard of proper performance and therefore their liability is minimised.
Under Dutch Law, board members have a large degree of discretion in respect of policy making and determining what is in the best interest of the legal entity and its stakeholders. As a consequence, the RIPE NCC may only hold an Executive Board member liable for improper performance of their duties in case of serious negligence.
The liability of Executive Board members is in principle a collective liability. This means that the Executive Board is jointly and severally liable for improper performance, unless:
Some duties, such as the financial policies of the RIPE NCC, are activities for which all the Executive Board members are responsible, even in the case that certain tasks have been divided among the Executive Board members. Therefore, collective liability is always the case with regards to financial policies. As noted above, however, such liability is only predicated on the Executive Board having acted in a manner that can be assessed as seriously negligent.
A third party may hold a board member of a legal entity liable on the basis of tort if they have acted seriously negligently and in particular if they have misled creditors.
Essentially, liability of Executive Board members will exist towards third parties only when it is evident or should have become evident that the RIPE NCC has in fact entered into a state of insolvency. In such a case, it should be evident that the continuation of the RIPE NCC is no longer “responsible”.
Pursuant to Dutch case law a board member can also be found liable if they have caused or allowed the legal entity to breach its statutory or contractual obligations if:
Finally, a specific rule exists for misleading accounts. A third party may hold an Executive Board member liable for misleading statements in the annual accounts of the company.
As in the case of internal liability, external liability only exists under Dutch Law when the Executive Board members have acted seriously negligently, or in other words have completely abdicated their duties as outlined in the AoA.
The bankruptcy trustee (curator) may hold each board member jointly and severally liable for the shortfall of the bankruptcy estate if the management board has:
The test of improper management is objective to the extent that it will only be satisfied if no reasonably thinking person would under the same circumstances have managed the legal entity in a similar way.
The duty of bookkeeping (i.e. being able to provide information of the current status of the assets and liabilities at any time) and the duty to publish the annual accounts in a timely manner are of particular importance. If one of these obligations is breached, two statutory presumptions apply:
It is however possible for an individual board member to exclude their personal liability in this regard. The board member will have to prove that under the given circumstances they have not been negligent as far as the improper management is concerned and have not been negligent in taking measures to prevent the consequences of that improper management.
As stated above, the claim against the board members can only be made by the bankruptcy trustee and is made on behalf of the collective creditors of the bankrupt estate. Only improper management that occurred in the three-year period before the bankruptcy can form the basis of the claim.