As a managing director or supervisory board member of a BV, you regularly face complex decisions. Sometimes your interests run parallel to your own personal interest, but sometimes your personal interest can also clash with that of the company. You do not always feel this yourself, but objectively speaking (if any outsider would experience it that way) there can still be a conflict of interest. Your personal interest in a particular board resolution is then not aligned with and in favour of the BV.<\/p>\n
What lessons can we learn from the law and case law? Many directors have learned the hard way, but you can protect yourself from that.<\/p>\n
In short (Section 2:129(6) of the Dutch Civil Code for an NV, Section 2:239(6) for a BV):<\/p>\n
Note:<\/strong> if you nevertheless take part in the decision-making while you have a conflict of interest, the resolution can subsequently be annulled by a court ruling (Section 2:15 of the Dutch Civil Code). Who can make such a request? For example, the company itself, a shareholder who is disadvantaged, a supervisory director exercising oversight, or a creditor whose position has been harmed.<\/p>\n Even though the resolution is voidable, until the annulment is a fact, the board remains authorised to represent the company externally in legal acts implementing that board resolution. If, as a result of the resolution taken, the board concludes an agreement, for example, that agreement remains valid vis-\u00e0-vis the other contracting party. That agreement therefore cannot be declared invalid merely because the resolution was defective due to a conflict of interest. That is, after all, an internal matter of which the contracting party has no knowledge. In that case, the company remains bound, even if the internal resolution is later annulled. However, the damage the company suffers as a result can be recovered from the director who, despite the conflict of interest, nevertheless took that resolution and acted on it.<\/p>\n The Supreme Court has developed clear criteria for this:<\/p>\n Example<\/em><\/strong>: you negotiate on behalf of the company for the sale of a commercial property owned by the company to yourself personally. Your personal financial interest (as low a purchase price as possible) is opposed to the company’s interest (as high a sale price as possible). There is a good chance that your personal interest will play a role in this decision.<\/p>\n Example<\/em><\/strong>: you are also a (co-)shareholder of a competing business. In decision-making on pricing policy, your interest as a shareholder of the competitor can clash with the interest of the company. Both interests cannot coexist without the risk of a conflict of interests.<\/p>\n Example<\/em><\/strong>: you want to distribute dividends to yourself as majority shareholder, while this jeopardises the position of creditors. The company’s interest then requires restraint, partly in view of the interests of creditors and any minority shareholders.<\/p>\n Example<\/em><\/strong>: you have the company award contracts to a business in which your partner is a shareholder (indirect interest). Even if you yourself have no direct financial benefit, this indirect interest can lead to a conflict of interest. An indirect interest can also arise when a director is involved with another company because they are also a director or supervisory director there, and both companies wish to enter into a contract with each other.<\/p>\n The Enterprise Chamber emphasises that directors must exercise a higher degree of care in situations of conflicting interests:<\/p>\n If you ignore a possible conflict of interest, this can have serious consequences:<\/p>\n In short: not taking conflicts of interest seriously can cause legal, financial and reputational damage.<\/p>\nWhen is there a conflict of interest?<\/strong><\/h4>\n
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Extra care is required<\/strong><\/h4>\n
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What can go wrong if a director ignores conflicts of interest?<\/strong><\/h4>\n
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Practical tips for directors<\/strong><\/h4>\n