You cannot completely rule out the risk of being held liable for your private limited company’s debts, but you can significantly reduce it. Here are five tips.
Tip 1: Be a good driver
Normally, you are not personally liable for the debts of your private limited company. This is because, as a legal entity, your private limited company is the independent bearer of rights and obligations. However, if, as a director of the private limited company, you fail to perform your duties properly, you may still be held liable. You should therefore act as a prudent director. Do not enter into onerous contractual obligations on behalf of the B.V. if you know that the B.V. is unable to meet them. Record decisions in writing as far as possible, document your reasoning and seek advice where necessary. Ensure that the private limited company’s entry in the Commercial Register is always up to date and file the company’s annual accounts with the Chamber of Commerce on time.
Tip 2: Take out directors’ and officers’ liability insurance
To minimise the risk of your personal assets being held liable, you can take out directors’ and officers’ liability insurance. This type of insurance is not cheap, and it does not cover all risks. You should therefore make sure you are fully informed in advance about what is and is not covered by the policy.
Tip 3: Report your inability to pay in good time
If, due to circumstances, your private limited company is (temporarily) unable to pay tax or social security contributions, please notify the Tax and Customs Administration of this inability to pay as soon as possible. If you do so in good time, written notification In the event of inability to pay – that is to say, within two weeks of the deadline by which the tax or contributions due should have been paid – you are, in principle, not liable. This is only different if the Tax and Customs Administration can demonstrate that the failure to pay is due to manifestly improper management in the three years preceding the date on which the inability to pay was reported.
Tip 4: Don’t pay out dividends just for the sake of it
When your private limited company pays out a dividend, you, as a director, must approve this. If it subsequently transpires that you should not have granted that approval, you will be personally liable for the resulting shortfall, plus statutory interest from the date of the dividend payment. As a shareholder, you may also be held liable if you knew, or ought to have known, that the private limited company would no longer be able to pay its debts following the dividend payment.
Please note! Since 1 October 2012, a mandatory solvency test has been in force whenever a private limited company (B.V.) intends to pay a dividend. This test must demonstrate that the B.V. will still be able to meet its obligations even after the dividend has been paid.
Minimise your liability by ensuring that everything relating to the dividend payment is properly documented, such as the dividend payment test and its positive outcome. This will enable you to prove that the decision to pay a dividend was based on careful consideration.
Tip 5: Carry out thorough research when selling shares
If you are selling the shares in your private limited company (B.V.) and, at the time of the sale, the company consists to a significant extent of investments (including cash and cash equivalents) and of hidden reserves in assets and/or tax reserves (such as the reinvestment reserve), you should take particular care. In some cases, as the seller, you may still face liability retrospectively if the sold private limited company is unable to pay the corporation tax due on the reserves at the time of the sale. Avoid unpleasant surprises. In any case, carry out thorough due diligence on the buyer before the sale of the shares and demand security for the payment of the tax due.