Directors’ liability

Yes. Directors can be held personally liable for mistakes in their management, even when they acted in good faith. 

No, it is not legally required. In practice, it is highly recommended, especially since the reform of company law. 

Yes, a directors' liability insurance policy generally covers the legal costs for defence in the event of a claim or investigation. 

Yes. Many policies provide what is known as run-off cover, which ensures that claims submitted after the end of a mandate may still be insured. This applies to liability claims arising from actions or decisions taken during the insured period and which fall within the terms and conditions of the policy. 

Even when the policy itself is terminated, run-off cover may still apply. This means that certain claims submitted only after the insurance period has ended can still be covered, provided that the events leading to the claim originated during the insured period. 

Business liability covers damage caused by the company. Directors’ liability covers personal mistakes made by directors in their capacity as board members.

Since the reform of Belgian company law, directors can be held personally liable for mistakes they make in the exercise of their mandate. 

A few practical examples: 

• Bankruptcy: after a bankruptcy, the liquidator holds the business manager personally liable for alleged mismanagement.span> 
• Fiscal, social or environmental investigations: a director is held accountable following an investigation by the tax authorities, social inspection, or environmental agencies. 
• Shareholder disputes: minority shareholders claim compensation because they believe mismanagement or incorrect decisions have occurred.span> 
• Workplace accidents: directors are held liable for negligence in complying with safety regulations or supervising safety procedures. 
• Mistakes in policy or supervision: decisions that cause financial damage to the company or third parties. 
• Violation of legal obligations: for example, failure to comply with company law, tax, or social regulations. 
• Mistakes in mergers, acquisitions or restructurings: when stakeholders suffer damage due to careless or incorrect decisions. 

In such situations, directors may face significant defense costs and claims for damages.

Errors in policy or supervision are decisions, omissions, or shortcomings by directors that cause harm to employees, shareholders, creditors, or other third parties. 

Since the entry into force of Book 6 of the Civil Code, directors can also be held personally liable on an extra-contractual basis more easily. As a result, in certain cases, those who have suffered damages can not only direct claims against the company, but also directly against the directors. 

A concrete example is a workplace accident where it is determined that there were insufficient safety measures or controls in place. Whereas in the past primarily the company was held liable, today a director can also be held personally accountable for errors in policy or supervision that contributed to the damage. 

This legislative change increases the liability risk for directors and highlights the importance of appropriate directors' liability insurance.