The influence of a financier or shareholder on (the policy of) a company

Authors: Christiaan Groenewoud - Attorney-at-Law, Partner and Lara Borrie - Paralegal

A financier, shareholder or authorised representative may have certain rights to exert far-reaching influence over the company’s policy, without being a statutory director of that company. For example, a fund manager acting on behalf of a private equity investor, as a shareholder, may issue payment instructions to the statutory director or provide guidance or instructions regarding the policy to be pursued.

In situations of this kind, it is important to realise that such actions may entail a liability risk if creditors remain unpaid and/or the company goes into liquidation. The question then is: where does the line lie for someone who is not a statutory director to exert influence over the company without being held liable if things go wrong?

This is often a grey area that must be assessed on the basis of the circumstances of the case. This article outlines a number of aspects that must be taken into account when a third party (non-director) exercises far-reaching influence over (the policy of) a company.

The basic principle is that a private limited company or public limited company (B.V. or N.V.), as a legal entity, bears its rights and obligations independently. This means that, in principle, only the company is liable for its debts. Only in exceptional circumstances is there scope for the statutory director to be held liable in addition to the company’s liability.

As regards the shareholder, the basic principle is that, in principle, he cannot be held liable for damage resulting from legal acts performed in the name of the company (see Articles 2:64 and 2:175 of the Dutch Civil Code), apart from certain statutory liabilities (see Articles 2:80, 2:216 and 2:403 of the Dutch Civil Code). Nevertheless, there are also conceivable situations in which shareholders, financiers or other third parties who perform certain (legal) acts on behalf of the company may be held liable for the company’s debts. A number of these situations are briefly discussed below.

De facto manager / decision-maker

A situation may arise in which a person, intentionally or unintentionally, acts as the de facto manager or policy-maker of the company. This is relevant in view of a number of statutory provisions (see Article 2:248(7) of the Dutch Civil Code and Article 348a of the Dutch Criminal Code). These provisions stipulate that certain standards of legal liability applicable to the statutory director also apply to the de facto policy-maker.

According to the Parliamentary History, de facto management within the meaning of Section 2:248 of the Dutch Civil Code is deemed to exist if (i) there is direct involvement in the management of the company and (ii) the formal management is effectively sidelined. These criteria have been further elaborated in case law. In particular, the latter requirement is not applied so strictly nowadays.

This doctrine is highly relevant to private equity practice. A fund manager who has acquired a portfolio company typically exercises far-reaching influence over that company’s policy. That is not problematic in itself: a shareholder is entitled to promote its interests and exercise its control rights within the limits of the law. However, when the parent company or fund manager intervenes so deeply in operational decision-making that it effectively performs management functions, there is a risk that it will be regarded as the de facto policy-maker, with the associated liability risks.

This is not to say that such an action will always succeed, but aggrieved creditors and/or the insolvency practitioner will certainly explore these possibilities in the current climate, where liability is being sought with increasing frequency. Even if it is merely to create leverage to persuade the PE shareholder to pay the damages or a portion thereof.

De facto management

According to a 2020 ruling by the Court of Appeal in Den Bosch, it is not always relevant whether the formal management has effectively been sidelined: what matters is whether the party being held liable actually performed management acts themselves. This case concerned a family member who was heavily involved in the company’s affairs. The spouse of the company’s director assisted the company with financial difficulties by assuming ‘overall responsibility’. For instance, the spouse made payments and was unable to clarify which management acts had been performed exclusively and actually by the director and which had been carried out by himself (and in what capacity). According to the Court, this meant he could be regarded as the de facto manager. The fact that the spouse helped the director to keep the company afloat did not, in the Court’s view, alter this.

In the Red Dragon judgment of 24 March 2023, the Supreme Court further qualified the second requirement of de facto bypassing. The Supreme Court held that this second requirement does not mean that ‘the de facto decision-maker must have governed in place of and to the exclusion of the formal board’. The de facto decision-maker must have appropriated at least part of the policy-making that normally falls to the board, whilst the formal board tolerates this. In doing so, the Supreme Court confirmed that a situation in which the co-policy-maker imposes his will on the board and the formal board tolerates this is also sufficient. Even if the formal board continues to perform its duties at subsidiary level.

Although we are not yet aware of any case law in which the court has applied these requirements to the actions of a private equity party, we certainly see parallels that are relevant to private equity practice. The Supreme Court’s rulings clarify the risk of being classified as a co-decision-maker in group relationships, including in private equity structures where the fund manager or parent company exercises extensive control over the portfolio company.

In a typical private equity structure, the fund manager manages one or more investment funds that acquire shareholdings in portfolio companies. The relevant question is always: do the portfolio companies determine their conduct independently, or does the fund manager exercise such decisive influence that they can be regarded together as a single economic entity?

In this context, the District Court of Rotterdam has explicitly ruled that, in the context of liability, the doctrine of attribution also applies to private equity firms: “After all, the conduct and powers of a private equity firm need not be the same as those of a purely financial investor.” The court emphasises here that the relevant question is whether the portfolio companies determine their own conduct independently, or whether the private equity firm exercises a decisive influence, meaning that it can no longer be said that the portfolio companies act independently.

Employee as de facto director

In 2012, the Almelo District Court ruled in a similar manner on the liability of an employee as a de facto director. There too, it was held that, in order to be regarded as a de facto director, it is not a strict requirement that the statutory board be sidelined.

A financial director was classified as a de facto decision-maker because he was not only involved in the financial administration (which did not comply with Section 2:10 of the Dutch Civil Code), but also maintained contact with the lawyer, the accountant and the FNV trade union, and participated in board meetings concerning production, quality, sales and investments. According to the Court, the intensive involvement in the company’s affairs at issue could be regarded as de facto management, even where one acts ‘merely’ together with or alongside the statutory board.

Shareholder’s right to issue instructions

Even in the case of a shareholder exercising an approval power granted to them, the risk of being classified as a de facto policy-maker may lurk. In 2021, the Limburg District Court ruled that a shareholder who had the power to approve or reject transactions above a threshold amount could be regarded as a co-policy-maker.

Nevertheless, this ruling appears to require some qualification. In principle, the mere exercise of an approval power does not make the shareholder a co-policy-maker, as the shareholder is then acting within their statutory and articles-of-association powers. However, as soon as the involvement extends to the executive level of the company, the classification shifts. A sole shareholder who dismisses and appoints the board, and actively exercises his right to issue instructions, is more likely to be regarded as a de facto policy-maker.

In light of the Supreme Court’s Red Dragon judgment, it is also important for private equity investors to be vigilant regarding the point at which powers of instruction or rights of approval concerning strategic decisions are exercised. The more the influence extends beyond the mere exercise of shareholder rights, and certainly where the shareholder effectively imposes his will on the board, the greater the risk that a court will regard him as a (co-)policy-maker. As long as instructions and approvals are channelled through the bodies and decision-making procedures laid down in the articles of association, the risk of being classified as a co-policy-maker is limited. However, as soon as a fund manager or boardroom representative effectively performs management acts that normally fall within the remit of the formal board, this risk increases.

Actions taken by the financier or by an interim manager appointed by the pledgee

Finally, a ruling concerning an insolvency adviser appointed by the financier/bank is relevant. Given this adviser’s extensive involvement in the company’s policy, the question arose as to whether he should be regarded as a de facto (co-)decision-maker. According to the Amsterdam Court of Appeal, this was indeed the case. After the bank had terminated the credit facility, it put forward an interim manager of its own. Although this specialist had no formal signing or management authority, everything indicated that, through his advice, he exerted such influence on the formal management that, from the moment he took office, he had in fact (co-)determined policy to a significant extent. That policy-making included, amongst other things, the sale of the companies’ assets and the distribution of the proceeds thereof amongst a select group of creditors.

The role of the financier in restructurings

Another category that merits attention in this context is the shareholder who, due to extensive involvement in the company’s policy, acquires a duty of care towards that company’s creditors. A (financing) shareholder may then, in certain circumstances, also be liable to the company’s individual or collective creditors if he breaches the duty of care he owes them. But when does this apply?

The court’s basic principle is consistent: a shareholder has less far-reaching obligations towards the company and towards third parties than a director or a supervisory director, and therefore less may be expected of a shareholder. The standard of scrutiny applied to a shareholder is therefore even stricter than that applied to a director.

This means that a shareholder is only liable if he had a duty of care towards the interested party in his capacity as a shareholder, breached that duty, and thereby caused foreseeable harm to one or more interested parties.

Below are a number of situations that have frequently arisen in case law and in which the circumstances listed below, taken together, may give rise to a duty of care. For this to be the case, at least the first three circumstances must be present.

Power to intervene:

A shareholder has such influence over the company’s policy that he has the power to intervene. That influence will generally be greater in a close-knit group structure, in which the cash flows and/or activities of different companies are closely intertwined. In determining the group relationships, factors such as the provisions in the articles of association, including any powers to issue instructions, and the financing structure are of importance.

The Supreme Court elaborated on this requirement in the Sobi/Hurks II judgment: given its position as a shareholder with extensive involvement in the subsidiary’s management, the parent company had a duty of care when it should have recognised that the subsidiary offered insufficient recourse to its creditors. In a recent ruling, the District Court of Gelderland confirmed that the bar is set considerably higher for the liability of a shareholder within a group than for the director himself, and high standards were set for the claimant’s duty to allege and the burden of proof.

Interference in policy:

A shareholder exercises the influence referred to in point 1 by interfering intensively and intrusively in the company’s policy.

Awareness of lack of recourse:

Due to his interference in policy, a shareholder was aware or should have been aware that the company would offer no recourse to its creditors. From the moment that knowledge exists, the shareholder must take measures to prevent damage, insofar as that is possible.

The shareholder’s liability was further examined by the Gelderland District Court in a case where a Belgian subcontractor sued a Dutch operating company following the bankruptcy of Senvion GmbH. The court ruled that the mere fact that assets are not held by the operating company but by the (grand)parent company, as is often the case in PE structures, is not in itself unlawful vis-à-vis creditors. However, such a structure and the dependence on a single client do entail a certain vulnerability which a director must take into account in his actions.

Appearance of creditworthiness:

A shareholder instils confidence in creditors that the company or the shareholder himself will settle the company’s debts, whilst this subsequently does not happen. This requirement is interpreted restrictively. For instance, the Gelderland District Court ruled that the chosen group structure did not entail such exceptional risks for the operating company that the shareholder, at the time of entering into the agreement, thereby created an incorrect (overly positive) expectation regarding the operating company’s creditworthiness. Similarly, in 2025, the Midden-Nederland District Court ruled that the conclusion of a subrogation agreement on behalf of the chemist’s shop was not accompanied by the directors’ knowledge that the company would be unable to meet its obligations.

Group structure:

A shareholder may establish a structure of companies comprising, for example, a cost company and a revenue company. The creditors of the company bearing the (staff, procurement and production) costs face greater risk than the creditors of the company through which sales are made.

As discussed in point 3 above, the Gelderland District Court ruled in its 2023 judgment that a structure in which the assets are held by the parent company is not inherently risky for creditors. In reaching this conclusion, it considered that such a structure is not unusual and indeed demonstrates responsible risk diversification by placing activities of different kinds and with different risks within different companies. The same applies to the cessation of business activities: the court emphasised that the decision to cease activities lies with the director, not with the shareholder; nor is the shareholder, on the basis of any power of intervention, obliged to prevent such cessation if there are sufficient commercial grounds for doing so.

Distributions and withdrawals:

A shareholder may arrange or allow the company to give priority to certain creditors, even where there was no justification for making such a payment. This may, for example, take the form of a dividend payment to the shareholder, but may also involve the shareholder making (or arranging for) payments to third parties that are in his interest. This situation often arises in conjunction with a high-risk group structure.

In this context, two recent judgments by the District Court of Gelderland provide clarification. In the 2023 judgment, the court initially reserved its decision on the selective payments to a group company, as the background to the payments (consisting of a repayment of a debt to group companies in 2020 and 2021) had not been sufficiently substantiated. In the final judgment, the court subsequently ruled that the director was liable to the creditor for selective payments to the group company, as it had been clear since Senvion’s bankruptcy that there were insufficient funds in the operating company to satisfy creditors. However, the claim against the shareholder was dismissed: the shareholder had not made the payments himself, and the burden of proof regarding shareholder liability had not been sufficiently met.

In 2024, the Arnhem-Leeuwarden Court of Appeal confirmed, in the context of a dividend payment and the failure to utilise credit facilities, that a shareholder does not readily act in a manner that is seriously culpable. The Court of Appeal quashed the District Court’s ruling that a plea of forfeiture of rights had succeeded, but at the same time found that no serious personal culpability could be established in relation to the dividend distribution, the failure to utilise the credit facility, or the director’s or shareholder’s application for their own bankruptcy.

Strengthening one’s own position to claim

A shareholder who strengthens his position of recourse at the expense of the creditors, thereby preventing the latter from recovering their claims from the company’s assets, may be held liable. As the Supreme Court ruled in the Coral/Salt judgment, excessive interference by a shareholder in the company’s policy may result in the shareholder being held liable for the resulting damage. In that case, the shareholder had discriminated against other parties by deliberately subordinating the claim of one creditor to the claims of all trade creditors and sister companies on the basis of subjective factors. It is important for shareholders to pay close attention to this.

Shareholder (and/or financier) breaching a duty of care towards creditors

A point of particular relevance in insolvency practice concerns the extent to which a financing shareholder can be obliged to provide additional financing, or to continue to make its existing credit facility available, if the company is in financial difficulty. In 2023, the Gelderland District Court explicitly ruled that the legal entity, as an independent legal person, is itself liable for its own debts and that the shareholder is, in principle, not obliged to make additional capital contributions or provide financing. An appeal to the Comsys Holding judgment, which held that circumstances may give rise to a duty of care on the part of a parent company towards the creditors of a subsidiary, did not apply in that case. This was because the structure of the group was not set up in such a way that one of the subsidiaries always incurred losses and was financed via an overdraft facility by the parent company.

Following on from this, in October 2024 the Supreme Court ruled on the question of whether, through the confirmation of a WHOA agreement, a lender can be obliged to make unused credit facilities available to the debtor on terms that deviate from the existing financing agreement to the detriment of the lender. The Supreme Court ruled that this is not possible: unused credit facilities do not constitute a claim and cannot therefore be included in a WHOA agreement. This ruling confirms that a PE financier retains considerable discretion to determine its credit commitment, even in the context of a restructuring.

Unauthorised representation and the appearance of authority to represent

Another situation in which a particular involvement with the company entails a liability risk is where there is unauthorised representation or the creation of the appearance of authority to represent. A non-director may only validly represent the company on the basis of a power of attorney (Section 3:60 of the Dutch Civil Code). An example of this is the authority to enter into agreements on behalf of the company up to a certain contract value.

 There are several conceivable situations in which the representative acts without authority: (i) no power of attorney has been granted at all, (ii) the power of attorney is void or has been revoked, (iii) the limits of the power of attorney have been exceeded, or (iv) the power of attorney has expired at the time the legal act is performed.

The basic principle here is that a party is not bound by a contract entered into on its behalf without authority by a third party. This may place the contracting party at a disadvantage. In such cases, the other party acting in good faith may hold the person who presented themselves as an agent liable under Article 3:70 or Article 3:76 of the Dutch Civil Code for the damage suffered as a result.

The situation is different where there is an ‘apparent authority to act’: if a legal act has been performed by an unauthorised person on behalf of another, and the other party was entitled to rely on the statements or conduct of that person to believe that a power of attorney had indeed been granted, then the company represented by the unauthorised person is nevertheless bound by the agreement.

This always concerns a person who exhibits conduct and/or performs acts that external parties, such as customers and suppliers, do regard as typical acts of management, whilst that person is not a director. It is important in all these situations to consider the extent of the authority (in the case of a power of attorney) and influence (in the case of a duty of care and de facto management).

Conclusion

Three liability risks are central to non-directors with extensive involvement in a company: (i) classification as a de facto policy-maker (Section 2:248(7) of the Dutch Civil Code), (ii) breach of a duty of care towards creditors, and (iii) unauthorised representation of the company. These risks arise in particular when the company is in financial difficulties and creditors remain unpaid.

The aforementioned liability risks will arise in particular if the company is in financial difficulties and/or if creditors remain unpaid for a long period. It is therefore important, if one is not a director but does have significant involvement in the management of the business, to ensure that one remains within the bounds of what is permissible in that regard. Experience shows that these risks can be further mitigated by: establishing a clear written division of duties between the board and the third party concerned; drawing up a clear written power of attorney, preferably registered in the commercial register, with clear communication to the authorised representative and the other party; and ensuring that decision-making takes place via the bodies and decision-making procedures laid down in the articles of association.