Private assets and bankruptcy
If your business goes bankrupt, a curator will pay off your debts as much as possible with money from the business. Depending on your legal structure, the curator may also use your private assets to pay creditors. Are you personally liable for your company debts? It depends on the legal business structure of your company.
Are you personally liable?
- If your business has a legal structure without legal personality, you are liable with your private assets. Business and private assets are joined together. Legal structures without legal personality include eensmanszaak (sole proprietorship), vof (general partnership), CV (limited partnership), and maatschap (professional partnership). What if you do not have enough of your own money to pay off the debts? Then creditors can demand that you use your private assets to pay them off after your bankruptcy.
- If your business has a legal structure with legal personality, you are usually not liable with your private assets. Business and private assets are separate. Legal structures with legal personality include the bv (private limited company), nv (public limited company), stichting (foundation), vereniging (association), and cooperative.
Check your legal structure
In the list below, view your legal structure and read whether you are personally liable.
A sole proprietorship (eenmanszaak) is a legal structure without legal personality. In the event of debt or bankruptcy, you are liable with your private assets. If you do not have enough money in your business to pay off your debts, you will pay the remaining debt with your own equity capital. This means that you could lose all your possessions that have any value, such as your savings, car, and house.
Your life partner
Are you married or in a registered partnership with (limited) community of property? Your partner may also be privately liable. In that case, the curator will also use your partner's private assets and the assets you have in common to pay off your debts. Whether or not your partner is also liable depends on how and when you formalised your relationship. You can limit your partner's liability by drawing up a prenuptial or partnership agreement with a civil-law notary.
A private limited company (bv) is a legal structure with legal personality. Only the assets of your bv can be used to pay off debts. You (as managing director) are not liable with your private assets. And you do not have to pay off the debts with your private assets.
In some cases, you as a director can be held personally liable. In that case, you will have to use your own equity capital to pay the debts. This happens:
In case of mismanagement
Examples of mismanagement are:
- fraud, such as forgery
- taking unnecessarily large financial risks
- making poorly prepared decisions with major financial consequences
- failure to pay taxes or social security contributions on time and failure to report this to the Netherlands Tax Administration on time
Read more about the liability of directors.
If you sign as a private individual
You are also personally liable if you sign an agreement not only as a director, but also as a private individual. For example, if you borrow money for your business and the bank asks you to co-sign as a private individual.
Read more about the liability of directors.
A general partnership (vof) is a legal structure without legal personality. All partners are personally liable for the entire debt of the general partnership, even if another partner incurred this debt. If the vof does not have enough money (operating capital) to pay off the company's debts, the partners pay the remaining debt with their own equity capital. This means that you could lose all your possessions that have any value, such as your savings, car, and house.
Does one of the partners have private debt? Then the vof or the other partners do not have to pay for this.
Your life partner
Are you married or in a registered partnership with (limited) community of property? Your partner may also be personally liable. In that case, the bankruptcy curator will also use your partner's private assets and the assets you have in common to pay off your debts. Whether or not your partner is also liable depends on how and when you formalised your relationship. You can limit your partner's liability by drawing up a prenuptial or partnership agreement with a civil-law notary.
Legal person as a partner
Legal persons can also participate as a partner in a vof. In the event of debts or bankruptcy of the general partnership, the participating legal person is also liable.
A professional partnership (maatschap) is a legal structure without legal personality. In the event of debts or bankruptcy, you are liable with your private assets. If you do not have enough money in your business (business assets) to pay off your debts, you will pay the remaining debt with your own equity capital. This means that you could lose all your possessions that have any value. For example, your savings, car, and house.
You are only liable for your own business debts. Has another partner incurred debts? In that case, creditors cannot claim this debt from you.
But in some cases, you are liable for the debts of another partner:
- The partners have authorised each other in a partnership agreement.
- The partners have jointly carried out an action or transaction. For example, to hire a receptionist, or to rent a practice space.
In these cases, the partners are all equally liable for the debts of the professional partnership.
Your life partner
Are you married or in a registered partnership with (limited) community of property? Your partner may also be personally liable. In that case, the curator will also use your partner's personal assets and the assets you have in common to pay off your debts. Whether or not your partner is also liable depends on how and when you formalised your relationship. You can limit your partner's liability by drawing up a prenuptial or partnership agreement with a civil-law notary.
Legal person as a partner
Legal persons can also participate as partners in a professional partnership. In the event of debts or bankruptcy of the professional partnership, the participating legal person is also liable.
The limited partnership (cv) is a legal structure without legal personality. In the event of debts or bankruptcy, all managing partners are liable with their private assets. This is also the case if another managing partner has incurred the debts. If the limited partnership does not have enough money (company assets) to pay off the debts, the managing partners pay the remaining debt with their own equity capital. This means you could lose all your possessions of any value, such as your savings, car, and house.
Silent partner
Silent partners are not liable for the debts. Unless the silent partner is actively involved in the business or their name is used in the cv. Then they are liable.
Your life partner
Are you married or in a registered partnership in a (limited) community of property? Your partner may also be personally liable. In that case, the bankruptcy curator will also use your partner's personal assets and the assets you have in common to pay off your debts. Whether or not your partner is also liable depends on how and when you formalised your relationship. You can limit your partner's liability by drawing up a prenuptial or partnership agreement with a civil-law notary.
Legal person as a partner
Legal persons can also participate as partners in a limited partnership. In the event of debts or bankruptcy of the limited partnership, the participating legal person is also liable.
A foundation (stichting) is a legal structure with legal personality. Only the foundation's capital can be used to pay off debts. You (the director) are not liable with your private assets. And you do not have to pay off the debts with your private assets.
In some cases, you as a director can be held personally liable. Then you do have to pay the debts with your own equity capital. This is the case with mismanagement.
In the case of mismanagement
Examples of mismanagement are:
- fraud, such as forgery
- taking unnecessarily large financial risks
- making poorly prepared decisions with major financial consequences
- failure to pay taxes or social security contributions on time and failure to report this to the Netherlands Tax Administration on time
Read more about the liability of directors.
An association (vereniging) with full legal capacity has legal personality. Only the association's assets can be used to pay off debts. You (the director) are not liable with your private assets. And you do not have to pay off the debts with your private assets.
In some cases, you as a director can be held personally liable. Then you will have to use your own assets to pay the debts. This is the case with mismanagement.
In case of mismanagement
Examples of mismanagement are:
- fraud, such as forgery
- taking unnecessarily large financial risks
- making poorly prepared decisions with major financial consequences
- failure to pay taxes or social security contributions on time and failure to report this to the Netherlands Tax Administration on time
Read more about the liability of directors.
Association with limited legal capacity
Are you a director of an association with limited legal capacity? Then you are liable with your private assets for the debts of the association if it is not listed in the Business Register.
Is the association registered with the Netherlands Chamber of Commerce KvK? Then you are liable alongside the association if it is clear that the association is not honouring the agreements.
Are you married or in a registered partnership in a (limited) community of property? If you are liable with your private assets, then this also applies to your partner's private assets and the assets you have in common with your partner. You can limit your partner's liability by drawing up a prenuptial or partnership agreement with a civil-law notary.
A cooperative (cooperatie) is a legal structure with legal personality. Only the cooperative's assets can be used to pay off debts. You (the director) are not liable with your private assets. And you do not have to pay off debts with your private assets. In some cases, however, you can be held privately liable as a director. Then you still have to pay the debts with your equity capital. This is the case of mismanagement.
In case of mismanagement
Examples of mismanagement include:
- fraud, such as forgery
- taking unnecessarily large financial risks
- making poorly prepared decisions that have major financial consequences
- failure to pay taxes or social security contributions on time and failure to report this to the Netherlands Tax Administration on time
Read more about the liability of directors.
Liability of members
Whether members are liable or not depends on the form you chose at incorporation:
- UA: Excluded from Liability (Uitgesloten van Aansprakelijkheid). This means that members are not liable for debts of the cooperative. Not even after bankruptcy.
- BA: Limited Liability (Beperkte Aansprakelijkheid). Members are liable for debts up to an agreed amount.
- WA: Legal Liability (Wettelijke Aansprakelijkheid). The members are jointly and equally liable for the cooperative's deficit.
A public limited company (nv) is a legal person. This means that, as a director, you are usually not liable for debts.
In case of mismanagement
Examples of mismanagement include:
- fraud, such as forgery
- taking unnecessarily large financial risks
- making poorly prepared decisions that have major financial consequences
- failure to pay taxes or social security contributions on time and failure to report this to the Netherlands Tax Administration on time
Read more about the liability of directors.
Are you a shareholder? Then you are not personally liable.
Debts continue to exist
During bankruptcy, the curator pays off as many debts as possible. If there is not enough money to pay off all debts, these debts will continue to exist. Creditors can still come forward in the future to claim money. Does the bankruptcy end with a creditor’s or court approval? Then creditors cannot claim any money at a later stage.
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Questions relating to this article?
Please contact the Netherlands Chamber of Commerce, KVK