Home > Directors’ Liability: Management Fault and Breach of Bylaws or CSA

Directors’ Liability: Management Fault and Breach of Bylaws or CSA

Types of breaches: management fault and breach of bylaws or CSA

The Code of Companies and Associations (CSA) establishes two types of breaches for directors: (i) management fault and (ii) breach of bylaws or the CSA.

Directors should be aware of these responsibilities to avoid committing mistakes that could impact their management and reputation

A. Examples of management faults

  • Risky investments
  • Disadvantageous contracts for the legal entity
  • Delay in filing financial statements or tax declarations
  • Negligence in supervising daily management delegates or accountants
  • Allowing non-repayable financial withdrawals by a financially troubled director

B. Examples of breaches of bylaws or CSA

  • Exceeding the legal entity’s social purpose
  • Non-compliance with CSA provisions in case of conflict of interest
  • Abandonment of powers by the Board of Directors

Differences between management fault and breach of bylaws and CSA

The victim of a management fault is the legal entity, while the victim of a breach of bylaws or CSA can be the legal entity or third parties.

Additionally, liability for management fault can be joint or individual, whereas liability for breach of bylaws or CSA is always joint

Similarities between management fault and breach of bylaws and CSA

Directors can escape joint liability by proving they did not participate in the fault and reporting it. Directors’ liability is limited to gross negligence, except for certain specific situations.

Liability is also capped at amounts ranging from 125,000 to 12 million euros, depending on various criteria.

Lastly, the statute of limitations for management fault and breach of bylaws or CSA is five years from the commission of the fault or its discovery in case of fraudulent intent.

Meet the authors

Jonathan TORO

Jonathan Toro, of Franco-Italian nationality, has been a lawyer at the Brussels Bar since 2005. He holds a license in private law and a diploma in specialized studies in international business law from the Université Libre de Bruxelles (ULB). With several years of experience acquired within a large Belgian business firm, Jonathan assists many companies in corporate law, enterprise law, labor law and real estate law.

Aurore DURAND

Aurore Durand holds a master's degree in private law with distinction from the Université Libre de Bruxelles. She has been a lawyer at the Brussels Bar since October 1, 2018.

SUBSCRIBE TO OUR NEWSLETTER

By subscribing to our newsletter, you will receive quick and easy to digest legal tips that may prove useful for your business and, from time to time, insight into a legal issue that may impact the conduct of your business.