CEW & Partners' Francine Messine - our partner specialising in banking and financial law, company and association law, economic and commercial law - explains the recent decision by Belgium's Constitutional Court which time-bars directors’ liability claims to five years.

Liability of Directors: 5 Years, That’s All!

The Constitutional Court recently ruled on a question referred to it by the Court of Cassation and held that:

“Article 2:143, paragraph 1, fourth indent, of the Code of Companies and Associations does not violate Articles 10 and 11 of the Constitution.”

In other words, the five-year limitation period applicable to actions brought against members of the management body, persons entrusted with daily management, statutory auditors, liquidators, permanent representatives of legal entities exercising such mandates, or any other persons who have in fact exercised powers of management within the company, on account of acts performed in the exercise of their functions, begins, in principle, to run from the occurrence of those facts and not from the moment at which they are discovered.

An exception is made where those facts have been fraudulently concealed; in such a case, the limitation period runs from their discovery.

This rule also applies in matters of bankruptcy.

In the case that gave rise to the question referred to the Court of Cassation, a liquidator had brought an action for liability against a former director on the basis, in particular, of a failure to declare bankruptcy, the continuation of a loss-making activity, the preferential payment of certain creditors, and the failure to pay institutional creditors, more than five years after the bankruptcy had been declared.

The liquidator argued that he had only become aware of the relevant facts at the time of the verification of claims and that the limitation period should therefore begin to run from that moment.

The Constitutional Court examined whether such a limitation regime was compatible with the principles of equality and non-discrimination, in particular with regard to the right of access to a court.

It recalled that limitation periods do not, in principle, constitute a restriction on the right of access to a court. They are justified by considerations of legal certainty, which require that legal situations become definitive after a certain period of time. They also serve the proper administration of justice by ensuring that disputes are brought within a reasonable time, when evidence is still available.

The Court therefore held that the provision in question does not produce disproportionate effects and is compatible with the Constitution.

This is yet another measure favorable to directors following the introduction of liability caps by the Code of Companies and Associations!

Francine Messinne

Partner, CEW & Partners

Lecturer at Université libre de Bruxelles