When your company invests in another company, you want to be able to trust the information and guarantees you get. But what if, afterwards, that information turns out to be wrong? And what about directors' liability and the validity of contractual guarantees? A judgment by the Overijssel District Court on 2 April 2025 (ECLI:NL:RBOVE:2025:1959) sharply addresses these questions. This article gives you practical insights on contract law, directors' liability and the impact of expiry periods in disputes over warranties.
The case study: investment, guarantees and a dispute
An investor stepped into a software company in 2022 by buying new shares. The existing shareholders and directors had given guarantees about the company's financial situation and prospects. When the results were disappointing, the investor claimed that he had been misled and that the guarantees had been breached. He claimed damages in tort, directors' liability and contractual liability for breach of warranties.
The directors put up a defence, arguing, among other things, that the claims were time-barred or expired due to a contractually agreed expiry period.
Directors' liability: high threshold
In contract law, the basic principle is that a director is not personally liable for debts of the company. Only under special circumstances can a director be held personally liable. This is the case if the director can be blamed personally in a serious way, for example if he knew or should have understood that the company would not be able to fulfil its obligations and would have no recourse.
In this case, the court examined whether the directors had knowingly provided misleading information, for example by presenting overly rosy forecasts or incorrect turnover figures. The court ruled that providing an overly optimistic forecast or a carelessly compiled lead list is in itself insufficient for personal liability of the director. There must be intent or deliberate misleading, or other additional circumstances that warrant serious culpability. There was none of these in this case.
Contractual warranties and the meaning of expiry periods
An important part of many investment and acquisition contracts are guarantees: statements about, for example, the company's financial situation, customer portfolio or prospects. If such a guarantee is breached, the investor can claim damages. But often the contract includes an expiry period: a hard time limit within which a claim must be made, otherwise the right to compensation lapses.
The court stressed that an expiry period is strictly applied. In this case, the guarantees had been agreed to be valid for 24 months. The investor had issued his writ only after this period. This meant his right of action had lapsed, even though he had still sent a summons within the period. Unlike prescription, a limitation period cannot be interrupted by a letter or summons; only the actual commencement of proceedings within the period is sufficient.
Practical lessons for practice
This ruling underlines the importance of careful contract formation and timely action in disputes over guarantees and directors' liability. Some concrete points of interest:
- Pay attention to the wording of guarantees and expiry periods: Make sure you know exactly until when you can invoke a guarantee and what you need to do to secure your rights.
- Act promptly in case of a possible dispute: Do not wait until the last minute to start proceedings. A letter or summons is not enough in the event of a lapse.
- Be critical of information and forecasts: Always ask for substantiation of forecasts and turnover figures. Insufficiently substantiated information can lead to a dispute, but not automatically to directors' liability.
- Document communication and agreements carefully: This can be decisive in proceedings about contractual liability or directors' liability.
How can our firm help you?
Contract law and litigation in investments and acquisitions are complex and require specialist knowledge. Our Corporate & Commercial Litigation team supports you in drafting and reviewing contracts, conducting negotiations and litigating disputes on warranties, liability and directors' liability - both nationally and internationally.
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