Mathias Wielinga Carvajal, attorney in Stek’s corporate litigation team, has published an article in Tijdschrift Ondernemingsrecht (Journal of Corporate Law). The article discusses the different types of directors’ duties of care found in case law. in the context of corporate governance.
In legal literature and case law, it is generally accepted that there is a single overarching duty of care, the specific contours of which depend on the circumstances.In practice, many assume there is only one general duty of care. This duty is said to depend on the specific situation. In his article, Mathias argues that this view is too limited considering the clear differences between the types of duty of care found in case law. He calls for a clear distinction between two types of duties: the ordinary (gewone zorgvuldigheidsverplichting) and the heightened duty of care (verhoogde zorgvuldigheidsverplichting).
The ordinary duty of care is aimed at protecting the interests of third parties affected by a company’s conduct. As a general rule, this duty only becomes legally relevant once actual harm has occurred (save for circumstances). The courts tend to adopt a cautious and restrained approach in assessing the board’s decision-making in light of its ordinary duty of care.
The heightened duty of care applies in situations involving a potential conflict of interest – such as when a director has a personal interest that conflicts with a board decision. In these cases, stricter standards govern the board’s conduct, and courts subject the decision-making process to closer scrutiny.
On the basis of recent Dutch case law, including the Estro judgment, this article highlights the significance of this distinction.
The ordinary duty concerns the interests of third parties affected by a company’s actions. This duty only becomes relevant when actual harm occurs. Courts usually apply a cautious and restrained approach in these cases.
The heightened duty applies when there is a possible conflict of interest. For example, when a director has a personal interest in a board decision. In such situations, stricter standards apply. Courts also review these cases more closely.
By examining recent Dutch case law, including the Estro decision, the article shows why this distinction matters. It is especially relevant for directors, legal professionals, and those involved in risk and compliance.
The article can be read here.
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