As of January 1st, 2025, company directors in Belgium are facing significantly increased liability exposure due to the adoption of Book 6 of the New Civil Code. This reform has abolished two long-standing protective principles that previously shielded directors from direct claims by contractual partners of the company they govern.
What Has Changed?
Abolition of the Principle of the Quasi-Immunity of Auxiliaries
Old regime
Previously, auxiliaries (e.g. directors, employees, subcontractors, and agents who work under the principal's direction or control) benefitted from a “quasi-immunity”, i.e. a legal protection that prevents the principal's contractual partners from directly suing them for contractual breaches of their principal, even if the fault of such auxiliaries gave rise to the damages of the contractual partner. Instead, claims had to be typically directed at the principal company or organization itself.
There were only two exceptions to this “quasi-immunity”:
- when the auxiliary person had committed a criminal offense; and
- when their fault also violated the general duty of care and the damage was solely attributable to this fault (and not merely to the contractual breach).
In other cases, the auxiliary person could only be held liable by the principal in the event of a contractual breach and not by the party that had incurred the actual damage.
Therefore, directors were largely shielded from personal liability for their own fault in the execution of the company’s contracts.
New regime
Since January 1st, 2025, the principle of the quasi-immunity of the auxiliary persons has been abolished, which means that the co-contractor of the auxiliary’s principal will be allowed to hold the auxiliary person directly liable for a fault committed in the framework of the execution of the contract provided that the following cumulative conditions are met:
- The auxiliary person has committed a fault that has caused a damage. Regarding faults committed by a director in the exercise of his/her mandate as director, Article 2:56 of the Civil Code shall still be taken into account and directors shall only be liable for decisions, actions or behaviour that clearly exceed the margin within which normally prudent and diligent directors, placed in the same circumstances, can reasonably have a divergent opinion.
- The co-contractor has suffered a damage.
- There is a causal link between the fault committed by the auxiliary person and the damage suffered by the co-contractor.
Example 1:
If a director knowingly approves the delivery of defective products to a customer, that customer can now pursue personal liability claims against the director for the resulting damages, rather than being limited to contractual remedies against the company.
Example 2:
A company enters into a significant investment agreement with a partner based on financial statements approved by the board. The director responsible for financial oversight fails to properly verify certain accounting practices, resulting in materially overstated profits. When the financial issues come to light, the investment partner suffers substantial losses. Under the new liability regime, the investment partner could bring an extra-contractual claim directly against the director for negligent oversight.
Introduction of the concurrence of contractual and extra-contractual liabilities
Old regime
In short, the ban on concurrence between contractual and extra-contractual liability under the old regime meant that claims between contracting parties could only be made on contractual grounds. This principle could only be waived in some exceptional cases. The Belgian Court of Cassation ruled that a party could sue his/her co-contractor on extra-contractual grounds provided that a fault that is not purely contractual be established and that there be damage unrelated to the damage resulting from a breach of contract. Both conditions had to be cumulatively met.
New regime
Book 6 also establishes freedom of choice between contractual and non-contractual liability regimes. The interest for a co-contractor in choosing the extra-contractual liability as the basis for his claim is twofold:
- The period of limitation for a contractual liability action is generally 10 years from the date the obligation arises whereas the period of limitation for an extra-contractual liability actions is 5 years from the day following the one on which the injured party became aware of the damage and the identity of the person responsible with an absolute maximum period of 20 years from the day following the one on which the event causing the damage occurred.
For example, if more than 5 years but less than 10 years have passed since the obligation arose, the contractual route might be preferred. To the contrary, if the damage has just been discovered but the obligation arose more than 10 years ago, the extra-contractual route might offer a possibility for recourse.
- Only the foreseeable damage can be recovered on the basis of a contractual liability action while all the damage can be recovered on the basis of extra-contractual liability.
Article 6.3, §1 of the Civil Code now allows an injured party to choose the basis for their action, even if the damage results from a contractual non-performance. When faced with an extra-contractual claim, the contracting party being sued can invoke contractual defences (such as liability limitations) to protect themselves.
For directors, this abolition of the prohibition of concurrent liability means that a company's co-contractor can now sue the company and its directors on the basis of non-contractual liability, even though the damage results from a contractual non-performance attributable to the company.
Example:
If a company fails to deliver promised goods and a director is at fault for this, the affected party can now choose to sue the company and/or its directors personally on the basis of extra-contractual liability rather than pursuing only contractual remedies against the company.
Consequences for directors of companies
Distinction Between Faults Within vs. Outside Director's Mandate
Under Belgian law, directors face different liability regimes depending on whether their fault occurs within or outside the execution of their mandate:
Faults within their mandate of directors: When directors act in their capacity as board members, the legal regime regarding directors' liability as provided in Article 2:56 through Article 2:58 of the Code of Companies and Associations applies.
Faults outside the mandate: When directors commit faults outside the execution of their mandate as directors, they can be held personally liable under general extracontractual law.
Impact of the New Extra-Contractual Liability Rules (Book 6)
The new Book 6 of the Belgian Civil Code fundamentally alters directors' liability by abolishing the quasi-immunity of auxiliary persons and by introducing the concurrence of contractual and extra-contractual liabilities.
These new provisions have the following key implications for directors:
Third parties can now directly claim against directors for extra-contractual breaches the latter committed while performing the company's contractual obligations.
The precise liability provisions applicable depend on the capacity in which the director committed the extra-contractual breach (Civil Code vs. Code of Companies and Associations).
Protective mechanisms
In the face of this increased exposure, the legislator has provided certain protective mechanisms from which the directors acting as auxiliary persons can benefit:
- Liability caps: As long as a director has acted within the limit of his mandate as director, the liability limitations provided for in Article 2:57 of the Code of Companies and Associations (CCA) remain applicable, with caps ranging from €125,000 to €12 million depending on the average balance sheet total and the average turnover (VAT excl.) over the last three financial years. This cap will not be applicable in the situations listed in Article 2:57, paragraph 3 of the CCA (e.g. in case of intentional misconduct; joint liability for tax matters); in case of bankruptcy, if the director(s) knew or should have known there was no reasonable chance to avoid bankruptcy yet continued business operations).
- Contractual clauses: Since the new legal provisions are of a supplementary nature (non-mandatory), it is now crucial to include explicit clauses in contracts that exclude or limit the non-contractual liability of the company towards their contracting parties. Article 6.3, §2 of the Civil Code allows directors to invoke these defenses arising from the contract between the company and their contracting parties, even if they have committed the fault within the execution of their mandate as director. Such a clause will not be contrary to Article 2:58 of the Companies and Associations Code. Indeed, this latter provision only precludes clauses that directly exonerate or indemnify directors in advance, and not clauses that exonerate the company in advance (and which thereby indirectly extend to the legal entity’s auxiliary persons).
Directors can even invoke the contractual defenses arising from their own (contractual) relationship with the company, however only to the extent their fault was not they committed within the exercise of their mandate as director of the company, but in another capacity (e.g. in the execution of their management agreement).
Under no circumstances can directors invoke contractual defenses in the event the damages incurred by the third party are in the form of bodily injury or the consequence of intentional misconduct by the director.
Practical example:
A pharmaceutical company contracts in 2023 with a logistics provider to distribute temperature-sensitive medications. The operations director at the logistics company decides to modify refrigeration protocols without conducting proper validation studies. In early 2025, a batch of medications degrades during transport, causing a supply shortage for hospitals.
Broader Scope of Recoverable Damages Under Extra-Contractual Liability
Contractual Recovery (Limited to predictable damages):
Under contractual liability, only foreseeable damages would typically be recoverable, which in this case would be limited to:
- Value of the damaged medications;
- Direct replacement costs.
Extra-Contractual Recovery (all the damages suffered):
Under extra-contractual liability, all damages can be recovered, which include:
- Full value of damaged medications
- Emergency sourcing costs from alternative suppliers
- Patient treatment delays and associated healthcare costs
- Regulatory investigation expenses
- Reputational damage requiring market repositioning
- Lost future contracts due to reliability concerns
Interest in Pursuing the Director Instead of the Company
Financial Recovery Advantages:
- The logistics company is facing financial difficulties with limited assets
- The director has substantial personal assets and D&O insurance
- The company's liability insurance has exclusions for protocol modifications
By pursuing the director personally, the pharmaceutical company can potentially access additional sources of recovery.
Action Plan: What Companies and Directors Must Do Now
These fundamental changes demand immediate action from Belgian companies and their directors:
Comprehensive Contract Review and Update
Systematically review all existing contracts and template agreements to incorporate explicit clauses limiting or excluding the non-contractual liability of the governed company and its auxiliaries. Directors will benefit from this protection provided by the governed company.
Enhance D&O Insurance Coverage
Work with insurance brokers to evaluate and potentially increase Directors and Officers liability insurance (D&O liability insurance). Ensure policies specifically cover the new liability scenarios created by Book 6 of the Civil Code, including direct claims from contractual partners against directors. Key coverage elements should include: defense costs for both contractual and extra-contractual claims, indemnification for damages awarded, and coverage for claims arising from decisions made by directors after 1st January and resulting in damages to third parties.
Implement Robust Documentation Protocols
Establish systems to meticulously document all board of directors’ decisions, including the information considered, risk assessments performed, and rationale behind decisions. This documentation will be crucial evidence of due diligence if directors face personal claims.
Strengthen Internal Governance
Develop clear decision-making hierarchies and approval processes, particularly for high-risk activities like contract negotiations, financial reporting, and quality control. Define responsibilities precisely to limit exposure.
Revise Management Agreements
Update agreements between directors and the company to include comprehensive indemnification provisions and clear allocations of responsibilities. To the extent permitted by law, provide for exoneration clauses for these actions outside of the context of the directorship mandate.
Director Training Program
Develop and deliver training for all directors about the new liability regime, their personal exposure, and best practices for protection. This should include scenario-based training on common risk situations.
Conclusion
The adoption of the new Book 6 of the Civil Code marks a turning point in relation to the personal liability of directors. By allowing direct extra-contractual claims against directors (and other auxiliary persons), these new rules introduce significant new legal and financial exposure for directors. While safeguards such as contractual defence and liability caps remain in place, they should not be considered sufficient on their own.
Companies and their directors must take immediate action to adapt to this new reality by reviewing contracts, enhancing insurance coverage, strengthening governance structures, implementing documentation protocols, and ensuring directors are thoroughly trained. These steps are essential to mitigate these new risks and ensure that directors are not personally caught in the legal crossfire of commercial disputes between companies and their contractual partners.
