Personal Liability for Construction Companies: Do You Know What Your Risks Are?

A Dilemma for the Entrepreneur

Imagine this: you have taken on various assignments, couldn't bring in enough work fast enough, and now your cash flow seems to be stalling. You've received substantial advance payments from customers, but you know you can't deliver the quality you promised. What if it all goes wrong? What happens to you personally if your ship sinks?

The BV Protects You, But Not Always

Most entrepreneurs think that their BV protects them and that liability is an issue assigned to the legal entity. This is indeed the case, except when you, as a director, incur a "personal severe reproach". This reproach means that you have acted willfully or with gross negligence. For example, if you were aware or should have been aware of problems but still allowed the contract to run its course, you can be held personally liable.

What Happened in This Case?

Let’s examine a case: ECLI:NL:GHAMS:2025:3629. In this case, a construction company received a 70% advance payment (€33,250) and began work by erecting scaffolding and removing tiles. They then unexpectedly stopped, leading to bankruptcy. The director was ordered to pay nearly €45,000 in damages because the court stated that there was a misleading depiction of circumstances. The advance payments were not used for their intended purpose, there was a structural pattern of high advance payments to various customers, and there was a misappropriation of funds. This put the director in a serious predicament.

What Does This Mean for You as an Entrepreneur?

Here are four crucial points to consider:

• Monitor your advance payments: do not let your customers pay more than necessary in advance.
• Take responsibility: ensure you are aware of the progress of the project and the resources available.
• Communication is key: regularly communicate with your customers, especially if there are unforeseen issues.
• Watch for patterns: if you find that you often have to deviate from agreements, you need to confront the cause.

What Do You Do Now?

• Revise your payment structure: limit advance payments to a minimum and ensure clear delivery dates.
• Check your cash flow: use budgeting and financial reporting to anticipate problems.
• Education and advice: invest in training on financial management and legal matters concerning liability.
• Legal protection: consider legal insurance or consultations to continually monitor your responsibilities.

By keeping these steps in mind, you can avoid much stress and financial damage. Stay sharp and don’t let surprises catch you off guard!

Verdict

This blog post is based on ECLI:NL:GHAMS:2025:3629.