Shadow director or only a title? Netherlands court ruling defines a “director”

A recent ruling by the District Court of The Hague of 26 November 2025 (ECLI:NL:RBDHA:2025:22543) addresses one of the most critical questions in corporate law regarding the determination of liability for improper management – who qualifies as a de facto policymaker. This decision brought clarity to Article 2:248(7) of the Dutch Civil Code (DCC), which equates with a director “anyone who has determined or co-determined the company’s policy as if he were a director” (feitelijk beleidsbepaler), a provision that prevented individuals from escaping liability while effectively exercising management power. 

The 2025 ruling makes clear that the test is factual and strict: that external presentation and perception are relevant but decisive. The decision also confirms that appearances do not determine liability, actual conduct does. 

Presenting oneself as a director to the outside world or being perceived as such by third parties does not make someone a de facto policy maker. The court explicitly stated that “the relevant question is not how he presented himself externally, but what he actually did.”

This following article discusses the legal framework for qualifying as a de facto policymaker, the facts and the court’s ruling, and the practical implications for governance and director liability.

The legal framework: Article 2:248(7) DCC and the Red Dragon case

Article 2:248 DCC governs director liability for improper management. If the board has manifestly improperly performed its duties and it is plausible that this was an important cause of the company’s financial distress, each director can be held jointly and severally liable. Where the board has failed to comply with the bookkeeping obligation (Article 2:10 DCC) or the publication obligation (Article 2:394 DCC), improper performance is established and causation is presumed.

Article 2:248(7) DCC extends this regime to de facto policymakers. The legislative history indicates that this covers the following:

• persons who give instructions to the statutory directors that are followed as if they were directors; and
• persons who determine policy while sidelining the formal board. 

The purpose is to prevent individuals from avoiding liability while effectively exercising management power.

There had long been uncertainty about what “sidelining” the formal board required. Under a narrow interpretation, the policymaker had to impose his will on the formal director and reduce him to a puppet. Under a broader interpretation, it was sufficient that the formal director tolerated another person assuming management power. The Dutch Supreme Court settled this debate in the Red Dragon case (HR 24 March 2023, ECLI:NL:HR:2023:445) by adopting the following broader interpretation: it is not required that the de facto policymaker manages the company in place of, and to the exclusion of, the formal board. Co-determining policy may suffice.

The case: a construction company and the alleged de facto policymaker

The case concerned a construction company in financial difficulties. The statutory director’s brother worked as acquisition manager, leading a sales team, issuing quotations, and maintaining customer contacts. He held a power of attorney but had no formal board appointment.

The claimant argued that the brother qualified as a de facto policymaker, relying on his external presentation as “management”, his signing of documents with that title, customer perceptions (56% of surveyed customers considered him a director), and an alleged transfer of company activities to an affiliated entity.

The court rejected the claim. Perception by third parties does not establish that someone performed management tasks. The brother worked under an employment contract, used an automated quotation system, and had no independent decision-making authority. Discounts, bonuses, and new projects all required the statutory director’s approval.

The court concluded: “it has not been established that [defendant 2] was involved in the management or in policymaking within [the company]. There was no question of taking decisions on an equal footing with the director.” External presentation and customer perceptions were insufficient to qualify as a de facto policymaker.

The statutory director, by contrast, was held liable. The bookkeeping obligation had been breached: essential parts of the administration were missing, including project records, the cash book, and loan agreements. The company’s rights and obligations could not be determined from the records. This established improper performance and triggered the presumption of causation. The director failed to rebut this presumption and was held liable for the resulting deficit. In addition, he was made subject to a five-year management ban.

Implications for governance: when is someone a de facto policymaker?

The judgment illustrates the practical limits of the doctrine after the Red Dragon case. While it is no longer required that the de facto policymaker completely sideline or exclude the formal board, concrete evidence of actual policymaking remains essential. The statutory language requires not only that someone determines or co-determines policy, but also that he does so “as if he were a director”. The person must have actually taken a seat at the boardroom table.

The legislative history makes clear that the provision does not target persons who, while having a strong or even decisive influence on the board’s policy, do not actually perform management tasks. Shareholders, advisers or employees may act within their own authority without performing management tasks. The line can be thin. The judgment illustrates this: an acquisition manager with customer contacts, quotations and a power of attorney does not qualify as a de facto policymaker if he operates within the confines of his employment contract and the statutory director remains ultimately responsible.

Legal literature identifies the following three main categories: 

• those who have determined overall policy while sidelining the board; 
• co-policymakers who have jointly determined overall policy with the board; and 
• co-policy-makers who have determined policy in a specific area of the company’s affairs. 

The judgment makes clear that for each of these categories, concrete evidence of actual management acts is required. External presentation or third-party perception is not enough.

For defendants, the judgment offers useful arguments: demonstrate the contractual basis for the role, the limits of authority, the decisions reserved for the statutory board, and the absence of independent managerial discretion. An employment contract and a power of attorney indicate subordination. Instructions from the director and the absence of independent decision-making freedom do not point to de facto policymaking.

Practical takeaways

For companies, the judgment is a reminder to maintain clear governance structures. Job titles, signatures, and powers of attorney should reflect actual authority. Senior employees should not use management designations if they are not board members. Internal decision-making processes should be documented so that it is clear who takes certain decisions and with what authority.

For shareholders and group companies, involvement in strategy, financing or restructuring may be legitimate, but should be channelled through proper corporate processes. Instructions to the board and informal decision-making may create exposure under Article 2:248(7) if the company later faces financial difficulties. This is all the more relevant now that the Supreme Court confirmed in Red Dragon that co-determining policy may suffice.

For claimants pursuing director liability, the broad interpretation of the Red Dragon case is not a blank cheque. Liability for de facto policymakers remains for exceptional cases: when someone, without formal appointment, takes a seat at the boardroom table and thereby exceeds his legal or contractual authority. A claim under Article 2:248(7) DCC must specifically demonstrate the specific management acts that the person performed. External presentation and perception may be a starting point but will not prove the case. The evidence must relate to actual conduct: decisions on financing, payment policy, major contracts, restructuring or asset transfers.

Conclusion

The Hague judgment does not narrow Article 2:248(7) DCC in principle but applies the provision with discipline. The concept of the de facto policymaker remains flexible and capable of reaching those who, without formal appointment, exercise management power. But flexibility is not liability by association.

The key message is clear: in Dutch corporate law, being seen as management is not the same as acting as management. Liability under Article 2:248(7) DCC requires evidence that the person determined or co-determined the company’s policy as if he were a director. That distinction will often decide whether the de facto policymaker doctrine provides an effective remedy or remains out of reach.

For more information on the definition of a de facto policymaker in the Netherlands, contact your CMS client partner or the CMS experts who contributed to this article.