Date 22.02.2024
In a judgment from Borgarting Court of Appeal on January 23, 2024, Hjort’s client was granted com-pensation under the Companies Act § 17-1. According to the provision, among others, the CEO, board members, or shareholders can be held personally liable for damage caused intentionally or negligently.
Both the board member and Hjort’s client (creditor) appealed the district court’s judgment, where the creditor had been granted parts of the compensation claim – consisting of several compensation items – against the relevant board member.
Hjort took over the case for the client in the Borgarting Court of Appeal, and the result involved a tripling of the awarded compensation amount, compared to the result in the district court.
The compensation claim arose from a board member’s failure to issue an enforceable promissory note for a loan that the creditor had provided to the company to finance a hotel project, which subsequently defaulted on repayment.
The board member raised several objections to the compensation claim. They argued that there was neither a basis for liability nor a causal link, and that the creditor had waived any compensation claim due to the claim being waived against the company. Additionally, they argued that the creditor had lodged their complaint too late, and that the claim had lapsed due to passivity. They also claimed that a payment of NOK 1,300,000 from another party to the creditor should be deducted from the compensation claim against the board member, and that a benefit deduction for partial coverage of interest should be made. Lastly, the board member argued that a deduction in the compensation should be made based on the creditor’s contribution to their own loss.
The Court of Appeal dismissed all of the board member’s objections to the compensation claim and tripled the compensation amount awarded in the district court.”
While the bar for imposing personal board liability is generally high, the decision illustrates that board liability is a real concern, and the threshold lowers as the imbalance in the professional power relationship between the parties increases. Therefore, as a board member, CEO, member of the corporate assembly, investigator, or shareholder, it is crucial to be aware of the personal responsibility that accompanies these roles.
In the current economic climate, where increased costs have led to challenging times for a significant portion of the business community, it’s particularly important for board members and CEOs to be aware of their personal responsibilities.
At Hjort, we have extensive experience in providing preventive advice, assessing the basis for applying personal liability, and managing such dispute cases.
