Liability of Directors for the Bankruptcy of a Company

Facts

Lawyers X. and [Y.] were members of the Board of Directors of company Z. S.A., incorporated in Geneva in 1983 and whose shareholders belonged to the N. family. Company Z. never carried out any business activity. In 1992, Z. S.A. was subject to payment orders for unpaid rent of a villa leased by the company. Directors X. and [Y.] did not provision this claim and did not notify the judge of the company's over-indebtedness situation, as required by Art. 725 para. 2 CO. The bankruptcy of Z. S.A. was declared in 1997.

Bank A., assignee of the rights of the bankruptcy estate of Z. S.A., brought an action for liability against X. and [Y.] for the damage suffered by the company due to the directors' breaches.

Considerations

The Court considered that directors X. and [Y.] had wrongfully failed to fulfill their duties under Art. 725 CO, by not provisioning the rent claim as of 1992 and by not notifying the judge of the company's over-indebtedness. This delay led to an aggravation of the deficit and an increase in the damage suffered by Z. S.A.

The Court held that the damage suffered by…