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1 Main questions
On 23 September 2025, the Supreme Court handed down an important ruling (HR-2025-1841-A) on directors' liability for failure to file for winding up. The case concerns a former chairman of a limited company who was sentenced to imprisonment and held liable for damages after failing to petition for a winding-up at the right time. The main question for the Supreme Court was whether the compensation should be measured
(i) corresponding to the company's operating losses in the period from the commencement of the compulsory administration until the bankruptcy was actually opened, or
(ii) the difference between dividends to creditors in the event of a timely winding-up and the actual date of the winding-up.
2 Briefly about the case
The company was insolvent by February 2019 at the latest, but continued operations until bankruptcy in April 2020. Significant losses were incurred during this period, and operations were financed partly through advances from customers. The chairman had full insight into the company's financial situation, but failed to comply with the statutory requirements for a winding-up. This resulted in increased debt and worsened the company's financial position.
The district court based its judgement on the operating loss, while the Court of Appeal reduced the compensation and based it on the dividend difference. The Supreme Court overturned the Court of Appeal's judgement and upheld the operating loss as the correct assessment principle. The case has been sent back to the Court of Appeal, which will decide on the amount of compensation. In addition to having to pay compensation, the chairman of the board has also been sentenced to eight months' imprisonment.
3 Legal starting points
The Supreme Court's starting point is Section 17-1 of the Limited Liability Companies Act and Section 4-1 of the Damages Act (which is based on the doctrine of difference as an assessment principle).
The majority of the Supreme Court judges emphasise that the board's duty to file for winding up is not only intended to protect the creditors, but also the company itself, as well as employees and society's interests in the continuation of the business. This shows that the protection interest is broader than just the creditor community, and includes the interests of several actors related to the company.
The Supreme Court has ruled that an insolvent company may also have claims against the board of directors for negligence of the duty to make a public offer, and that the bankruptcy estate, as the company's legal successor, may bring such claims, even if in practice this only affects the creditors.
The majority refers to section 2-2 of the Coverage Act, which authorises the bankruptcy estate to seek coverage in any asset belonging to the debtor, including claims for damages against the board of directors. The decisive factor is that the basis for liability is linked to the company, and that the compensation must go into the estate for distribution among the creditors. This means that the creditors' losses are considered part of the company's losses, and that the bankruptcy estate can pursue the claim on behalf of the company.
4 The Supreme Court's assessment of the award
Section 17-1 of the Companies Act (on directors« liability) does not say anything about how the compensation should be calculated. The main rule is that the assessment must be made in accordance with the general rules of tort law, so that the compensation must »cover the injured party's financial loss". The question in the case was whether this principle also applies when the liability is based on a lack of duty to petition for liquidation and the company has gone bankrupt.
The Supreme Court states that the company's loss constitutes the reduction in assets, including any increased debt as a result of the failure to fulfil the obligation to make a public offer.
The respondent argued that an increase in debt after the time when a petition for winding up should have been filed is not a loss the company suffers in the bankruptcy. The Supreme Court did not agree. The fact that individual creditors may have special claims does not prevent the company from having a claim against the board of directors for failure to initiate a winding-up. On the other hand, the Court of Appeal believed that loss assessment based on operating losses could be in tension with general principles. The Supreme Court rejects this assessment and upholds the operating loss as the correct assessment principle.
The majority argues that the Court of Appeal's method - which focuses on the creditors' losses and the dividend difference - contradicts the fundamental principle that the bankruptcy estate pursues the company's claims. The loss calculation will then be different for different creditors, which is not in accordance with the difference doctrine. The Supreme Court emphasises that the operating loss during the insolvency period is in accordance with the difference doctrine, and that this constitutes the loss incurred by the community of creditors from the time a petition for bankruptcy should have been filed. The distribution rules in the Coverage Act ensure equal rights for all bankruptcy claims in the same class. The court rejects that the addition of more debt during the insolvency period necessarily gives a financial advantage to existing creditors, and points out that the pool of creditors can change significantly between the time of the reorganisation obligation and the bankruptcy.
The Supreme Court emphasises that loss assessment based on the dividend difference would have raised several difficult questions, including changes in the pool of creditors and priority claims. The case illustrates that the Court of Appeal's method would have reduced the coverage for new creditors, especially small creditors who have little opportunity to pursue their claims themselves.
The Supreme Court's conclusion is that the award should be based on the reduction in the company's assets between the time when the petition for winding up should have been filed and the time of bankruptcy. This is in accordance with general principles and bankruptcy law rules that the estate takes over and pursues the company's claims.
5 Consequences and significance
The judgement clarifies the principle for calculating damages in the event of a breach of the duty to dissolve the company, and is important for future cases. The bankruptcy estate can pursue the company's claims, and the compensation must be calculated based on the operating loss, not just the creditors' losses. This strengthens the estate's position and ensures more comprehensive coverage for the community of creditors. The decision clarifies the liability of the board of directors and the consequences of failing to initiate a bankruptcy in insolvency situations, and may affect the future number of board cases and legislation in this area.
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The Supreme Court's decision clearly emphasises the responsibility that rests with the board of directors in situations of financial pressure. Board members should be particularly aware of the duty to monitor the company's financial position and take necessary measures in accordance with sections 3-4 and 3-5 of the Companies Act, especially if there is a risk of insolvency. It is crucial that the board continuously assesses equity and liquidity, and does not hesitate to petition for winding up if it is clear that the company is insolvent and can no longer handle clear and overdue debts. Failure to act in time may result in significant personal liability and claims for damages against board members.
Advokatfirmaet Halvorsen has broad and interdisciplinary experience of bankruptcy and directors' liability cases, and we regularly litigate such cases before the courts. We recommend that all companies and board members contact us at an early stage if their finances are failing. By involving us at an early stage, we can provide strategic and practical advice to avoid board liability and significant financial consequences. Our experience shows that early counselling is crucial to ensure proper handling and safeguard the interests of both the company and the board members.
