What is the difference between internal and external directors’ liability?

As a director, you can be held liable in two ways: internally and externally.

Internal
Internal directors’ liability arises when the legal entity (such as an LLC) holds you responsible for damage due to a managerial error. This happens only in cases of ‘gross negligence.’ For example, if you seriously neglect the administration and thereby cause the company to run into problems.

External
External directors’ liability means that you can be held personally liable by third parties. This can happen if you do not perform your duties properly and the organization goes bankrupt as a result.