Relaxation of Dutch mandatory rules governing private limited liability companies

The most common type of legal entity in the Netherlands is the “besloten vennootschap” (private limited liability company) or “B.V.”).
The B.V. is the Dutch version of the English Limited and is popular among entrepreneurs since the directors and shareholders of a B.V. are, generally, not liable for debts incurred by the B.V.

It has, however, become clear that the strict statutory rules governing the B.V. sometimes discourage starting entrepreneurs from incorporating their business activities in a B.V. A call has been made for an amendment of these rules.

On 15 December 2009, the bill for the Act on the Simplification and Flexibilisation of the B.V. (the “Wet vereenvoudiging en flexibilisering van het bv-recht”, also referred to as the “Flex Act“) was passed by the lower chamber of the Dutch Parliament.
The bill, which was first submitted on 31 May 2007, will still have to be approved by the upper chamber. The Flex Act is expected to enter into force on the 1st of January, 2011.

Easier incorporation

The current requirement of a minimum share capital of € 18.000,- will be abolished, as well as the current rules on the provision by a B.V. of financial assistance to third parties for the purchase of shares in the company’s own capital.

Better protection of creditors

In order to protect creditors, the B.V. will not be entitled to pay dividends if it is clear that the B.V. will not be able to continue paying its debts. Directors and shareholders that have acted negligently can be held liable.

More freedom of organization and decision-making

Entrepreneurs will be given more freedom with regard to the organization of their company. B.V.’s will have more leeway for diverging from statutory rules concerning B.V.’s in their articles of association and can (for instance) determine that each shareholder of a B.V. may appoint its own director.
Furthermore, the B.V. can decide to issue shares without voting rights or shares that do not entitle the holder to profit.
It will be easier to pass resolutions without a meeting being held and it will be possible to hold shareholder meetings outside The Netherlands. Because of this increased freedom of organization and decision-making, B.V.´s will be able to adapt to changes in the market quicker and better and will be able to enhance their competitive position.

Abolishment of restriction of share transfers

The current law governing B.V.s provides for mandatory restrictions on the transfer of shares in a B.V. These restrictions safeguard the private character of the B.V. One of these rules is that a shareholder who intends to sell his shares first has to offer his shares to the other shareholders. Under the Flex Act, the share transfer restrictions will no longer be mandatory. The transferability of shares may be entirely excluded in the articles of association for a specific period of time.

Improvement of dispute settlement

The Flex Act provides for a drastic change in the dispute settlement procedure. The new dispute resolution procedure will offer shareholders the options of retiring from the company in specific situations or squeezing out another shareholder through a procedure that is swifter than the current procedure. The new procedure is expected to take twelve to eighteen months, whereas a procedure under the current law usually takes up to five years.

Further information

If you have any questions about (the incorporation of) a B.V. in The Netherlands under the current law or under the new Flex Act, please do not hesitate to contact Arjen Paardekooper or Jeroen Latour.

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Together with a number of international law firms outside
The Netherlands, Blenheim is member of Lawyers Associated Worldwide.

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