Since the entry into force of the Flexibilization of BV Act (flex-BV Act) as of 1 October 2012, a private company (B.V.) may issue shares without voting rights and/or shares without profit entitlement. These shares do have a profit entitlement attached, but no voting rights, or vice versa. A share without profit entitlement and without voting rights is not possible.

There has been a need, in practice, for the option to differentiate between voting rights and profit entitlements for some time already. Before, the issue of depositary receipts for shares offered such an option, albeit it somewhat limited. Issuing depositary receipts for shares means that shares are delivered to a trust office in order to obtain corresponding depositary receipts. Next, these depositary receipts for shares provide the holder with the profit entitlement attached to the shares, while the voting rights remain vested in the trust office. As a result of the introduction of new kinds of shares, we sometimes forget that the option to issue depositary receipts for shares still exists. But why would we still need the issue of depositary receipts for shares while we have the option of issuing shares without voting rights?

Pros and Cons

However, the choice between the two variations is harder than it looks like at first, and it would certainly go too far to brush aside the issue of depositary receipts for shares completely. Both systems have their pros and cons, which have to be examined first before we can properly weigh the pros and cons and make a choice between the two options. Shares without voting rights may be issued after the general meeting has adopted a resolution to this effect. Before these shares can be issued, however, the articles of association of the company concerned have to amended first, whereas the issue of depositary receipts for shares is usually possible without such an amendment. On the other hand, the issue of depositary receipts for shares requires a trust office. The incorporation and maintenance of such an office (usually a foundation) will involve additional costs. However, the sale and delivery of depositary receipts may be effected privately, whereas the delivery of shares without voting rights must always be effected through a notarial deed. Therefore, a choice on the basis of costs will depend, amongst other things, on the number of foreseeable future deliveries to the rightholders. If, for instance, employees will obtain the shares or depositary receipts in several portions, the delivery costs may increase rapidly.

More Differences

Other differences between shares without voting rights and depositary receipts include that the holders of shares without voting rights always have the right to attend the meetings of shareholders. This right to attend meetings is not always desired in the case of employee's shareholding.

In addition, shares without voting rights may, for instance, obtain the right of appointment, and there is a difference in the pre-emptive right upon issue. Moreover, there are tax differences between the two variations, because shares without voting rights qualify as a specific kind of shares, as a result of which they may very soon represent a substantial interest.

What If There Already Are Depositary Receipts?

If depositary receipts have already been issued, the law attaches a number of consequences thereto. To assess whether these consequences are also of interest to you, it is, for instance, relevant whether the depositary receipts were issued with the assistance of the company at the time. If that is the case, the board of the company is obliged to register the holders of depositary receipts in the shareholders' register of the company, so that henceforth these holders of depositary receipts will also be invited to all shareholders' meetings and also be given access to these meetings.