On 10 June 2016 the Dutch Ministry of Justice filed a legislative proposal on the management and supervision of Dutch legal entities for discussion and adoption with Dutch Parliament. The legislative proposal, named “Wet bestuur en toezicht rechtspersonen”, will hereinafter be referred to as the Proposal. The Proposal follows to a range of governance incidents in social enterprises in the Netherlands over the past few years. The Proposal sees to, among other things, the definition of the governance guidelines and liability risks for management board members and supervisory directors of Dutch foundations (stichtingen) and associations (verenigingen). The Proposal aims to both align the legislation for all legal entities under Dutch law as well as to codify rules developed in case law and doctrine.

Highlights of the Proposal are:

  1. the definition of a general governance guideline applicable to board members and supervisory directors of all Dutch legal entities (NV, BV, association, foundation, cooperative, mutual insurance society): each management board members and each supervisory director shall in the performance of their duties act “in the interests of the relevant corporation and its allied enterprise or organization”;
  2. the introduction of legislation on a supervisory board in a foundation;
  3. expansion of the rules on one tier board systems to all Dutch legal entities;
  4. general harmonization of rules on decision making procedures in the legal entities, including a (newly) added rule of law on conflicts of interests for foundations and associations;
  5. management board members and supervisory directors of associations and foundations shall be subject to the same liability rules as currently apply to the supervisory directors in an NV and or a BV (a slightly different rule will apply to the liability of voluntary officers of non-commercial foundations and associations); and
  6. increase of the scope of grounds for the dismissal of management board and supervisory board members of a foundation by the court.

The date on which the change of law is to be enacted has not yet been announced. The change of law will apply not only to newly incorporated legal entities, but to all existing legal entities under Dutch law as well. There will be no obligation to immediately conform the current articles of association to the changes of law, although in some cases we would advise to do so. The Proposal aims to provide for an elementary set of rules applicable to all legal entities, that may be complemented by, for instance, codes of conduct. Advisory councils dedicated to the supervision of the general scope of businesses will under the Proposal be regarded as supervisory board, irrespective of the actual title of such body. Please note that the Proposal may still be changed during parliamentary proceedings.