The general transitional rules within the scope of the Flex-Wet are based on the New Civil Code Transition Act of 28 November 1991 (“Transition Act”) and the specific transitional provisions of the Flex-Wet are set out in Section V.2 of the Dutch Simplification and Flexibilization of BV Implementation Act (Invoeringswet vereenvoudiging en flexibilisering bv-recht (“Implementation Act”)).
General Rules Transition Act
The Flex-Wet will have immediate effect on facts occurring after the implementation. In principle, the law amendment has no influence on legal acts and resolutions validly effected prior to the Flex-Wet (Section 68a).
No Consequences for Existing Rights
The implementation of the Flex-Wet has no consequences for existing rights. Existing rights will be respected. New rights will not come into being as a result of the implementation of the Flex-Wet (Section 69).
Example: under former law dividend was paid out which, in view of the then applicable capital maintenance provision, was too high. A company has a claim because of undue payment. This claim will continue to exist after the implementation of the Flex-Wet, even if this excessive payment would indeed be allowed under the Flex-Wet.
Reference to Statutory Provisions
A reference to statutory provisions in existing agreements and articles of association must be regarded as a reference to sections of law of the new Flex-Wet. If the applicability of the Flex-Wet is not in accordance with the purport of the provision in which the reference is included, the former interpretation will prevail (Section 71).
Example: In articles of association reference is made to (the former) Section 2:195 (1) of the Dutch Civil Code (DCC) on the basis of which shares can be freely transferred within a group of persons (spouse/children). Pursuant to Section 71 of the Transition Act, according to the legislator, after the entry into effect of the Flex-Wet this reference will be regarded a reference to the new Section 2:195 of the DCC. Since the new Flex-Wet does not have a statutory free group any more, shares can no longer be transferred (within the old concept of the free group), unless it can be proven that the intention was indeed to include the free group explicitly in the articles of association. If a free group is now desired, this will have to be included explicitly in the articles of association.
Example: If it is explicitly mentioned in the articles of association, drafted prior to the implementation of the Flex-Wet, that shares can be freely transferred to the spouse and the children, the legislator has provided that this continues to apply as a deviation under the articles of association of the main rule under the Flex-Wet, because the amended Section 2:195 of the DCC stipulates that the articles of association may provide otherwise. If the BV does not want to maintain the free group under the articles of association, the articles of association will have to be amended.
The provision in the articles of association will have to be interpreted. The text of the provision is very important for the interpretation of a provision in the articles of association. The intention will often not have been to stipulate something different than prescribed by the law. After the implementation of the Flex-Wet the provisions in the articles of association regarding the former capital maintenance will, for instance, often have no independent meaning any more. This may imply that a regulation under the articles of association in which a description with an auditor’s report in the event of contribution or Nachgründung is still required will not have to be followed any more.
Example: Within two years after its registration in the trade register, a BV (private company) obtains through purchase a thing which belonged to a shareholder or founder of this BV a year before the incorporation or later. Under the former law the Nachgründung procedure had to be followed and this meant that a description of the thing to be obtained and of the consideration was required, followed by an auditor’s report and also an official approval of the general meeting. The Flex-Wet has no such procedure any more. Therefore, in the absence of these requirements the legal act cannot be affected any more (Section 80).
Specific Transitional Provisions Section V.2 of the Implementation Act
Depositary Receipts with the Right to Attend Meetings
Within one year after the date of the entry into effect of the Flex-Wet, that is before 1 October 2013, the BV must register holders of depositary receipts with the right to attend meetings in the shareholders’ register. Holders of depositary receipts which have been granted with the assistance of the BV, had rights to attend meetings before the entry into force of the Flex-Wet and according to the legislator they still have these rights (as a consequence of reasonableness and fairness). After the entry into force of the Flex-Wet their presence will also appear from the updated shareholders’ register; after all, holders of depositary receipts issued with the assistance of the BV may request the BV in writing to register hem in the register as persons entitled to attend meetings. If the board of directors rejects this request, they may even enforce the registration before a Court (in preliminary relief proceedings). The registration is required so that the holders of depositary receipts can personally be called to attend meetings. Subsequently, in the next amendment of the articles of association the right to attend meetings will be explicitly included in the articles of association.
This transitional provision will have meaning for practice for many years to come, because the next amendment to the articles of association may still be years away and the consequence may be that the inclusion of the rights to attend meetings in the articles of association may be forgotten, because the holders of depositary receipts involved already have rights to attend meetings (pursuant to the shareholders’ register) and this will not be taken into account anymore in this transitional provision.
Share Transfer Restriction
Under the former act, a share transfer restriction was mandatory, but the act also provided for a statutory exemption from restriction: the transfer within the so-called free group (partner/spouse). Pursuant to the Flex-Wet, if the articles of association do not stipulate otherwise, the obligation to offer shares to co-shareholders applies to the alienation of shares. Articles of association may also stipulate that no share transfer restriction applies. It followed from the former act that BVs which did not include a free group in their articles of association and have not restricted this group either, still had the right to alienate shares to the free group. The Flex-Wet, however, does not have a free group anymore, and therefore the shareholders lose this right. If BVs would still want to create a free group, they will have to include this explicitly in their articles of association.
This transitional provision stipulates that the transfer within the free group still applies if the shares are offered in accordance with (former) Section 2:195 of the DCC but the transfer does not take place until after the entry into force of the Flex-Wet. Without this transitional provision, after the entry into effect of the Flex-Wet the shares should have to be offered to the co-shareholders in accordance with the new Section 2:195 (unless the articles of association facilitated transfer within the free group).
Convocation of the General Meeting
Under the former act convocation took place no later than on the fifteenth day before the day of the general meeting. Under the Flex-Wet convocation takes place no later than on the eighth day before the day of the general meeting. This transitional arrangement stipulates that the shortened convocation period applies to all shareholders’ meetings held after the entry into force of the Flex-Wet. The terms stipulated in the articles of association must be taken into account, but since the new act only provides for a minimum term, the (former) fifteen-day convocation period included in the majority of the articles of association will still apply.
Above I have discussed some transitional rules. Some of the transitional arrangements are clear, while others may give rise to questions of interpretation in practice. In order to prevent unnecessary misunderstandings, we advise you to adjust your articles of association to the new Flex-Wet as soon as possible.