On 1 October 2012 the Act simplifying the law applicable to private companies with limited liability or “B.V.’s” (“Wet vereenvoudiging en Flexibilisering B.V.-recht”) came into force, followed by the Act Management and Supervision (“Wet bestuur en toezicht”) on 1 January 2013. The new legislation has abandoned a number of mandatory provisions and, as a consequence, the articles of association of a B.V. can be more closely tailored to the wishes of the shareholders. Also, a statutory basis has been created upon which a one tier board system can be implemented in a Dutch B.V. (or N.V.).
Whilst the current provisions in the articles of association of an existing B.V. remain in force certain provisions of the new legislation supersede them. For example, the new rules applicable to distributions to shareholders will apply even if the articles of association are drafted in accordance with the “old” legislation. Greater flexibility, however, allows shareholders to lay down agreement regarding their shareholding in the articles of association which was not always possible in the past. Therefore, it is advisable to review articles of association of B.V.’s in order to see whether amenemdents are necessary or desirable.
Below, you will find a short description of the amendments.
Possibilities of the Flex B.V.
- Due to the implementation of the new B.V. legislation all existing Dutch B.V.’s are subject to this new legislation from 1 October 2012. It is not possible to opt for the new legislation or remain subject to the old legislation.
Several provisions in Dutch law, which were mandatory in the old legislation, have been abandoned:
- the mandatory authorised share capital (maatschappelijk kapitaal);?the mandatory minimum issued and paid up share capital of EUR 18,000;
- the requirement to have a share transfer restriction clause included in the articles of association;
- creditor opposition procedures regarding capital reduction;
- the requirement to have at least half of the issued share capital that is held by others than the company or a group company of the respective company;
- requirement of a bank statement, upon the incorporation of a B.V., stating that the payment obligation on the shares has been paid on the shares in cash;
- requirement of an auditor’s statement if the shares have been paid up in kind upon the incorporation;
- restrictions on financial assistance in relation to the acquisition of shares in its capital by a third party.
In addition to abandoning some prohibitions and formalities, some other statutory provisions have been amended. It concerns, inter alia, the following:
- distributions to the shareholders may be made, when the equity of the B.V. exceeds the mandatory and statutory reserves, provided that the board of directors of the respective company has approved the same. Lack of such approval has the effect that the distribution will have no effect and the board of directors of the company is obliged to refuse its approval if it is of the opinion that the distribution will jeopardize the continuity of the company (i.e. the company will not be able to pay its obligations after the distribution);
- directors liability (and shareholders liability) on the occasion of a distribution that appears to have jeopardized the continuance of the B.V. has been formalized;
- shareholders meetings may be convened outside the Netherlands;
- the mandatory period to convene a shareholders meeting has been amended to 8 days, unless otherwise provided for in the articles of association;
- if all parties with meeting rights agree, shareholders resolutions may be taken outside a formal meeting with the majority of votes as included in the articles of association (no unanimity is required);
- a one tier board (with executive and non-executive directors) is possible;
- conflict of interest situations have an effect on the resolution taking process only, not on the valid representation of the company;
- it is possible to create (a) shares without profit rights or (b) shares without voting rights, but it is not possible to create shares which have neither;
- articles of association may contain a lock up period in which shares cannot be transferred
- share transfer restriction clauses may provide for a specific valuation method for specific situations (i.e. in a specific situation a valuation by a third party expert is no longer required even if possible);
- the number of positions as supervisory director or non-executive director in large companies (depending on the value of the assets, net turn over and number of employees) is limited;
- members of the board of directors may also be appointed by a class meeting provided that each shareholder has the opportunity to cast his vote on the appointment of at least one director;
- specific instruction rights for corporate bodies can be included in the articles of association. These instructions have to be followed by the board of directors unless such instructions are not in the corporate interest of the company.
- Since the new B.V. legislation contains less mandatory law the articles of association can be tailored more closely to each situation.
- The current practise of including specific arrangements between shareholders in a shareholders agreement is still possible, and is advisable, as the articles of association will be available to the public as they are registered with the trade registrar.
What to do?
The new legislation focuses mainly on companies with several shareholders. Within a group structure the articles of association could be simplified and consideration could be given to including the main aspects of current Dutch corporate law. Since non-profit sharing shares and non-voting shares are possible, governance within a group structure could be made more flexible; for example, having one management company which holds all shares with voting rights in all subsidiaries.
Taxation and confidentiality are still important drivers to amend (or not) a current structure. Therefore, there is no general rule to determine whether or not articles of association (or a group structure) have to be amended. This will always depend on the specific circumstances of the case. It is, of course, advisable to have a corporate structure (and/or articles of association) reviewed on a regular basis in order to verify whether the initial objectives are still being achieved.
The objective of the legislator that stakeholders should have greater flexibility in choosing their arrangements in articles of association has been reached. Whether or not this flexibility will also lead to a decrease of (legal) costs is uncertain, since an increase of possibilities does not always lead to more clarity or fewer (practical) problems.