After the latest bill for the modernisation of the Dutch law on partnerships foundered in 2011, a working group made up of lawyers and tax specialists drawn from practice, academia and the corporate world took up the cause in an initiative launched later that year. The working group (the werkgroep personenvennootschappen) has drawn up a report setting out a number of basic principles, the group's recommendations and a proposed set of statutory rules with an accompanying explanatory memorandum. The report was discussed with the Company Law Committee (Commissie vennootschapsrecht) and, on 15 June 2016, was presented to the participants at a symposium in Amsterdam. The working group will be submitting a definitive version of the report together with a definitive set of proposed statutory rules to the Minister of Security and Justice, after the responses from the symposium are incorporated. Although it is uncertain what action will be taken by the Minister based on the definite proposal, we nonetheless believe there is a good chance that it will be submitted to the lower house of the Dutch parliament in the form of a bill. Consequently, we thought it useful to highlight for you the most important recommendations and proposed rules in the working group's report.
Names/categories of partnerships and rules on formation to remain largely unchanged
Under the recommendations, the current categories – private partnerships (maatschappen), general partnerships (vennootschappen onder firma) and limited partnerships (commanditaire vennootschappen) – would be maintained, as would the distinction between the practice of a profession and the conduct of a business. However, a new category would be introduced: partnerships not acting under a common name (stille vennootschappen), in contrast to the existing categories which, by law, would collectively be classified as partnerships acting under a common name (openbare vennootschappen). The main characteristic of partnerships in this new category is that they do not act in a manner which would make them cognizable as partnerships to third parties, under a name used for this purpose. The formation rules for partnerships would remain the same; the proposal merely clarifies the current legislation.
Introduction of legal personality
A significant proposed change is that private partnerships, general partnerships and limited partnerships (i.e. partnerships acting under a common name) that are registered in the Trade Register would possess legal personality. This would automatically be acquired on the day following the partnership's registration; in the case of partnerships already registered on the date the relevant new legislation enters into effect, legal personality would be acquired on that date. Partnerships not acting under a common name would not possess legal personality, nor would partnerships acting under a common name that are not registered in the Trade Register. As is currently the case, an unregistered partnership would be deemed to have been entered into for an indefinite period of time and without a specific set of objects/aims, and each of the partners would have the authority to act on behalf of the partnership.
Under the current rules, assets held by each of the partners for the benefit of the partnership are treated as separate from the relevant partner's private assets. To that extent, the partnership is deemed to "hold" separate assets. Under the proposal, this would continue to be the case for partnerships acting under a common name, irrespective of whether or not they are registered in the Trade Register. By contrast, a partnership not acting under a common name would never be deemed to hold separate assets. For partnerships with legal personality, the departure of an existing partner would be simplified in that it would no longer be necessary to transfer an undivided portion of the partnership's assets; a straightforward financial transaction is all that would be required. The admission of a new partner would likewise be simplified.
Management and representation of partnerships (directory rules of law)
Responsibility for the partnership's management would, in principle, continue to be vested in all of the partners (with the exception of limited partners in the case of a limited partnership). All partners would have the power to perform everyday activities. They also have the power to perform activities that cannot be postponed, even where these lie outside the scope of the partnership's normal business or professional activities. In addition every partner would have the power to represent the partnership, also –unlike at present – in the case of private partnerships. The above changes are intended to enable partnerships to operate more efficiently. Under the proposal, each of the partners in a private partnership would continue to be liable for an equal part of the partnership's obligations; joint and several liability would continue to apply to all partners in a general partnership and the general partners in a limited partnership.
Obligations in the case of new or departing partners
Under the proposal, a new partner would only be bound by a pre-existing obligation of the partnership if performance of that obligation is due, or can only be demanded, following that partner's admission. A departing partner would remain liable for the partnership's obligations for a maximum period of five years.
The recommendations include new rules on the creation of a usufruct or pledge over a partner's financial rights under a partnership agreement. The aim of the new rules is to make it easier for the partnership to obtain financing by clarifying the possibilities and requirements for creating a usufruct or pledge and the implications of doing so.
Under the proposal, it would be possible for a partnership of one type to be converted into a different type of partnership (provided it meets the criteria for the latter), by amending the partnership agreement and registering the conversion in the Trade Register. Where the conversion results in the acquisition or loss of legal personality, the partnership assets would pass by universal succession to the legal entity or to the partners, as the case may be. Another new option would be that of converting a partnership acting under a common name into a BV, NV, cooperative or mutual insurance association (onderlinge waarborgmaatschappij), or vice versa. In addition, it would be possible for a partnership to enter into a merger or demerger.
Special rules regarding limited partnerships
Under the current rules on limited partnerships, a limited partner is prohibited from acting on behalf of the partnership, even if the partner is granted a power of attorney for this purpose. Under the proposal, limited partners would be allowed to act on the partnership's behalf pursuant to a power of attorney.