Statutory two-tier company (structuurregime): when does it apply?

The statutory two-tier company (structuurvennootschap) is a Dutch NV or BV that must install a supervisory board (raad van commissarissen) with powers that would otherwise sit with the shareholders. The regime applies automatically once three conditions in article 2:153 of the Dutch Civil Code (for the NV) and article 2:263 (for the BV) have been met for three consecutive years, unless one of four statutory exemptions applies. It is not a choice, and it is not reserved for listed multinationals.

What is the two-tier regime for?

The regime was introduced in the 1970s, when long-term, identifiable shareholders were giving way to shorter and more anonymous ownership. The general meeting was becoming a weak check on the board.

Lawmakers responded by moving a block of shareholder power to a mandatory supervisory board, and by giving the works council (ondernemingsraad) influence over who sits on it. The aim was to balance capital and labour and to secure independent supervision of a company whose decisions affect a large workforce.

The regime applies to the NV and the BV, and in an equivalent form to the cooperative and the mutual insurance association. The rules for the BV sit in articles 2:262 to 2:274a of the Civil Code; the parallel NV provisions sit in articles 2:152 to 2:164a. Practitioners cite the two sets as a pair, because they run in step.

When does the regime apply?

What are the three conditions?

All three conditions must be met at the same time. First, the issued capital plus the reserves shown in the balance sheet and notes must reach the amount fixed by royal decree, currently sixteen million euros; this figure is adjusted at most once every two years and is not indexed automatically, so check it against the decree in force. Repurchased but not cancelled shares count towards the total, as do reserves disclosed in the notes.

Second, the company, or one of its dependent companies, has a works council it was legally obliged to establish; a voluntary works council does not trigger the regime. Third, the company and its dependent companies together employ at least one hundred people in the Netherlands, counted by head rather than by full-time equivalent.

The second and third conditions catch companies that do not expect them. A holding company with three employees of its own can meet the works council and headcount conditions through its subsidiaries, and a company that has grown steadily can cross the capital threshold through retained earnings alone.

What counts as a dependent company?

The dependent company (afhankelijke maatschappij) is defined in article 2:262 for the BV and article 2:152 for the NV. A legal entity is a dependent company where the company, alone or with other dependent companies, provides at least half of its issued capital. The same applies to a partnership registered in the commercial register in which the company, or a dependent company, is fully liable to third parties as a partner.

This is where a common misconception sits. Boards often assume that because the works council was set up at an operating subsidiary rather than at the holding company, the holding company falls outside the regime. It does not: the conditions are tested at group level through the dependent-company definition, and it is the holding company, not the subsidiary, that becomes the two-tier company.

How do the notification and the three-year period work?

A company that meets the conditions must notify the commercial register within two months of the general meeting adopting its annual accounts. The regime itself only takes effect once that notification has stood in the register for three consecutive years without interruption; that is the point at which the articles of association must be brought into line with the statutory rules.

Two details matter in practice. The three-year period runs only from the moment the notification is actually filed, so a company that missed the deadline does not thereby bring the regime forward, though it should still file without delay. The notification can also be withdrawn if the conditions stop being met, for example if the Dutch headcount drops below one hundred, and if the conditions are met again later the period generally starts to run afresh.

Are there exemptions or a weakened regime?

Which companies are fully exempt?

Article 2:263 paragraph 3, and its NV counterpart article 2:153 paragraph 3, exempt several categories of company entirely; an exempt company does not even have to notify the register. One category is a company that is itself a dependent company of a legal entity to which the full or weakened regime already applies; the exemption runs downwards only, so a subsidiary of a two-tier parent can be exempt, but a parent is never exempted because of its subsidiary. Other categories cover management and finance companies within an international group whose employees mostly work outside the Netherlands, and companies whose capital is held, under a joint arrangement, by legal entities that are themselves already subject to the regime.

Where a full exemption applies, it applies immediately, without a transitional period. Where it falls away, the ordinary route through notification and the three-year period begins.

How does the weakened regime work?

The weakened regime (verzwakt structuurregime) is not an exemption but a variant. Article 2:265 of the Civil Code, and article 2:155 for the NV, remove the supervisory board’s power to appoint and dismiss directors where at least half of the issued capital is held by a legal entity whose group mostly employs people outside the Netherlands, or by its dependent companies, or under a joint arrangement between them. Article 2:265a extends similar treatment to certain joint-venture structures.

Under the weakened regime, shareholders keep the power to appoint and dismiss directors. Everything else, including the mandatory supervisory board, its appointment procedure and its catalogue of approval rights, still applies. The weakened regime does not apply once the company’s own workforce is mostly based in the Netherlands.

What changes once the regime applies?

How is the supervisory board composed and appointed?

A supervisory board becomes mandatory and must have at least three members. Supervisory directors are appointed by the general meeting on the board’s own nomination, and the general meeting can only reject a nomination by an absolute majority representing at least one third of the issued capital.

For one third of the seats, the works council has an enhanced right of recommendation: the supervisory board must follow it unless it objects on statutory grounds, and a dispute goes to the Enterprise Chamber (Ondernemingskamer). In practice, a shareholder cannot simply place its own people on the board, and cannot remove an individual supervisory director at will. Dismissal of an individual director instead runs through the Enterprise Chamber of the Amsterdam Court of Appeal, on grounds of neglect of duty, other weighty reasons or a fundamental change of circumstances.

How are directors appointed, and what needs approval?

Under the full regime, the supervisory board appoints and dismisses the directors; under the weakened regime, that power stays with the general meeting. In both versions, the supervisory board holds a statutory catalogue of approval rights over major decisions, set out in article 2:274 for the BV and article 2:164 for the NV.

That catalogue covers, among other things, issuing shares, significant investments, acquiring or disposing of a participating interest above a statutory threshold, amending the articles of association or dissolving the company, filing for bankruptcy, and a major reduction of the workforce or a far-reaching change in employment conditions.

Missing approval does not affect the board’s authority to represent the company towards third parties; a counterparty acting in good faith is protected, and the consequences stay internal, as possible director liability.

Can shareholders withdraw confidence in the supervisory board?

Shareholders’ counterweight is collective rather than individual. Under article 2:161a of the Civil Code, and article 2:271a for the BV, the general meeting can withdraw confidence in the supervisory board by an absolute majority representing at least one third of the issued capital. The resolution dismisses every supervisory director immediately, but only after the works council has had the chance to state its position and the board has been heard.

The management board must then ask the Enterprise Chamber to appoint supervisory directors on a temporary basis, and shareholders cannot dismiss the directors the court appoints. Withdrawing confidence therefore hands the board’s composition to the court rather than to the meeting that voted, which is why the instrument is used sparingly. Our article on the Enterprise Chamber explains how those proceedings run.

Is there a one-tier alternative, or voluntary application?

A two-tier company does not have to run a separate supervisory board. Articles 2:274a and 2:164a of the Civil Code allow the statutory tasks to be exercised within a one-tier board, where non-executive directors sit alongside the executives. The choice is made in the articles of association, and it suits groups already used to a single decision-making body; it does not soften the regime, since the non-executives inherit the same appointment procedure, recommendation right and approval catalogue.

The regime can also be adopted voluntarily, in full or weakened form, by writing it into the articles of association. In that case only the works council condition applies, and the regime takes effect as soon as the articles say so. Companies do this because a professional supervisory board with statutory powers can separate ownership from management once family shareholders no longer run the business day to day, and it signals to lenders that supervision is not merely nominal.

What does this mean for shareholders, family businesses and investors?

For a controlling shareholder, the regime is a genuine loss of power. Under the full regime, you can no longer appoint or dismiss directors, cannot place your own candidates on the supervisory board without its nomination, and face a board that must weigh the interests of the business as a whole, not just those of the largest shareholder. Removing an individual supervisory director requires proceedings before the Enterprise Chamber; removing all of them hands the appointment to that same court.

Family businesses feel this most sharply, because they often cross the thresholds while ownership stays concentrated and hands-on. Growth through retained earnings, a works council set up at an operating company, and a headcount creeping past one hundred can bring the regime into view years before anyone has considered it. Start preparing when the second condition comes into range, not when the notification under article 2:264 falls due. Our article on the role of supervisory boards in a crisis sets out what such a board is worth when things go wrong.

For foreign investors, the regime is often a point of negotiation in a transaction. A buyer that assumed it would control the board of a Dutch target may find it controls only the general meeting. Whether the weakened regime applies, and whether an exemption can still be relied on after the deal, belongs in due diligence rather than post-completion clean-up. The same goes for minority positions: the regime changes what a shareholding is actually worth in governance terms, a point our article on the position of minority shareholders develops further.

Where is there room to tailor the structure?

The regime is mandatory at its core, but not everything is closed. The statutory approval rights of the supervisory board cannot be reduced in the articles of association, but they can be supplemented, so that certain decisions also need approval from another corporate body, such as the general meeting. That is the usual way to preserve a shareholder say over the decisions they care about most, and it works because it is anchored in the articles rather than in a contract.

You can also shape the supervisory board’s profile, the number of members above the statutory minimum, its committees, and how the works council recommendation right operates in practice. A shareholders’ agreement can add commitments between the shareholders themselves, but it binds only its parties and cannot override the statutory powers of the corporate bodies, which is why it is a weaker tool here than well-drafted articles. Directors of a two-tier company should also remember that the ordinary rules on proper performance of their duties, and on directors’ liability, continue to apply unchanged alongside the regime.

What should you check as a company or board?

Test the conditions at group level every year when the annual accounts are adopted. These checks keep you ahead of the three-year period.

• Compare issued capital plus reserves with the 16 million euro threshold, using the most recent balance sheet and notes.
• Check whether the company or a dependent company has a works council it was legally obliged to set up under the Works Councils Act (WOR).
• Count Dutch employees by head, not by full-time equivalent, across the company and its dependent companies.
• If the conditions are met, check the exemptions in article 2:263(3) BW and file the notification within two months of adopting the annual accounts.
• Use the three-year period to amend the articles of association and choose between a supervisory board and a one-tier board.

What should you check as a shareholder or investor?

Check how much control your shareholding still gives you once the regime applies. These points belong in due diligence and in the articles of association.

• Check whether the target is registered as a two-tier company in the commercial register, or is about to be.
• Check whether the weakened regime of article 2:265 BW applies, based on where the group’s employees actually work.
• Check whether an exemption still applies after the transaction, for example if the target stops being a dependent company of a two-tier parent.
• Add approval rights for the general meeting in the articles of association for the decisions that matter most to you.
• Note that removing the supervisory board requires a vote of no confidence under article 2:271a BW, after which the Enterprise Chamber appoints new members.

What can we do for you with the two-tier regime?

Our corporate lawyers advise boards, supervisory boards, shareholders and works councils on the statutory two-tier regime. See also our Dutch corporate law guides and our page on shareholder disputes.

• We test the three conditions and the exemptions against your group structure and annual accounts.
• We assess whether the weakened regime or a full exemption is available.
• We draft the amendment of the articles of association, including one-tier board provisions and additional approval rights.
• We prepare the notification to the commercial register and the timetable for the three-year period.
• We act in proceedings before the Enterprise Chamber about appointments, dismissals and the works council recommendation right.

Summary

• The two-tier regime applies automatically once the capital, works council and headcount conditions in article 2:153 (NV) or 2:263 (BV) BW have been met for three consecutive years.
• Four statutory exemptions exist, and a weakened variant leaves the power to appoint and dismiss directors with the shareholders.
• Once the regime applies, the supervisory board appoints and dismisses directors (under the full regime) and holds a statutory catalogue of approval rights.
• Withdrawing confidence in the supervisory board hands its composition to the Enterprise Chamber, not to the shareholders.
• Test the conditions at group level, check the exemptions, and use the three-year notification period to prepare the governance structure rather than to wait.

Frequently asked questions