BV: the Dutch private limited company and how its liability works

A Dutch BV (besloten vennootschap met beperkte aansprakelijkheid) is a private company with its own legal personality, in which shareholders risk only what they paid for their shares, not their private assets. The main exception is personal liability of directors, which Book 2 of the Dutch Civil Code (BW) and tax law impose in specific cases such as mismanagement before a bankruptcy or unreported tax arrears.

A BV is incorporated by a notarial deed before a Dutch civil-law notary (notaris). From that moment it owns its own assets, owes its own debts and enters into its own contracts; creditors of the company recover from the company.

What is a BV?

A BV is a private company with limited liability and separate legal personality, governed by Book 2 BW. It exists from the moment the notary executes the deed of incorporation, which contains the articles of association (statuten).

The shares are registered shares; they cannot be issued to bearer and are not traded on an exchange. A transfer of shares requires a notarial deed and is recorded in the company’s shareholders’ register (Article 2:194 BW).

The articles may contain a transfer restriction (blokkeringsregeling), usually an obligation to first offer the shares to the co-shareholders. Since the Flex-BV reform of 1 October 2012 this restriction can be relaxed or excluded, which investors often require.

The same reform abolished the minimum capital of €18,000. A BV can now be incorporated with a share capital of one eurocent, without a bank statement. Creditor protection moved to a test that applies each time money leaves the company. See our article on share capital in a Dutch company.

The articles can create shares without voting rights or without profit rights, attach obligations to a class of shares, and let each class appoint its own director. A BV can therefore be shaped for a family business as well as for a multi-round investment structure.

What does limited liability cover?

If the company cannot pay, its creditors can only recover from the company’s assets. A shareholder loses at most the value of the shares and any loan made to the company; the shareholder’s home and savings stay out of reach.

That is the key difference with a sole proprietorship (eenmanszaak) or a general partnership (vennootschap onder firma, VOF), where the owners are liable for business debts with all their private assets. In a BV bankruptcy, the trustee (curator) sells the company’s assets and distributes the proceeds among creditors in the statutory order.

Limited liability does not cover risks you accept personally. Banks and landlords often ask a director-shareholder for a personal guarantee (borgtocht) or joint and several liability before granting credit or a lease. That is a separate contract binding you as a person, whatever the company’s status.

When are you personally liable despite the BV?

Personal liability in a BV is almost always director’s liability (bestuurdersaansprakelijkheid), not shareholder liability. Dutch law has no general doctrine of piercing the corporate veil; it has specific statutory grounds, each with its own conditions.

• Improper performance of duties towards the company (Article 2:9 BW). Liability requires a serious personal reproach (ernstig verwijt). The claim belongs to the company itself. Each director is responsible for the general course of affairs, even where tasks are divided.
• Liability in bankruptcy (Article 2:248 BW). If the board manifestly performed its duties improperly in the three years before the bankruptcy, and this is an important cause of it, each director is liable for the shortfall. Failing to keep proper records (Article 2:10 BW) or to file the annual accounts on time (Article 2:394 BW) counts as improper performance by law and creates a presumption that it caused the bankruptcy.
• Tort towards a creditor (Article 6:162 BW). For example, a director who enters into an obligation for the company knowing that the company cannot perform and offers no recourse, or who frustrates payment of an existing debt.
• Unpaid taxes (Article 36 of the Collection of State Taxes Act, Invorderingswet 1990). Directors are jointly and severally liable for unpaid payroll tax and VAT if non-payment results from manifestly improper management. If the company cannot pay, the board must report this to the Tax Administration (Belastingdienst) in writing in time; a late report shifts the burden of proof to the director.
• Acting before incorporation or registration (Articles 2:203 and 2:180 BW). Whoever acts on behalf of a BV in formation is personally bound until the BV ratifies the act. Directors are jointly and severally liable for acts before the BV is registered in the trade register.
• Legal entity as director (Article 2:11 BW). If a holding company is director, its liability as director also rests on its own directors. A holding structure does not shield the person behind it.

Shareholders are rarely liable, and then under the general law of tort (Article 6:162 BW): for example a shareholder who strips the company of assets or misleads a creditor. Our article on pre-incorporation liability in a BV in formation covers the start-up phase.

Who decides what within a BV?

A BV has two mandatory bodies: the general meeting of shareholders and the board of directors. A supervisory board is optional, unless the company falls under the structure regime (structuurregeling) for large companies.

The general meeting adopts the annual accounts, decides on profit allocation, amends the articles and appoints and dismisses directors. The board manages the company and represents it; each director can in principle represent the BV alone, unless the articles provide otherwise and this is registered with the Chamber of Commerce (KVK).

The articles of association are public and can be ordered from the trade register. What shareholders want to keep private goes into a shareholders’ agreement (aandeelhoudersovereenkomst): good and bad leaver rules, tag-along and drag-along rights, deadlock mechanisms and an exit valuation formula.

How is a BV incorporated?

Incorporation always runs through a Dutch civil-law notary; there is no online self-service route. In a straightforward case it takes one to two weeks, mostly spent on identification and drafting the articles.

1. Preparation. Choose the company name and check it against existing trade names and trade marks, decide on the share structure and the directors, and draft the articles of association.
2. Client due diligence. Under the Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft) the notary identifies the founders and the ultimate beneficial owners (UBOs) and checks the origin of the funds. For foreign founders this often takes longest; apostilled and translated documents may be required.
3. Execution of the deed. The founders sign the deed of incorporation before the notary, in person or by power of attorney, take up the shares and appoint the first directors. The BV exists from that moment.
4. Registration. The notary registers the BV in the trade register of the Chamber of Commerce (Kamer van Koophandel, KVK), which issues the KVK number and RSIN. The UBOs are registered in the UBO register. Then follow the business bank account, the VAT number and, with staff, registration as an employer with the Belastingdienst.

Costs consist of the notary’s fee, which depends on how bespoke the articles are, a one-off KVK registration fee published on kvk.nl, and the share capital, which you set freely. Articles for an investment round with several share classes cost considerably more than standard articles for a single shareholder.

There is no residence or nationality requirement for shareholders or directors; a BV can be wholly foreign-owned and foreign-managed. Tax residence, work permits and substance are separate questions. Our guides on setting up a Dutch BV with foreign shareholders and the legal steps from idea to BV set out the sequence.

Which obligations keep the protection intact?

Limited liability is kept by compliance, not by the deed alone. Under Article 2:248(2) BW a failure to keep records or to file annual accounts counts as improper management in a later bankruptcy.

• Proper records. The board keeps records from which the company’s rights and obligations can be known at any time, and retains them for seven years (Article 2:10 BW).
• Annual accounts. The board draws up the annual accounts within five months after the end of the financial year; the general meeting can extend this by up to five months for special circumstances (Article 2:210 BW).
• Filing. The accounts are filed with the trade register within eight days after adoption, and in any case no later than twelve months after the end of the financial year (Article 2:394 BW). Small companies may file an abridged version.
• Trade register and UBO register. Changes in directors, articles, address or UBOs must be reported to the KVK. Since November 2022 the UBO register is no longer publicly accessible, but the duty to register remains.
• Shareholders’ register. The board keeps a register of shareholders, pledges and usufructs (Article 2:194 BW). It is the first document a buyer asks for in a due diligence.

Not filing annual accounts is also an economic offence under the Economic Offences Act (Wet op de economische delicten). The more serious consequence is the presumption of improper management if the company later goes bankrupt.

When may the BV pay out profit?

A resolution to distribute profit or reserves has no effect until the board has approved it (Article 2:216(2) BW). The board must refuse if it knows or should reasonably foresee that the company will then be unable to pay its due debts: the distribution test (uitkeringstoets).

A distribution is also only allowed in so far as equity exceeds the reserves required by law or the articles (Article 2:216(1) BW). A director who approves a distribution while foreseeing payment problems is jointly and severally liable to the company for the shortfall; a shareholder who knew or should have foreseen this must repay what was received.

Document every dividend decision: a board resolution recording the test, recent figures and a short liquidity forecast for the coming period. A bankruptcy trustee looking back will ask for exactly that.

How is a BV taxed, in outline?

A BV pays corporate income tax (vennootschapsbelasting) on its own profits under the Corporate Income Tax Act 1969; the shareholder is taxed separately on distributions. Dividends are subject to dividend withholding tax under the Dividend Tax Act 1965.

A shareholder with at least five per cent of a class of shares has a substantial interest (aanmerkelijk belang) and is taxed in box 2 of income tax. A director-shareholder must receive a customary salary under the Wage Tax Act. Current rates and thresholds are published each year by the Belastingdienst.

Law & More does not give tax structuring advice. The salary and dividend mix, fiscal unity and a holding and operating company structure should be discussed with a tax adviser; we handle the legal side next to it.

When is a BV the right choice?

A BV is worthwhile when the risk it removes is larger than the cost of running it. Three situations make the case: substantial liability risk, plans to bring in investors, and a profit level at which the corporate route is more efficient.

Liability risk is the strongest reason: manufacturing, construction and property development, professional services and technology businesses face claims that can exceed the value of the business. Investors subscribe for shares, and an eenmanszaak or VOF has none; an option pool, a share sale exit or a holding structure all require a company with share capital.

Against that stand notarial incorporation, annual accounts, filings and higher accountancy costs. For a freelance practice with low risk and modest profit, an eenmanszaak with professional indemnity insurance is often sufficient; the business can be contributed to a BV later.

For member-based or purpose-driven organisations, a cooperative or foundation (stichting) can fit better; see also what is a partnership?

How does a BV compare with foreign company forms?

The BV is comparable to the German GmbH, the French SARL and the English private company limited by shares: all separate the company from its owners and impose filing duties. Unlike a US LLC, a BV is always subject to Dutch corporate income tax and is governed by public articles that must comply with Book 2 BW.

Company disputes can go to the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal, and international commercial disputes can be heard in English before the Netherlands Commercial Court. If a foreign entity such as a US LLC will hold shares in the BV, have its tax classification checked by a tax adviser before the structure is set up.

What should you check as a director?

• Have the last annual accounts been filed with the KVK within twelve months after the end of the financial year (Article 2:394 BW)?
• Was every distribution in the past year preceded by a documented board approval with a distribution test (Article 2:216 BW)?
• Are the records complete and kept for seven years (Article 2:10 BW)?
• If the BV cannot pay payroll tax or VAT, has the inability to pay been reported to the Belastingdienst in writing and in time?
• Have you signed personal guarantees, and are they still needed?
• Is the division of tasks within the board recorded in writing?

What should you check as a shareholder?

• Do the articles contain a transfer restriction, and do they suit your plans for an exit or new investors?
• Is there a shareholders’ agreement covering leavers, deadlock and the valuation of shares?
• Is your shareholding correctly recorded in the shareholders’ register (Article 2:194 BW)?
• Are you or your holding company also a director, with the liability that comes with it (Article 2:11 BW)?
• Did you receive a distribution while the company was in financial difficulty, which may have to be repaid (Article 2:216(3) BW)?

What can we do for you with your BV?

Our corporate lawyers advise founders, shareholders and directors in English and Dutch throughout the life of a BV:

• We draft the articles of association and coordinate the incorporation with the notary.
• We draft or review your shareholders’ agreement, including leaver, deadlock and exit provisions.
• We document share transfers and investment rounds.
• We assess your personal exposure as a director and respond to liability claims from a trustee, creditor or the Belastingdienst.
• We conduct proceedings in shareholder disputes, including inquiry proceedings before the Enterprise Chamber.

More background is available in our corporate law guides.

Summary

• A BV is a legal entity incorporated by notarial deed; shareholders risk only what they paid for their shares.
• Since 1 October 2012 there is no minimum capital; distributions are subject to a distribution test (Article 2:216 BW).
• Directors can be personally liable, for example in bankruptcy after improper management (Article 2:248 BW) or for unpaid taxes (Article 36 Invorderingswet 1990).
• Keep proper records and file the annual accounts within twelve months after year-end; failure creates a presumption of improper management.
• There is no residence requirement for shareholders or directors.

Frequently asked questions