The BV: the Dutch company with limited liability

Dutch BV limited liability means that a shareholder of a besloten vennootschap risks only the amount paid up on the shares, and not their private assets. The BV, in full the besloten vennootschap met beperkte aansprakelijkheid, is a legal entity in its own right: it is incorporated by notarial deed before a Dutch civil-law notary and it holds its own assets, owes its own debts and enters into its own contracts. Creditors of the company recover from the company. Book 2 of the Dutch Civil Code (Burgerlijk Wetboek, BW) then sets out the narrow situations in which a director, and in rare cases a shareholder, can still be addressed in person.

That single sentence explains why the BV is the default vehicle for commercial activity in the Netherlands, from a one-person consultancy to a listed group’s Dutch operating company. It also explains why so many disputes about a BV are really disputes about the edges of that protection: an unpaid tax assessment, a bankruptcy trustee looking at the three years before the filing, a personal guarantee signed years earlier and long forgotten. Understanding where the wall stands is more useful than repeating that it exists.

This guide sets out what a BV is, what its limited liability does and does not cover, how the company is incorporated and governed, which obligations keep the structure sound, and when the form is the right choice. It is written for entrepreneurs and foreign investors dealing with Dutch law, and it deliberately avoids figures that are reset every year.

What is a besloten vennootschap (BV)?

A BV is a private company with limited liability and separate legal personality, governed by Book 2 of the Dutch Civil Code. It comes into existence at the moment a Dutch civil-law notary executes the deed of incorporation, which contains the articles of association (statuten). From that moment the company can own property, employ staff, sue and be sued, and go bankrupt, all independently of the people behind it.

The word “private” is not decorative. The shares of a BV are registered shares; they cannot be issued in bearer form and they are not traded on an exchange. A transfer of shares requires a notarial deed, which means every change in the shareholder base passes through a notary and is recorded in the company’s shareholders’ register. The articles of association may also contain a transfer restriction, the blocking arrangement (blokkeringsregeling): unless the articles say otherwise, a shareholder who wants to sell must first offer the shares to the co-shareholders. Since the Flex-BV reform of 1 October 2012 that arrangement can be relaxed or switched off entirely, which is exactly what venture capital investors usually ask for.

The same reform removed the minimum share capital. Before October 2012 a BV had to be incorporated with at least EUR 18,000 and a bank statement proving the money had been paid in. Both requirements are gone. A BV can now be incorporated with a share capital of one eurocent, or with shares denominated in another currency, and no bank declaration or auditor’s statement is needed. Capital protection has shifted from a fixed entry threshold to a test applied every time money leaves the company, which is discussed further below. Anyone weighing up the capital structure will find more detail in our article on share capital in a Dutch company.

Three features distinguish the BV from the other Dutch legal forms: it has legal personality, so it carries its own obligations; the liability of the shareholders is limited to their contribution; and its internal organisation is set by the articles of association within the limits of Book 2 BW. Those limits are wider than they used to be. Articles can create shares without voting rights or without profit entitlement, can attach obligations to a class of shares, and can allow each class of shareholders to appoint its own director. In practice this means a BV can be shaped for a family business and for a multi-round investment structure alike.

What limited liability actually covers

Limited liability is a rule about the shareholder, not about the business. If the company cannot pay, its creditors are limited to the company’s assets, and a shareholder loses no more than the value of the shares and any loan they made to the company. The shareholder’s home, private savings and other investments fall outside the reach of the company’s creditors. This is the practical difference between a BV and a sole proprietorship (eenmanszaak) or a general partnership (vennootschap onder firma), where the entrepreneur or the partners answer for business debts with everything they own.

Take a small design agency that trades through a BV, runs into a failed project and ends up in bankruptcy owing suppliers a substantial sum. The trustee (curator) liquidates the company’s receivables, equipment and goodwill and distributes the proceeds among the creditors in the statutory order. If the shareholder simply subscribed for shares and paid them up, that is where their exposure ends. Had the same business been run as an eenmanszaak, the same suppliers could have attached the entrepreneur’s bank account and, in principle, their house.

What limited liability does not do is remove ordinary contractual risk that the entrepreneur has voluntarily accepted. Banks and landlords are perfectly aware of the wall and routinely ask for a personal guarantee (borgtocht or hoofdelijke medeschuldenaarschap) before extending credit or signing a lease. A guarantee is a separate contract that binds the person who signed it, and the company’s limited liability has no bearing on it. The same applies where a director-shareholder has pledged private property as security. Before signing anything, check what is actually being promised and by whom.

When the protection does not hold

Personal liability in a BV is almost always director’s liability (bestuurdersaansprakelijkheid), not shareholder liability. Dutch law does not have a general doctrine of piercing the corporate veil; instead it has a set of specific statutory and case-law grounds, each with its own conditions and its own burden of proof. These are the ones that matter in practice.

• Improper performance of duties towards the company (article 2:9 BW). A director owes the company a proper performance of their task. Liability requires a serious personal reproach (ernstig verwijt), judged on all the circumstances, and the claim belongs to the company itself.
• Liability in bankruptcy (article 2:248 BW). If the board has manifestly performed its duties improperly in the three years before the bankruptcy and that is an important cause of the bankruptcy, each director is liable for the shortfall in the estate. Failure to keep proper records (article 2:10 BW) or to file the annual accounts on time (article 2:394 BW) counts as improper management by definition and shifts the burden on causation onto the director.
• Tort towards a specific creditor (article 6:162 BW). The best-known variant is the Beklamel situation: a director enters into an obligation on behalf of the company while knowing, or having reason to know, that the company will not be able to perform and will offer no recourse. Frustrating the recovery of an existing claim can also be a tort.
• Unpaid taxes and pension contributions (article 36 Invorderingswet 1990). Where a BV cannot pay payroll tax, VAT or mandatory pension fund contributions, the board must notify the Tax and Customs Administration in writing of the inability to pay, in principle within two weeks after the tax became payable. A timely notification keeps the burden of proof with the tax authority. A late notification reverses it, and the director then has to prove that the non-payment was not the result of manifestly improper management.
• Acting before registration (article 2:180 BW) and before incorporation (article 2:203 BW). Anyone who contracts on behalf of a BV in formation is personally bound until the company is incorporated and ratifies the act, and directors are jointly and severally liable for acts performed while the company has not yet been entered in the trade register.
• Pass-through in group structures (article 2:11 BW). Where a legal entity is a director, its liability as a director rests jointly and severally on its own directors. A holding company therefore does not shield the natural person behind it from director’s liability.

Shareholders themselves are only rarely liable, and then on the general law of tort rather than on company law: a shareholder who dictates the company’s conduct, strips it of assets or misleads a creditor can be addressed under article 6:162 BW. Fraud, of course, is never covered by any corporate form. Our article on pre-incorporation liability in a BV in formation works out the start-up phase in more detail.

The practical lesson is narrow and important: limited liability survives bad luck and bad markets. It does not survive sloppy bookkeeping, unfiled accounts, unreported tax arrears or promises made to creditors that the company was never going to keep.

The organs of a BV and who decides what

A BV has two mandatory organs, the general meeting of shareholders and the board of directors, and one optional organ, the supervisory board. The general meeting is the ultimate decision-making body: it adopts the annual accounts, resolves on profit distributions, amends the articles of association and appoints and dismisses directors. The board manages the company and represents it externally; each director is in principle authorised to represent the company alone, unless the articles provide otherwise and this is registered in the trade register.

The articles of association are the company’s constitution and are public: anyone can order them from the trade register. Whatever the shareholders would rather keep out of public view goes into a shareholders’ agreement (aandeelhoudersovereenkomst). That contract is where you find good leaver and bad leaver provisions, tag-along and drag-along rights, reserved matters, non-competition clauses, deadlock mechanisms and the valuation formula for an exit. It is not legally required, and a BV with a single shareholder does not need one, but for every other configuration it is the document that prevents a disagreement from becoming litigation.

Larger companies that meet the statutory thresholds fall under the structure regime (structuurregeling), which makes a supervisory board mandatory and gives it powers that would otherwise sit with the general meeting. Most BVs never reach those thresholds. What every BV does need is a clear allocation of tasks within the board, because article 2:9 BW makes each director collectively responsible for the general course of affairs even where duties have been divided.

How a BV is incorporated

Incorporating a BV always runs through a Dutch civil-law notary; there is no online self-service route and no way to contract around the notarial deed. In a straightforward case the whole process takes one to two weeks, most of which is spent on identification and preparing the articles rather than on the deed itself.

1. Preparation. Choosing the company name and checking that it does not conflict with an existing trade name or trade mark, deciding on the share structure and the number of directors, drafting the articles of association, and providing the notary with identification and, where a shareholder is a legal entity, its corporate documents.
2. Client due diligence. The notary is subject to the Money Laundering and Terrorist Financing (Prevention) Act (Wwft) and must identify the founders and the ultimate beneficial owners and establish the origin of the funds. For foreign founders this is usually the step that takes the longest; apostilled and translated documents are often required.
3. Execution of the deed. The founders sign the deed of incorporation before the notary, in person or through a written power of attorney, subscribe for the shares and appoint the first directors. The company exists from that moment.
4. Registration and set-up. The notary registers the BV in the trade register of the Chamber of Commerce (Kamer van Koophandel), which allocates the KVK number and the RSIN. The ultimate beneficial owners are registered in the UBO register. After that come the business bank account, the VAT number and, if there will be staff, registration as an employer with the Tax and Customs Administration.

Costs consist of the notarial fee, which depends almost entirely on how bespoke the articles are, a one-off registration fee charged by the Chamber of Commerce, and the share capital itself, which the founders set freely. Standard articles for a single shareholder sit at the bottom of the range; articles built for an investment round, with several share classes, anti-dilution mechanics and class-based appointment rights, sit well above it. The Chamber of Commerce fee is set annually and is published on its website, which is why it is not reproduced here.

Two points regularly surprise foreign founders. First, there is no residence or nationality requirement for shareholders or directors of a BV; a company may be wholly foreign-owned and foreign-managed. Second, the absence of a residence requirement in company law says nothing about the tax position, work permits or the substance a group may need for treaty purposes, which are separate questions with separate answers. Our step-by-step guide on setting up a Dutch BV with foreign shareholders covers that route, and the legal steps from idea to BV sets out the sequence for a first-time founder.

The obligations that keep the protection intact

Limited liability is maintained by compliance, not by the deed alone. Article 2:248 BW turns two administrative failures into a presumption of improper management, so the records and the filings are not paperwork: they are the load-bearing wall of the whole structure.

• Proper administration. Article 2:10 BW requires the board to keep records from which the rights and obligations of the company can be known at any time, and to retain them for seven years.
• Annual accounts. The board draws up the annual accounts within five months after the end of the financial year, a period the general meeting may extend by at most five further months on the ground of special circumstances. The accounts are then adopted by the general meeting.
• Filing with the trade register. Article 2:394 BW requires the accounts to be filed within eight days of adoption and, in any event, no later than twelve months after the end of the financial year. Micro, small and medium-sized companies file an abridged version; the size classes and their thresholds are set out in articles 2:395a to 2:397 BW.
• Trade register and UBO register. Changes to the board, the articles or the address must be notified to the Chamber of Commerce within one week. Changes in the ultimate beneficial owners must be registered as well; access to the UBO register has been restricted since the Court of Justice of the European Union set aside general public access in November 2022, but the duty to register has not changed.
• Shareholders’ register. The board keeps a register of shareholders, pledges and usufructs under article 2:194 BW. It is the company’s own record of who owns what, and it is the first document a buyer’s lawyer asks for in a due diligence.
• Tax returns. Corporate income tax annually, VAT monthly or quarterly, payroll tax monthly where there is staff. Late payment attracts interest and penalties, and unreported inability to pay opens the door to article 36 Invorderingswet 1990.

Failure to file annual accounts is an economic offence under the Wet op de economische delicten as well as a ground for the presumption in article 2:248 BW. The maximum fine falls within a statutory fine category that is adjusted periodically by the legislator, so the amount is best checked at the time rather than quoted from an article. The far more serious consequence is the shift in the burden of proof if the company later fails.

Paying out profit: the distribution test

Because the Flex-BV abolished the minimum capital, creditor protection moved to the moment money actually leaves the company. Under article 2:216 BW a resolution of the general meeting to distribute profit or reserves has no effect until the board has approved it, and the board must withhold approval if it knows or ought reasonably to foresee that the company will be unable to continue paying its debts as they fall due. That is the distribution test (uitkeringstoets), and it applies to dividends, to repayments of capital, to the repurchase of shares and to a capital reduction.

The consequences of getting it wrong are personal. A director who approved a distribution while knowing or foreseeing that the company would run into trouble is liable to the company for the resulting shortfall, together with the interest. A shareholder who knew or ought to have foreseen the same may be required to repay what was received. There is also a limited balance sheet test: a distribution may not reduce equity below reserves that must be maintained by law or by the articles.

In day-to-day practice this means a dividend resolution should be documented properly: a board resolution recording the test, a recent set of figures, and a short note on the company’s liquidity and its committed obligations for the coming period. It takes an hour. Reconstructing it three years later in front of a bankruptcy trustee takes considerably longer and rarely ends as well.

Tax treatment of a BV in outline

A BV is opaque for tax purposes: it is itself liable to Dutch corporate income tax (vennootschapsbelasting) on its profits under the Wet op de vennootschapsbelasting 1969, and the shareholder is taxed separately on what the company distributes. There is no Dutch equivalent of the American check-the-box election, so a BV cannot opt to be treated as transparent.

Corporate income tax has two brackets. The rates and the threshold between them are fixed each year in the Tax Plan (Belastingplan) and published by the Tax and Customs Administration, so the figures in force at the time of a decision should always be taken from that source rather than from an article. A dividend paid by the BV is subject to dividend withholding tax under the Wet op de dividendbelasting 1965, which the shareholder can normally credit or reclaim; the rate for a treaty resident may be reduced or brought to nil by an applicable tax treaty or by the EU Parent-Subsidiary Directive.

A shareholder who holds at least five per cent of a class of shares has a substantial interest (aanmerkelijk belang) and is taxed on dividends and on the gain realised on sale in box 2 of the income tax. Where that shareholder also works for the company, the customary salary rules of article 12a of the Wage Tax Act require a salary that is not unreasonably low; the reference amounts are set annually. Between companies, the participation exemption (deelnemingsvrijstelling) of article 13 of the Wet Vpb 1969 generally exempts dividends and capital gains on holdings of at least five per cent, which is why the holding structure with an operating subsidiary is so common. Our guide to the holding and operating company structure explains that set-up.

Law and More does not provide tax structuring advice; the salary and dividend mix, the fiscal unity under article 15 of the Wet Vpb 1969 and the international substance requirements belong with a tax adviser. What we do handle is the legal side that sits next to it: the articles, the shareholders’ agreement, the share transfers and the director’s liability exposure that a tax arrear can create.

When is a BV the right choice?

A BV is worth its administrative burden when the exposure it removes is larger than the cost of running it. Three situations make the case almost by themselves: substantial liability risk, an intention to bring in outside capital, and a profit level at which the corporate tax route is more efficient than personal income tax. The first of those is a legal question and the last is a tax question, which is why the decision is usually taken with both advisers at the table.

Liability risk is the strongest argument. Manufacturing and product liability, construction and property development, professional services exposed to negligence claims, and technology businesses facing intellectual property disputes all carry claims that can exceed the value of the business. Growth ambitions are the second: investors subscribe for shares, and there are no shares in an eenmanszaak or a vennootschap onder firma. Employee participation, an option pool, an exit through a share sale, and a group structure with a holding company on top all presuppose a company with share capital.

Against that stands the burden: notarial incorporation, annual accounts, filings, payroll for the director-shareholder and a heavier accountancy bill. For a modest freelance practice with limited risk and limited profit, an eenmanszaak with sound professional indemnity insurance is often the more sensible answer, and the switch to a BV can be made later by contributing the business into a newly incorporated company.

The cooperative (coöperatie) and the foundation (stichting) are separate routes with their own logic and are occasionally the better fit, particularly for member-based or purpose-driven organisations.

The BV compared with the LLC and other foreign forms

Foreign entrepreneurs often reach for the American limited liability company as a point of reference. The comparison works for the liability shield and breaks down almost everywhere else. An LLC is a creature of state law that can elect how it is taxed at federal level; a BV is a creature of Book 2 BW that is always subject to Dutch corporate income tax. An LLC is governed by an operating agreement drafted almost entirely at the members’ discretion; a BV is governed by public articles of association that must satisfy Book 2 BW, with the freely negotiated part moved into a separate shareholders’ agreement.

Within Europe the closer equivalents are the German GmbH, the Belgian BV, the French SARL and the English private company limited by shares. All of them separate the company from its owners and all of them impose filing and accounting duties. The Netherlands distinguishes itself less by the form than by what surrounds it: an extensive tax treaty network, a court system with specialised chambers for company disputes, including the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal, and English-language proceedings before the Netherlands Commercial Court.

One warning is worth stating plainly. A US LLC used as a shareholder of a Dutch BV, or as a vehicle alongside it, raises a classification question under Dutch law: depending on its characteristics it may be treated as transparent or as non-transparent, with entirely different consequences for withholding tax and for the participation exemption. That analysis belongs with a Dutch tax adviser before the structure is put in place, not after the first dividend has been paid.

What to do next

If you are incorporating, spend the time on the articles of association and the shareholders’ agreement before the notary is instructed; both are far cheaper to get right than to amend. If you already run a BV, the two questions worth answering this week are whether the last set of annual accounts was filed within the statutory period and whether any distribution made in the past year was preceded by a documented board approval. Those are the two files a trustee opens first.

Law and More advises entrepreneurs, shareholders and directors on the full life cycle of a BV: incorporation and articles of association, shareholders’ agreements and share transfers, governance and boardroom disputes, director’s liability claims and proceedings before the Enterprise Chamber. We act for Dutch and international clients and work in English. If you would like your situation assessed, please contact one of our corporate lawyers.

Related reading

• Share capital in a Dutch company
• The cooperative as a Dutch legal form
• What is a partnership?
• All corporate law guides