In short: a dividend distribution from a Dutch BV requires two decisions, not one. The general meeting resolves to distribute, but under article 2:216 of the Dutch Civil Code that resolution has no effect until the board approves it. The board may only approve after the balance sheet test (equity must still exceed the reserves required by law or by the articles) and the distribution test (the company must remain able to pay its debts as they fall due). A board that approves a distribution it should have known the company could not carry is personally liable for the resulting deficit, and a shareholder who knew may have to repay.
A dividend distribution from a Dutch BV is governed by article 2:216 of the Dutch Civil Code, which splits the decision in two. The general meeting decides that a distribution is made and how large it is; the board of directors decides whether it may actually be paid, and must refuse approval if it knows or should reasonably foresee that the company will not be able to continue paying its due debts afterwards. Without that board approval the shareholders resolution simply has no effect, and paying anyway exposes the directors to personal liability towards the company.
What a distribution is, and who decides
Distributing profit is one of the two ordinary ways a director-shareholder (DGA) takes value out of a BV, the other being salary. Legally the two are unrelated. Salary is consideration for work performed as a director or employee; a dividend is a distribution to a shareholder on account of the shares. That is why the rules are so different: employment law protects the person who works, while the distribution rules in Book 2 protect the creditors of the company against the shareholder taking the company empty.
The starting point is that the general meeting is competent to allocate the profit and to resolve on distributions, unless the articles of association assign that power to another body. Read your articles before you assume anything: a BV with an investor, a supervisory board or two classes of shares often has a different arrangement, and a resolution taken by the wrong body is voidable.
The second point is that a resolution is not the same thing as a meeting. Under Dutch corporate law a resolution of the general meeting can be adopted outside a meeting, in writing, provided that all persons entitled to attend have agreed to that method of decision-making and the vote is unanimous. For the single-shareholder BV that is the normal route, and it is entirely valid; the widespread belief that you must formally convene and minute a meeting with yourself is not what the statute says. What you do need in every case is a written, dated and signed record of the decision. If you do hold a meeting, note that Dutch law also allows it to be held digitally where the articles permit it.
The third point is the one people miss. The shareholders resolution is conditional. Article 2:216 provides that a resolution to distribute has no effect for as long as the board has not given its approval. The board is not a rubber stamp: it has its own statutory duty, its own test to perform and its own liability if it gets it wrong. In a BV where the shareholder and the director are the same person, that person wears two hats in sequence and has to be able to show it.
Distributions in kind, and how an NV differs
A distribution does not have to be made in cash. A BV can distribute an asset, for example a receivable, a car or a participating interest, provided the articles do not exclude it and, in principle, with the agreement of the shareholder concerned. The two tests apply in exactly the same way, with the additional question of valuation: the amount of the distribution is the value of what is handed over, and a defensible valuation belongs in the file. Distributions in kind are also the point at which the transfer formalities for the asset itself come into play, since shares in another BV can only be transferred by notarial deed.
The rules described here are those for the BV. A public limited company (NV) is subject to a different and stricter regime, built around a capital maintenance requirement rather than around a board-level liquidity test, and it retains a minimum capital. Anyone converting a BV into an NV, or advising a Dutch subsidiary of a foreign group, should check which regime applies before copying a resolution across. The same caution applies to a foundation or a cooperative, where the ability to distribute at all depends on the articles and, for a foundation, is restricted by statute.
The balance sheet test
The balance sheet test asks a single question: after the distribution, does the company’s equity still exceed the reserves it is required to maintain by law or by its articles of association? If the answer is no, the general meeting is not permitted to resolve on the distribution at all. This test is a snapshot, taken on the figures, and it is the easier of the two to apply.
Two categories of reserve are locked. Statutory reserves are those the annual accounts rules require a company to form, the best-known example being the reserve for capitalised development costs; a revaluation reserve and certain reserves relating to participating interests work the same way. Reserves required by the articles are those the shareholders imposed on themselves when the company was set up or when the articles were last amended. Everything above that line is in principle distributable, including retained earnings from previous years.
That last point answers a common question. A BV that made a loss this year may still distribute, because the test looks at accumulated equity rather than at the result for the year. It also explains why the balance sheet test is a weak constraint for the typical owner-managed BV: a company with no statutory or contractual reserves passes the test as long as its equity does not go negative. Since 2012 the BV has had no minimum capital, so there is no capital floor underneath that either. The real limit on what you can safely take out is the second test.
One technical point for companies with more than one class of share. When the distributable amount is calculated, shares which the company holds in itself, and shares on which the company itself holds the profit entitlement, are left out of account. Articles of association may also attribute profit rights unequally between classes, and where they do, the resolution has to follow that division rather than a simple pro rata split.
The distribution test and what the board has to document
The distribution test is the board’s test. Article 2:216 requires the board to refuse approval if it knows, or ought reasonably to foresee, that after the distribution the company will be unable to continue paying its due and payable debts. That is a forward-looking judgement about liquidity, not a calculation, and it is where directors get into trouble.
The statute does not name a period. The twelve-month horizon that every adviser quotes comes from the parliamentary history of the flexible BV legislation and from practice, and it is a sensible working rule rather than a statutory deadline. Where the company has an obligation falling due in month fifteen that it plainly cannot meet, the board cannot hide behind a twelve-month window. Conversely, a board is not required to guarantee the future; it has to make a reasonable assessment on the information reasonably available to it at the time.
A defensible assessment looks at the whole picture: the liquidity forecast for the coming year, corporation tax and VAT still to be paid, wage and rent obligations, repayment and covenant schedules on loans, the concentration of the customer base, committed investments, pending claims and disputes, and any guarantee or group liability the company has taken on. If the company is part of a group, the position of the other group companies belongs in the assessment as well, because intercompany claims are worth what the debtor is worth.
Write it down. The board resolution should record that both tests were performed, set out in a few concrete sentences what the board looked at, state the conclusion, and be dated and signed before the money moves. Attach the figures that were used. A resolution written after the fact, or a file consisting only of the sentence that the tests were carried out, is worth very little when a trustee in bankruptcy asks the question two years later. This is the cheapest piece of evidence a director will ever create and the one most often missing.
Liability if the test was wrong
If the company turns out to be unable to pay its due debts after the distribution, article 2:216 makes the directors who knew or should have foreseen that jointly and severally liable to the company for the shortfall caused by the distribution, increased by statutory interest running from the day of the distribution. The claim belongs to the company, which in practice means it is brought by a trustee in bankruptcy.
A director can escape by proving that the failure is not attributable to him and that he was not negligent in taking measures to avert the consequences. That is a real defence, but it is a narrow one: dissenting in the boardroom and recording the dissent is very different from having been absent or uninformed. A director who signs an approval without asking for the figures has, in effect, given away the defence.
The shareholder is not out of range either. Someone who received a distribution while knowing, or having reason to foresee, that the company would run into payment problems has to repay what was received, up to the amount of the shortfall. Where director and shareholder are the same person, the knowledge requirement is almost automatically satisfied, which is why a badly documented dividend in an owner-managed BV is a double exposure rather than a single one. The liability also reaches a person who has determined the company’s policy as if he were a director, so stepping back from the formal board seat does not solve it.
Article 2:216 does not stand alone. A distribution that damages creditors can also support a claim under the general standard of proper performance of duties owed to the company, and, in bankruptcy, a claim for manifestly improper management. A director who allowed the company to incur obligations he knew it could not meet can additionally be liable in tort towards the individual creditor concerned. Our article on directors’ liability in a Dutch BV sets out how these routes interact, and the piece on internal directors’ liability deals with the duty owed to the company itself.
The procedure step by step
The sequence matters, because a step taken out of order can invalidate the ones after it. The following order is the safe one.
First, prepare the figures. Establish the distributable equity on the most recent adopted annual accounts, adjusted for what has happened since, and prepare the liquidity forecast that the board will rely on. Second, take the shareholders resolution, either in a meeting or in writing outside a meeting with the unanimous agreement of everyone entitled to attend, and record the amount, the shares it relates to and the date. Third, have the board perform and document both tests and adopt a signed approval resolution. Only at that point does the distribution become effective and the amount become claimable by the shareholder.
Fourth, deal with the dividend withholding tax return and payment within the statutory period, which runs from the moment the dividend is made available rather than from the date of the bank transfer. Fifth, pay, and book the distribution correctly so that the reduction in equity is visible in the accounts. Keep the resolutions, the figures used and the tax return together in one file; if the question ever arises, that file is the answer.
Dividend process and documentation
| Step | Action | Document | Timing |
|---|---|---|---|
| Preparation | Determine distributable equity and prepare the liquidity forecast. | Figures and forecast used by the board. | Before any resolution. |
| Shareholders resolution | Resolve to distribute, in a meeting or in writing outside a meeting. | Signed minutes or written resolution. | Before board approval. |
| Board approval | Perform and record the balance sheet test and the distribution test. | Signed board resolution stating both tests. | Before payment; the distribution has no effect without it. |
| Dividend tax | File the dividend withholding tax return and pay the tax. | Aangifte dividendbelasting. | Within the statutory period after the dividend is made available. |
| Payment | Transfer the net amount and book the distribution. | Bank records and accounting entries. | After approval and filing. |
Annual accounts, filing and why they matter here
A distribution is normally measured against the equity shown in the most recent adopted annual accounts, which ties the dividend question to the company’s accounting obligations. The board draws up the accounts, the general meeting adopts them, and the adopted accounts are filed with the Chamber of Commerce. The outer deadline for filing is twelve months after the end of the financial year, and in a BV where all shareholders are also directors the signing of the accounts by all directors counts as adoption, which brings the filing moment forward.
The reason this belongs in an article about dividends is the liability consequence. In a bankruptcy, a failure to file the accounts on time counts as improper management and carries a presumption that the improper management was an important cause of the bankruptcy, which the director then has to rebut. A director who has both filed late and approved a distribution starts the conversation with a trustee in a very poor position, because the same file has to answer two questions at once. Filing the accounts on time is therefore not administrative housekeeping; it is part of keeping the distribution defensible.
The same applies to the underlying administration. A company must keep records from which its rights and obligations can be established at any time. Where those records do not allow the board to show what the liquidity position was on the day of the distribution, the distribution test cannot be reconstructed afterwards, whatever the resolution says.
Distributions when the company is under pressure
The two tests are at their most demanding precisely when the money is most wanted. A company that is trading through a difficult period, negotiating with its bank, or preparing a restructuring should treat any distribution as a decision that will be reviewed with hindsight by someone with an interest in reversing it.
Three consequences follow. First, the distribution test has to be based on a forecast that takes the downside seriously, including the loss of a major customer, the calling of a facility or an adverse outcome in pending litigation. Second, a director who doubts the position should say so in writing and record what was decided; a documented dissent is a defence, an unrecorded misgiving is not. Third, a distribution made while the company was heading for insolvency can be attacked by a trustee in bankruptcy not only under the distribution rules but also under the rules on fraudulent preference in the Bankruptcy Act, which apply more readily to a gratuitous act such as a dividend and to payments to a party connected with the company. The practical effect is that the shareholder may have to hand the money back even where the director’s own liability is disputed.
If the company is genuinely in difficulty, the correct order is the opposite of the instinctive one: address the balance sheet and the financing first, and consider a distribution only once the position is stable. Where a restructuring is on the table, take advice before any payment leaves the company, because a distribution made in the run-up to a composition or a court-approved arrangement will be one of the first items examined.
Interim dividends and other ways of taking value out
A dividend does not have to wait for the annual accounts. An interim distribution (tussentijdse uitkering) is permitted, and exactly the same two tests apply to it. The difference is evidential: because there are no adopted accounts to lean on, the board has to base the balance sheet test on an interim statement of assets and liabilities and be able to explain how it arrived at the distributable amount. Interim dividends taken casually during the year, and only reconciled at year end, are one of the most common findings in a liability file.
A distribution is also not the only way value leaves a company, and the neighbouring routes carry their own rules. A repurchase of its own shares by the BV is subject to the distribution test as well, and to further restrictions in Book 2 and in the articles. A formal reduction of capital by amendment of the articles requires a separate procedure with a creditor objection period. A loan from the company to the director-shareholder is not a distribution at all, but it is scrutinised closely: an arrangement that no third party would have accepted can be recharacterised, and an unsecured current account balance that keeps growing is treated by trustees as value taken out without a resolution. Where a company is close to insolvency, all of these routes attract the same question as a dividend, namely whether the creditors were prejudiced.
Many entrepreneurs hold their operating company through a personal holding company. Legally this changes who the shareholder is, not what the rules are: a distribution from the operating BV to the holding company must pass both tests at the level of the operating BV, and a later distribution from the holding company to the individual must pass both tests again at the level of the holding. The board of each company performs its own assessment. The commonly cited advantage of the structure is a fiscal one, and whether it is available and worthwhile in a given case is a question for a tax adviser rather than for us.
The tax side, and where it belongs
A distribution has tax consequences at two levels: the company must withhold and remit dividend withholding tax and file a return within one month of the dividend being made available, and the shareholder with a substantial interest declares the distribution in box 2 of the personal income tax return, with the tax withheld credited against the amount due. Those are the mechanics.
We deliberately do not set out the rates, thresholds or a worked calculation here. The box 2 brackets, the rate of the withholding tax and the interaction with the customary salary rules for a director-shareholder are adjusted regularly, and a figure that was right when an article was written is a trap once it is not. More importantly, choosing between salary and dividend, timing distributions across tax years and structuring a holding are tax questions, and this firm does not give tax advice. Discuss them with your accountant or tax adviser, and let us make sure the corporate resolutions underneath the outcome are valid.
Where it goes wrong in practice
The recurring problems are procedural rather than exotic. The most frequent is a missing or backdated board approval: the shareholder signs a distribution resolution, the money is transferred, and the board resolution is drafted months later at the accountant’s request. In a subsequent bankruptcy that sequence is easy to reconstruct from the bank statements and hard to defend.
The second is a distribution test performed on the wrong information, typically a profit figure rather than a liquidity forecast. Profit is not cash; a company can be profitable and still be unable to pay a tax assessment falling due in three months. The third is ignoring the articles of association, which may reserve the decision to another body, require a supervisory board approval, attribute profit rights unequally or prescribe a reserve that the balance sheet test then has to respect.
The fourth is the position of shareholders who are not directors. A distribution decided by a majority against the interest of the company, or a persistent refusal to distribute anything at all, is the sort of conduct that can be tested before the courts, and a minority shareholder is not without remedies; our article on the position of minority shareholders in the Netherlands deals with that. The fifth is timing around a transaction: a dividend declared shortly before a sale, a refinancing or a restructuring will be examined afterwards with hindsight, and the board file needs to be strong enough to survive that.
What to arrange before the next distribution
Three documents and one habit cover most of the risk. The first document is a current set of articles of association, read rather than assumed, so that you know which body decides, whether any reserve is prescribed and whether the profit rights of the classes of share differ. The second is the shareholders resolution, dated and signed, adopted either in a meeting or in writing outside a meeting with the unanimous agreement of everyone entitled to attend. The third is the board approval, dated and signed before the payment, stating in plain sentences what the board examined and why it concluded that the company can continue to meet its obligations.
The habit is to keep the underlying figures with the resolutions. A one-page liquidity forecast, the trial balance the equity figure came from and a note of the known commitments for the coming year turn a formal document into evidence. Where the company has several shareholders, agree the distribution policy in the shareholders agreement rather than resolving it afresh under time pressure each year, and make sure that policy is consistent with the articles.
Finally, keep the corporate and the fiscal decisions separate in your own mind. The tax adviser determines what is efficient; the board determines what is permitted. When those two answers conflict, the corporate answer governs, because no tax advantage protects a director against liability for a distribution the company could not carry.
Frequently asked questions
The questions below are the ones directors and shareholders ask most often when a distribution is being prepared. They are general answers; the position in your company depends on its articles of association, its figures and its commitments.
Can I distribute a Dividend if my BV made a loss this year?
Yes, it’s technically possible, but you have to be extremely careful. A dividend isn't paid from this year's profit alone; it comes from the company's total equity—specifically, the distributable reserves like retained earnings from previous years. So, even with a recent loss, you might still have a healthy pot of accumulated profits. To move forward, you must satisfy two critical tests without fail: The Balance Sheet Test: Your company's equity must remain higher than its legally required and statutory reserves after the distribution. The Distribution Test: The board needs to conduct a very thorough and meticulously documented uitkeringstoets . This proves the company can comfortably meet all its financial obligations for at least the next 12 months . With a loss on the books, justifying the distribution test becomes a much bigger hurdle. If your documentation is weak and the company later faces financial trouble, the risk of personal liability for the directors shoots up dramatically.
What is the difference between salary and Dividend for a DGA?
For a Director-Shareholder (DGA), salary and dividends are the two main ways to draw money from the BV, but they couldn't be more different in purpose or tax treatment. Getting this distinction right is fundamental to smart financial planning. Your salary ( gebruikelijk loon ) is a mandatory payment for the work you do as a director. The BV treats it as a business expense, and you pay income tax on it in Box 1. Think of it as your paycheque for your labour. A dividend , on the other hand, is a distribution of the company’s profit to you as a shareholder. It’s not a reward for your work but a return on your investment in the company. It’s paid out after the BV has paid corporate tax, and you are then taxed on it personally under the Box 2 tax regime. Key Difference: Salary is a pre-tax business expense for services you provide. A dividend is a post-tax distribution of profit to you as the owner. This core difference has a major impact on both the company’s tax bill and your personal one.
What happens if I forget to file the Dividend Tax return?
Forgetting to file the dividend withholding tax ( dividendbelasting ) return is an expensive and easily avoidable mistake. The Dutch Tax and Customs Administration ( Belastingdienst ) is very strict about its deadline: the return must be filed and the tax paid within one month of the dividend being made available to the shareholders. If you miss this deadline, penalties are automatic. The Belastingdienst will hit you with a fine for late filing and will charge interest on the overdue tax. This not only costs you unnecessary money but can also put your company on the tax authority's radar for extra scrutiny. It’s a simple deadline to remember but a painful one to miss—setting a calendar reminder is non-negotiable.
Law and More advises directors and shareholders of Dutch BVs on distributions and on the corporate decision-making around them: checking the articles of association, drafting the shareholders resolution and the board approval, framing the distribution test so that it holds up, and defending directors when a trustee in bankruptcy challenges a payout after the fact. If you are planning a distribution, or you have already made one and want to know where you stand, please contact us.
